(MENAFN- Khaleej Times) Emirates NBD announced on Wednesday that first-quarter profit rose 27 per cent rise year-on-year to Dh2.4 billion, underpinned by higher net interest income on the back of loan growth and improved margins.
The bank, the largest lender in Dubai, said total Income of Dh4.1 billion grew 13 per cent year on year due to loan growth and the positive impact of recent rate rises while total assets grew one per cent to Dh475.6 billion from end 2017.
Shayne Nelson, group chief executive officer, said the group's balance sheet remains strong with solid liquidity and capital ratios and a further strengthening in credit quality.
"We continued to expand the bank's international presence and opened a new branch in Jeddah last month and we are in the process of opening 2 further branches in the Kingdom of Saudi Arabia. We are well positioned to utilise our strong franchise, digital capabilities and financial strength to take advantage of growth opportunities within the region."
Surya Subramanian, group chief financial officer, said margins widened 17bps during the first quarter as rate rises flowed through to the loan book and funding costs remained stable due to healthy liquidity conditions. With current and savings accounts representing 57 per cent of deposits, the bank's book is positioned to benefit from expected rate rises.
"The cost to income ratio, at 31.1 per cent, provides headroom to keep investing for future growth as we further enhance our digital and technology capabilities."
Hesham Abdulla Al Qassim, vice-chairman and managing director, Emirates NBD, said as the region's leader in digital banking, the bank rolled out several initiatives this year, including the group's first Innovation Month, aligned to the UAE Innovation Month initiative.
The bank's net interest income improved 7 per cent over the previous quarter due to loan growth coupled with an improvement in margins. Core gross fee income was flat quarter-on-quarter and improved four per cent year-on-year on account of higher fee income.
During the quarter, the Impaired Loan Ratio improved by 0.2 per cent to 6.0 per cent. The impairment charge in Q1-18 of Dh440 million is a 31 per cent improvement on that in Q1-17 as the net cost of risk improved. The bank said the increase in net profit was driven by asset growth, higher margins and reduced provisions, which helped, offset a modest decline in non-interest income. Both loans and deposits increased by two per cent during the quarter. The advances to deposits ratio remains comfortably within Management's target range at 93.8 per cent. In first quarter, the bank raised Dh5.2 billion of term funding through a mix of public issues and private placements.
The bank's common equity Tier 1 ratio is 15.5 per cent, Tier 1 ratio is 19.0 per cent and Total Capital ratio is 20.3 per cent, as calculated under Basel III.
The bank said it expects the UAE's real GDP growth to accelerate to 3.4 per cent in 2018 from an estimated 2.0 per cent last year. "Crude oil output should recover this year following a slowdown in 2017 due to oil production cuts."
Growth in the non-oil sector will be underpinned by investment in infrastructure as the country prepares for Expo 2020, with the public sector driving this investment. Household consumption is likely to remain constrained against a backdrop of modest job and wage growth, higher taxes and increased fuel costs, said the bank.
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Issac John Associate Business Editor of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.
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