* Q4 net profit 400 mln dhs vs 64 mln dhs yr-ago - Reuters
* 2012 net profit 1.37 bln dhs vs 820 mln dhs in 2011 - statement
* Lower provisions, higher fee income boost profit
* Proposed cash dividend of 38 pct
DUBAI, Feb 4 (Reuters) - Mashreq, Dubai's second-biggest bank by market value, posted a big jump in fourth-quarter net profit on Tuesday, as provisions dropped and the bank earned more fee income.
The lender made a net profit of 400 million dirhams ($108.9 million) in the final quarter of 2012, compared to 64 million dirhams in the prior-year period, according to a Reuters calculation based on the bank's full-year earnings statement.
Arqaam Capital forecast the bank would make a quarterly profit of 146 million dirhams.
Net profit for the full year stood at 1.37 billion dirhams, up from 820 million dirhams in 2011, the statement said.
The profit increase between the two fourth quarters was aided by a 29.4 percent growth in operating income.
Over the full year, fee and commission income in 2012 was 20.8 percent higher than it was in 2011.
Impairments dropped to 826.5 million dirhams in 2012, down from the 1.2 billion dirhams set aside for bad loans in 2011.
Loans and advances increased 9.9 percent over the course of 2012 to 41.4 billion dirhams from 37.7 billion dirhams at the end of 2011.
By comparison, sector-wide lending growth in the United Arab Emirates stood at 3 percent during the first ten months of 2012, according to central bank figures.
Deposits rose 4.5 percent to 47.5 billion dirhams at the end of the 2012.
Mashreq proposed a cash dividend of 38 percent, subject to central bank and shareholders' approval, the statement added.
Moody's downgraded Mashreq by one notch in December to Baa2 from Baa1, citing weak asset quality and problem loan levels higher than its UAE peers. ($1 = 3.6730 UAE dirhams) (Reporting by Praveen Menon; Editing by David French)