* Q1 net profit 1.04 bln dhs vs 837 mln dhs yr-ago
* Higher interest, fee income cited for profit rise
* Profit hike despite 43 pct y-o-y jump in provisions
* To continue building towards 80 pct coverage ratio -CEO
* Better economy to aid this without need for cash
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By David French
DUBAI, April 24 Emirates NBD expects
the buoyant local economy to keep boosting its profits and allow
the bank to build up its bad loan coverage ratio without the
kind of severe provisioning which stymied recent earnings, its
CEO said on Thursday.
Dubai's largest lender beat analysts' forecasts with a 25
percent jump in first-quarter net profit to 1.04 billion dirhams
($283.7 million) as higher interest and fee income outstripped a
jump in provisions.
The result maintained the impressive profit growth posted by
banks in the United Arab Emirates so far for the first quarter
as they enjoy a rebound in the local economy which is improving
the finances of their clients - whose bad debts and
billion-dollar restructurings were weighing on the
Dubai's tourism, transport and logistics sectors are booming
along with the stock market - up more than 50 percent since the
turn of the year - and real estate prices - up 33 percent in the
last 12 months.
"We are confident the bank can capitalise on the
opportunities in the local economy for the benefit of the bank
and its shareholders," ENBD chief executive Shayne Nelson told
reporters on a results call, adding it expected Dubai's GDP to
grow 4.7 percent in 2014.
Healthy growth in both net interest and non-interest income,
which climbed 28 percent and 25 percent respectively, accounted
for the rise in first-quarter profits, the bank said.
Non-interest income, which climbed to 1.1 billion dirhams,
was a reflection of the booming economy. Brokerage fees rose 86
percent year-on-year and banking fee income - aided by higher
credit card activity - gained 44 percent on last year.
Income from property nearly tripled on the same period last
year, which chief financial officer Surya Subramanian attributed
to the bank selling off real estate it received from Union
Properties under previous debt-for-asset swap
Finalising this portfolio sell-off would generate revenue
for the bank over the next few quarters, he added.
ENBD's first-quarter profit would have been greater if it
were not for the 43 percent year-on-year jump in provisioning.
The bank is targeting an 80 percent coverage ratio in the
next couple of years, which would bring it closer to regional
peers after suffering more than most from soured debts related
to Dubai's 2009 crash.
The bank set aside 1.27 billion dirhams in the three months
to March 31 to cover bad loans, which it attributed to continued
conservative provisioning to increase its coverage ratio - which
rose to 60.7 percent at March 31, up 3.6 percent since end-2013.
Provisions have been a major drag on the bank's earnings in
recent years and have remained high despite the improving local
However, better economic conditions mean indebted borrowers
will find it easier to repay their existing obligations, which
in turn should help ENBD to recover bad loans and improve its
coverage ratio without resorting to setting aside more cash.
($1 = 3.6730 UAE Dirhams)
(Additional Reporting by Olzhas Auyezov; Editing by Sophie