* 2014 loan growth forecast cut to 4-5 pct from 7-8 pct -
* 2014 NIMs revised up to 2.7-2.8 pct from 2.5-2.6 pct
* Q2 net profit 1.31 bln dirhams vs 972 mln dirhams year-ago
* Beats estimates as higher income outstrips more provisions
* Q2 impairments 1.34 bln dirhams, up 34.4 pct year/year
(Recasts, adds call details, context)
By David French
DUBAI, July 24 Emirates NBD trimmed
its 2014 loan growth forecast but raised its expectations for
how much lending would earn it this year after reporting an
estimate-beating 34.8 percent jump in second-quarter net profit
Dubai's largest lender expects to see its lending grow by 4
to 5 percent this year, finance head Surya Subramanian told
reporters on a results call. This is down from the 7-8 percent
that the bank forecast at the start of the year.
"This change is made considering current lending levels and
the intense competition in the market," Subramanian said. ENBD's
total loans grew just 1.4 percent since the end of last year.
Despite the reduction in the amount of lending it expected
to do, ENBD raised its forecast for net interest margin, or NIM
- the amount it makes on its lending above the original cost of
funds - to 2.7 to 2.8 percent from 2.5 to 2.6 percent.
Subramanian said NIMs had stabilised around their current
level of 2.77 percent, despite competitive pressures, enabling
the bank to revise up its guidance.
Banks in the United Arab Emirates have been enjoying bumper
profits in recent quarters as the sector benefits from strong
domestic economic conditions. A poll of economists expects GDP
growth this year of 4.3 percent in the UAE.
However, with 52 banks operating in the Gulf Arab nation,
competition is fierce and lenders have been looking to diversify
away from traditional revenue streams, dominated by local
lending, into fee-based services and through acquisitions in
ENBD, which bought BNP Paribas's Egyptian business
last year, made 1.31 billion dirhams ($357 million) of profit in
the three months to June 30, up from 972 million dirhams in the
same period last year.
The figure was well ahead of the consensus view of analysts
polled by Reuters, who expected ENBD to make 1.09 billion
dirhams in the quarter.
The bank's stock rose 4.2 percent against a 0.3 percent
decline for the wider Dubai market.
Profit was boosted by strong year-on-year growth in both net
interest income, up 21.6 percent to 2.33 billion dirhams, and
non-interest income, 37 percent higher at 1.38 billion dirhams.
ENBD's higher quarterly profit also came despite another
significant jump in provisioning, which leapt 35 percent
year-on-year to 1.35 billion dirhams.
Impairments have been a major drag on the bank's profits in
recent years as the bank suffered from its exposures to the debt
of local sovereign-linked firms that were forced to restructure
and the local property market, which crashed at the end of the
last decade but which has rebounded in the last two years.
Much of the provisioning in the last two quarters has been
towards boosting the bank's bad loans coverage ratios.
This improved to 64.7 percent at end-June, up from 52.7
percent at the same point of 2013 and 4 percentage points higher
than the figure at the end of the first quarter.
Chief executive Shayne Nelson had said in April that the
buoyant local economy would allow it to keep boosting profits
and its bad loan coverage ratios without the need for severe
Despite the large hike in provisions in the latest results,
Nelson said he was happy with the bank's current performance,
which was allowing it to address any concerns it was facing due
to legacy issues.
($1 = 3.6730 United Arab Emirates Dirhams)
(Additional Reporting by Archana Narayanan; Editing by Andrew