UPDATE 2-Emirates NBD Q3 profit up, beats expectations

* Remains cautious after soaring credit impairments

* Provisions at Gulf Arab banks on rise

* Shares rise 4.7 percent following Q3 results (Adds detail, analyst comment)

DUBAI, Oct 26 (Reuters) - Dubai bank Emirates NBD ENBD.DU posted a small rise in third-quarter net profit on Monday, sending its shares higher as it beat analysts' expectations, but said it remained cautious after soaring credit impairments dampened growth.

Emirates NBD, the United Arab Emirates' largest bank by assets, said net profit rose three percent to 1.05 billion dirhams ($285.9 million) from 1.02 billion dirhams in the third quarter of 2008.

Two analysts polled by Reuters had forecast an average third-quarter net profit of 580 million dirhams. [ID:nL4495965]

"On the face of it is a big beat, it is a very good set of numbers," said Ali Khan, managing director and head of brokerage at Arqaam Capital. "Provisions were below estimates which helped the bottom line."

Shares of Emirates NBD rose 4.7 percent in early trading in Dubai, making it the strongest gainer. The broader index .DFMGI gained 1.4 percent.

Emirates NBD's credit impairments jumped to 699 million dirhams during the third quarter from 91 million dirhams in the year-ago period. In the second quarter of this year, impairment losses on the bank's financial assets came in at 1.15 billion dirhams.

"While the Dubai exposure is high, the growth in NPL's (non-performing loans) continues to be muted and well provisioned for," said Deepak Tolani, banking analyst at Al Mal Capital.

Emirates NBD's profits also received a boost from writing back the value of its investment and credit default swap portfolio. It booked a writedown on that portfolio of 380 million dirhams in the same quarter last year.

Arab stock markets have partly recovered from their first-quarter lows, when equities worldwide were hit by the credit crisis.

"Uncertainties and challenges remain in the near term and Emirates NBD retains its cautious stance while selectively pursuing growth opportunities and improving profitability and efficiency," according to a statement released on the bourse website.

Banks across the Gulf Arab region have seen provisions on the rise, eating away profits, as a result of the global economic slump and the ensuing rise in bad loans. (Reporting by Nicolas Parasie; editing by Thomas Atkins and Rupert Winchester)