* Net profit 435 mln dirhams
* Hit by increased provisions
(Adds details, background, share price)
DUBAI, July 29 (Reuters) - Mashreqbank MASB.DU on Wednesday reported a 38-percent drop in quarterly net profit, citing increased provisions against bad loans.
Mashreqbank, the largest lender by market value in Dubai, said net profit fell to 435 million dirhams ($118.4 million) from 706.86 million dirhams in the same period in 2008.
Mashreqbank booked provisions of 319 million dirhams in the quarter. Total provisions stood at 551.4 million dirhams in the first half of 2009, compared with 200.3 million dirhams in the same period last year, it said.
A slew of Gulf lenders have been forced to boost provisions as they face an economic downturn, and against their exposure to a pair of troubled Saudi firms.
The provisions “are key to ensuring that the bank operates in a sustainable manner while the ups and downs of the current crisis play out,” Chief Executive Abdul Aziz Al Ghurair said.
Mashreqbank last week confirmed it was suing Ahmad Hamad Algosaibi & Bros, one of the two Saudi companies at the heart of a large financial dispute. [ID:nLL566732]
Mashreq’s Tier 1 ratio - a measure of financial strength - now stands at 14.8 percent, a level it achieved following help from the government and by reducing risk-weighed assets. ($1=3.673 Uae Dirham) (Reporting by Nicolas Parasie; editing by Simon Jessop)