Dubai: Emirates NBD on Wednesday reported Dh2.4 billion net profits for the first quarter of 2018, up 27 per cent year on year and 10 per cent compared to the previous quarter.
The solid operating performance was underpinned by higher net interest income on the back of loan growth and improved margins, and a lower cost of risk. The bank’s balance sheet continues to strengthen with further improvements in credit quality, coupled with solid liquidity and capital ratios.
“Emirates NBD has delivered another record net profit this quarter. As the region’s leader in digital banking, we rolled out several initiatives this year, including the Group’s first Innovation Month, aligned to the UAE Innovation Month,” said Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD.
Total income of Dh4.1 billion improved 13 per cent year on year due to loan growth and the positive impact of recent rate rises. Net interest margin improved by 17 bps to 2.68 per cent in the first quarter of 2018 from 2.51 per cent in first quarter 2017, helped by rate rises and stable funding costs.
Net interest income improved 7 per cent over the previous quarter due to loan growth coupled with an improvement in margins. Core gross fee income was flat quarter-on-quarter and improved 4 per cent year-on-year on account of higher fee income.
“The Group’s balance sheet remains strong with solid liquidity and capital ratios and a further strengthening in credit quality. We continued to expand the bank’s international presence and opened a new branch in Jeddah last month and we are in the process of opening two further branches in the Kingdom of Saudi Arabia. We are well positioned to utilise our strong franchise, digital capabilities and financial strength to take advantage of growth opportunities within the region,” said Group Chief Executive Officer, Shayne Nelson.
Total assets at Dh475.6 billion, up 1 per cent from end 2017. Both loans and deposits increased by 2 per cent during the quarter. The advances to deposits ratio was at 93.8 per cent at the close of the quarter. In the first quarter 2018, the bank raised Dh5.2 billion of term funding through a mix of public issues and private placements. Term funding represents 10 per cent of total liabilities.
“Our margins widened 17 basis points (bps) during the quarter as rate rises flowed through to the loan book and funding costs remained stable due to healthy liquidity conditions. With CASA [current and savings account] representing 57 per cent of deposits, our book is positioned to benefit from expected rate rises. The cost to income ratio, at 31.1 per cent, provides headroom to keep investing for future growth as we further enhance our digital and technology capabilities,” said Group Chief Financial Officer, Surya Subramanian.
Costs for the quarter ended 31 March 2018 amounted to Dh1,276 million, an improvement of 3 per cent over the preceding quarter, as lower marketing, IT and professional fees more than offset a modest increase in staff costs. Costs increased 14 per cent year on year in the quarter due to investment in our digital transformation and technology refresh. The cost to income ratio at 31.1 per cent, remains within 2018 guidance of 33 per cent and enables us to invest to support future growth.
During the quarter, the impaired loan ratio improved by 0.2 per cent to 6 per cent. The impairment charge in first quarter 2018 of Dh440 million is a 31 per cent improvement on that in first quarter 2017 as the net cost of risk improved. As at 31 March 2018, the bank’s common equity tier 1 ratio is 15.5 per cent, Tier 1 ratio is 19 per cent% and total capital ratio is 20.3 per cent, as calculated under Basel III.
