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Emirates NBD (DFM: EmiratesNBD), a leading bank in the region, delivered a strong set of results with net profit up 15% y-o-y and 15% q-o-q to AED 2.7 billion. This solid operating performance was supported by an increase in total income, driven by loan growth and stable margins. Core fee income increased 15% y-o-y and 9% q-o-q on the back of higher income from forex and derivatives. The Bank’s balance sheet continues to strengthen with further improvements in capital & liquidity and stable credit quality.
Financial Highlights – Q1 2019
- Net profit of AED 2.7 billion, up 15% y-o-y and 15% q-o-q
- Total Income of AED 4.7 billion improved 15% y-o-y due to loan growth, an improvement in margins and higher fee income
- Net Interest Margin improved 15 bps y-o-y to 2.83%, helped by rate rises
- Total assets at AED 525.8 billion, up 5% from end 2018
- Customer loans at AED 337.7 billion, up 3% from end 2018
- Customer deposits at AED 359.4 billion, up 3% from end 2018
- Credit quality ratios stable with impaired loan ratio at 5.9% and coverage ratio at 123.9%
- Liquidity Coverage Ratio of 198.8% and AD ratio of 94% demonstrate the Group’s healthy liquidity position
- Capital Ratios strengthened with Common Equity Tier 1 ratio improving to 16.8%, Tier 1 ratio to 20.9% and Capital Adequacy Ratio to 22%
Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD said: “I am delighted that Emirates NBD has delivered another strong net profit this quarter. I am also pleased that Emirates NBD was named the UAE’s most valuable banking brand in The Banker’s annual brand valuation league table. Our brand value reflects our solid financial performance as well as our ongoing initiatives in customer service, product development and corporate social responsibility. In keeping with the ‘Year of Tolerance’ initiative, launched by His Highness Sheikh Khalifa bin Zayed Al Nahyan, Emirates NBD will continue to engage its customers and the community with innovative campaigns, programmes and initiatives that celebrate the nation’s unity and commitment to diversity.”
Commenting on the Group’s performance, Shayne Nelson, Group Chief Executive Officer said:“Emirates NBD delivered a strong set of results with net profit advancing by 15% to reach AED 2.7 billion in the first quarter, underpinned by higher income on the back of loan growth, stable margins, and increased foreign exchange and derivative income. The Bank’s balance sheet remains strong with an improvement in liquidity and capital ratios and a stable credit quality. The Bank has now converted 40% of its branch network in the UAE into disability-friendly branches. We will continue to introduce specialised banking services and assistive solutions that support financial inclusion. As we prepare for Expo 2020 Dubai, Emirates NBD will remain at the forefront of innovation with its efforts to simplify banking and deliver a technology-driven banking experience with a human touch. I am pleased to announce that we have revised, on favourable terms, the Sale and Purchase Agreement relating to the acquisition of Denizbank. We expect this transaction to complete by the end of Q2 2019, subject to obtaining the required regulatory approvals.
Surya Subramanian, Group Chief Financial Officer said: “The operating performance for the first quarter of 2019 was pleasing as we delivered growth in both net interest income and fee income. Costs improved by 7% from the previous quarter due to a reduction in staff costs, lower professional fees and marketing expenses. NIMs declined by 2bp during the quarter as the effect of higher wholesale funding and fixed deposit costs were largely offset by an improvement in loan yields and higher CASA balances.”
Total income for the quarter ended 31 March 2019 amounted to AED 4,717 million; an increase of 5% compared with AED 4,497 million in the preceding quarter.
Net-interest income improved 1% over the previous quarter as 3% loan growth more than offset a small decline in net interest margins.
Core fee income increased 9% over the preceding quarter and 15% year-on-year on the back of higher foreign exchange and derivative income generated by the Trading and ALM desks.
Costs for the quarter ended 31 March 2019 amounted to AED 1,397 million, an improvement of 7% over the preceding quarter due to an improvement in staff costs, lower professional fees and marketing expenses. Costs increased 9% y-o-y in Q1-19 due to investment in our digital transformation and technology refresh.
The cost to income ratio at 29.6% remains within 2019 guidance of 33% and gives us headroom to invest selectively to support future growth.
During the quarter, the Impaired Loan Ratio remained unchanged at 5.9%. The impairment charge in Q1-19 of AED 570 million is 30% higher than in Q1-18 and an 11% improvement on the preceding quarter.
The Group’s strong net profit of AED 2,743 million in Q1-19 is 15% above that posted in the comparable quarter in 2018. The increase in net profit was driven by loan growth, fee income and higher margins which helped offset an increase in provisions and operating costs
Both Loans and Deposits increased by 3% during the quarter. The Advances to Deposits Ratio remains comfortably within Management’s target range at 94%. In Q1-19, the Bank raised AED 4.7 billion of term debt issued in 4 currencies with maturities out to 20 years, covering 67% of 2019 total maturities.
As at 31 March 2019, the Bank’s Common Equity Tier 1 ratio is 16.8%, Tier 1 ratio is 20.9% and Total Capital ratio is 22%, as calculated under Basel III.
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