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Emirates NBD (DFM: EmiratesNBD), a leading banking group in the region, delivered a solid set of results with net profit increasing 3% q-o-q to AED 2.1 billion. Net interest income increased 45% y-o-y and non-interest income grew 48% y-o-y with the acquisition of DenizBank in 2019. Net profit declined 24% y-o-y due to higher impairment charges. The Group’s balance sheet remains strong with healthy liquidity, credit quality and capital ratios. Whilst credit quality was stable in Q1 2020, the Group increased impairment allowances for Stage 1 and 2 coverage in recognition of a potential deterioration in credit quality in subsequent quarters related to the coronavirus (COVID-19) pandemic.
Financial Highlights – First Quarter 2020
- Net profit of AED 2.1 billion, increased 3% q-o-q and declined 24% y-o-y
- Total income of AED 6.9 billion improved 46% y-o-y due to loan growth and higher fee income, including DenizBank
- Impairment allowances increased to AED 2.6 billion with annualised net cost of risk increasing to 210 bps as the Group increased Stage 1 & 2 expected credit loss (ECL) allowances
- Net interest margin improved 19 bps y-o-y to 3.02% helped by the positive impact of DenizBank
- Total assets at AED 692 billion, up 1% from end 2019
- Customer loans at AED 443 billion, up 1% from end 2019
- Customer deposits at AED 467 billion, maintaining 2019 levels
- Non-performing loan ratio stable at 5.5% and coverage ratio improved by 8.2% to 120.5%
- Liquidity coverage ratio (LCR) of 149.7% and advances to deposit ratio of 94.8% demonstrate a healthy liquidity position
- Common equity tier 1 ratio (CET1) at 14.8%, well above minimum requirements
Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD said: “Emirates NBD delivered a net profit of AED 2.1 billion for the first quarter of 2020 and strengthened its balance sheet. As the global economy and the banking industry face unprecedented challenges due to COVID-19, we remain fully supportive of the UAE Government and the UAE Central Bank’s swift and unprecedented actions in introducing measures to protect the health of UAE residents and to provide economic relief measures to support customers. We are very proud of the commitment and compassion shown by our management and employees to ensure that we provide an uninterrupted, full banking service to our customers and the community. We are grateful to the wise and decisive Leadership of the UAE during these challenging times and with the full support of our community, we will emerge stronger together.
Commenting on the Group’s performance, Shayne Nelson, Group Chief Executive Officer said: “During these uncertain times, we have aimed to ensure that we continue to provide customers with uninterrupted banking services and the Bank’s balance sheet remains solid. Despite higher provisions in the first quarter of 2020, the Bank delivered a good set of results with a net profit of AED 2.1 billion whilst maintaining healthy capital, liquidity and credit quality ratios. As the safety of our staff, customers and the community comes first, we have temporarily closed some branches as part of our precautionary measures. A number of key branches across the UAE remain open to provide important customer services, while they operate increased customer safety procedures. The Bank’s leading digital platform is invaluable in providing a secure, convenient and safe environment through which our customers can continue to bank. Liv., the lifestyle digital bank for millennials now serves 370,000 customers, and recently launched its innovative digital credit card which allows customers to select and change loyalty and rewards, offering a truly customized experience. Liv. has also commenced pilot operations in the Kingdom of Saudi Arabia, a large market with a young and dynamic population.”
Patrick Sullivan, Group Chief Financial Officer said: “The operating performance for the first quarter of 2020 was good, prior to the emergence of the economic impact of COVID-19 in March 2020. Pre-impairment operating profit rose 46% y-o-y on higher income from loan growth and improved margins from the inclusion of DenizBank. Pre-impairment operating profit grew 10% q-o-q helped by lower expenses. Net operating profit declined 24% y-o-y as the Group took additional impairment allowances to increase coverage in anticipation of a deterioration in credit quality in subsequent quarters. Regional banks face multiple challenges from low interest rates, low oil prices and lower economic growth due to disruption from COVID-19. Emirates NBD has a good underlying operating performance, coupled with a robust balance sheet to help navigate these challenges. The Group continues to operate with strong liquidity and healthy capital ratios.”
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