Emirates NBD’s profit jumps, says ready for higher rates

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Emirates NBD’s annual profit rose 34 percent as an improving economy boosted investment banking income, Dubai’s biggest lender said on Wednesday, while impairments fell sharply from the height of the pandemic.

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The lender also boosted its dividend by 25 percent to 0.50 dirhams per share and said it was in a good shape to navigate rising interest rates amid a better mix of funding options.

“The funding mix improved as we added a further 38 billion dirhams ($10.35 billion) of current accounts and saving account balances during 2021 and we are well positioned to benefit from a potential rise in interest rates,” Group CEO Shayne Nelson said in a statement.

Banks in the United Arab Emirates are benefiting from an uptick in economic activity as the effects of the pandemic ease amid government support, higher oil prices and strong tourism due to the world fair Expo in Dubai.

Analysts expect 2022 will be even better for banks as domestic interest rates should rise, tracking higher US rates, and loan growth should also improve.

“Rates environment is favorable for the banks,” said Shabbir Malik, an analyst at EFG Hermes. “Loan growth should be better than last year.”

Emirates NBD posted a net profit of 9.3 billion dirhams ($2.53 billion) for 2021, up from 7 billion dirhams a year earlier. Analysts on average had expected a net profit of about 9 billion dirhams, according to Refinitiv’s Eikon data.

Separately, Dubai Islamic Bank reported a 39 percent jump in full-year earnings to 4.4 billion dirhams and a significant decline in impairment charges.

Emirates NBD said impairment allowances were down 26 percent in 2021 from a year earlier, with cost of risk within the pre-pandemic range.

For the fourth-quarter, net profit jumped more than 50 percent to 2 billion dirhams from a year earlier. EFG Hermes had forecast 2.3 billion dirhams and Arqaam Securities 1.6 billion dirhams.

Emirates NBD’s net interest income rose 7 percent to 4.3 billion dirhams in the quarter, while non-funded income - earnings from areas such as investment banking and foreign currency trading - jumped 146 percent.

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