Emirates NBD profit misses estimates over funding costs

Dubai: Emirates NBD reported first-quarter profit that missed analyst estimates as a rise in lending income and a drop in provisions at Dubai’s biggest bank was partly offset by higher funding costs.
Net income advanced to Dh1.81 billion ($493 million) from Dh1.67 billion a year earlier, according to a statement posted on Nasdaq Dubai. The median estimate of three analysts was for a profit of Dh1.91 billion, according to data.
Net interest income rose 3 per cent and impairment allowances, including for bad loans, dropped 24 per cent. The bank’s net interest margin declined to 2.6 per cent from 2.9 per cent.
"Liquidity pressures in the sector continued to ease in the first-quarter from the tight conditions experienced in the second-half of 2015,” Shayne Nelson, group chief executive officer, said in the statement. "We remain cautiously optimistic for the remainder of 2016 but are conscious of the headwinds that a strong dollar and volatile oil price can present.”
Banks from the United Arab Emirates to Saudi Arabia are facing liquidity pressures as a more than halving of oil prices over approximately the past two years has slowed deposit growth and pushed up funding costs.
The three-month Emirates Interbank Offered Rate, a benchmark used to price some loans, climbed 29 basis points in the past year to its highest in nearly three years. Banks are preparing for deteriorating conditions into next year as oil prices remain lower for longer, leading to a decline in government spending, slower economic growth and falling asset quality, Standard & Poor’s said in January.
Emirates NBD’s loans increased 12 per cent at the end of March from a year earlier to Dh279 billion, while deposits grew at the same pace to Dh291 billion. The ratio of bad loans to total loans fell to 6.9 per cent in the quarter, from 7.1 per cent in the preceding three months helped by a write-back and recoveries of Dh226 million, the bank said.