Emirates NBD’s Q1 profit drops as it sets aside $700m in Covid-19 provisions
Dubai’s biggest bank increased impairments more than four times, resulting a 24% drop in its first-quarter profit, according a statement
Emirates NBD set aside about $700 million in the first quarter to cover bad loans, giving investors a glimpse at the damage the coronavirus and lower oil prices are wreaking on bank earnings in the Gulf.
Dubai’s biggest bank increased impairments more than four times, resulting a 24% drop in its first-quarter profit, according a statement.
The lender boosted provisions for a potential deterioration in credit quality in the coming quarters due to the coronavirus pandemic, it said.
First-quarter numbers:
- Profit 2.08 billion dirhams vs 2.74 billion
- Impairment allowances 2.56 billion vs 570 million
- Total income 6.89 billion dirhams vs 4.72 billion
- Net interest income 4.94 billion dirhams vs 3.4 billion
- Non-interest income 1.95 billion dirhams vs 1.32 billion
- Cost to income ratio 29.8% vs 29.6%
- Net interest margin 3.02% vs 2.83%
- “Regional banks face multiple challenges from low interest rates, low oil prices and lower economic growth due to disruption from COVID-19,” Group CFO Patrick Sullivan said
Banks in the six-member Gulf Cooperation Council face an “earnings shock” from the plunge in oil prices and the coronavirus pandemic, according to S&P Global Ratings.
Profit growth at Qatar National Bank stalled in the first quarter, while Dubai’s Mashreq Bank recorded a 28% drop and Oman’s Bank Muscat posted a 27% decline.
Business conditions in Dubai worsened in March to the lowest level since IHS Markit began compiling its purchasing managers’ index a decade ago. Banks might get a boost in the coming months after the United Arab Emirates cut required reserves for demand deposits, and unlocked more stimulus to support lending.
SOURCE: ARABIAN BUSINESS
