Emirates NBD Q1 profits fall 24% on coronavirus impairment surge

The bank posted a net profit of Dh2.08 billion ($566.29 million) in the quarter, down from Dh2.74 billion in the same period a year earlier.

Dubai's largest lender Emirates NBD said on Monday first-quarter net profit declined 24 per cent year-on-year due to higher provisions the bank took in anticipation of the impact of the new coronavirus outbreak on credit conditions.
The bank posted a net profit of Dh2.08 billion ($566.29 million) in the quarter, down from Dh2.74 billion in the same period a year earlier. On a quarterly basis, however, net profit improved by 3 per cent.
"Net operating profit declined 24 per cent year-on-year as the group took additional impairment allowances to increase coverage in anticipation of a deterioration in credit quality in subsequent quarters," Patrick Sullivan, the group chief financial officer, said in a statement.
Banks in the United Arab Emirates are feeling the impact of measures aimed at containing the outbreak, which have brought parts of the economy such as tourism and transport to a near halt.
"Regional banks face multiple challenges from low interest rates, low oil prices and lower economic growth due to disruption from Covid-19," said Sullivan. The operating performance of the bank was good prior to the emergence of the economic impact of Covid-19, he said.
The bank increased impairment allowances to Dh2.6 billion, with an increase in the annualised net cost of risk of 210 basis points.
Its non-performing loan ratio was stable at 5.5 per cent in the quarter, and total assets increased by 1 per cent from the end of 2019 to Dh692 billion.
"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," Sullivan said. - Reuters