Emirates NBD (DFM ticker: EmiratesNBD), the Middle East’s largest banking group by assets, today announces its results for the 9 month period ending 30 September 2009.
Results Highlights
- Strong income and improved efficiency drives financial performance
- Total income up 24% to AED 8.3 billion for 9 months ended 30 September 2009 compared to AED 6.7 billion for the same period last year
- Operating profit before impairment allowances in the first 9 months of 2009 up 36% to AED 5.6 billion (Q3 2008 YTD: AED 4.1 billion)
- Cost to income ratio improved to 32.2% for Q3 2009 year-to-date through continued cost management (Q3 2008 YTD: 37.9%)
- Net profit of AED 3.2 billion for the 9 months ended 30 September 2009 down 14% from the comparable period in 2008 (AED 3.7 billion) due to prudent credit impairment allowances
- Third quarter net profit up 3% to AED 1.1 billion from Q3 2008
- Significantly improved capitalisation and liquidity metrics due to success of balance sheet optimisation initiatives and continued proactive support from federal and local Government
- Total assets increased 3% to AED 291.0 billion from AED 282.4 billion at end-2008
- Customer loans grew 4% to AED 217.1 billion from AED 208.9 billion at end-2008
- Customer deposits increased 13% to AED 183.6 billion from AED 162.3 billion at end-2008
- Loan to Deposit Ratio improved to 118% at 30 September 2009 from 127% at the end of the previous quarter
- Capitalisation strengthened significantly from 2008 levels with Capital Adequacy Ratio of 19.9% (11.4% at 31 December 2008) and Tier 1 ratio of 12.7% (9.4% at 31 December 2008)
- Credit quality remains healthy across the Bank’s corporate and retail portfolios
- NPL ratio increased in line with expectations to 1.88% from 1.56% in Q2 2009
Integration fully on track for completion in 2009
Commenting on the Group’s performance, Ahmed Humaid Al Tayer, Chairman of Emirates NBD said: “Emirates NBD’s strong performance in the third quarter of 2009 continues the resilient trend from previous quarters, reflecting the strength of our business model and cementing our position as the region’s leading banking group. The third quarter of 2009 has witnessed continued stabilisation of local and international economies and sentiment and confidence. However, we continue to move forward in a prudent manner. The success of the largest banking merger in the region has proven our ability to capitalise on value-adding opportunities for our shareholders. We are confident about the strength and capabilities of Emirates NBD to continue to realise more success.”
Emirates NBD’s Chief Executive Officer, Mr. Rick Pudner, said: “While the operating environment in the first 9 months of the year has been challenging, we have delivered a robust financial performance. Revenue growth in the period has been strong due to the broad-based strength of our businesses. At the same time, we have continued to realise cost efficiencies resulting from ongoing rationalisation and the integration process. Our historically conservative and robust credit and risk management framework is bearing fruit with credit metrics in line with our expectations. In line with our focus on balance sheet optimisation, we have taken steps to bolster our capital base during the first 9 months of the year and have significantly improved our funding profile.”
Total Income
Total income for the first 9 months of 2009 rose by 24% to AED 8,278 million compared to AED 6,664 million in the comparable period of 2008. In the third quarter of 2009, total income grew by 39% to AED 2,768 million from AED 1,985 million in Q3 2008.
Net interest income reached AED 5,488 million in the 9 months of 2009 and AED 1,845 million for the third quarter of 2009, an increase of 33% and 32% respectively on the comparable periods in 2008, driven by controlled growth in lending and an improvement in the 2009 year-to-date net interest margin to 2.55% from 1.96% in Q3 2008 year-to-date. The margin improvement resulted from increased asset yields across both corporate and retail businesses and the benefit of active balance sheet management which in combination more than offset increased funding costs.
Non-interest income recorded a year-on-year improvement of 11% to AED 2,790 million in Q3 2009 year-to-date. The increase was largely driven by positive mark to market gains on investment and other securities during the first 9 months of 2009, partly offset by lower fees relating to trade finance and underwriting.
Total Costs
In the 9 months ended 30 September 2009, costs amounted to AED 2,667 million, with growth contained to 6% from the comparable period of 2008 compared to income growth of 24% over the same period. Costs in the third quarter of 2009 rose by 10% to AED 850 million from AED 774 million in Q3 2008 but declined 6% compared to Q2 2009 (AED 906 million). The 2009 year-to-date cost to income ratio decreased to 32.2% from 37.9% in 2008 year-to-date, while the Q3 2009 ratio fell to 30.7% from 39.0% in Q3 2008. The positive, widening gap between income and expenses is was achieved through proactive cost management and the accelerated realisation of integration synergies while maintaining substantial investment in the bank’s IT and infrastructure platforms as well as in the governance and control environment.
Asset Quality and Impairments
Emirates NBD’s credit quality remains robust across the Bank’s corporate and retail portfolios, with the increase in delinquencies and non-performing loans increasing within expected levels. The NPL ratio, excluding impaired investment securities, increased to 1.88% in Q3 2009 from 1.56% reported in Q2 2009 and 0.95% reported in 2008.
The impairment allowance on financial assets in respect of the first 9 months of 2009 grew to AED 2,374 million compared to AED 810 million in the comparable period of 2008, driven by an expected increase in specific impairments across retail and corporate portfolios and the addition of AED 957 million to portfolio impairment provisions as a measure of prudence in the current environment.
Customer Loans and Deposits
Customer Loans as at 30 September 2009 (including Islamic financing) reached AED 217.1 billion, growing 3.9% since the end of 2008. Customer Deposits as at 30 September 2009 were AED 183.6 billion, an increase of 13.1% over the customer deposit base as at 31st December 2008.
Net Profits
Net profits for the Group were AED 3,164 million for the 9 months ended 30 September 2009, 14% below the record profits posted in the comparable period of 2008 of AED 3,667 million due to the prudent credit impairment allowances taken by the Bank during 2009. Net profits for Q3 2009 were AED 1,053 million, up 3% on Q3 2008 of AED 1,019 million and up 24% on Q2 2009 of AED 852 million.
Capital
The Bank’s total capital adequacy ratio has strengthened significantly to 19.9% from 11.4% at the end of 2008. The Bank’s Tier 1 capital ratio also improved from 9.4% at 31st December 2008 to 12.7% at 30 September 2009. This increase in capitalisation was due in the main to the issuance of AED 4 billion Tier 1 perpetual securities in Q2 2009 to the Investment Corporation of Dubai, the strong retained earnings generated during the period and the conversion of Ministry of Finance deposits into Tier 2 capital in Q1 2009.
