DUBAI: Emirates NBD, a leading banking group in the region, delivered a net profit of AED 4.1 billion for the first half of 2020 ending June 30, 2020, a news release said.
Net interest income increased 36% y-o-y and non-funded income grew 24% y-o-y with the acquisition of DenizBank in 2019. Net profit declined 45% y-o-y due to higher impairment charges and the gain on disposal of a stake in Network International not repeated in 2020.
Excluding the gain from Network International net profit was down 24%. The Group’s balance sheet remains strong with healthy liquidity, credit quality and capital ratios. The Group increased impairment allowances for Stage 1 and 2 coverage in anticipation of a potential deterioration in credit quality in subsequent quarters related to the coronavirus (Covid-19) pandemic.
Commenting on the Group’s performance, Shayne Nelson, Group Chief Executive Officer said: “We proactively reached out to our customer base and support has now been provided to approximately one-tenth of our customers primarily through the deferral of over eight billion dirhams of interest and principal for periods of up to six months. In addition, we have waived certain fees to help individuals and businesses cope with the disruption. We believe that by providing support now we will assist in stabilizing the economy and minimize the impact on our customers.
“As the economy re-opens we are seeing business volumes improving although they are expected to remain below pre-Covid levels in the coming quarters. The Group’s balance sheet remains strong with stable credit, capital and liquidity”.
Patrick Sullivan, Group Chief Financial Officer said: “The net profit of AED 4.1 billion for the first half of 2020 was resilient given the significant impact of the challenging operating environment through Q2-20, which saw interest margins decline from rate cuts, lower economic activity affecting non-funded income, and an elevated cost of risk from loan provisioning.
“Pre-impairment operating profit rose 29%y-o-y on higher income from loan growth and improved margins from the inclusion of DenizBank. Net profit declined 45% y-o-y, or down 24% due to higher provisions excluding the gain on disposal of Network International in Q2-19. Margins declined in Q2-20 as lower interest rates fed through to the loan book. We are acting to manage costs to reflect lower levels of economic activity, albeit cost reduction will not entirely offset lower levels of income. Emirates NBD continues to have a good underlying operating performance, coupled with a robust balance sheet to help navigate these multiple challenges from low interest rates, low oil prices and lower economic growth due to disruption from Covid-19. The Group continues to operate with strong liquidity and healthy capital ratios.”
Restrictions on economic activity to contain the spread of Covid-19 have had a significant impact on the global economy, with the IMF now expecting global GDP to contract 4.9% this year. Tourism, hospitality, transportation, logistics, trade, construction and real estate are all adversely affected. The OPEC agreement reached in April is expected to result in a sharp contraction in oil production this year. The UAE economy is, however, expected to return to growth in 2021. The UAE headline PMI rose to 50.4 in June from 46.7 in May, the first reading in expansion territory this year.
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