Loan growth, higher margins boost Emirates NBD fourth quarter net profit

By Tom Arnold

DUBAI (Reuters) - Emirates NBD, Dubai's largest bank, on Wednesday reported a 10 percent rise in fourth-quarter net profit as loan growth and improved margins offset lower income from investment securities and higher expenses.

The bank, the first United Arab Emirates lender to report quarterly results, made a net profit of 2.39 billion dirhams ($650.7 million) in the three months ended Dec. 31, 2018, compared with 2.18 billion dirhams in the year-ago period.

EFG Hermes forecast a net profit of 2.33 billion dirhams, while SICO had expected the lender to post a profit of 2.51 billion dirhams.

Emirates NBD, 55.6 percent owned by state fund Investment Corp., and other banks in the United Arab Emirates benefited from a rise in interest rates in 2018.

The lender's net interest margins surged 34 basis points from the previous year to 2.85 percent as an increase in rates bolstered the loan book and outweighed a rise in deposit costs.

Apart from higher margins, loan growth also helped bolster net interest income by 20 percent during the fourth quarter, while lower income from investment securities meant that non-interest income slipped 8 percent.

However, the bank posted an increase of 14 percent in higher expenditure due to staffing, information technology-related costs, global expansion, the implementation of Value Added Tax, advertising and also Expo 2020 sponsorship.

The bank has been closely monitoring the situation in Turkey after a plunge in the lira since it agreed last May to buy Turkey's Denizbank from Russia's state-owned Sberbank in a $3.2 billion deal.

The bank said it was engaged with regulators in a number of jurisdications, in response to a Reuters request for more information on the deal.

"The timing of regulatory approval is a function of regulatory requirements and is not within our direct control," it said. "We continue to be positively engaged with all the relevant regulators."

Jaap Meijer, managing director of research at Arqaam Capital, said pricing on the deal will come down due to the lira's depreciation, adding that he hoped to see a reduction in the price to book value. ($1 = 3.6728 UAE dirham)

(Editing by Sherry Jacob-Phillips/Keith Weir)