Emirates NBD (DFM: EmiratesNBD), the leading bank in the region, announced its results for the quarter ended 31 March 2014.
-Net profit for Q1 2014 of Dhs1.0bn, up 25% from Q1 2013 and up 55% from Q4 2013
-Total income of Dhs3.3bn, up 27% from Q1 2013 and up 5% from Q4 2013
-Pre-impairment Operating profit of Dhs2.3bn, up 34% from Q1 2013 and up 18% from Q4 2013
-Total assets up 1% at Dhs347.1bn compared with Dhs342.1bn at the end of 2013
-Customer loans at Dhs239.7bn, up 1% from Dhs238.3bn at the end of 2013
-Customer deposits at Dhs251.5bn, up 5% from Dhs239.6bn at the end of 2013
-Headline Advances to Deposits (AD) ratio improved to 95.3% from 99.5% at the end of 2013
-Capital adequacy ratio at a healthy level of 19.2% and Tier 1 ratio at 15.0%
Group Chief Executive Officer, Emirates NBD, Shayne Nelson, said, “I am delighted that, in my first full quarter with the Group, we have delivered a strong set of financial results with a net profit of Dhs1,042m, up 25% in comparison with the same quarter in the previous year. This is driven by continued growth in total income which grew 27% year-on-year helped by loan growth and an increase in fee income. The Bank is well positioned to capitalise on our strong franchise and capital base and to take advantage of further expected improvements in the economic environment of Dubai and the UAE.”
Group Chief Financial Officer, Emirates NBD, Surya Subramanian, said, “The operating performance for the first quarter of 2014 has strengthened, as demonstrated by the growth in both the total income and pre-provision operating profit. In Q1 2014, pre-impairment operating profit grew by 34% over the comparable period in 2013. Costs continued to be proactively managed and, despite competitive pressures, margins were maintained helped by a change in asset mix and improving funding base.”
Total income for the quarter ended 31 March 2014 amounted to Dhs3,333m; an increase of 27% compared with Dhs2,630m in Q1 2013 and an increase of 5% compared with Dhs3,162m in Q4 2013.
Net interest income for the quarter ended 31 March 2014 improved by 28% to Dhs2,232m from Dhs1,748m in Q1 2013. The improvement in net interest income is attributable to a combination of year-on-year loan growth, an improvement in the net interest margin helped by a more efficient capital and funding structure, higher growth in consumer lending and the positive impact of declining EIBOR rates on loan spreads. Non-interest income for the quarter improved by 25% to Dhs1,101m from the previous year, driven primarily by an increase in both core banking fee and property related income.
Costs for the quarter ended 31 March 2014 amounted to Dhs1,050m, an increase of 14% over the same period in the previous year and a decline of 14% compared to the previous quarter. Excluding Egypt, costs were up 5% y-o-y and improved by 14% q-o-q. This 5% increase is due to investments in customer service, IT and communication related costs. The improvement in costs over the previous quarter is due to a decrease in staff related costs and a number of one-off costs which were not repeated in Q1 2014. The cost to income ratio improved by 3.7% in Q1 2014, compared to Q1 2013, as improving top line momentum offset the increase in costs that were primarily directed at customer facing activities.
Credit Quality and Impairments
The NPL ratio improved to 13.8% at the end of Q1 2014. The impairment charge for the period under review increased to Dhs1,267m, compared with Dhs888m in the previous year. This was primarily driven by continued conservative provisioning, which helped improve the coverage ratio to 60.7% from 51.4% in Q1 2013.
Associates and Joint Ventures
The positive contribution of the Bank’s investments in associates and joint ventures amounted to Dhs61m in Q1 2014 compared with Dhs26m in Q1 2013 and Dhs45m in Q4 2013.
Net profit for the Group was Dhs1,042m for the quarter ended 31 March 2014, 25% above the profit posted in Q1 2013 of Dhs836m and 55% above Q4 2013 of Dhs674m, due to an increase in income and an improvement in expenses over the previous quarter.
Customer Loans and Deposits
Customer Loans as at 31 March 2014 (including Islamic financing) amounted to Dhs239.7bn, an increase of 1% from the end of 2013. Customer Deposits as at 31 March 2014 were Dhs251.5bn, an increase of 5% from 31 December 2013. The Advances to Deposits Ratio improved in Q1 2014 to 95.3% from 99.5% at the end of 2013, due to continued strong growth in Current and Savings account balances.
As at 31 March 2014, the Bank’s total capital adequacy ratio and Tier 1 capital ratio were 19.2% and 15.0% respectively, compared with 19.6% and 15.3% as at 31 December 2013. The marginal decline in the Capital adequacy ratio and the Tier 1 ratio during the quarter resulted from the 2013 dividend payout and the amortization of Ministry of Finance Tier 2 sub-debt.
Retail Banking & Wealth Management (RBWM)
The Bank’s Consumer Banking and Wealth Management division recorded a strong performance, with income growth of 13% for the quarter ended 31 March 2014 reaching Dhs1,388m compared to Dhs1,225m in Q1, 2013. Growth was driven by an 11% increase in net interest income and a 17% growth in fee income. RBWM’s sustained focus on deposit growth during this period, driven by a strong momentum in current and savings account categories, resulted in a 6.7% growth in customer deposits to reach Dhs107.9bn.
In Q1 2014, the Retail business focused on deepening relationships with existing customers as well as targeted acquisition of high value customers. The Bank continued to build on, and realize the benefits from, the partnerships formed in 2013 with Porsche Financial Services, Dubai SME and Manchester United. Several product related campaigns such as the FIFA linked liabilities campaign, PIN2WIN campaign and Skywards credit card promotion were launched during the quarter. The ‘Wealth Optimizer platform’ launched in 2013 was made available to Relationship Managers on iPads.
The Bank maintained its focus on innovation and digital channels in Q1 2014. The Bank launched DirectRemit an online remittance service that allows customers to remit funds instantly to partner banks and within the hour to other banks in India. The Private Banking business delivered strong revenue growth from its core GCC market and the non-resident Indians and non-resident Pakistani segments. Emirates NBD Securities, the brokerage arm, continued to grow strongly and consolidate its position as a leading brokerage firm in the market. The Asset Management business recorded strong financial results with equity products seeing significant inflows. The business also launched its first Luxembourg based open ended mutual fund.
Wholesale Banking (WB)
Despite the on-going challenging environment of increased competition and margin pressures, WB continued its strong performance in Q1 2014 with operating income up by 12% to Dhs1.15bn as compared to Dhs1.03bn in Q1 2013. Net interest income increased by 13% in Q1 2014 to Dhs815m, compared with Dhs721m in Q1 2013, and fee income increased by 8% to Dhs331m, compared with Dhs307m in Q1 2013, reflecting the management’s continued focus on non-funded / service related avenues resulting in balance sheet optimization and improvement in return on assets.
In terms of balance sheet, Q1 2014 registered an increase of 5.7% in Deposits while Loan balances remained stable. The management’s continued focus on asset quality is reflected by the 33% increase in provisions for Q1 2014 in comparison to Q1 2013. During Q1 2014, the management continued with the execution of its comprehensive strategy and transformation process of becoming the leading Wholesale Banking business in the Middle East and witnessed positive results in the quarter, which enhanced the division’s overall performance.
Global Markets & Treasury (GMT)
GMT reported a total income of Dhs244m for the first quarter of 2014 compared with Dhs112m in the first quarter of 2013. This shows a significant improvement over the comparable period in 2013 and compares favourably to the Dhs130m income in Q4 2013. The ALM desk showed significantly improved performance in the quarter on the back of balance sheet positioning undertaken late last year. Sales Revenues were supported by retail foreign exchange sales. In the first quarter, client interest in Fixed Income products were reflected in good revenues from this product set. The demand for Interest Rate Hedging products by corporate clients is likely to increase in the near future given the expectation of interest rates rising later in the year. In spite of market volatility caused by geo political challenges, the Credit Trading desk delivered a strong performance.
Total Emirates Islamic (EI) income (net of customers’ share of profit) for the period witnessed an increase of 30% to Dhs420m from the comparable previous period of Dhs323m. Net financing and investing receivables grew by 2% to Dhs24.4bn from the end of 2013. As at 31 March 2014, the branch and ATM/CDM network of EI totaled 50 and 175 respectively.
EI continued its growth in Q1 2014, with a net profit of Dhs93m compared to Dhs33m in the comparable period of 2013, leveraging its expanded platform in further customer acquisition. EI continues to focus on strengthening its core franchise through the expansion of its Retail, SME, and Corporate offerings.
Information Technology and Operations
Group IT has geared up its systems in support of the Al Etihad Credit Bureau (AECB) initiative and is ready to provide further help in this regard. As part of this process, customers’ borrowing history for the last five years was shared with the Bureau. On the Retail front, Group IT also completed the introduction of ‘cheque image capture’ through Emirates NBD cash deposit machines, which added significant value to the Bank’s continuous focus on customer experience and efficiency. Being a major contributor to UAE cheque clearing volumes, this initiative is expected to support growth in volumes.
Group IT also supported Emirates Islamic (EI) in the EI Retail Card Enhancement project to boost the EI Card’s revenue across all card portfolios. This initiative introduced many features and services to card products such as point redemptions, redemption against annual card fee, cash back and Nol card top-up, Easy Payment Plan options and some automation to speed up the back office processing on pre-approved credit card applications.
In the first quarter of 2014, Tanfeeth has exceeded its SLA targets that include revenue, operating income, customer satisfaction, audit and compliance. In achieving these results, Tanfeeth also established a separate vertical team to provide additional dedicated operational support for Emirates Islamic. Over the quarter, Tanfeeth received significant external recognition, particularly for its expertise in managing overseas payment transactions. This included two major industry awards; the Barclays Bank and the Deutsche Bank Straight Through Processing (STP) Awards.
Emirates NBD S.A.E. Egypt
Despite a challenging political and economic backdrop, the Emirates NBD S.A.E. Egypt operation has continued to perform well since its consolidation with the Group on 9 June 2013. In Q1 2014, it contributed Dhs161m revenue and Dhs52m net profit to the Group’s results. At present, cultural, system and policy integration are ongoing and proceeding as expected, in accordance with the Group’s integration plans.
The UAE remains well-positioned to enjoy solid growth in 2014 driven primarily by an expansion in non-oil sectors, particularly tourism, retail and manufacturing. We believe the construction sector will contribute more significantly to GDP growth this year as the strong recovery in real estate prices encourages new development. Following a boost to oil production in excess of 4% in 2013, we expect growth in the hydrocarbon sector to slow this year. Against an improving global economic backdrop, the Bank forecasts 2014 GDP growth of 4.5% in the UAE and 4.7% in Dubai. The Bank will continue to implement its successful strategy and take advantage of the positive growth opportunity in Dubai and the region. This strategy is built around five core building blocks which include delivering excellent customer experience, building a high performance organisation, driving core businesses, running an efficient organisation and diversifying sources of income.
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Head – Group Corporate Affairs
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