Emirates NBD posts record net profit of Dh8.35b for 2017
Emirates NBD delivered a strong set of results with record net profit of Dh8.35 billion in 2017, up 15 per cent year-on-year.
Net interest income improved seven per cent y-o-y due to loan growth and the positive impact of recent rate rises. The operating performance was also supported by higher non-interest income, lower expenses and an improved cost of risk.
The bank's balance sheet continues to strengthen with further improvements in capital and liquidity and stable credit quality. These results have enabled the board of directors to recommend a 2017 dividend of 40 fils per share.
Total income for the year ended 31 December 2017 amounted to Dh15,455 million; an increase of 5 per cent compared with Dh14,748 million in 2016.
Net interest income grew by 7 per cent in 2017 to Dh10,786 million due to loan growth and the positive impact of recent rate rises. Net interest margins showed a growing trend in 2017 helped by rate rises and an improvement in funding costs.
Non-interest income increased 1 per cent during the year as higher foreign exchange and derivative income offset lower income from the sale of properties.
Costs for the year ended 31 December 2017 amounted to Dh4,844 million, an improvement of 1 per cent over the previous year, helped by a containment in staff costs following cost control measures implemented in 2016. The rise in Marketing and IT costs relates to our planned investment in digital and technology refresh.
During 2017 the Impaired Loan Ratio improved by 0.2 per cent to 6.2 per cent. The impairment charge during this period of Dh2,229 million is 15 per cent lower than in 2016 as the net cost of risk improved. This net provision includes Dh1,777 million of write-backs and recoveries, and together helped boost the coverage ratio to 124.5 per cent.
Net profit for the Group was Dh8,346 million in 2017, 15 per cent above that posted in 2016. The increase in net profit was driven by asset growth, a control on expenses and reduced provisions.
Loans and Deposits both grew by 5 per cent during 2017. The Advances to Deposits Ratio remains comfortably within management's target range at 93.1 per cent and the Liquidity Coverage Ratio is at a healthy 146.0 per cent. During 2017, the Bank raised Dh 10.2 billion of term funding through a mix of public issues and private placements with maturities out to twenty years. Term funding represents 11 per cent of total liabilities.
As at 31 December 2017, the Bank's capital adequacy ratio and Tier 1 capital ratio, as calculated under Basel II, strengthened to 21.9 per cent and 19.5 per cent respectively. Under the Basel III framework, the Bank's Common Equity Tier 1 ratio is 16.4 per cent, Tier 1 ratio is 19.7 per cent and Total Capital ratio is 22.0 per cent.
Commenting on the Group's performance, Sheikh Ahmed bin Saeed Al Maktoum, Chairman, Emirates NBD said: "2017 marked a successful year for Emirates NBD as we achieved a record annual net profit. We continued to advance Emirates NBD's digital capabilities and are honored to be named the Official Banking Partner for Expo 2020 Dubai where we will play a key role in ensuring that banking services at Expo 2020 Dubai are at the forefront of innovation. As a homegrown bank, we are proud to have dedicated our 2017 Corporate Social Responsibility activities to the UAE's Year of Giving initiative and successfully exceeded our targets. In 2018, we will align our CSR activities and strategy to the Year of Zayed initiative to honor the legacy of our nation's founding father. As a leading bank in the region and a front-runner in digital banking innovation with a strong balance sheet, we are well placed to take advantage of growth opportunities in our preferred markets. In light of the solid performance by the Bank, we are proposing a cash dividend at 40 fils per share."
Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD said: "Emirates NBD delivered an excellent performance in 2017, achieving a record annual net profit of Dh 8.35 billion. The Bank's strong financial and operating performance, along with its digital focus, were also recognized when Emirates NBD was named The Banker's 'Bank of the Year - UAE' for the third consecutive year. We opened our first branch in India and will continue to expand the Bank's international presence in 2018, by growing our branch network in Egypt and Saudi Arabia and opening a representative office in Turkey, to better support our customer network. We are confident that our prudent business model shall continue to deliver a solid performance and deal with the opportunities and challenges that will present themselves."
Group Chief Executive Officer, Shayne Nelson said: "Emirates NBD delivered a record performance in 2017 as net profit increased by 15 per cent to reach a new high of Dh 8.35 billion, underpinned by higher income, a control on expenses and a lower cost of risk. Margins widened 22 bps in 2017, helped by rate rises and improved funding costs. The Group's balance sheet continued to strengthen, with further improvements in capital and liquidity and a stable credit quality profile. We made good progress in advancing our digital agenda and are pleased to be named Most Innovative Financial Services Organization of the Year at the BAI Global Innovations Awards forum. As part of the Bank's efforts to drive further innovation, I am delighted to announce our partnership with Motive Partners to launch Motive Labs, an innovation and investment accelerator to pioneer digital transformation across the financial services industry. Going forward, I am confident that Emirates NBD will continue to deliver excellent customer service and superior value to our shareholders."
Emirates Islamic (EI)
Emirates Islamic achieved a record net profit of Dh702 million in 2017, a six-fold improvement from 2016.
EI reported a total income (net of customers' share of profit and distribution to sukuk holders) amounting to Dh2.4 billion for 2017, a decline of 4 per cent compared to 2016 due to EI's shift to financing secured and superior credit risk rated customers. Total cost improved by 7 per cent as a result of the consistent control of operating costs. EI recorded its highest ever total assets of Dh62 billion and customer deposits grew by 2 per cent to Dh42 billion.
Financing and investing receivables declined by 7 per cent to Dh34 billion due to a containment in new business as a result of a tightening in underwriting standards. EI's focused approach to improve its liabilities mix led to a significant increase in CASA balances, and at December 2017, CASA represented 68 per cent of total customer deposits.
EI's headline Financing to Deposit ratio stood at 81 per cent and is comfortably within the management's target range. Capital ratios, as calculated under the Basel III framework, were strong with the Common Equity Tier 1 ratio at 16.2 per cent and the Total Capital ratio at 17.4 per cent.
During 2017, Fitch affirmed EI's long term Issuer Default Rating of 'A+' with a Stable Outlook.