Emirates NBD expects loan growth of 5 to 7 per cent this year as the Dubai economy continues to expand, despite the oil price drop.
Loans at the bank, Dubai’s biggest by assets, grew 3 per cent to Dh246 billion last year from 2013. Net profit increased 58 per cent to Dh5bn.
“If we have a good year this year with no new problem loan formation, we should have a very profitable year this year,” said the bank’s chief executive Shayne Nelson. “The driver for profitability this year is going to be around what we charge off bad debts.”
Emirates NBD’s optimism is in contrast to analysts’ forecasts for the UAE banking sector as a whole.
For the five UAE banks rated by Standard & Poor’s – a group that does not include Emirates NBD – the agency predicts profit growth of 5 to 6 per cent this year, versus 21.3 per cent last year, with cheaper oil as a prime reason.
Emirates NBD's impaired loan ratio dropped last year to 7.8 per cent from 13.9 per cent in 2013 after reclassifying Dubai World debt exposure as performing. State-owned Dubai World has won unanimous creditor approval to repay some of its loans ahead of schedule and extend payments for another chunk of debt. Emirates NBD had the biggest exposure among financial institutions to Dubai World, Mr Nelson said.
The oil price slump is unlikely to have a big effect on the bank because most of the bank’s operations are in Dubai, which has a diverse economy and is forecast to have GDP growth of about 4.5 per cent this year.
UAE growth will range between 4 and 4.5 per cent, according to the economy minister Sultan Al Mansouri.
"Given our concentration on Dubai, and its very little reliance on oil, we expect good growth for the bank and the banking industry as a whole," said Mr Nelson.
But the oil price slump could hit liquidity. Money supply growth slowed to 9.2 per cent in December from 11.6 per cent the previous month, Central Bank data show.
The central bank’s numbers also showed that lending growth in the UAE slowed at year’s end, to 9.5 per cent year on year in December from 10.2 per cent in November.
“One of the issues always with low oil prices is going to be liquidity, and I think certainly banks are going to have to be careful about managing their liquidity and loan growth in conjunction with that liquidity,” said Mr Nelson.
“I think banks are far more prudent. The positioning of the banking industry is much stronger than it was before the banking crisis, and if you look at liquidity management of banks in the UAE has improved dramatically.”
dalsaadi@thenational.ae
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