Dubai’s Largest Bank Slightly Misses Estimates, Shares Experience Steep Drop
Emirates NBD, Dubai’s largest bank by assets, announced a flat net profit for the fourth quarter of 2024, missing the analyst expectations by a whisker. The net profit for the October-December period remained generally stable at 4 billion dirhams, or around $1.09 billion.
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PC: Business Recorder
Although profits were up and the bank’s impairment charges were lower than the second quarter of 2024, most of the gains were offset by significant investments for future growth, which drove the stock down. While analysts had expected a profit of 4.1 billion dirhams, the bank missed it just slightly.
The shares of Emirates NBD opened down 6% on Wednesday after the release of the results. The stock fell 7.5% by 0650 GMT to 20.9 dirhams, significantly underperforming Dubai’s main share index, which was down by 1%. This marked the bank’s worst trading day in over five years, indicating investor concerns about the sustainability of future profitability.
Full-Year Profit Grows, But Dividend Reduced
While quarterly profits were almost constant, the full-year net profit of Emirates NBD rose by 7%, reaching 23 billion dirhams. The bank attributed this increase to growth in its balance sheet, mainly from its lending activity and deposit base.
In spite of this profit growth, the bank attempted to pay out dividends amounting to 100 fils ($0.2723) per share, in contrast to the declaration of 120 fils annalized last year. Although it doubled its dividend in 2023, Emirates NBD has opted for this dividend reduction in 2024 by taking the cautionary statement, perhaps probably by trying to invest in growth strategy-oriented directions.
Loan, Deposit, and Asset Growth
The bank continued to expand its lending activities, with gross loans increasing by 10% towards the 529 billion dirhams attained at the end of December 2024. Customer deposits, on the other hand, showed a 14% increase, now at 667 billion dirhams, indicating strong liquidity and customer confidence. Furthermore, total assets shot upward by 16%, amounting to 997 billion dirhams.
The banking sector in the UAE region has benefited from this region’s growth in broader economic growth as its government diversifies the economy beyond oil revenues. Investment in productive sectors of the economy such as real estate, tourism, and financial services continues to bear fruits in the revenue performance of the banking industry.
Interest Income and Margin Outlook
Emirates NBD reported a net interest income of 8.6 billion dirhams in the fourth quarter, which is reflective of a rise of some 10%. Non-funded income went up by some 8% to reach 2.7 billion dirhams. However, these picked up gains were partially offset by the investments in strategic initiatives taken by the bank.
The bank’s NIM for 2024 was stated at 3.64%. However, it still sees the margin coming down into a 3.3%-3.5% range for the next year. The drop is mainly attributed to the interest rate cut expected from the U.S. Federal Reserve in September. Given that the UAE dirham is pegged to the U.S. dollar, the U.A.E. The Central Bank closely follows the movements of the Fed in adjusting its interest rate to ensure currency stability.
As of Wednesday, the Federal Reserve remains expected to keep steady rates at 4.25%-50% before maintaining those rates, and likely paving the way for a change in the UAE and broader Gulf banking environment.
($1 = 3.6729 UAE dirhams)