Dubai’s biggest bank shrugs off slow economy as profits surge

Emirates NBD and other banks in the United Arab Emirates benefited from a rise in interest rates in 2018. (Reuters)
Updated 18 April 2019
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Dubai’s biggest bank shrugs off slow economy as profits surge

  • The bank made a net profit of $735.17 million in the three months ended March 31
  • Emirates NBD said a 9 percent increase in costs was due to investments in its digital transformation

DUBAI: Emirates NBD, Dubai’s biggest bank, reported a 15 percent increase in first-quarter profit on Wednesday as overall lending and margins gained.
Both loans and deposits rose as improved margins helped to offset an increase in provisions and operating costs.
The stock closed 0.4 percent lower on Wednesday after gaining more than 18 percent this month.
Monsef Mursi, co-head of research at Cairo-based CI Capital told Arab News that the bank’s bottom line performance had exceeded its estimates by about 4 percent, “underpinned by stronger-than-expected non-interest income growth and lower-than-estimated credit impairment.”
The bank also revealed that Group CFO Surya Subramanian is leaving the lender after almost nine years.
Rising US interest rates have benefited Gulf lenders in countries with currencies pegged to the US dollar as the margins they earn from lending to their customers have improved. Howver a regional economic slowdown and property market distress is showing signs of weighing on the bank sector as bad loan provisions start to tick higher.
A glut of new homes together with lackluster underlying demand is a worry for the banking sector.
Still, Emirates NBD said that it expected economic activity in the UAE to be underpinned this year by higher oil production as well as increased government spending.
First-quarter profit advanced to 2.74 billion dirhams ($747 million) from 2.39 billion dirhams, a year earlier the bank said in a statement.
“The bank’s balance sheet remains strong with an improvement in liquidity and capital ratios and a stable credit quality,” said Emirates NBD CEO Shayne Nelson in a statement.
Emirates NBD could save as much as $700 million in its revised deal to buy Turkey’s Denizbank. The revised deal followed a huge slump in the value of the Turkish lira.
Separately, Commercial bank of Dubai (CBD), one of the smaller lenders in the emirate also shook off economic headwinds, reporting a 22 percent leap in first quarter net profit. CEO Bern van Linder said the increase was underpinned by higher income and lower costs. Like its larger Dubai peer, it also reported a rise in deposits and loans.
 


Lufthansa profit warning spooks European airline sector

Updated 17 June 2019
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Lufthansa profit warning spooks European airline sector

  • Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called ‘attritional fare wars’

FRANKFURT: Germany’s Lufthansa sent shockwaves through the European airline sector on Monday as it cut its full-year profit forecast, with lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings.
The warning follows gloomy comments last month from Irish budget airline Ryanair, which vies with Lufthansa for top spot in Europe in terms of passengers carried. Air France-KLM also reported a widening quarterly loss last month.
In a statement issued late on Sunday, Lufthansa forecast annual EBIT of between €2 billion and €2.4 billion, down from the previously targeted €2.4 billion to €3 billion.
“Yields in the European short-haul market, in particular in the group’s home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share,” it said.
European airlines are locked in a battle for supremacy, with a surfeit of seats holding down revenues and higher fuel costs adding to the pressure. A number of smaller airlines have collapsed over the past two years.
Lufthansa cited falling revenue from its Eurowings budget business as a key reason for the profit warning.
“The group expects the European market to remain challenging at least for the remainder of 2019,” it said.
It also pointed to high jet fuel costs, which it said could exceed last year’s figure by €550 million, despite a recent fall in crude oil prices.
Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called “attritional fare wars” and said four or five European airlines were likely to emerge as the winners in the sector.
“No signs that anyone is prepared to reduce capacity, therefore we would anticipate the wave of consolidation in European short haul is not over,” said analyst Neil Wilson, analyst at London-based broker market.com.
Earlier this month global airlines slashed a widely watched industry profit forecast by 21 percent as an expanding trade war and higher oil prices compound worries about an overdue industry slowdown.
Lufthansa’s problems are centered on its European business, with a more positive outlook for its long-haul operations, especially on transatlantic and Asian routes.
Eurowings management is due to implement turnaround measures to be presented shortly, Lufthansa said, adding that efforts to reduce costs had so far been slower than expected.
Lufthansa’s adjusted margin for earnings before interest and tax (EBIT) was forecast between 5.5 percent and 6.5 percent, down from 6.5 percent to 8 percent previously, it said in a statement.
Lufthansa also said it would make a €340 million provision for in its first-half accounts, relating to a tax matter in Germany originating in the years between 2001 and 2005.