ENBD, Dubai's largest bank by market value, reported sharply higher fourth-quarter profit but impairments on non-performing, or bad, loans and on investments hit its yearly results.

"We all know that a portion of Dubai Holding is undergoing a similar negotiation and restructuring as Dubai World is, and in addition we do expect further migration of corporate loans into impaired loans this year," said Ben Franz-Marwick, head of investor relations at ENBD.

"Putting all that together, I would say we expect impaired loans as a percentage of gross loans to peak in the region of 14-15 percent during this year."

ENBD said fourth-quarter profit was 403 million dirhams ($109.7 million) in the three months to Dec 31, up from 178 million in the prior-year period.

The figure missed expectations forecast in a Reuters poll, but beat a consensus mean estimate of 12 analysts posted on the bank's website.

Full year profit of 2.3 billion dirhams was down 30 percent.

Shares in ENBD ended 0.3 percent lower.     

The bank is among lenders with the largest exposure to Dubai World, the state-linked conglomerate which reached a deal to restructure $25 billion of debt last year.

It said it provisioned fully for its exposure to Dubai World during the year and booked a 360 million dirham impairment on its investment in real estate developer Union Properties.

"The latter we don't consider enough," said Jaap Meijer, senior analyst at AlembicHC, noting the bank had booked 869 million in losses on associates.

"I would have preferred (overall) larger loan loss provisions in Q4 to bolster the provisioning levels for ENBD."

In the fourth quarter, impaired loans as a percentage of gross loans increased to 10 percent, up from 2.6 percent in the prior-year period.

Total impairments for 2010 stood at 3.2 billion dirhams, down from 3.3 billion in 2009, and loans fell 8 percent over the year.

Rick Pudner, chief executive officer, said in a media conference call he expected loan growth of 5 percent in 2011.

He also said the bank would continue to look at capital markets and medium-term funding but that current pricing levels were a "little too expensive".

The lender has approximately 12.9 billion dirhams in debt maturing in the next two years, with 3.8 billion due in 2011 and just over 8 billion next year, a presentation said.

ENBD is 56 percent owned by the Investment Corporation of Dubai (ICD), the emirate's sovereign wealth fund.