Dubai Islamic Bank said impairments rose more than fourfold from a year earlier as profit fell 17%
Dubai Islamic Bank PJSC set aside $404 million in provisions in the first quarter, joining its competitors in the Middle East business hub to prepare for the impact of the coronavirus on their loan books.
The Shariah-compliant lender’s impairments rose more than fourfold in the first three months from a year earlier as profit fell 17% to 1.11 billion dirhams ($302 million), according to a statement on Thursday.
“We have adopted a highly conservative approach to provisioning in this quarter building coverage and protection against any impacts on asset quality arising out of the current environment,” chief executive officer Adnan Chilwan said in the statement.
Dubai Islamic Bank Q1 numbers:
Banks in the six-member Gulf Cooperation Council face an “earnings shock” from the plunge in oil prices and the coronavirus pandemic, according to S&P Global Ratings. Emirates NBD PJSC set aside a record amount of provisions to cover bad loans, while profit growth at Qatar National Bank, the Middle East’s biggest lender, stalled and Dubai’s Mashreqbank recorded a 28% drop.
Business conditions in Dubai worsened in March to the lowest level since IHS Markit began compiling its purchasing managers’ index a decade ago. Banks might get a boost in the coming months after the United Arab Emirates cut required reserves for demand deposits, and unlocked more stimulus to support lending.