Lender may increase profit this year from 2010; expects its net interest margin to remain stable
Commercial Bank of Dubai, which is part-owned by the government, aims to boost lending by 5 percent to 10 percent this year as economic growth in the UAE accelerates.
“It’s not a matter of liquidity anymore, we have enough money to go out and to make sure we grow our loan book,” chief executive officer Peter Baltussen said in an interview in Dubai on Monday.
It’s difficult to find projects outside the real-estate industry to lend to as companies still haven’t begun to invest, but “I do believe that will change,” he said.
Commercial Bank’s loan book shrank 4.2 percent last year as Dubai’s economy struggled from the impact of the global financial crisis.
Property prices in the emirate have dropped almost 60 percent from their peak in mid-2008 and loan defaults have risen, pushing banks to reduce lending. Dubai’s government owns 20 percent of Commercial Bank.
Some family-owned businesses, one of the lender’s key target groups apart from wealthy individuals, have weathered the credit crisis “quite well” and are using lower startup costs for projects in Dubai’s Jebel Ali Free Zone or manufacturing, Baltussen said. “I do believe that we will see more and more investment projects coming,” he said.
Dubai’s economic growth will accelerate to 4 percent in 2011 from about 1.5 percent to 2 percent in the previous year, according to estimates from Standard Chartered in December.
Commercial Bank on January 30 reported a 2.2 percent gain in net income for 2010 to AED821m ($224m).
The lender may increase profit this year from 2010 and expects its net interest margin, the difference between what the bank earns on loans and what it pays on deposits and funds, to remain stable, according to Baltussen. Non-performing loans will rise at a slower pace this year, he said.
“The recovery of the real-estate market will have a huge impact on decision-making in both Dubai and Abu Dhabi as many people and companies have invested in it,” Baltussen said.
“As long as it’s stifled and not moving, a lot of people will be very conservative in their investment decisions.”