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Mon 24 Oct 2011 11:00 AM

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Dubai’s ENBD sees profit slump 59% on impairments

City’s largest bank sees net profit of $47.6m after taking provisions against Dubai Holding

Dubai’s ENBD sees profit slump 59% on impairments
Emirates NBD made a net profit of AED175m for the quarter

Emirates NBD, Dubai's largest bank by market value, posted a
59 percent slump in third-quarter net profit, widely missing analysts'
forecasts, after taking provisions against the ruler of Dubai's investment
vehicle.

The lender, which is 55.6 percent owned by the Dubai
government, made a net profit of AED175m ($47.6m) for the three months to Sept
30, compared with AED424m in the corresponding period in 2010, a statement to
the Dubai bourse said on Monday.

Impairment allowances rose to AED1.57bn in the quarter,
compared with AED1.2bn this time last year, as the bank took full provisions
against loans affected by restructurings at Dubai Holding, the personal
investment vehicle of Sheikh Mohammed bin Rashid Al Maktoum.

"During the first nine months of 2011 we have delivered
a robust set of financial results with net profits for the period up 20
percent, despite adopting a significantly more conservative approach to
de-risking the balance sheet," Rick Pudner, chief executive officer of
Emirates NBD, said.

Before provisioning, ENBD made an operating profit of AED1.76bn
for the third quarter, it said.

Net interest income rose 9.5 percent for the third quarter
to AED1.79bn, while net fee and commission income was up 2.25 percent in the
period at AED420.6m.

Emirates NBD has now taken full provisions against its
exposure for both Dubai government-related conglomerates which have experienced
debt issues - Dubai World, which completed its $25bn restructuring last year,
and Dubai Holding.

The results did not reflect the impact of its full takeover
of struggling lender Dubai Bank, which ENBD announced earlier this month.

While the bank insisted that the move would not affect
profits and would have a negligible impact on ENBD's capital ratio, Barclays
Capital said at the time that it would need around AED2bn in fresh capital to
have a "clean balance sheet".

ENBD shares have risen 34.4 percent year-to-date.

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