Surge in non-interest income boosts profits.
FGB reported 13 per cent growth in revenue to Dh2.28 billion in second quarter of 2014 compared to the same period last year. Net interest and Islamic financing income increased by 12 per cent to Dh1.64 billion. This was primarily the result of improving net interest margin at 3.7 per cent and higher loan balances as loans and advances grew 4 per cent during the quarter. Non-interest revenues also rose by 18 per cent to Dh641 million when compared to the same period in 2013.
According to a Shu Capital analysis, decent non-funded income generation on higher investment income and property gains and improvement in asset quality metrics translating into lower cost of risk both year on year and quarter on quarter supported FGB's profit growth.
In Mashreq's case net interest income at the end of June 2014 was up by 38.1 per cent compared to a year earlier. Mashreq's net fee and commission income grew 25.7 per cent in the first half of the year resulting in its net fee, commission and other income to operating income ratio at 49.5 per cent. The bank's net investment income was up 30 per cent over the first half of last year.
Faster market growth
Emirates NBD's retail banking and wealth management division continued to record robust performance during the first half, with income growth of 15 per cent for the half year ended 30 June 2014 reaching Dh2.79 billion compared to Dh2.5 billion the same period in 2013.
Net interest income increased in the first half of the year by 12 per cent while fee income grew by a strong 22 per cent. The division's sustained focus on liabilities growth and, in particular, current and savings accounts resulted in faster than market growth of 7.3 per cent in customer deposits to reach Dh108.6 billion.
Strong net interest income generation (+22 per cent) supported by better net interest margins (NIMs) and contribution from Egyptian operations, impressive non-funded income (+37 per cent) driven by robust fee income and gains from property sales portfolio, boosted the performance of ENBD in the second quarter of this year, according to Shu Capital's analysts.
Decent cost efficiency during the quarter with a cost to income ratio at 29 per cent versus 34 per cent in the same period last year strengthening pre-provision profit growth to 36 per cent year on year.
"Costs remain firmly under control with a cost-to-income ratio of 30.3 per cent for the first 6 months on 2014, 4.2 per cent lower than the comparable period in 2013," said Surya Subramanian, Group Chief Financial Officer, Emirates NBD.
Net interest margin
NBAD's interest income (including income from Islamic financing) rose 3.7 per cent in the first half 2014. In the second quarter it increased 10.8 per cent sequentially and 4.6 per cent year-on-year. Net interest margin (NIM) for the first half of 2014 was 1.98 per cent down 7 basis points compared to first half of 2013. Second quarter NIM was 1.97 per cent up 13 bps sequentially and down 9 bps year-over-year.
Net fees and commissions were up 26.8 per cent in the first half of 2014, driven by increases in trade finance, retail, brokerage and lending related fees. In the second quarter, they were up 12.1 per cent sequentially and 25.2 per cent year-on-year.
"Under the new management's strategy, NBAD's focus on non-funded income generation is gradually paying off. On the flip side, rebound in loan growth was weak at 2 per cent quarter on quarter (due to a drop in GRE lending) and NIM pressures did not ease off due to lower yields on the wholesale book," Shu Capital in a note.
ADCB's non-interest income increased 8 per cent to Dh982 million. Net fees and commission income was up 24 per cent at Dh589 million compared to the first half of 2013. Disciplined cost management reduced interest expense significantly while continued improvements in credit quality and risk profile were seen. Interest expense improved 24 per cent year-on-year to Dh719 million in the first half of 2014 with the cost-to-income ratio weighing in at 31.9 per cent.
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