Photo: A branch of Dubai Islamic Bank in Dubai, UAE, in December 2019.

Islamic Finance

Dubai Islamic Bank first-quarter profit falls 18% on 1.5 bln dirhams in provisions

Dubai Islamic Bank posted 1.11 billion dirhams ($302 million) in net profit for the first three months of this year compared to 1.36 billion dirhams for the same quarter in 2019, a drop of 18.31%.

The UAE’s largest standalone Islamic bank said in a bourse filing on Thursday (Apr 30) its profit was achieved “despite creating additional provision and buffers of nearly AED 1.5 billion” ($408 million).

“Extraordinary gain and recurring profits allowed us to build further stage 1, 2 & 3 provisions adding to the management overlay totaling AED c.1.5 bln to protect the financial position of the bank from any expected impacts emanating from the pandemic, oil price volatility and low interest rate environment,” said Chilwan.

DIB CEO Adnan Chilwan said the bank adopted “a highly conservative approach” to provisioning in the first quarter to build coverage and protection against impacts on asset quality arising from the economic fallouts.

Income decreased by 4% to 3.56 billion dirhams versus 3.41 billion dirhams in the first quarter of 2019.

Financing and deposits both jumped.

Deposits surged to 199.87 billion dirhams, a 22% increase compared to 164.42 billion dirhams for the first three months of 2019.

Financing went up by 17% year-on-year to reach 216.17 billion dirhams. This includes consumer financing of 52 billion dirhams and corporate financing of 133 billion dirhams.

Total assets reached 276.4 billion dirhams, up by 19% from the end of 2019.

The bank’s non-performing financing ratio hit 4.3%, up from 3.9% at the end of last year.

At the same time, the ratio for impaired financing went from 3.9% at the end of December to 4.1% at the end of March.

Along with other UAE banks, Dubai Islamic is offering relief packages for retail and corporate clients to soften the impact of the COVID-19 crisis and other economic fallouts. They include repayment holidays, deferred monthly instalments, and debt consolidation.

UAE authorities have also extended stimulus packages worth billions of dollars to mitigate the economic impact of the pandemic and lower oil prices, but even with these, the credit profiles of GCC banks are set to weaken, according to Fitch Ratings

DIB has concluded its acquisition of Noor Bank through a share swap transaction and the smaller institution's operations are currently being integrated into DIB. The process is scheduled for completion by the end of the year, said the bank.

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