Islamic Finance

Dubai’s Islamic banks see impairments fall on economic recovery

Dubai Islamic Bank and Emirates Islamic posted large drops in impairment charges for the first half of the year, citing economic recovery.

DIB reported a 29% fall in impairment losses to 1.5 billion dirhams ($0.41 billion) although net profit dropped by 12% year-on-year to 1.86 billion dirhams, according to a bourse filing on Wednesday (July 28).

Emirates Islamic saw its impairment allowances slashed by 85.56% year-on-year to 85.2 million dirhams, according to a statement on Wednesday.

The bank’s net profit surged to 568.71 million dirhams compared to 11.85 million dirhams for the first six months of 2020, a 4,700% increase.

A subsidiary of Emirates NBD, Dubai’s biggest lender, Emirates Islamic has cause to cheer as it was the only standalone Shariah-compliant bank in the UAE last year to post a loss.

The UAE central bank in its most recent quarterly report, for the first three months of the year, forecasted GDP growth of 2.4% for 2021 from a contraction of 6.1% last year. This remains below the 2019 pre-pandemic level of 3.4%.

The non-oil sector showed improvement in the first quarter, benefiting from the pick-up in global travel, said the central bank. Oil production fell by 17.6% year-on-year in the first quarter and the central bank expects real oil GDP to contract by 1% this  year.

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