Emirates NBD Q3 profit dives 69% as COVID-19 lifts bad debt charges
Adds details on earnings, comments, and background
DUBAI, Oct 20 (Reuters) - Dubai's biggest bank Emirates NBD ENBD.DU on Tuesday posted a 69% slump in quarterly profit, as bad debt charges rose in the wake of COVID-19 crisis, while earnings suffered in comparison with last year, when they were swelled by an asset sale.
Net profit for the third quarter fell to 1.56 billion dirhams ($424.74 million), from 5 billion dirhams last year when the bottomline was boosted by a stake sale in Network International NETW.L.
Analysts had expected a net profit of 1.76 billion dirhams. The lender's third-quarter net profit was the lowest recorded since December 2014, according to Refinitiv data.
Emirates NBD said impairment allowances increased 41% to 2.15 billion dirhams by September-end, from a year-ago period.
The bank said recent economic data suggests there has been some recovery in global economic activity, but activity remains well below its level at the beginning of 2020.
Emirates NBD's research team has forecast a 5.5% contraction in the United Arab Emirates' economy this year, as both oil and non-oil sectors are affected by the outbreak.
Ratings agency S&P said in a report last week that authorities in the Gulf region are expected to withdraw the regulatory relief measures progressively over the next six-to-12 months to avoid major repercussions for their banking sector.
"We believe that most of the deterioration in asset quality will be down to struggling SMEs and companies in the real estate, construction, hospitality, and consumer-related sectors," S&P said.
Signs of such deterioration are already emerging.
Arabtec Holding shareholders authorised the board of the Dubai-listed construction company earlier this month to file for liquidation due to its untenable financial position following the fallout from the coronavirus pandemic.
($1 = 3.6728 UAE dirham)
(Reporting by Saeed Azhar, Editing by Shri Navaratnam and Sherry Jacob-Phillips)
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