Emirates NBD's Q1 Profit Drops As It Sets Aside $700m In Covid-19 Provisions

Emirates NBD set aside about $700 million in the first quarter to cover bad loans, giving investors a glimpse at the damage the coronavirus and lower oil prices are wreaking on bank earnings in the Gulf.

Dubai’s biggest bank increased impairments more than four times, resulting a 24% drop in its first-quarter profit, according a statement.

The lender boosted provisions for a potential deterioration in credit quality in the coming quarters due to the coronavirus pandemic, it said.

First-quarter numbers:

• Profit 2.08 billion dirhams vs 2.74 billion
• Impairment allowances 2.56 billion vs 570 million
• Total income 6.89 billion dirhams vs 4.72 billion
• Net interest income 4.94 billion dirhams vs 3.4 billion
• Non-interest income 1.95 billion dirhams vs 1.32 billion
• Cost to income ratio 29.8% vs 29.6%
• Net interest margin 3.02% vs 2.83%
• “Regional banks face multiple challenges from low interest rates, low oil prices and lower economic growth due to disruption from COVID-19,” Group CFO Patrick Sullivan said

Banks in the six-member Gulf Cooperation Council face an “earnings shock” from the plunge in oil prices and the coronavirus pandemic, according to S&P Global Ratings.

Profit growth at Qatar National Bank stalled in the first quarter, while Dubai’s Mashreq Bank recorded a 28% drop and Oman’s Bank Muscat posted a 27% decline.

Business conditions in Dubai worsened in March to the lowest level since IHS Markit began compiling its purchasing managers’ index a decade ago. Banks might get a boost in the coming months after the United Arab Emirates cut required reserves for demand deposits, and unlocked more stimulus to support lending.

Dubai’s Emirates NBD revealed a $203 million exposure to NMC Health earlier this month.