Emirates NBD Third-Quarter Net Seen Rising by 50%: Week Ahead

By Arif Sharif

Oct. 19 (Bloomberg) -- Emirates NBD PJSC, the United Arab Emirates' biggest bank by assets, may say this week third-quarter profit jumped 50 percent, helped by benefits from a merger and higher lending in the second-biggest Arab economy.

Net income for the period ended Sept. 30 advanced to 978 million dirhams ($266 million), according to the median estimate of three analysts surveyed by Bloomberg. Forecasts ranged from 753 million dirhams by Global Investment House KSCC to 1.37 billion dirhams from Al Mal Capital LLC. Compared with the second-quarter this year, profit fell 36 percent.

``The bank has benefited from its size, retail footprint and enhanced product offerings - especially in syndicated loans,'' Deepak Tolani, a Dubai-based research analyst at brokerage Al Mal Capital, said in a report Oct. 12. ``We expect a slowdown in loans and deposit growth from the previous quarter although growth will be healthy on an annual basis.''

Emirates NBD was formed a year ago after its controlling shareholder, the Dubai government, merged Emirates Bank International PJSC and National Bank of Dubai PJSC to create the Persian Gulf's largest bank by assets. The combination was aimed at taking on competition from foreign rivals like Citigroup Inc. and HSBC Holdings Plc.

The region's largest lender achieved revenue benefits and cost savings of 200 million dirhams by the end of June as a result of the merger, 61 percent ahead of its 2008 target, the Dubai-based bank said July 22. Its first-half cost-to-income ratio declined to 37.4 percent from 38.8 percent last year.

Investments Hurt

Third-quarter earnings may be hurt by a ``significant downward revaluation'' of the bank's shares and bonds portfolio, the largest among U.A.E. lenders, Raj Madha, an analyst at EFG- Hermes Holding SAE, said in a report Oct. 14. The Dubai Financial Market index fell 24 percent in the third quarter and the Abu Dhabi market by 20 percent. Bond spreads have ballooned, suggesting bond values declined, it added.

Dubai, one of the U.A.E.'s seven emirates, is building projects like the $33 billion Jebel Ali airport that will be the world's biggest, and the $54 billion Bawadi, a Las Vegas-like entertainment strip. Projects like these are boosting demand for loans and propelling bank earnings.

Emirates NBD's loans at the end of June jumped 42 percent from a year ago, just short of industry growth of 49 percent.

In the third quarter, loan growth is estimated to have slowed ``sharply'' and funding costs risen, as the outlook for the banking industry changed ``rapidly'' from ``excess liquidity to a period of restricted liquidity,'' in part due to the global credit crisis, the EFG-Hermes report said.

``Overall, we expect poor third-quarter results,'' Madha said. ``We have concerns about potential losses from its syndicated lending portfolio'' adding to losses from the downward revision of the investment portfolio, he added.

Commercial Bank of Dubai PSC, another U.A.E. lender, said Oct. 15 quarterly net rose 20 percent to 261 million dirhams.

Markets Last Week

Five of the seven Gulf stock markets tracked by Bloomberg rose last week. Saudi Arabia's Tadawul All Share Index, the only measure in the region closed on Thursdays, jumped 11 percent. The Abu Dhabi Securities Market Index added 5 percent and benchmark indexes in Dubai and Oman gained 0.2 percent and 1 percent, respectively. Qatar's gauge also advanced.

Markets rallied early in the week, after the United Arab Emirates made more funds available to the banking industry and on U.S. government plans to invest $250 billion in banks. Dubai's index surged 22 percent in two days.

Gauges pared gains on speculation that the rescue measures won't prevent a global recession, curbing demand for the region's energy exports and slowing foreign investments.

Industries Qatar soared 11 percent to 124.6 riyals. The largest publicly traded company in the Persian Gulf emirate said third-quarter profit rose to 2.6 billion riyals ($714 million) from 1.35 billion riyals a year earlier.

The following is a list of events in the Gulf next week:

Emaar Properties third-quarter results            Oct. 19
Al Ahli Bank third-quarter results                Oct. 19
Qatar National Cement third-quarter results       Oct. 19
International Islamic Bank third-quarter results  Oct. 19
Qatar Gas Transport Co. third-quarter results     Oct. 19
U.A.E. Middle East Capital Markets conference     Oct. 20
World Carbon Emission Reduction Summit 2008       Oct. 20
National Bank of Abu Dhabi third-quarter results  Oct. 20
Qatar Telecom to announce third-quarter results   Oct. 21
Doha Bank to announce third-quarter results       Oct. 21
Emirates NBD third quarter results                Oct. 22

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net