Dubai Islamic Bank posts 2.12 bln dirhams in H1 profit amid ‘difficult’ Q2

Dubai Islamic Bank on Wednesday (July 22) posted 1.007 billion dirhams ($274 million) in net profit for what it said was a “difficult” three months to June 30, a drop from 1.11 billion dirhams in the first quarter.

This takes the UAE’s largest standalone Islamic bank’s profit for the first six months of this year to 2.118 billion dirhams ($577 million).

The bank’s first-half profit dropped by 23.07%, from 2.753 billion dirhams, compared to the same period last year pre-COVID 19 crisis.

HIGHER EXPENSES, IMPAIRMENT CHARGES

DIB’s total income for the six-month period was 6.824 billion dirhams, only 2.26% lower compared to the same period last year, which considering the economic challenges as a result of the pandemic, can be viewed as a positive achievement.

However, net profit was dragged down by a 22.47% increase in total operating expenses to 1.47 billion dirhams compared to the same six months last year.

The bank attributes this rise to the integration costs incurred in the preceding quarter as part of the acquisition of Noor Bank.

Impairment charges also contributed to the lower profit. They reached 636.716 million dirhams for the second-quarter, down from 1.483 billion dirhams in extraordinary impairment, ECL and overlay that the bank put aside in the first-quarter. These take DIB’s total six-month impairment charges to 2.12 billion dirhams.

Impairment charges for the first six months of 2019 were 724.731 million dirhams and 392 million dirhams in 2018.

DIB’s non-performing financing ratio for the three months to end-June was 4.5%, up from 4.3% in the first-quarter.

DEPOSITS, FINANCING

Customer deposits crossed the 200 billion dirhams mark at the end of June to reach 206.521 billion dirhams. They stood at 164.418 billion dirhams at the end of 2019.

The bank’s net financing and sukuk investments grew to 237.099 billion dirhams at the end of the first half of this year from 184.157 billion dirhams on December 31.

DIB said 20 billion dirhams were deployed in new financing growth driven by the realignment of strategy focusing on lower risk sectors, particularly sovereigns.

“In a bid to realign our strategy and build on our strength in the domestic market, the quarter saw a strong advancement in our financing book of 11% QoQ, driven by our calculated focus on sovereign and related businesses,” CEO Adnan Chilwan said in a statement.

“This deliberate strategy may result in a short-term dilution of margins, but we believe, will lead to a more sustainable business model, particularly given the current uncertain macro-environment, and will also help preserve the strength of our balance sheet and continue to generate stable returns in the future.”

NOOR BANK INTEGRATION BOOST TO ASSETS

DIB started integrating Noor Bank’s operations in the first quarter of this year.

Chilwan said on Wednesday the execution phase of the Noor Bank integration programme started in the second-quarter. “The integration is on track for completion by YE2020, and we anticipate further synergies to materialise over the course of the year,” said the CEO.

DIB completed its acquisition of Noor Bank in January.

The acquisition of Noor Bank took Dubai Islamic Bank’s total assets at the end of June to 294.797 billion dirhams, up from 231.796 billion dirhams at the end of 2019.

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