Higher provisions led to plunge in top UAE banks’ Q1 profit – ZAWYA

Higher provisions led to plunge in top UAE banks’ Q1 profit – ZAWYA

The net profit of four largest banks-First Abu Dhabi Bank (FAB), Emirates NBD , Abu Dhabi Commercial Bank ( ADCB ) and Dubai Islamic Bank ( DIB )-fell 32 per cent to 5.80 billion dirhams in Q1 2020 compared with the same period last year.. In the context of the impending pandemic looming, banks, where possible, increased their provisioning," said Gowribalan.. For DIB net profit was 1.1 billion dirhams, 18 percent lower y-o-y. Impairment charges rose to 1.48 billion dirhams from 347 million dirhams.. NIMs have been under pressure for UAE banks after the Central Bank was obliged to mirror the US Federal Reserve's series of interest rate cuts.. We expect downward pressure on NIMs, as the full impact of large rate cuts in Q1 2020 filter through over the coming quarters," he added.. To mitigate the effect of the pandemic-related slowdown, the UAE Central Bank has required banks to apply a prudential filter to IFRS 9 expected loss provisions.. The central bank has allowed them more time to update their forecasts for future economic conditions, given the significant uncertainty and them to apply management overlays to top up their provisions..