Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Emirates NBD PJSC (DFM:EMIRATESNBD, Financial) reported a 56% increase in profit before tax, reaching AED7.8 billion, driven by strong loan demand and an improved deposit mix.
- The bank's balance sheet surpassed the AED1 trillion milestone, supported by impressive loan and deposit growth.
- Emirates Islamic's quarterly profit exceeded AED1 billion for the first time, highlighting its strong position in the UAE's Islamic banking sector.
- The bank achieved a 35% market share in UAE credit card spend, demonstrating its dominance in the retail banking sector.
- Innovative products and strategic investments in digital and regional networks have successfully offset lower interest rates, contributing to a 11% year-on-year income increase.
Negative Points
- The potential impact of tariffs and lower oil prices could indirectly affect trade and corporate confidence, posing a risk to future growth.
- Volatility in equity and bond markets may influence consumer behavior, potentially affecting property and holiday spending.
- The bank's cost-income ratio increased to 30.9%, with costs rising 20% year-on-year due to investments in digital and international expansion.
- Denise Bank's cost of risk is expected to be at the higher end of the 100 to 200 basis points range due to high interest rates affecting retail and SME books in Turkey.
- The bank anticipates a tightening of net interest margins by 20 to 25 basis points for the full year, influenced by expected rate cuts and changes in business mix.
Q & A Highlights
Q: Your quarter-on-quarter loan growth of 3.5% is impressive. Do you see any upside to your high single-digit loan growth guidance for the year, especially considering the strong momentum in Saudi Arabia? Also, do you foresee any risks to loan growth due to weaker oil prices?
A: We have strong momentum, particularly in retail, and expect it to continue, though not necessarily at the same pace every quarter. Corporate growth may moderate, and we maintain our high single-digit guidance due to sovereign repayments. Regarding oil prices, we don't see a major negative impact on credit quality across the region. Our strategy includes growing in markets like Turkey, Egypt, and India, where low oil prices are beneficial.
Q: You didn't revise the cost of risk guidance despite strong recoveries. Is it reasonable to expect you might come in towards the lower end of your guidance? Also, could strong performance lead to a higher dividend at the end of the year?
A: We had strong recoveries in Q1, but these aren't linear. We maintain our 40-60 basis points guidance, expecting to be towards the lower end. Regarding dividends, it's early to discuss, but we focus on driving core business growth, which has been strong.
Q: Has recent market volatility been favorable to your trading and hedging businesses? Also, trade finance income was strong despite global trade pressures. Can you explain this trend?
A: Market volatility helps our global markets business, but we're not heavily reliant on proprietary trading. In trade finance, we haven't seen tariff impacts, and our markets have trade deficits with the US, minimizing tariff risks. We continue to focus on growing trade.
Q: What is your minimum CET1 level, especially considering M&A aspirations? Also, your NIM guidance seems to decline; is this due to expected rate cuts or changes in business mix?
A: We haven't published a specific CET1 target, but you can estimate excess capital using a 12.5% threshold. Our NIM guidance considers expected rate cuts and a tightening margin in ENBD, with Denise Bank's margin expected to moderate slightly.
Q: Can you clarify your lending strategy in Saudi Arabia? Are loans cash flow-linked or collateral-based?
A: Our lending in Saudi is bilateral and focused on the private sector. We are a cash flow bank, meaning we prioritize cash flow evidence for lending decisions. Our focus is on private enterprises for cross-selling opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
