Mashreq, one of the UAE's leading financial institutions announced a net profit of AED 647.4 million (US$172.5 million) for the nine months ended 30th September 2010. The Bank's performance, with an operating income of AED 3.2 Billion, is reported against a backdrop of challenging local and global economic conditions.
The Bank's Net Interest Income and income from Islamic products net of distribution increased by 10.3% to AED 1.74 billion in the first nine months of year 2010 compared with AED 1.58 billion for the same period last year. The growth in Net Interest Income was achieved by improvement in Net Interest margins through strategic management of the balance sheet and reduction in cost of funding. The Net Interest margin improved from 2.24% for full year 2009 to 2.60% for the first 9 months of 2010.
The core Fees and other income, after excluding certain one time gains recorded last year has dropped by 13% due to the reduction in Banking products fees and Foreign exchange income. However, the Fee and Other Income to Gross Income ratio at 46% remained one of the highest in the market.
Commenting on Mashreq's nine months performance, Abdul Aziz Al Ghurair, the CEO of Mashreq said, "We have seen stability and growth in Q3 2010 in general, and the Bank's current position is ensuring that we remain optimistic of further growth in the coming period."
"In spite of the difficult global financial environment, Mashreq has delivered a robust performance during the first nine months of the year. Our well diversified and stable revenue streams highlight the sustainability of our operating strategy in these uncertain times." Al Ghurair added.
During the period under review, the Bank has undertaken significant expansion, however proactive cost management has enabled Mashreq to maintain the same levels of operational expenses year on year, while being able to fund its continued growth and investment in strategic projects.
Mashreq continues with prudent provisioning policies and the Bank has set aside AED 317 Million for the third quarter. The total provisions for the first nine months of 2010 at AED 1.21 Billion is lower by 12.3% as compared to AED 1.38 Billion for the same period of 2009, reflecting improvement in portfolio quality.
In line with the Bank's strategy of re-positioning the Balance Sheet, Loans and advances as of 30 September 2010 have declined from AED 47.7 Billion in December 2009 to AED 43.3 billion, a drop of 9.4%. Customer deposits as of September 2010 were AED 49.2 billion a decline of 8.2% from December 2009 levels. This ensured that Advances to Deposits ratio remained at an optimum level of 88% and Liquid Assets comprising of cash and due from banks were strong at 31% of Total Assets, even after repayment of the AED 1.1 billion of EMTN tranche that matured during the first quarter of 2010.
The Capital Adequacy ratio at the end of September 2010 under new Basel II guidelines improved to 22.3% as compared to 20.18% at the end of 2009. The Tier One ratio also improved from 14% at the end of 2009 to 15.6% at the end of Sep. 2010.