Emirates NBD, which reported a 41 percent drop in quarterly net profit, on Monday said its exposure to two Saudi groups was not material but warned economic conditions would remain tough in the near term. The bank, the largest by assets in the United Arab Emirates, said net profit in the second quarter dropped to AED852 million ($232 million) from AED1.45 billion in the same quarter in 2008 “due to the prudent credit impairment allowances taken by the bank during 2009”. The results were below the range expected by two analysts polled by Reuters who forecast AED948 million and AED1.06 billion respectively. “What we can say is that we do have exposure to Saad and Algosaibi, but it is not material in relationship to our balance sheet,” Chief Executive Rick Pudner told reporters during a conference call. He declined to be more specific. The bank said net impairment losses on its financial assets more than quadrupled to AED1.15 billion during the second quarter versus AED248.7 million a year earlier. Analyst Janany Vamadeva at HC Brokerage said the extent of the provisions at Emirates NBD were of concern. “The core operating profit is very good, but the provisioning level is the issue,” Vamadeva said. “This is a common issue among banks in the UAE and we expect it to be like that until the economy recovers.” Gulf banks have seen quarterly profits hammered by provisioning for credit losses amid the financial crisis but also due to exposure to a pair of troubled conglomerates. Regulators and bankers are grappling with fallout from debt restructuring and fraud allegations at privately held Saad Group and Ahmad Hamad Algosaibi & Bros.
