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DIB adopts digital plan for growth in 2019 - Bloomberg Intelligence

DIB adopts digital plan for growth in 2019 - Bloomberg Intelligence
The Dubai-based bank is well-positioned and has a more-diversified credit portfolio
DIB
DIB
-0.17% 5.83 -0.01

Dubai – Mubasher: Dubai Islamic Bank (DIB) has adopted a new digital strategy that will serve its customers and operational capabilities.

The new plan is to help the UAE’s largest Islamic lender address its challenged retail business this year, according to a new report issued by Bloomberg Intelligence.

The Dubai-based bank is well-positioned and has a more-diversified credit portfolio and refined underwriting, which helped credit quality, the report said.

By the end of 2018, the UAE’s fourth-biggest lender posted a net profit worth AED 5 billion ($1.36 billion), compared to AED 4.5 billion ($1.23 billion) in 2017.

DIB's earnings for the financial year 2019 may come under some pressure from the higher cost of risk as recoveries dry out, along with increasing spending on a new digital strategy, the report found.

“DIB's tactical move to acquire deposits ahead of 4Q's rate rise and intense competition has borne fruit, with NIM at the higher end of the target range,” Bloomberg Intelligence highlighted.

The lender’s 2018 profit growth of 13.7% beat the agency’s expectations on a lower-than-expected cost-to-income ratio and recoveries that sent the cost of risk or default charges below normalised levels.

However, the bank remained its ambitious growth and nonperforming loan and real-estate exposure limit guidance for 2019 amid strong and more-diversified credit expansion.

The bank’s revenues will expand within 8% and 10% this year, versus only 7% in 2018.

“Non-interest revenue is likely to boost top-line growth this year, with fee income expanding on higher corporate volume and a recovery in the retail business,” the report pointed out.

In 2018, DIB has successfully lowered its cost-income ratio to 28%, compared to 30% in the prior year.

The digital strategy is the key to DIB’s ambitious growth and is likely to weigh on the cost-income ratio, bringing it close to the 30% mark, analysts said.

On the other hand, the bank doesn’t expect a substantial increase in its digital investments, unlike Emirates NBD, which is investing more than AED 1 billion in technology over three years.

“DIB's lending appetite will continue to support revenue expansion, with management confident in a strong corporate pipeline, yet this business is uneven,” analysts reported.

DIB, the UAE’s largest Islamic bank by assets, remains confident in its loan- and collateral-portfolio quality, in spite of market worries over the real estate, hospitality, and retail sectors.

The bank can leverage its low lending exposure to the government sector to support its growth strategy, the report said.

By 01:44 pm UAE time, DIB's stock fell 0.78% at AED 5.12.