Dubai Islamic Bank PJSC reported a 33 percent drop in second-quarter profit as income from investments at the biggest Islamic lender in the United Arab Emirates (UAE) declined.
Net income fell to 301.3 million dirhams (US$$82 million) from 450.3 million dirhams a year earlier, the bank said in a statement yesterday. That beat the median estimate of five analysts for a profit of 217 million dirhams, according to estimates compiled by Bloomberg. The shares rose for the first time in more than a week, gaining 1.1 percent to 1.89 dirhams at 11:21am in Dubai.
“Despite conservative financing and provisioning policy, the retail and corporate banking division has registered positive growth,” chairman Mohammed Ibrahim Al Shaibani said in the statement.
Global sales of Islamic bonds, or sukuk, dropped 28 percent to US$7.85 billion so far this year, according to data compiled by Bloomberg. Sukuk sold by the six-country Gulf Cooperation returned 0.5 percent in the second quarter, compared with 7.3 percent in the year-earlier period, according to the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index.
Income from investments in Islamic bonds at the government- controlled bank declined 37 percent to 94.2 million dirhams, while income from financing and investing assets retreated 7.2 percent to 794.9 million dirhams. Dubai Islamic set aside 146 million dirhams for impairment provisions.
UAE banks have increased provisions for bad loans and tightened lending because of the global credit crisis and a drop in real-estate prices. Dubai property prices have slumped more than 50 percent from their peak in August 2008 as mortgages dried up, according to estimates from Colliers International
Total assets stood at 83.8 billion dirhams at the end of June, the bank said. That compares with 84.9 billion dirhams at the end of the first quarter. Customer deposits were at 64.8 billion dirhams at the end of June.
Transactions in the Islamic financial services industry are based on the exchange of asset flows rather than interest, to comply with the religion’s principles. The majority of sukuk are of the Ijarah type, which are based on a sale and lease agreement, as in real estate.
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