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Emirates NBD shares tumble as dividend proposal disappoints

A man rides a bicycle past Emirates NBD head office in Dubai Reuters/Satish Kumar
Emirates NBD's stock price declined following the announcement of a reduced dividend for 2024, even with increased annual profits
  • Dubai’s biggest bank
  • Lower quarterly profit
  • Net interest margin decline

Emirates NBD shares tumbled on Wednesday after Dubai’s biggest bank announced a lower dividend for 2024, despite its annual profit rising 7 percent year on year.

The bank, which is majority owned by Dubai government institutions, proposed a dividend of AED1 ($0.27) per share, down from AED1.2 per share in 2023.

Shares fell 9.3 percent to AED20.50 on Wednesday.

Its shares have been among the biggest gainers in a prolonged Dubai bourse rally, tripling in value since slumping to a seven-year low in early 2020. Dubai’s index hit a 16 year-high in mid-January.

The stock price fall is largely due to investor disappointment that the bank did not increase its dividend payout, said Sherif El Etr, a banking analyst at CI Capital in Cairo.

Dubai bellwether Emaar Properties in December announced its 2024 dividend would be double that of 2023, fuelling investor hopes that other blue-chip companies would follow suit, El Etr said, as the emirate’s buoyant economy translates into bumper corporate profits.

Wednesday’s share price slump means the bank’s stock has a dividend yield of 4.9 percent, according to AGBI calculations. That compares with yields of 5.0 percent for First Abu Dhabi Bank and 5.1 percent for Abu Dhabi Commercial Bank, financial website Simply Wall Street estimates.

Emirates NBD made a net profit of AED3.98 billion ($1.08 billion) in the fourth quarter of 2024, down from AED4.02 billion in the prior-year period, according to AGBI calculations.

The bank said its slightly lower quarterly profit was due to “continued investment to drive future growth”, which more than offset its rising income and lower impairments.

Fourth-quarter net interest income was AED8.57 billion, up 9.6 percent year on year, while fees and commission income grew 21 percent to AED1.65 billion over the same timeframe.

The bank’s loan book expanded 10 percent to AED529 billion in full-year 2024 as retail and corporate borrowing increased by nearly one-third and one-tenth respectively.

“Fourth quarter loan growth was below our expectations – we need further clarity on management as to why corporate lending was weaker for the quarter,” El Etr said.

“It could be a timing issue, with some corporate loans agreed in December but not finalised until the following month.”

The bank’s management has given guidance for high single-digit loan growth in 2025, although El Etr predicts this could be slightly bigger at around 12 percent.

“We’re confident in Emirates NBD’s ability to expand its loan book,” he said. “It remains one of our preferred stock picks in the UAE.”

CI Capital has an “overweight” recommendation on Emirates NBD and a share price target of AED28.

Emirates NBD’s fourth-quarter non-performing loan ratio was 3.3 percent, down 130 basis points year on year thanks to recoveries, write-offs, repayments and write-backs. The bank said it will probably make fewer recoveries and suffer “credit deterioration” at its Turkish unit Denizbank.

Emirates NBD made a 2024 annual profit of AED22.97 billion, up 7 percent versus its 2023 net profit of AED21.48 billion in 2023 (p6).

Its 2024 net interest margin, an important metric for banks, was 3.65 percent, down 31 basis points from 2023 following US interest rate reductions. The UAE benchmark rate follows those of the Federal Reserve due to the dirham’s dollar peg.

Emirates NBD forecast its net interest margin will slip to 3.3-3.5 percent in 2025.

“The decline in net interest margins wasn’t a surprise – we expect further margin pressure in the UAE in 2025 although this will be partly offset by higher margins in Turkey,” added El Etr.