DUBAI: Dubai Islamic Bank's (DIB) third-quarter net profit fell 31 per cent year-on-year, much worse than forecast, as the lender booked higher provisions for exposure to bad loans.
Analysts had forecast the bank's third-quarter profit to range between a 13.8 per cent rise to a decline of 28.4pc.
The bank reported a drop in its nine-month earnings to 1.12 billion UAE dirhams ($304.9 million), or 35pc from the same period last year.
The lender booked provisions of 164m dirhams in the three months to September 30, slashing its net profit to 296.75m dirhams.
DIB said earlier this year that it had no exposure to Saudi conglomerates Saad Group and Ahmed Hamad Algosaibi & Brothers, whose debt is forcing lenders across the Gulf region to beef up their bad debt cushions.
The lender predicted a better business environment in the coming period.
"The past 12 months have presented a range of unprecedented threats to the stability of the global financial system," chairman Mohammed Al Shaibani.
The bank's total assets dropped to 82.9bn dirhams from 87.8bn dirhams at the end of the second quarter.
Rating agency Fitch said late last month that Dubai Islamic was one of eight UAE's banks that continue to face rising impairments and other challenges, but can absorb higher impairments as capitalisation has improved and they have a high level of sustainable revenues.
DIB's shares eased 0.32pc on Thursday to 3.16 dirhams, close to a year high of 3.37 dirhams logged on October 15.
Meanwhile, Saudi banks booked more provisions for bad loans during the third quarter but a veil of secrecy over the level of their exposure to troubled private firms is keeping investors guessing over their adequacy.
Stock exchange data showed that five Saudi banks booked more provisions for loan losses in the quarter, raising by at least 183pc their total amount this year compared to the first nine months of last year.
"We don't have a clear idea about exposure ... If you don't know the level of exposure, then it will be difficult to say if these provisions are enough," said KSB Capital deputy chief executive Ibrahim Al Alwan.
Standard & Poor's says banks in Saudi and the UAE account for almost two-thirds of the total net exposure to the conglomerates of the 30 commercial banks it rates in the Gulf.
