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A quick look at Emirates Islamic Bank PJSC

The bank's profitability suggest that the UAE Islamic banking market may not be very competitive. Its immediate parent is a conventional bank, and like many UAE businesses is state owned.

Posted 24 April 2022

Many people underestimate how much you can learn about a company simply by reading its published accounts.

The idea for my February column for the magazine "Islamic Finance News" came from repeatedly seeing the name of Emirates Islamic Bank's CEO Salah Mohammed Amin in the media.

You can read it below.

A quick look at Emirates Islamic Bank PJSC

To avoid missing mentions of myself in the media, several years ago I set up a Google alert on “Mohammed Amin” so that Google’s search engine would automatically tell me about any mentions in the previous 24 hours.

The unavoidable consequence is that most days I receive an alert because some random person with “Mohammed Amin” as part of his name is in the media. Usually they are politicians, but sadly I also see too many stories about criminals called “Mohammed Amin”!

Recently, for three days running, Google alerts told me about the 2021 preliminary results of Emirates Islamic Bank because its CEO is Salah Mohammed Amin. Those press reports led me to take a closer look.

Emirates Islamic Bank PJSC (public joint stock company) is the third largest Islamic bank in the UAE, although it is much smaller than the largest, Dubai Islamic Bank, which has about four times the assets. It has just announced the preliminary results for the year ended 31 December 2021 as a profit of AED 823 million, about US$ 224 million. (The UAE Dirham, AED, is worth about $0.27 approximately.)

Obviously, the full 2021 financials are not yet available. However, from the bank’s website I had no problems downloading the 2020 annual report, financial statements and Basel II Pillar III disclosures.

Overall, I found the reports excellently informative. In my view the main reason is international standardisation. The accounts are of course prepared under International Financial Reporting Standards. As I have often said, the accounting standards promulgated by AAOIFI (the Accounting and Auditing Organisation for Islamic Financial Institutions) are used by very few countries and I see negligible likelihood of that changing.

The 2020 financial result was a significant loss of AED 425 million (US$ 115.72 million). That was no surprise given the impact of COVID—19 on economies everywhere, including the UAE. (The financial statements disclose the geographical distribution of the bank’s assets and show that its business is overwhelmingly domestic, both retail and corporate.)

The previous year, 2019, was presumably normal and the bank reported a profit of AED 1,061 million (US$ 288.90 million). That represents a return of 12.7% on its 31 December 2019 shareholders’ equity of AED 8,305 million (US$ 2,261 million). That return on equity is much higher than the figures I see for UK Islamic banks or indeed large UK conventional banks. Perhaps the UAE Islamic banking market is not particularly competitive. I may look more closely in a future article.

I had two other thoughts while looking at the report and accounts.

Firstly, the bank is a subsidiary of Emirates NBD Bank PJSC of Dubai which is a conventional bank. That replicates the pattern which I see very commonly around the world (except where it is legally prohibited) of conventional banks having an Islamic subsidiary. There is obvious scope for shared expertise and movements of personnel, compared with the challenges of running a small stand-alone Islamic bank.

Secondly, the ultimate parent company of Emirates NBD Bank PJSC is Investment Corporation of Dubai, a company in which the Government of Dubai is the major shareholder. This is a reminder of high levels of state ownership of business in the UAE and most other OIC countries. In my view, this is always a bad idea.

Mohammed Amin is an Islamic finance consultant and former tax partner at PwC in the UK.


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