Dubai’s ENBD Profit Slumps Amid Tax and Recovery Setbacks

Emirate-owned Emirates NBD has recorded a 9 percent drop in its net profit for the first half of 2025, reporting AED 12.5 billion, down from AED 13.8 billion during the same period last year, the bank announced on Thursday. The decline has been attributed to lower recoveries—amounting to AED 2 billion less than the previous year’s figures—and a hike in its tax rate.

The UAE’s largest bank by assets cited “very strong recoveries” in H1 2024, which did not recur this year, exacerbating the impact of the new, higher rate of corporate tax as it began applying in 2025. The bank underscored that the profit dip reflected these dual pressures rather than operational weakness.

Despite this, Emirates NBD maintained robust lending activity and deposit mobilisation. The bank had seen strong growth in both loans and deposit inflows through the first quarter, supported by its expanding international operations, especially in Saudi Arabia. Pre-tax earnings for the first quarter alone reached AED 7.8 billion, a 56 percent increase quarter-on-quarter, reflecting strong core performance.

Analysts note Emirates NBD’s diversified funding base, driven by CASA deposits, alongside expanding digital offerings and product innovation. The bank has pushed into digital-first banking with initiatives like ENBD X in Saudi Arabia and WhatsApp banking in the UAE. Partnerships with Mastercard and Visa on AI and cybersecurity have also boosted its fintech credentials.

Nonetheless, the combination of a new fiscal regime and volatile recovery income has diminished profitability in headline terms. The AED 2 billion year‑on‑year drop in recoveries, compared with last year’s elevated benchmark, underscores this shift. The bank noted that recoveries in H1 2025 fell significantly short of levels seen in the prior period.

Dubai’s government holds a majority stake in Emirates NBD, reinforcing its strategic position in the emirate’s financial ecosystem. Management has emphasised that the pre-tax performance remains healthy, buoyed by loan growth across retail, corporate and treasury segments, as well as disciplined risk management and expense control.

Compared with regional rivals, Emirates NBD remains among the strongest performers. First Abu Dhabi Bank, the UAE’s other large financial institution, reported a 26 percent increase in net profit to AED 10.6 billion for H1 2025, driven largely by non‑interest income such as fees and trading. Analysts suggest that Emirates NBD’s focus on lending and core banking, rather than fee-driven services, positions it differently in the regional landscape.

The introduction of the UAE’s new corporate tax regime has added complexity to earnings estimates across the banking sector. With a 9 percent headline rate now in effect, banks must factor in a higher baseline tax expense. Emirates NBD’s CFO has described this as a timing phenomenon—the result of stronger recoveries in the prior year combined with new taxation—without signalling a long-term earnings concern.

Recovery performance—reflecting loan repayments from distressed or restructured borrowers—stands as a key variable going forward. A strong economic environment typically supports better recoveries, though predictability is low. Bank management plans to offset this volatility by deepening digital channels and international expansion.

In the shorter term, investors will be monitoring whether recoveries can return to prior levels in the second half of 2025, and how much the bank can harness further cost efficiencies. Emirates NBD’s guidance for full‑year 2025 highlights continued loan momentum, healthy asset quality, and ongoing fintech investment, suggesting that net earnings could rebound if recovery trends align and tax impact stabilises.