Emirates NBD posted an 80% rise in net profit for the second quarter of this financial year, in part a consequence of higher foreign exchange income.
Currency exchange price and market fluctuations frequently cause companies to post vastly different figures in comparison to the same quarter from previous years. In Emirates NBD’s case, foreign exchange profits contributed to the Dubai bank producing a Q2 net profit of 4.74 billion dirhams.
This exceeded predictions from investment specialists EFG Hermes, who had only anticipated a net profit of 4.06 billion dirhams. Non-interest income sources increased by 23%, with foreign exchange income accounting for a considerable part of this growth. Foreign exchange profits were not the only contributing factor to Emirates NBD’s productive quarter. The bank sold its stake in digital payment provider Network International, providing Emirates NBD with an additional profit of 2.1 billion dirhams.
That kind of profit is a one-off that cannot be replicated in future quarters, so Emirates NBD will be far more emboldened by the rise in core operating profits. Chief executive Shayne Nelson revealed that net profit grew by 49% in the first half of the year, while core operating profit was 8% higher than its respective figure for 2018. That core operating profit was propelled by loan growth, increased investment banking activity, and a rise in foreign exchange income.
Predicting foreign exchange markets
Currencies that can sustain a strong performance will inevitably provide higher foreign exchange incomes for businesses from that nation. The UAE, and therefore the dirham, have long been attractive for foreign investors. Earlier in the year, the country was ranked 11th worldwide at attracting Foreign Direct Investments. Nevertheless, it is often difficult for companies to set specific targets of net profit from foreign exchange markets, given the tendency of these markets to fluctuate. Currency pairs are beholden to political and social developments within the relevant countries, and these developments are rarely easy to foresee.
Chief executive Shayne Nelson revealed that net profit grew by 49% in the first half of the year, while core operating profit was 8% higher than its respective figure for 2018.
On a smaller scale, this volatility provides opportunities for individual traders to profit. Forex opportunities for casual traders have swelled in recent years, which is largely a response to technological developments. Smartphones have revolutionised many industries, and forex trading is no different. Most of the best forex brokers now offer a mobile solution, so that traders can check the market while on the move. This allows traders to respond almost instantly to sudden political and economic developments across the world.
There are several other companies in other continents that, like Emirates NBD, have benefited from foreign exchange profits this year. Let’s look into some of them.
This Mexican telecom company saw its Q2 profits boosted by gains in the foreign exchange markets, largely a consequence of the strength of the Mexican peso. Mexico was the first nation to ratify the new deal that replaced the old North American Free Trade Agreement, a renegotiation that has left the peso in good standing. Many currencies have been able to make gains against the US dollar this year, a result of the American currency’s decline.
The Mexican peso has even outperformed the yen against the dollar in 2019, so it is no surprise to see leading Mexican companies like America Movil reaping the benefits. Last year, currency fluctuations restricted America Movil’s Q2 profits to 434.8 million pesos. This year, that net profit came in at a significantly healthier 14.07 billion pesos. Admittedly, the resignation earlier this month of Mexico’s Finance Minister, Carlos Urzua, has prompted an immediate decline in the peso. However, the wider outlook suggests that Mexican companies, like America Movil, should continue to make foreign exchange gains in the remaining quarter of 2019.
Amedeo Air Four
While America Movil posted huge foreign exchange gains in comparison with the previous year, Amedeo Air Four Plus Ltd did the opposite. Different currencies are performing at different levels at any given moment of a year, which is where forex traders find their opportunities for profit. While the Mexican peso may have enjoyed a positive 2019, the GBP has been restricted by political uncertainty in the United Kingdom.
Nevertheless, Amedeo has still produced a foreign exchange gain of £1.9 million for the financial year. However, a comparison to the respective figure from last year reveals the aircraft leasing company’s struggles. Amedeo amassed foreign exchange profits of £184.8 million last year, as well as an overall pre-tax profit of £228.5 million. That its pre-tax profit has fallen to £8.5 million this year is largely attributed to the decline in foreign exchange profits.
UkrProduct Group Ltd
UkrProduct announced its figures for 2018, with the Ukrainian dairy food producer managing a small pre-tax profit as a result of foreign exchange gains. This swing to profit will have understandably been well received by a company that posted a loss of £1.2 million in the previous year. This time, UkrProduct’s £90,000 pre-tax profit will provide hope of a more robust future for the company.