Mashreqbank on Wednesday reported a 38-per cent drop in quarterly net profit, citing increased provisions against bad loans.

Mashreqbank, the largest lender by market value in Dubai, said net profit fell to Dh435 million ($118.4 million) from Dh706.86 million in the same period in 2008.
   
Mashreqbank booked provisions of Dh319 million in the quarter. Total provisions stood at Dh551.4 million in the first half of 2009, compared with Dh200.3 million in the same period last year, it said.

A slew of Gulf lenders have been forced to boost provisions as they face an economic downturn, and against their exposure to a pair of troubled Saudi firms.

The provisions 'are key to ensuring that the bank operates in a sustainable manner while the ups and downs of the current crisis play out,' chief executive Abdul Aziz Al Ghurair said.

Mashreqbank last week confirmed it was suing Ahmad Hamad Algosaibi & Bros, one of the two Saudi companies at the heart of a large financial dispute.

Mashreq's Tier 1 ratio - a measure of financial strength - now stands at 14.8 per cent, a level it achieved following help from the government and by reducing risk-weighed assets.-Reuters