Mashreq, Dubai's third-biggest lender by assets, posted a 25.7 percent rise in second-quarter net profit on the back of higher fee income, the latest bank in the United Arab Emirates to report strong quarterly numbers.

The bank made a net profit of 402.6 million dirhams ($109.6 million) for the three months to June 30, it said in a statement on Thursday, up from 320.3 million dirhams in the same period last year.

Banks in the UAE were expected to report strong second-quarter earnings thanks to an economic recovery in key sectors, primarily real estate, and lower provisions as the Gulf state recovers from debt troubles at Dubai's state-linked entities.

Emirates NBD, First Gulf Bank and Abu Dhabi Islamic Bank all beat estimates with increases to net profit. National Bank of Abu Dhabi missed expectations but still increased profit by 15.8 percent.

Mashreq's second-quarter profit was boosted by a 23 percent year-on-year advance in net fee and commission income.

The profit increase came despite a 20.9 percent jump in impairments compared with the second quarter of 2012. Provisions for the three months to June 30 were 213.6 million dirhams.

Profit for the first six months of 2013 rose 40.1 percent over the same period last year to 828 million dirhams. The increase was expected after a 57 percent hike in first-quarter net profit year-on-year.

Mashreq chief executive Abdulaziz Al Ghurair said in February that he was "optimistic" about the bank's performance this year and expects profits to grow by 10-15 percent, with provisions continuing to recede.

Loans and advances at the end of June were up 14.6 percent on the end of 2012, while deposits over the same period grew 7.4 percent.

In May the Dubai-based bank settled a lawsuit it brought in the United States, accusing Netherlands-based ING Groep NV of losing 40 percent of a $108 million investment by improperly putting the money in risky debt. – Reuters