First Gulf Bank (FGB), the third largest lender by assets in the UAE, posted an 8 per cent rise in second-quarter net profit on Sunday, with performance bolstered by growth in new lending and a drop in bad loans.

The results continue a run of positive earnings for UAE lenders during the quarter, with six major lenders now reporting higher profits.

FGB made a net profit of Dh1.45 billion ($394.77 million) for the three months to June 2015, compared to Dh1.35 billion ($367.53 million) in the same period a year ago, it said in a statement.

The results were in line with the estimates of six analysts polled by Reuters earlier this month. They had forecast an average net profit of Dh1.44 billion ($392.03 million).

Loans and advances grew by 16 per cent to Dh148.9 billion ($40.54 million) at the end of June, compared to Dh128.2 billion ($34.90 million) in the year earlier period.

In comparison, overall UAE bank lending rose by 8.8 per cent in June, its highest rate this year, according to central bank data.

FGB's performance in recent quarters has been aided by a general improvement in the amount of provisions it has had to set aside to cover bad loans as the local economy has rebounded. That trend continued in the second quarter as provisions dropped 34 per cent on an annual basis to Dh258 million ($70.2 million).

For the first half of the year, the bank's non-interest revenue remained a solid growth driver, with its contribution to total operating income reaching 31 per cent at the end of June. Core fee income strengthened by 9 per cent on an annual basis to reach Dh978 million ($266.2 million) at the end of June.

Banks have squeezed higher revenue from fees for their products and services as net interest margins have tightened as a result of several years of low interest rates.

Reflecting this trend, FGB said net interest and Islamic financing income for the second quarter dropped by 2 per cent on an annual basis to reach Dh1.61 billion ($438.31 million). - Reuters