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Dubai Islamic Bank
DFM: DIB · Quarterly review Q2 2026
Rating
Equal-Weight
Fair value
AED 7.95
Analyst
S. Rahman
Status
published
Pipeline
Editor
Model
Charts
Studio
Stage 1 · Results & model update
Generation complete: DIB_BeatMiss_Q22026.md, DIB_Model_Q22026.xlsx
accepted
Associate summary:
Generation complete: DIB_BeatMiss_Q22026.md, DIB_Model_Q22026.xlsx
# Dubai Islamic Bank (DFM: DIB) — Q2 2026 beat/miss and estimate revisions **Stage 1 working paper — earnings update, Q2 2026** Prepared 28 August 2026 | Contract: `dreams-associate/contracts/earnings-update-structure.json` v1.0.0 Inherited model: `dreams-associate/reports/DIB/Task2_Model/DIB_Financial_Model_2026-08-28.xlsx` Updated model: `dreams-associate/reports/DIB/EU_Q22026/Stage1/DIB_Model_Q22026.xlsx` Results announced 14 July 2026. Rating and fair value carried forward from the initiation dated 28 August 2026. --- ## 1. Verdict An in-line quarter with a rearranged income statement. Q2 2026 net profit of AED 1,937.6m came in 4.0% above our pro-rated estimate and H1 2026 profit before tax of AED 4,334.0m landed within AED 0.1m of it, but the composition differs from what we modelled on three counts: non-funded income is running ahead on non-core items while fees are behind, the cost base is growing materially faster than we assumed, and provisions were front-loaded into Q1 through an AED 186m ECL overlay that left Q2 impairments at just AED 69.2m. FY2026E EPS moves from AED 0.928 to AED 0.930 (+0.2%) because these offset almost exactly. The genuine change is further out: a permanently higher cost base and a re-based investment-property income line cut FY2027E EPS by 3.4% and FY2030E EPS by 3.1%. Blended fair value moves from AED 7.98 to AED 7.95, an upside of 8.7% against the 27 August 2026 close of AED 7.31. **Under the house +/-15% rule the rating remains Equal-Weight, unchanged.** --- ## 2. Beat/miss table Reported figures are from the reviewed condensed consolidated interim financial information for the six-month period ended 30 June 2026 [1]. "Our estimate" is the inherited FY2026E model pro-rated — 25% of full-year flows for Q2, 50% for H1, and balance sheet items straight-lined from 31 December 2025 to the modelled year end. Surprise is reported divided by our estimate, less one; for expense and impairment lines a negative surprise means the charge came in **smaller** than modelled. No quarterly consensus is published for DFM-listed DIB, so consensus is shown on the FY2026 basis only [5]. AED millions unless stated. ### Q2 2026 (three months ended 30 June 2026) | Metric | Reported | Our estimate | Consensus | Surprise | |---|---:|---:|---:|---:| | Net operating revenue | 3,246.3 | 3,356.0 | n/a | (3.3%) | | Net funded income | 2,290.5 | 2,315.7 | n/a | (1.1%) | | Non-funded income | 955.7 | 1,040.3 | n/a | (8.1%) | | Total operating expenses | (969.2) | (982.7) | n/a | (1.4%) | | Pre-impairment operating profit | 2,277.0 | 2,373.4 | n/a | (4.1%) | | Impairment charges, net | (69.2) | (206.4) | n/a | (66.5%) | | Profit before income tax | 2,207.8 | 2,167.0 | n/a | +1.9% | | Net profit for the period | 1,937.6 | 1,863.6 | n/a | **+4.0%** | | Attributable to owners of the Bank | 1,855.9 | 1,785.4 | n/a | +3.9% | | EPS (AED) | 0.25 | 0.232 | n/a | +7.7% | ### H1 2026 (six months ended 30 June 2026) | Metric | Reported | Our estimate | Consensus | Surprise | |---|---:|---:|---:|---:| | Total income (gross revenue) | 12,438.9 | 12,413.0 | n/a | +0.2% | | Net operating revenue | 6,794.5 | 6,712.1 | n/a | +1.2% | | Net funded income | 4,590.2 | 4,631.4 | n/a | (0.9%) | | Non-funded income | 2,204.3 | 2,080.7 | n/a | **+5.9%** | | Total operating expenses | (1,971.3) | (1,965.4) | n/a | +0.3% | | Cost-to-income ratio | 29.01% | 29.28% | n/a | (0.27pp) | | Pre-impairment operating profit | 4,823.3 | 4,746.8 | n/a | +1.6% | | Impairment charges, net | (489.3) | (412.8) | n/a | **+18.5%** | | Profit before income tax | 4,334.0 | 4,334.0 | n/a | 0.0% | | Income tax expense | (597.7) | (606.8) | n/a | (1.5%) | | Net profit for the period | 3,736.3 | 3,727.3 | n/a | +0.2% | | Attributable to owners of the Bank | 3,572.0 | 3,570.7 | n/a | +0.0% | | EPS (AED) | 0.47 | 0.464 | n/a | +1.3% | ### Balance sheet at 30 June 2026 | Metric | Reported | Our estimate | Consensus | Surprise | |---|---:|---:|---:|---:| | Islamic financing and investing assets, net | 280,995.4 | 275,157.9 | n/a | **+2.1%** | | Investments in sukuk | 85,165.7 | 90,588.6 | n/a | **(6.0%)** | | Customers' deposits | 326,978.3 | 329,790.0 | n/a | (0.9%) | | Total assets | 423,169.7 | 427,814.8 | n/a | (1.1%) | ### FY2026 basis — the only level at which consensus is findable | Metric | Reported/revised | Our prior estimate | Consensus | Surprise vs consensus | |---|---:|---:|---:|---:| | Net operating revenue, FY2026E | 13,519.0 | 13,424.1 | 13,400 | +0.9% | | EPS, FY2026E (AED) | 0.930 | 0.928 | 0.95 | (2.1%) | Consensus is the Simply Wall St analyst consensus for DIB, 8 analysts, published 1 May 2026: FY2026E revenue AED 13.4bn on the reported net-operating-revenue basis and FY2026E statutory EPS AED 0.95 [5]. We could not locate a published Q2 or H1 2026 consensus for DIB from any provider; Reuters reported the Q2 attributable profit of AED 1.86bn without an estimate comparison [6]. The sell-side price target consensus stands at AED 8.21 across 14 analysts as at 27 August 2026 [7], against AED 8.97 from the smaller Simply Wall St panel on 1 May 2026 [5]. ### What the surprises mean - **The Q2 profit beat is a provisioning-timing artefact, not an operating beat.** Our pro-rata put a quarter of the full-year impairment charge into Q2 (AED 206.4m); the actual charge was AED 69.2m because the AED 186m ECL overlay was taken in Q1 and management confirmed no further overlays in Q2 [3][4]. Above the impairment line Q2 missed: pre-impairment operating profit was 4.1% light. - **H1 profit before tax matched our estimate to within AED 0.1m** — a coincidence of a revenue beat, a provisioning miss and a cost line that landed on top of our number. - **Non-funded income beat on H1 but missed on Q2.** The H1 beat is entirely "other income" (AED 785.3m against AED 270.4m in H1 2025, +190% YoY), concentrated in Q1. Q2 non-funded income of AED 955.7m was down 12.9% YoY as investment property income collapsed to AED 25.6m from AED 207.4m. - **Fees are two different stories.** H1 commissions, fees and FX of AED 906.3m fell 2.7% YoY against our +6% growth assumption, but the weakness is all Q1 (AED 427.0m, -15.5% YoY); Q2 fees of AED 479.3m rose 12.4% YoY. - **Costs are the real miss.** H1 operating expenses rose 9.1% YoY against net operating revenue growth of 6.6% — negative jaws of 2.5pp. Personnel costs were up 8.2% and G&A up 14.1%, against our modelled full-year growth of 5% and 4%. Reported H1 cost-to-income of 29.01% is above management's 28% full-year target [2]. - **Financing growth is ahead of plan, the sukuk book is being run down.** Net financing rose 7.2% year to date against our full-year assumption of 10%, while the sukuk portfolio fell 6.0% year to date against our assumption of no change. Senior sukuk issued fell to AED 16.6bn from AED 25.1bn and due-to-banks rose to AED 9.9bn from AED 2.0bn — a visible shift in the funding mix. --- ## 3. Estimate revision log Every change made to the inherited model, with old and new values. Model cells refer to `DIB_Model_Q22026.xlsx`. Section E of the new "Q2 2026 Actuals" sheet carries the same log inside the workbook. ### Driver assumptions changed | # | Line | Model cell | Old | New | Reason | |---|---|---|---:|---:|---| | 1 | Net financing growth, FY2026E | `'Revenue Model'!G8` | 10.0% | 12.0% | H1 delivered 7.2% YTD growth already; 12% needs only 4.4% in H2 and management flagged a stronger H2 pipeline across sovereign, energy, aviation, utilities and manufacturing [4]. | | 2 | Sukuk portfolio growth, FY2026E | `'Revenue Model'!G10` | 0.0% | (5.0%) | The book ran off 6.0% YTD to AED 85.2bn; we allow a 1% H2 rebuild from redeployment of the AT1 and planned senior sukuk proceeds [1][2]. | | 3 | Gross yield on average earning assets, FY2026E | `'Revenue Model'!G15` | 5.65% | 5.67% | H1 annualised at 5.695%; we hold the H2 exit slightly lower on the expected easing path, giving 5.67% for the year. | | 4 | Due to banks, FY2026E | `'Revenue Model'!G22` | 6,000 | 9,000 | Reported at AED 9,913.8m at 30 June against AED 1,966.4m at year end; interbank is now a standing part of the funding mix [1]. | | 5 | Senior sukuk issued, FY2026E | `'Revenue Model'!G23` | 20,000 | 18,000 | The senior sukuk balance fell AED 8.4bn in H1 to AED 16.6bn as maturities ran off; management flagged a possible H2 senior unsecured issuance but not a full replacement [1][3]. | | 6 | Fee, commission and FX income growth, FY2026E | `'Revenue Model'!G34` | +6.0% | 0.0% | H1 fees fell 2.7% YoY. Flat for the year implies H2 of AED 967.6m, +2.7% YoY, consistent with the Q2 recovery rather than the weak Q1. | | 7 | Income from investment properties, FY2026E | `'Revenue Model'!G36` | 300 | 180 | H1 came in at AED 79.7m against AED 380.7m a year ago. AED 180m implies H2 of AED 100m against AED 124m in H2 2025. | | 8 | Income from investment properties, FY2027E–FY2030E | `'Revenue Model'!H36:K36` | 300 each | 200 each | Two consecutive years of decline (FY2024 AED 738.9m, FY2025 AED 504.7m, H1 2026 AED 79.7m) re-base the run rate; this is a level reset, not a timing effect. | | 9 | Other income, FY2026E | `'Revenue Model'!G39` | 1,000 | 1,250 | H1 alone booked AED 785.3m. AED 1,250m implies H2 of AED 465m, just above the AED 200m Q2 run rate, treating the lumpy Q1 gain as non-repeating. | | 10 | Other income, FY2027E–FY2030E | `'Revenue Model'!H39:K39` | 800 / 800 / 850 / 900 | 900 / 900 / 950 / 1,000 | The line has re-based over FY2025–26 (FY2023 AED 294.2m to FY2025 AED 1,003.6m); the old outer-year path implied a return to 2023-24 levels that the last six quarters do not support. | | 11 | Personnel expense growth, FY2026E | `'Income Statement'!G21` | +5.0% | +7.5% | H1 personnel costs rose 8.2% YoY; 7.5% for the year implies H2 growth moderating to 6.8%. | | 12 | G&A expense growth, FY2026E | `'Income Statement'!G22` | +4.0% | +10.0% | H1 G&A rose 14.1% YoY on digital and franchise investment; 10% for the year implies H2 growth of 6.3%. | | 13 | Cost of risk, FY2026E | `'Income Statement'!G30` | 30bps | 28bps | H1 booked AED 489.3m, 36bps annualised on our definition, but AED 186m of that was a one-off Q1 overlay and Q2 ran at 10bps annualised. 28bps for the year implies H2 charges of AED 288m, still double the Q2 run rate. | | 14 | Effective tax rate, FY2026E | `'Income Statement'!G34` | 14.0% | 13.8% | H1 effective rate of 13.79% (Q2 12.24%) against AED 597.7m of tax on AED 4,334.0m of pre-tax profit [1]. | | 15 | NCI share of net profit, FY2026E–FY2030E | `'Income Statement'!G38:K38` | 4.2% | 4.4% | H1 minorities took 4.40% of group profit against 3.56% a year earlier, on faster growth at the consolidated subsidiaries. | | 16 | Base-case cost-to-income ratio, scenario engine | `Scenarios!C10` | 29.5% | 30.0% | Aligns the scenario engine with the revised full-model cost path so the 2030E scenario outputs stay consistent with the income statement. | ### Consequential changes to the estimates Nothing else was touched. The following move only because the drivers above moved. **FY2026E** | Metric | Old | New | Change | |---|---:|---:|---:| | Net funded income | 9,262.8 | 9,340.1 | +0.8% | | Net profit margin (NFI / avg earning assets) | 2.53% | 2.55% | +2bps | | Non-funded income | 4,161.3 | 4,178.9 | +0.4% | | Net operating revenue | 13,424.1 | 13,519.0 | +0.7% | | Total operating expenses | (3,930.7) | (4,062.2) | +3.3% | | Cost-to-income ratio | 29.28% | 30.05% | +0.77pp | | Pre-impairment operating profit | 9,493.5 | 9,456.9 | (0.4%) | | Impairment charges | (825.5) | (777.8) | (5.8%) | | Profit before income tax | 8,668.0 | 8,679.1 | +0.1% | | Net profit | 7,454.5 | 7,481.4 | +0.4% | | Attributable to owners | 7,141.4 | 7,152.2 | +0.2% | | **EPS (AED)** | **0.928** | **0.930** | **+0.2%** | | DPS (fils) | 35 | 35 | unchanged | | ROTE | 15.07% | 15.09% | +2bps | | Net financing, year end | 288,260.6 | 293,501.7 | +1.8% | | Investments in sukuk, year end | 90,588.6 | 86,059.2 | (5.0%) | | Total assets, year end | 439,681.3 | 440,708.2 | +0.2% | | Tangible book value per share (AED) | 6.443 | 6.444 | +0.0% | **FY2027E and beyond** — the outer years carry the higher cost base and the re-based property income, with growth rates unchanged. | EPS (AED) | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E | |---|---:|---:|---:|---:|---:| | Old | 0.928 | 0.891 | 0.886 | 0.952 | 1.020 | | New | 0.930 | 0.861 | 0.857 | 0.921 | 0.988 | | Change | +0.2% | (3.4%) | (3.3%) | (3.2%) | (3.1%) | | Cost-to-income ratio | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E | |---|---:|---:|---:|---:|---:| | Old | 29.3% | 29.9% | 30.4% | 29.9% | 29.4% | | New | 30.1% | 31.1% | 31.5% | 31.0% | 30.5% | The outer-year cost-to-income path is the single largest consequence of this quarter and should be flagged in the note. Holding the inherited 5% personnel and 4% G&A growth rates off a cost base that is 3.3% higher pushes the ratio above 31% through the forecast period, against management's 28% target. Reaching that target requires cost growth below our assumption, not just revenue growth above it. ### Explicitly not revised | Assumption | Value held | Why the quarter does not change it | |---|---|---| | Cost of funds, FY2026E | 3.20% | H1 annualised at 3.222%. Management attributed elevated Q2 term-deposit pricing to a temporary liquidity premium and expects normalisation [4]. | | Customer deposit growth, FY2026E | +6.0% | H1 was +2.1% YTD, but the funding gap was met with interbank and the H2 deposit season is seasonally stronger. The funding-mix change is captured in revisions 4 and 5 instead. | | DPS, FY2026E | 35 fils | No interim dividend; DIB declares annually. Nothing in H1 changes the payout view. | | Outer-year cost of risk | 40/45/45/45bps | Still below management's stated 50–60bps normalised level. One benign quarter after a Q1 overlay is not evidence for the 2027–30 path. | | Effective tax rate beyond FY2026E | 15.0% | The H1 rate reflects period-specific reliefs; the medium-term UAE corporate tax view is unchanged. | | Cost of equity (10.7%), terminal growth (3.0%), sustainable ROTE (13.0%) | unchanged | Valuation inputs are set on a through-cycle basis; a single in-line quarter is not a reason to move them. | | Share price | AED 7.31 (27 Aug 2026) | Current market price at the model date [7]. | | Receivables, payables, other reserves, translation reserve, associates carrying value | unchanged | 30 June balances differ from the modelled year end but these are volatile, non-earning lines with no effect on profit or valuation. Reported balances are recorded on the "Q2 2026 Actuals" sheet. | --- ## 4. Valuation and rating The four-method blend and its weights are inherited unchanged from the initiation. Only the underlying estimates moved. | Method | Weight | Old | New | Change | |---|---:|---:|---:|---:| | Justified P/TBV (Gordon on ROTE) | 25% | 8.37 | 8.37 | +0.0% | | Dividend discount model | 25% | 6.39 | 6.24 | (2.4%) | | Trading comparables | 25% | 8.29 | 8.30 | +0.1% | | Historical multiples | 25% | 8.87 | 8.88 | +0.1% | | **Blended fair value (AED)** | **100%** | **7.98** | **7.95** | **(0.4%)** | The DDM does the work: dividends per share to 2030 are unchanged, so the entire move comes from the terminal value, which is set off FY2030E EPS — down 3.1% on the higher cost base. **Rating under the house rule.** Fair value AED 7.95 against the 27 August 2026 close of AED 7.31 is an upside of 8.7%, inside the +/-15% band. **Equal-Weight, maintained** (prior fair value AED 7.98, upside 9.2%). The rating is not close to a threshold. Fair value would need to reach AED 8.41 for Over-Weight, AED 0.46 or 5.8% above where the revised model puts it, or fall to AED 6.21 for Under-Weight. Taking the sustainable ROTE in the justified P/TBV method as the single lever, it would have to rise from 13.0% to roughly 15.2% to carry the blend across the Over-Weight line. Reported H1 post-tax ROTE annualised at 15.7%, so that is not an absurd number, but it would mean capitalising the current return in perpetuity on a tangible common equity base that management is deliberately rebuilding — CET1 is up 70bps year to date to 13.0% [3] — and nothing in this quarter argues for it. --- ## 5. Sources 1. **Dubai Islamic Bank P.J.S.C., Review report and condensed consolidated interim financial information (unaudited) for the six-month period ended 30 June 2026.** Reviewed by KPMG Lower Gulf Limited; authorised for issue by the Board 14 July 2026. Statement of profit or loss (three-month and six-month periods ended 30 June 2026 and 2025) and statement of financial position as at 30 June 2026. Primary source for every reported figure in this paper. Filed via DFM and published at DIB investor relations: https://www.dib.ae/about-us/investor-relations/financial-information (document retrieved 28 August 2026). 2. **DIB, "DIB Posts Strong H1 2026 Results with Gross Revenue up 10% YoY to AED 12.4 Billion and Asset Quality Continuing to Advance", results release, 14 July 2026.** https://www.dib.ae/about-us/news/2026/07/14/dib-posts-strong-h1-2026-results — source for disclosed KPIs: NPF 2.4%, cost of risk 28bps, cash coverage 122%, total coverage 158%, CET1 13.0%, CAR 16.1%, LCR 140%, NSFR 105%, CASA AED 112bn, gross new financing AED 43bn. 3. **Investing.com, "Dubai Islamic Bank H1 2026 slides: revenue up 10%, asset quality improves" and "...revenue surges 10%, NPF ratio improves", 15 July 2026.** Coverage of the H1 2026 investor presentation; source for segment revenue and financing detail, the AED 186m Q1 ECL overlay, and the maintained FY2026 guidance set. https://www.investing.com/news/company-news/dubai-islamic-bank-h1-2026-slides-revenue-up-10-asset-quality-improves-93CH-4792503 and https://www.investing.com/news/company-news/dubai-islamic-bank-h1-2026-slides-revenue-surges-10-npf-ratio-improves-93CH-4792517 4. **Investing.com, "Earnings call transcript: DIB posts strong H1 2026 growth, keeps guidance", 15 July 2026.** Source for management commentary on no additional Q2 overlays, the 50–60bps normalised cost of risk, elevated Q2 deposit pricing expected to ease, the stronger H2 lending pipeline, and unchanged FY2026 guidance. https://www.investing.com/news/transcripts/earnings-call-transcript-dib-posts-strong-h1-2026-growth-keeps-guidance-93CH-4792482 5. **Simply Wall St, "Dubai Islamic Bank P.J.S.C. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions", 1 May 2026.** Post-Q1 2026 consensus for 8 analysts: FY2026E revenue AED 13.4bn, FY2026E statutory EPS AED 0.95, consensus price target AED 8.97. The most recent dated consensus we could locate; no Q2 or H1 2026 consensus is published for DIB. https://simplywall.st/stocks/ae/banks/dfm-dib/dubai-islamic-bank-pjsc-shares/news/dubai-islamic-bank-pjsc-just-beat-analyst-forecasts-and-anal-1 6. **Reuters via TradingView, "Dubai Islamic Bank Q2 Net Profit Flat At 1.86 Billion Dirhams", July 2026.** Confirms the Q2 attributable result of AED 1,855.9m; the report carries no analyst estimate comparison. https://www.tradingview.com/news/reuters.com,2026:newsml_FWN43G0MK:0-dubai-islamic-bank-q2-net-profit-flat-at-1-86-billion-dirhams/ 7. **stockanalysis.com, DFM:DIB quote page, 27 August 2026, 15:00 GST.** Share price AED 7.31, market capitalisation AED 52.83bn, analyst price target AED 8.21 across 14 analysts. https://stockanalysis.com/quote/dfm/DIB/ 8. **Q1 2026 comparatives** used to derive the Q2 standalone reconciliation: Dubai Islamic Bank Q1 2026 results announced 29 April 2026 — net profit AED 1,798.7m, pre-tax profit AED 2.1bn, operating revenue AED 3,548.3m. Reported by Zawya/Reuters and Business Today Middle East, 29–30 April 2026. All three tie exactly to the H1 2026 minus Q2 2026 figures in source [1], which is our check that the quarterly split is correct. **Number binding.** Every figure in section 2 is either a reported line from source [1], a cell in the inherited model workbook, or a consensus figure from source [5]. Every figure in section 3 is a cell in `DIB_Model_Q22026.xlsx` with the cell reference given. Section 4 values come from the `Valuation Summary` sheet of the same workbook.
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