UPDATE 2-Lender ENBD mirrors Dubai recovery with bumper profit
* ENBD shares 7.9 pct higher on results
* Q2 net profit 972 mln dhs, up 50 pct over year-ago
* Q2 impairments 997 mln dhs vs 954 mln dhs in 2012
* Sells unspecified amount of Union Properties stake
* Has repaid 7.8 bln dhs of 2008 govt support in H1
(Recasts, adds analyst quote, UP info)
DUBAI, July 22 (Reuters) - Dubai's biggest bank Emirates NBD beat expectations with a 50 percent surge in net profit in the second-quarter, adding to signs the emirate's economy is recovering robustly and driving its shares higher.
ENBD, 55.6-percent owned by state fund Investment Corp of Dubai, made a net profit of 972 million dirhams ($264.6 million) in the three months to June 30, compared with 647 million dirhams in 2012, a statement from the bank said.
Analysts polled by Reuters had forecast a net profit of 783.8 million dirhams and shares jumped 7.9 percent in response, taking gains so far this year in a wider market rally in Dubai to 82.5 percent.
"Overall we believe that the bank posted an amazing set of results and is very likely to prompt us to revise our full year estimates on the bank significantly upwards," Naveed Ahmed of Global Investment House said in a note.
Investor sentiment towards the emirate's economy has recovered since it was pummelled by a sovereign-linked debt crisis and the bursting of a local real estate bubble in 2009.
Local banks suffered from slower growth and higher provisioning as a result and ENBD, by far the emirate's biggest bank, received 12.6 billion dirhams as part of a 70 billion dirham UAE government support package for the banking sector.
It said on Monday it had now repaid 7.8 billion dirhams of that money, up from 3 billion in April.
One important improvement in the bank's performance in the past year was a levelling off of previously soaring provisions for bad loans. Those rose by 43 million dirhams to 997 million dirhams in the second quarter compared to the same period of 2012.
That slight rise, however, was offset by the 17 percent year-on-year rise in both net interest and non-interest income in the second quarter, aided respectively by higher loan and deposit spreads and increased fee income.
ENBD sold part of its stake in Union Properties during the first half of the year but didn't provide details of the transaction, except to say the shares it still holds are now valued lower than before.
It remains the developer's largest shareholder with 31.4 percent of the firm, according to Dubai bourse data. Shares in Union Properties were trading 0.4 percent down.
In May, it raised $1 billion from a capital-boosting bond. This helped increase its Tier 1 capital ratio - a key measure of financial strength - to 14.5 percent at the end of June, from 13.5 percent at the end of March, well above targets brought in by the Basel banking reform.
The IMF gave an upbeat assessment of improvements in the United Arab Emirates' finances last month, although it warned that there were still risks of another boom and bust cycle in Dubai, where growth topped 5 percent at the end of last year. ($1 = 3.6730 UAE dirhams)
(Reporting by David French; Editing by Dinesh Nair and Patrick Graham)