Abu Dhabi Commercial Bank almost doubled its profit as its margins on lending widened.
ADCB, the capital's second-biggest lender, reported a 91.2 per cent increase in third-quarter net profitto Dh607.5 million (US$165.3m).
Profit margins on lending were "unbelievably strong", said Raj Madha, a financial analyst at Rasmala Investment Bank. "It was a great quarter for ADCB, but I have a question mark on the sustainability of these levels of revenue."
The bank's net interest income soared 48.6 per cent to Dh1.2 billion, driven by a sharp decline in interest expense.
ADCB is among the UAE banks that determine their interest rates for consumer borrowing and deposits using a formula that does not reflect declining interbank lending costs.
Interbank lending rates fell in the first half of the year and remained at historic lows throughout the third quarter.
"This quarter has seen another positive period for ADCB, with sustainability in our financial performance and delivering both top and bottom line growth," said Deepak Khullar, the bank's chief financial officer. The third quarter was the fifth consecutive quarter of earnings growth for ADCB. The third-quarter figure beat analysts' estimates of Dh332m.
But Tirad Mahmoud,the chief executive of Abu Dhabi Islamic Bank (ADIB), sounded a note of caution yesterday on the deteriorating local and regional economy as the bank reported a third-quarter profitof Dh319.1m, 1.5 per cent higher than in the same period last year.
Many of the UAE's lenders, including Emirates NBD, have made substantial provisions during the past three months against fallout from the European debt crisis as the outlook for the world economy darkens.
"The UAE may face another down cycle in the credit environment triggered by the prevailing negative global sentiment and its impact on the entire region," Mr Mahmoud said. "The main area of concern is the concentration of non-performing real estate assets, which require a lot more time to recover."
Provisioning at ADIB, the capital's biggest Sharia-compliant lender, rose 11.9 per cent to Dh150.8m. Losses at Burooj Properties, the bank's property unit, widened in the quarter by 27.3 per cent to Dh36.3m as the unit took write-offs of Dh6.2m.
Burooj is expected to post losses "until there is a meaningful and sustained positive change in the real estate market," the bank said.
ADCB also reported a tenfold increase in net income from Islamic financing to Dh36.3m compared with a year earlier, after it relaunched its Sharia-compliant operations during the quarter.
During the quarter, ADCB completed its sale of a 25 per cent stake in RHB Capital, a Malaysian lender, to Aabar Investments, a strategic investment company.
The Aabar purchase, for 5.9bn Malaysian ringgit - worth Dh7.3bn in the third quarter - was funded by an interest-free loan from Aabar's parent, the International Petroleum Investment Company, a recent bond prospectus revealed.
A Dh7.3bn loan from ADCB to Ipic was used to fund that transaction, allowing ADCB to bolster its lending book. Net loans and advances at the bank increased 5.7 per cent to Dh124.2bn during the third-quarter, although, excluding the loan to Ipic, the bank's lending contracted by about Dh500m.
Meanwhile, the Dubai bank Mashreq reported an increase in net profit of 16.8 per cent to Dh756m for the first nine months of the year. The earnings are equivalent to a third-quarter profit of Dh204.4m, a 5.3 per cent increase on the same period last year.
ghunter@thenational.ae
Joker: Folie a Deux
Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
Rating: 2/5
So what is Spicy Chickenjoy?
Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Russia's Muslim Heartlands
Dominic Rubin, Oxford
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
