Gulf currencies a bright spot for NBAD amid challenging climate

The volume of Arabian Gulf currency traded by clients with NBAD rose to US$46.4 billion during the first quarter of this year versus $38.6bn in the fourth quarter of last year.

A slower economic growth in the region has dampened loan growth for many banks. Silvia Razgova / The National

National Bank of Abu Dhabi (NBAD) said on Sunday that an uptick in fees and commissions from trade in Arabian Gulf currencies over the past year has been a silver lining in what has been a difficult time for many banks as slower economic growth in the region puts a dampener on loan growth.

“The biggest action we have seen this year and the biggest flow we have seen this year has been in the GCC currencies,” said Mahmood Al Aradi, the head of global markets at the bank.

“At the beginning of the year, we have seen a massive speculative run on our currencies in this part of the world and Saudi led the charge. A lot of these foreign speculators needed some liq­uidity to trade with. And we said OK,” said Mr Al Aradi.

The volume of Gulf currency traded by clients with NBAD rose to US$46.4 billion during the first quarter of this year versus $38.6bn in the fourth quarter of last year. Mr Al Aradi did not disclose the amount of revenues it earned from GCC currency trading.

The bank said in April that first-quarter profit fell by 11 per cent year-on-year to Dh1.27bn thanks to more money being set aside for bad debt as well as ­lower gains from investments amid a slowing economy.

While commissions on the world’s most heavily traded currencies, such as the euro, are not especially lucrative, commissions and fees for trading Gulf currencies and their related derivatives are because there are fewer banks willing to do it for clients, Mr Al Aradi said.

Some traders have not been upbeat on the ability of Saudi Arabia, the world’s biggest oil exporter, to defend its peg to the US dollar as the price of oil fell to a 13-year low in January. Since then, however, the price has rebounded amid supply shocks that included wildfires in the oil-producing nation of Canada.

Mr Al Aradi said he saw more constraints to supply this year and the next as oil companies cut back on spending.

The banker is forecasting that the price of oil will be trading between $60 and $80 per barrel by the first quarter of next year.

NBAD is also getting lift from private placements in the bond markets, he said, as the amount of cash available to banks to lend out decreases. “These are local guys who need liquidity and we tap for them clients in Asia,” he said.

“Private placements have been very popular because the debt goes very quietly from institution to institution and we do the intermediary work, the negotiation.”

Mr Al Aradi said the bank had done about $3bn worth of private placements this year, the first year it had started doing them.

Follow The National's Business section on Twitter