National Bank of Abu Dhabi (NBAD) was the best of a mixed bag of fourth-quarter UAE bank results yesterday, with the overall picture showing a sector that is still coping with a sluggish lending market.
NBAD, which is merging with Abu Dhabi lender FGB, reported a net profit of Dh1.33 billion, a 28 per cent year-on-year rise in the three months to the end of December, on lower expenses and lower-than-expected impairment charges.
FGB reported an 11 per cent fall in fourth-quarter net profit, to Dh1.52bn, with rising expenses eating into its margins.
“On the face of it, the NBAD results were not bad,” said Sandeep Ahuja, a sector analyst at Naeem Brokerage in Cairo. “We expected their provisions would be Dh100 million but it was much lower, below Dh40m.”
Indeed, NBAD, FGB and Abu Dhabi Commercial Bank were all better than the average of a poll of analysts had forecast.
“A common theme for all three of the banks was sluggish loan growth, though liquidity wasn’t under pressure,” said an analyst at an Abu Dhabi investment bank who did not have permission to be quoted by name.
“With the kind of guidance we’ve had so far from management, I’d expect loan growth in the mid to low single digits, 3 to 4 per cent, for the coming year,” said the analyst.
Mr Ahuja said that NBAD’s profit was helped by fee income and commissions, similar to the foreign exchange gain in the third quarter last year that helped to boost profit.
The bank does not provide enough detail until some time after the quarterly report to tell where exactly it made the non-interest income, but Mr Ahuja said that banks in such flat lending markets typically preserve capital and invest more in bonds – particularly foreign bonds – and pursue off-balance-sheet business, such as guarantees and letters of credit.
While provisioning for bad loans had declined, the key factor to look out for is any sign of deterioration in the loan book, especially given how much of it is exposed to businesses like retail, he said.
“Overall, the results were quite lukewarm in terms of growth and I expect that to continue given the macroeconomic situation,” said Mr Ahuja.
FBG and NBAD’s shareholders on December 7 approved the merger between the two Abu Dhabi lenders, which will create the Middle East’s biggest bank by assets, surpassing current leader Qatar National Bank.
The merger has also been approved by the Central Bank of the UAE, but requires further approval from international regulators and the UAE’s market regulator, the Securities and Commodities Authority.
amcauley@thenational.ae
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