NBAD earns Dh3 billion net profits in 9 months

Third quarter profit increased by 12.1 percent to Dh1,031 million compared with Dh 920 million earned in the third quarter of previous year.

The annual return on shareholders’ funds for the nine months of 2011 is 17.7 per cent in line with the target for 2011.

Nasser Alsowaidi, Chairman of NBAD said, “NBAD has delivered healthy profits on the back of strong and prudent balance sheet growth in a year characterised by multiple economic and political challenges. In line with the Government’s plan to provide necessary infrastructure and support to the SME (small and medium sized enterprises) sector, the Bank has undertaken various initiatives to play a leading role in the development of the sector.”

Michael Tomalin, Group Chief Executive, commented, “In turbulent and difficult global markets, NBAD has produced another solid result. None of this could have been achieved without the support of our clients and the skills of our people. NBAD’s strategy remains to build organically, widening and strengthening our network, systems and products.”

OPERATING INCOME

Operating income for the nine months reached Dh 5,889 million, up 9.9per cent compared with Dh 5,361 million for the corresponding period of 2010. Third quarter’s operating income at Dh 2,001 million is higher by 10.4per cent when compared to the third quarter of 2010. Net interest income and net income from Islamic financing contracts for the first nine months rose 11.6per cent to Dh 4,310 million compared with corresponding period of 2010 while non-interest income was higher by 5.4per cent at Dh 1,579 million.

The net interest margin was 2.53per cent for the nine months of 2011, marginally higher than 2.51per cent for the comparable period of 2010.

EXPENSES

Operating expenses for the nine months of 2011 were Dh 1,805 million, higher by 16.2per cent compared with the corresponding period of 2010.

The cost to income ratio was 30.7per cent for the nine months of 2011. The ratio remains below the medium-term cap of 35per cent.

During the third quarter, the Bank expanded its domestic network to 116 branches & cash offices and six Business Banking centres across the UAE in its ongoing effort to expand its services to small- and medium-sized enterprises (SMEs).

OPERATING PROFITS

The Bank’s various businesses delivered a steady performance contributing operating profits of Dh 4,084 million for the nine months of 2011. Year-on-year, the International banking and the Financial markets business achieved a growth of 23per cent and 31per cent, respectively. Islamic banking now contributes 3.2per cent to the operating profits from 1.8per cent a year ago, reflecting a growth of 85per cent in its operating profits year-on-year.

IMPAIRMENT CHARGES

The gross impairment charge for the nine months was Dh 1,248 million, which after DH 231 million of recoveries reduced to a net charge of Dh 1,017 million, comprising of collective provision of DH 257 million, net specific charges of Dh 690 million and other provisions for impaired assets of DH 70 million. Net impairment charges were Dh 321 million for the third quarter including additional collective provision of Dh 87 million.

Collective provision of Dh 2,149 million has been maintained in excess of 1.4per cent of the credit risk-weighted assets, which is in line with Central Bank’s requirement for banks to have a collective provision of 1.5per cent of credit risk-weighted assets by the end of 2014. NBAD targets to increase this buffer to 1.43per cent by the end of 2012.

Non-performing loans increased to DH 4,536 million representing 2.83 per cent of the loan book.

BALANCE SHEET

Total Assets were Dh 242.0 billion as at 30 September 2011, 14.5per cent up on 31 December 2010 and 13.4per cent up on 30 September 2010.

Loans and advances to customers continued to grow in the third quarter of 2011 by another 1.9per cent to Dh 155.8 billion, up 13.9per cent on 31 December 2010 and 12.1per cent up on 30 September 2010.

Customer deposits at Dh 142.6 billion were up 15.8per cent from the year end and by 18.4per cent compared to 30 September 2010.

Capital resources stood at DH 34.2 billion after dividend payments of Dh 240 million on Government of Abu Dhabi (GoAD) Tier-I capital notes in the nine months of 2011.

Capital resources consist of shareholders’ funds of Dh 22.1 billion, GoAD Tier-I capital notes of Dh 4 billion and subordinated notes of DH 8.1 billion. Capital adequacy ratios (Basle-II) remain well above the minimum 12per cent required by the UAE Central Bank and (prospective) Basle-3 with a capital adequacy ratio of 20.7per cent and a Tier-I ratio of 15.3per cent as at 30 September 2011.

EMIRATISATION

The Emirati ratio reached 39.8 per cent at the end of September 2011. The Bank introduced a Master of Science in Finance as part of the AFAQ program at its training academy for young UAE national graduates and enrolled 75 aspiring recruits. The Bank also launched 2 additional new emiratisation programmes and both include an opportunity to earn a professional diploma or an associate degree in Banking and Finance while gaining work experience simultaneously. In addition to the programs, international secondments for high potential UAE national staff as well as international scholarships were also launched in September 2011.

ACCOLADES & RECENT DEVELOPMENTS

During the third quarter, the Bank was listed for the third year in a row amongst the World’s 50 Safest Banks by Global Finance. For the first time, NBAD was listed as the Safest Bank in the Middle East.

NBAD’s long term ratings continue to remain amongst the strongest combined ratings of any financial institution in the MENA region with ratings from Moody’s Aa3, Standard & Poor’s A+, Fitch AA-, RAM (Malaysia) AAA and R&I’s (Japan) rating of A+.

In August, NBAD and an Abu Dhabi-based Islamic bank executed the first Islamic equivalent of the conventional Repo product, a collateralised Murabaha transaction valued at $20 million for a one-week maturity, opening the gateway to an alternative method of liquidity management in the Islamic banking sector.