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Citigroup Upgrades First Gulf Bank to ‘Buy’

DUBAI — Citigroup has upgraded First Gulf Bank to ‘buy’ from hold, and raised its target price to Dh20 from Dh14.40, saying the Abu Dhabi-based bank posted strong second quarter results.

First Gulf Bank incurred a four per cent decline in its second quarter net profit as the bank put aside more funds for bad loans. Its net profit declined to Dh775 million compared with Dh808 million earned last year. The bank’s net profit for the first half of this year stood at Dh1.53 billion — three per cent higher than the Dh1.48 billion generated during the first half of 2008.

Citigroup said that while it expects the bank’s non-performing/gross loans to increase to 3.75 per cent by 2011, the bank has a strong loan loss absorption capacity as high as 12.6 per cent.

Based on its solid second quarter earnings, Citigroup raised its year-on-year growth rate estimates for the bank’s total assets to 15 per cent from 6 per cent for 2009, 11 per cent from 9 per cent for 2010, and 12 per cent from 11 per cent for 2011.

Citigroup has also revised upwards its forecast for First Gulf Bank’s yearly loan growth — 16 per cent from 9 per cent in 2009, 13 per cent from 11 per cent in 2010, and 14 per cent from 13 per cent in 2011. It said the growth in customer deposits, is likely to be supported by an inflow of government/quasi-government deposits, which in turn is driven by higher oil prices. Earlier this year, the UAE finance ministry pumped Dh4.5 million into First Gulf Bank which will be converted into Tier2 capital.

rocel@khaleejtimes.com