First Gulf Bank PJSC, (FGB), the leading financial partner of choice in the UAE, today announced that the bank posted a Net Profit of AED 3,707 million for 2011, 8% higher than it did last year. The Net Profit for the fourth quarter (Q4) amounted to AED 1,022 million, 18% higher than same quarter of 2010 at AED 865 million, and 11% higher than the third quarter of 2011. FGB has achieved consistent growth in net profit for the sixth consecutive quarter.
Commenting on the strong financial performance, Andre’ Sayegh, CEO of First Gulf Bank said: “The outstanding results FGB has achieved during a challenging year for the global economy demonstrate the clear vision and strategy of our Board of Directors, which is being effectively implemented by a dedicated and motivated team. With a strong reliance on core banking combined with diversified sources of revenues and a very efficient model built on a low cost to income ratio, we have continued our progress to generate consistent results. FGB’s fundamental strategy of efficiently managing the bank’s balance sheet led to very solid ratios in 2011 particularly in respect of liquidity and capitalisation. We are strong believers, that the priority remains in maintaining a solid balance sheet and profitability follows.”
Sayegh added, “Despite challenging global economic and financial events, 2011 was a year of continued growth for the UAE. Throughout the years, FGB’s has built a deep understanding of the domestic market financial needs, enabling the bank to fully support the country’s development projects. FGB’s balanced business strategy has led to a full year Net Profit of AED 3,707 million. The core banking businesses of the group contributed 98% of the total net profit, mainly Retail, Corporate, Treasury, Investments, Islamic and International presence. The local subsidiaries and associate companies of the group contributed with the remaining 2%.”
Cash Dividend and Bonus Shares
The Board met today, reviewed the audited financials and expressed their satisfaction with the 2011 strong financial performance. They have considered the financial position of the bank, the current capitalization level and the share price performance during the year 2011 and proposed the distribution of a cash dividend 100% of capital or AED 1.00 per share. They recommended also the distribution of 100% of capital as bonus shares. Each existing share would be eligible for one new share. The cash dividend and distribution of bonus shares are subject to the approval of the respective authorities to be followed by the approval of the Ordinary General Assembly of Shareholders.
Abdulhamid Saeed Managing Director, First Gulf Bank, commented: “The bank has consistently been paying dividend without interruption since the year 2000. This is the highest ever cash dividend to be paid by FGB to its shareholders and the highest ever bonus share distribution in FGB’s history.
Q4 2011 income statement highlights
The revenue analysis of Q4 highlighted a very strong contribution from the Net Interest and Islamic Financing activities which was at AED 1,357 million, same as the previous quarter and 23% higher than same quarter of last year. The Net Interest and Islamic Financing contributed 82% to the total revenue of the quarter.
Full year 2011 income statement highlights
FGB has recorded a Net Profit at AED 3,707 million, 8% higher than last year. The strategy of geographical diversification through a prudent international expansion plan is generating positive results. The revenue made by the three international locations Singapore, Qatar and India for the full year 2011 was at AED 109 million, a growth of almost three folds from AED 37 million in 2010.
Due to the growth in the asset book, the Net Interest and Islamic Financing income for the full year 2011 was at AED 5,079 million, 19% higher than 2010, the Corporate and Retail fees and commissions stood at AED 1,201 million, 19% lower than 2010, mainly on the back of regulatory changes to the Retail lending framework implemented in May 2011. The investment income at 62 million was higher than 2010 by 58%. This is the result of a prudent investment strategy focused in 2011 mainly on the fixed income.
During the year 2011, the bank managed to keep its expenses under control at AED 1,222 million to achieve a Cost to Income ratio of 18.9%, which is low by local and international standards but slightly higher than the 17.8% achieved in 2010.
Abdulhamid Saeed, Managing Director of First Gulf Bank stated: “FGB has been able to maintain its growth throughout 2011 through partaking in profitable investment opportunities while adhering to its sound risk management policies. As we continue to expand our operations, we remain committed to providing optimum returns to our shareholders and customers.
Balance Sheet – Liquidity
The balance sheet by end of year 2011 showed a comfortable liquidity position. The liquid assets ratio increased to 13.9% from 13.4% at the end of 2010. The loan to deposit ratio was at 101% by the end of 2011 down from 106% by end of September 2011. This was a result of increased customer deposits in 2011 by 5% from AED 98.7 billion to AED 103.5 billion. The UAE Central Bank advance to stable deposit ratio by year end 2011 stood at 84.5%, far below the regulatory maximum of 100%.
During the year 2011, the bank was successful in raising medium and long term funding to support the growth of the balance sheet and to reduce the reliance on the short term customers deposits. The bank raised CHF 200 million through five year conventional bonds in the first half of 2011. This was followed by a phenomenal success of its inaugural five year Sukuk issue raising US$ 650 million in a transaction oversubscribed six times. That was the first drawdown under a total approved US$ 3.5 billion new Sukuk Programme. The bank also raised US$ 200 million through a two year bi-lateral loan from an international bank in Q3, 2011.
In January 2012, the bank continued with its rationalised medium term funding strategy to make the second drawdown under the Sukuk Programme in a 5-year $ 500 million Sukuk transaction, which was oversubscribed by 2.8 times.
Capitalisation and Earnings per Share
Shareholders’ equity by end of 2011 stood at AED 26.7 billion, 11% higher than the previous year. Capital adequacy ratio, after the proposed cash dividend distribution this year would be, at 21.5%, one of the highest in the UAE banking industry and the Tier 1 Capital Ratio would be at 18.5%.
Earnings per share for the full year 2011 were set at AED 2.37, 13% higher than 2010.
Saeed added: “FGB continues to enjoy the trust of investors and the market through our operations, we continue to maintain a favourable position moving forward and we are in a very solid position against the growth expectation in the years to come and the future requirements of Basel III”.
The quality of the loan book improved in 2011, the ratio of Non Performing Loans measured at 90 days overdue to Gross Loans excluding exposures to Dubai World and Dubai Holding groups stood, by end of year 2011, at 3.4%, this is an improvement from the 3.7% at end of 2010. The Provision Coverage Ratio was also improved significantly from 89% in 2010 to 98% in 2011.
“In general, the NPL trend continues to decline on the Corporate and Retail side. During the year 2011, the loans and advances book has grown by a net 10% to reach by end of December AED 104.7 billion which represents an allocation of 67% of the total assets of the group. The Corporate Loans which represented 64% of the total loan book grew by 8% in 2011 and the Retail Loans which represented the remaining 36% of the total loans grew by 13% in 2011,” said Sayegh.
Andre’ Sayegh concluded: “As we are heading into 2012, we maintain a positive outlook. Indeed, we are very well placed to support the infrastructure projects which have been recently approved by Abu Dhabi. Our focus remains on our proven strategies of ensuring a prudent balance sheet growth, which confirms our commitment of providing superior returns to our shareholders year on year. The bank’s rating was affirmed at A+ by Fitch in May 2011 with Stable Outlook and affirmed at A2 by Moody’s in August 2011 with upgrade of the outlook from Negative to Stable, reiterating our strong standing.”