Andre Sayegh, CEO of First Gulf Bank
First Gulf Bank, one of the largest equity-based banks in the UAE, started the year 2011 with a solid financial performance, recording a net profit of AED 875 million in the first quarter (Q1) of 2011. This represents an increase of AED 10 million or 1.2% higher than Q4 2010 net profit of AED 865 million. Noting that core banking revenues at AED 1,580 million was 8% higher than last year and represented 99% of the total revenue, this compares to 88% in the first quarter of last year. For four consecutive quarters, FGB has shown consistent positive growth in net profit
Commenting on the continued strength in financial performance, Andre’ Sayegh, CEO of First Gulf Bank said: “We have posted significant gains in our core banking portfolio which represented an 8% jump in revenue over the first quarter of 2010. It is fair to remember that our first quarter 2010 profit included proceeds of AED 179 million from the sale of real estate. After excluding this one-off sale, the net profit of the first quarter this year is 18% higher than that of last year. We are particularly satisfied by the jump of almost AED 119 million in core banking revenues totally in line with our business strategy. In addition, during the month of March 2011, we have distributed AED 900 million as cash dividend to our shareholders, this is over and above the 75 million free shares which we distributed back to our shareholders, those shares were originally bought under the share buy-back program. With this total distribution, FGB could be considered as one of the best corporations in the UAE giving such high returns to its shareholders.”
Capitalisation and Earnings per Share
After cash dividend distribution of AED 900 million, total shareholders’ equity stands at around AED 24 billion and capital adequacy ratio is at 22.6% which is one of the highest within the UAE banking sector and the Tier 1 capital ratio is 19.4%.This will keep the bank, in a very solid position against the future requirements of Basel III.
On March 31, 2011, the bank’s earnings per share were at AED 0.56 for the quarter, which is exactly the same as at the end of Q1 2010. During Q1 2011, the bank converted AED 3,600 million worth of convertible bonds into 125 million new shares taking the total shares to 1,500 million since the 21st of February 2011.
Abdulhamid Saeed, Managing Director, First Gulf Bank, comments: “The bank is strongly capitalized and well positioned to meet the requirements of future business growth. It also ensures optimum liquidity at all times while creating additional shareholder value. We continue to set the pace when it comes to rewarding shareholders and protecting their interests. As our performance has shown consistent growth over the last four quarters, it is only apt that our shareholders share our success.”
Q1 2011 Income Statement Highlights
FGB continued to generate its core banking revenue from a strong balance sheet which reflected in total net interest and Islamic financing income for Q1 2011 at AED 1,146 million which is 10% higher than same quarter of last year and 4% higher than Q4 2010. Net interest margin for Q1 2011 is at 3.66%, slightly higher than the 3.59% achieved during the full year 2010. Retail and corporate fees and commissions stood at AED 405 million, 17% higher that the AED 347 million earned during the same quarter of last year, and 20% higher than in Q4 2010.
Balance Sheet – Liquidity
FGB liquidity is at very comfortable levels, the Central Bank advance to stable deposits ratio was, by end of March 2011, at 81.5% against an allowed maximum of 100%, this is even better than the ratio of 86.2% of Q1’ 2010. During Q1 2011, loans increased by 1.5% to AED 97.1 billion over the Q4 2010 figure and a 4.1% increase over Q1 2010. Deposits were at AED 98.5 billion, almost the same as Q4 2010 but 10.1% higher than Q1 2010. From March 2010 to March 2011, deposits have grown faster than loans, hence the improvement in loan to deposit ratio from 104% in March 2010, to 99% in March 2011.
In Q4 2010, FGB adopted the new Central Bank circular relating to the classification of loans and provisioning, requesting to show the overdue loans in excess of 90 days rather than 180 days as Non Performing Loans (NPLs). Accordingly, the ratio of NPLs to gross loans was at 3.7% by end of Q1’2011 which was also the same as at end of December 2010. However, the provision coverage ratio improved from 89% by end of December 2010 to 97% by end of March 2011.
“We are very comfortable with these levels of conservative provisioning keeping in mind that our coverage ratio does not take into consideration any of the collaterals possessed by the bank against its loan portfolio. We would like to highlight as well to our stakeholders of the substantial security and collateral that the bank holds against its loan portfolio. Now that the worst of the economic downturn is gradually coming to an end, our provisioning level is reflecting this market reality whereby our provisioning reduced by 7% to AED 459 million in the first quarter of 2011 as compared to the same period last year,” said Sayegh.
Andre’ Sayegh concluded: “We are focusing on growing our core business as we are well positioned to increase lending to the targeted sectors in the coming quarters of 2011 and beyond. The UAE economy is showing a robust growth as indicated by the IMF revising growth forecasts upwards to 3.25% from 2%. We are confident that the current trend will continue and that economic growth targets will be surpassed. Our overseas expansion is organic, it is gradual and it aims to increase and strengthen our global footprint as well.”