National Bank of Abu Dhabi (NBAD) earned a net attributable profit of AED 770 million in the first quarter of 2009, 57% up compared with the fourth quarter of 2008. Compared with the March quarter 2008, net attributable profits rose by 9% based on the core profits of AED 710 million, after excluding the AED 165 million gain on the sale of land purchased for the purpose of our northern emirates regional office site but later exchanged for another. Annualised diluted earnings for the first quarter were AED 1.39 per share.
Chairman of NBAD H.E. Nasser Ahmed Khalifa Al Sowaidi says, “The Bank delivered good results in difficult trading conditions. Comprehensive measures have been put in place to protect future earnings through our collective provisions, tightening of credit criteria, effective cost efficiencies and supporting our relationships while assisting distressed customers to meet their obligations.”
NBAD’s total assets of AED 161 billion were 2% higher from AED 157 billion for the first quarter of 2008, but 2% lower than the previous quarter from AED 165 billion, reflecting global economic conditions. Loans and advances to customers showed an increase of 25% over the first quarter of 2008 from AED 93 billion to AED 116 billion as at 31 March 2009 and a 4% increase from AED 112 billion as at 31 December 2008.
Impaired assets during the first quarter of 2009 increased by AED 175 million from AED 1,072 million as at 31 December 2008 to AED 1,247 million, on a portfolio of AED 116 billion. This represents 1.1% of the loan portfolio.
Net impairment charges for the quarter were AED 214 million of which collective provisions were AED 152 million, specific provisions were AED 85 million, mitigated by recoveries of AED 23 million.
Provisions increased by 13% from AED 1,550 million to AED 1,750 million compared with the December quarter 2008.
Customer deposits declined by 5% to AED 98 billion from AED 103 billion compared with the previous quarter of 2008. The Abu Dhabi Government’s deposit of AED 4 billion was transferred to equity during the quarter, reducing deposits but increasing the capital base.
The Group’s return on equity was 21.5% for the quarter under review, below our medium-term target of 25%, but consistent with our 2009 target of 20%. The cost to income ratio of 30% remains below our 35% medium term expected level.
The Bank’s equity increased to AED 18 billion after the AED 4 billion Government of Abu Dhabi Tier-I injection and the distribution of AED 593 million in cash dividends. The total capital resources of the Bank now exceeds AED 21 billion and takes our total capital adequacy ratio to 18% positioning the bank among the best capitalised banks worldwide.
NBAD’s operating income for the quarter reached AED 1,438 million, up by 12% on the March 2008 quarter and 7% up on the December quarter of 2008. Operating expenses were well contained showing a 2% decrease from AED 444 million in the fourth quarter 2008 to AED 435 million in the first quarter, but 33% up from AED 328 million year-on-year.
The organic growth of NBAD will not be constrained by the uncertain market conditions as the bank has sufficient capital to fund its growth and commitments.
The restructuring of NBAD’s business has been successfully completed and we are providing, for the first time this quarter the new segmental reporting for all the Bank’s businesses and therefore no comparisons are made with previous quarters.
A satisfactory performance was achieved by the Bank’s businesses which contributed operating profits of AED 1,003 million, reflecting an improvement of 5% and 11% on the first and fourth quarters of 2008, respectively.
Domestic Banking earnings of AED 206 million represents 21% of the top-line operating profits; Financial Market’s performance of AED 223 million contributed 22%; International Banking delivered AED 134 million, representing a 13% contribution; Corporate and Investment Banking was the strongest performer contributing 42% or AED 421 million. Contributions from Global Wealth and Islamic Banking were AED 4 million and AED 3 million, respectively and Head Office – which is managed as a business – contributed AED 12 million The combined contributions from Global Wealth, Islamic Banking and Head Office amounted to 2% of the top line operating profits.
“Towards the end of the first quarter, the first green shoots of a market revival were visible but trading conditions remain tricky and we must remain diligent and cautious. We will continue building a safety net to cushion the Bank for uncertain times ahead through our collective provisions and prudent underwriting. Notwithstanding these uncertain times, we plan to achieve a 20% return on equity this year which is consistent with an average 25% return over the economic cycle. We anticipate the underlying businesses generally to grow modestly and to keep our credit expansion limited to the extent of funding available and in line with Central Bank directives”, Michael Tomalin, Chief Executive, concluded.
