Q2 results hint at strong Abu Dhabi banking sector

By WALID MAZI | ARAB NEWS

Published: Jul 29, 2010 21:52 Updated: Jul 29, 2010 21:52

ABU DHABI: The second-quarter results of key Abu Dhabi banks indicate the sector is continuing to prosper in the emirate despite tough global financial conditions that has hit the region, especially Dubai.

While First Gulf Bank, Abu Dhabi's second-largest bank by market value, reported on Thursday a two-percent rise in its second-quarter profit to $214.3 million, Union National Bank (UNB) witnessed a 25-percent profit increase to $92.57 million in the three months to June 30.

Earlier, National Bank of Abu Dhabi (NBAD) reported a 10.4 percent rise in second-quarter profit, beating analysts’ estimates as the UAE lender boosted income from lending and set aside less money for bad loans. Abu Dhabi Islamic Bank, the UAE’s second-biggest bank complying with Shariah banking rules, also recorded a 56 percent increase in second-quarter profit.

FGB’s second-quarter revenues rose 12 percent to $399.4 million and net interest income from loans and Islamic financing advanced nine percent to $283.95 million. Loans and deposits grew four percent and two percent respectively.

Impairments stood at $245.84 million at the end of the first half, after the bank booked $111.89 million in second quarter. Non-performing loans were reported to be 2.5 percent of total gross loans but the bank has provisions coverage of 126 percent, FGB said in a statement.

Meanwhile, UNB’s operating income, which includes interest income and fees, rose 24 percent to $175.49 million against $141.6 million a year earlier. Loan impairments stood at $58.94 million at the end the first half after the bank booked $33.92 million in the second quarter. It stood at $31 million in June last year.

The net profits of NBAD, the UAE's second-largest lender by assets, for the second quarter ending on June 30 rose to $272.52 million. The bank posted a 21 percent increase in profit in the first half of the year at $553.21 million on the back of strong revenue growth.

NBAD saw net interest income for the first half rising 16.3 percent to $680.62 million, while fees and other non-interest incomes also posted a double-digit growth of 11.6 percent. However, net interest margins during the period were at 2.53 percent, just slightly above the 2.50 percent level in the same period in 2009.

“These are a strong set of results in difficult markets reflecting the resilience and strength of the bank,” Chief Executive Officer Michael Tomalin said.

ADIB, another key player of Abu Dhabi banking sector, earlier reported that its net income rose to $82 million from $52.65 million in the year-earlier period. Provisions dropped 21 percent to $36.64 million. The bank said it may need to take more provisions this year.

UAE banks are recovering from the global credit crisis, which weakened lending and investment banking activity, while provisions for bad loans are rising amid the economic slowdown.

The UAE Central Bank released figures on Thursday showing the narrowing gap between loans and deposits to $10.95 billion in June from $13.73 billion in May.

Total loans of UAE banks grew to $279.5 billion in June from $278.25 billion a month earlier, while deposits increased to $268.5 billion from $264.5 billion. Banks booked higher specific provisions for NPLs in June totaling $10.05 billion versus $9.59 billion. General provisions were slightly down to $3.5 billion from $3.7 billion the previous month.

The country’s economic growth may accelerate to 3.2 percent this year, with oil prices at $85 a barrel, from 1.3 percent in 2009, Economy Minister Sultan Bin Saeed Al Mansouri said in May. ¬