National Bank of Abu Dhabi (NBAD) and FGB, set to complete a merger by next year, both revealed in third-quarter earnings yesterday that their core business of lending remained steady despite the slowdown in economic growth gripping the country.
While FGB reported a 31 per cent gain in profit for the quarter on the back of strong revenue from non-core businesses, NBAD said its profit was unchanged as a gain in fees and commissions was outweighed by a slight drop in income from loans.
“We achieved this performance during a period of seasonal slowdown and ongoing challenging market conditions, while we continued to maintain expense discipline along with strong capital and liquidity positions,” said Abhijit Choudhury, the bank’s acting chief executive.
“Looking ahead to the rest of the year, we are aiming to continue to deliver solid underlying net profit growth while maintaining our conservative risk profile.”
Mr Choudhury said that the merger with FGB was on track to be completed in the first quarter of next year. The banks this week invited shareholders to separate general assembly meetings on December 7 to approve their merger.
The merger comes amid a slowdown in the economy that has put a damper on loan growth and spurred more default among banks.
At the same time, banks’ net interest margin, the money they make from the difference between what they pay on deposits and what they get on interest, is also being squeezed by less money available in bank vaults.
As a result, NBAD’s profit fell by 0.5 per cent to Dh1.32 billion in the three months to the end of September, from Dh1.326bn in the same period a year ago. Revenue, however, was up by 3.4 per cent, to Dh2.68bn from Dh2.59bn a year ago, but impairment charges have risen by 68 per cent to Dh287m from Dh171m.
Net interest income decreased by 1.4 per cent to Dh1.8bn compared with Dh1.83bn in the corresponding period last year, while non-interest income rose by 14.9 per cent to Dh877m from Dh763m.
Meanwhile, customer loans fell by 3.2 per cent to Dh205.3bn at the end of last month, compared with Dh212.1bn for the same period last year, amid an industry-wide slowdown in loan growth. Net interest margin fell to 1.89 per cent in the third quarter from 2.04 per cent in the same period last year.
FGB’s profit rose to Dh1.86bn in the three months to the end of September from Dh1.41bn in the same period last year. Net interest income and Islamic financing increased by 1 per cent to Dh1.59bn versus Dh1.57bn in the same period last year. Other operating income leapt by 324 per cent to Dh708m from Dh167m. The bank did not specify what was behind that gain.
NBAD’s earnings met the expectations of most analysts who cover the bank.
“No surprises with numbers in line with our expectations,” said Jaap Meijer, the head of research at Arqaam Capital, a Dubai-based investment bank. “Strong investment income but credit costs remain elevated while margins compress as expected and in line with sector trend.”
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