The National Bank of Abu Dhabi (NBAD), the largest UAE bank by market value, reported a second-quarter profit fall of 9.3 per cent but still managed to beat analyst expectations. It joined its peers in setting aside large provisions for bad loans as profit fell to Dh907 million (US$246.9m) from Dh1 billion for the second quarter last year.
Michael Tomalin, the chief executive of NBAD, said the bank was confident it would "weather these turbulent conditions", adding that it was taking "collective provisions to put us in the best possible position for the future". The bank said it had set aside Dh500m in provisions for bad loans since January, up more than three-fold from Dh145m for the first half of last year. Deepak Tolani, a banking analyst at Al Mal Capital, said the provisions were about twice as high as his bank had expected.
First-half profit came in at Dh1.67bn, down 10.6 per cent on the same period last year. The bank's chairman, Nasser al Sowaidi, said the Abu Dhabi Government's infrastructure spending would boost the regional economy. "The global outlook remains uncertain but the strong investment in infrastructural projects by the Government is expected to support the economic growth of Abu Dhabi and counter to some extent the slowdown," he said.
Tight credit, sharp declines in property values and the rising number of defaults have hurt local bank earnings this year. Most banks have reported lower second-quarter earnings because of higher provisions to protect themselves against defaulting customers. Emirates NBD, the UAE's largest bank by assets, said this week it expected bad loans to continue to rise this year before peaking next year.
NBAD said it had increased lending by 7.2 per cent since the first quarter of the year. This contrasts sharply with recent Central Bank data that shows loans to the private sector fell almost 2 per cent in the first three months of this year. Analysts said that some of NBAD's fresh lending may be loans to government organisations. Without putting the money aside, the bank's first-half operating profit would have been 8 per cent higher than the same period last year, NBAD said.
It said it had $7.5m of exposure to Ahmad Hamad Al Gosaibi and Brothers, one of two troubled Saudi family groups undergoing debt restructuring. NBAD also holds $3.4m of a sukuk issued by the Saad Group, the other Saudi company. The bank also said yesterday its board of directors had approved a buyback of 10 per cent of its shares, subject to regulatory approvals. NBAD shares rose 4.3 per cent yesterday. The bank disclosed its earnings after the market closed.