Two of Abu Dhabi's biggest banks reported a sharp rise in profits for the first quarter, bucking expectations of a slowdown in earnings as lending cools.
National Bank of Abu Dhabi (NBAD), the capital's biggest lender, generated net profits of Dh1.04 billion (US$3.82bn) during the first quarter, an increase of 12.2 per cent compared with the same period a year earlier. The results edged past analysts' estimates of Dh1.01bn.
Meanwhile, Abu Dhabi Commercial Bank (ADCB) generated quarterly profits of Dh802 million, reporting a 38 per cent increase in net profits compared with a year ago and beating analysts' estimates of Dh612m.
Shareholders approved a buy-back of 10 per cent of the shares in issue.
Both banks benefited from high levels of net interest income, with interbank lending rates at historic lows.
"NBAD posted a very healthy set of results," wrote Naveed Ahmed, a financial analyst at Global Investment House, saying the bank's bottom line "fared better than expectations".
With growth at home, NBAD was on track to capitalise on greater opportunities overseas, said Michael Tomalin, the bank's chief executive.
"The first-quarter result has got the group off to a strong start for the year in what remains a generally difficult market for banking," he said. "The bank's expansion programmes, both at home and abroad, remain on track and our offices in Malaysia and China are planned to open in the second quarter of this year."
Charges for bad debts fell by 14.3 per cent to Dh313m compared with the same quarter a year earlier, as the bank expanded its loan book by 2.3 per cent during the three months to Dh163.2bn.
But NBAD was alone among Abu Dhabi's lenders in generating significant credit growth, which typically has been driven by the bank's lending to arms of the Abu Dhabi Government.
ADCB reported a 0.7 per cent dip in lending to Dh123.8bn during the quarter, while other big Abu Dhabi banks, including First Gulf Bank and Union National Bank, have reported minimal lending growth as banks find their ability to provide loans constrained by new regulations.
The Central Bank capped the amount banks can lend to an individual company during the quarter to 25 per cent of total capital, intended to shield lenders from accumulating large exposures to the UAE's government-related holding companies.
The amount banks could distribute to individuals as personal loans was also regulated last year and fees capped in May, with banks bracing for further regulators in the coming months.
Nonetheless, ratings agencies reacted positively to the surprise jump in earnings.
After the release of ADCB's earnings, Moody's Investors Service responded by lifting the "negative" outlook on the bank's credit rating to "stable", citing an improvement in the bank's liquidity and risk management.
"ADCB's standalone ratings continue to be constrained by the persistent challenges relating to credit and funding concentrations as well as significant related-party lending," the agency wrote in its report.
"ADCB's franchise has been weakened slightly by the bank's strategy to re-focus its operations on the UAE and deleverage rapidly the balance sheet," it added, saying the bank had lost out to its UAE rivals for market share during the period.