Abu Dhabi Islamic Bank (ADIB) has provided a rousing overture for first-quarter reports from UAE banks, but also a hard act to follow. After a woeful time last year, ADIB posted a 9 per cent rise in first-quarter net profits to Dh293 million (US$79.76m). The result was backed by a sharp increase in deposits and Sharia-compliant loans, which were up 28 per cent to Dh50 billion and 17 per cent to Dh42bn, respectively, from the same quarter last year.
After posting an intraday six-month high of Dh3.27 on Monday, ADIB shares rose 1.3 per cent to finish at Dh3.22 yesterday. ADIB's deposit and loan growth defies what is going on elsewhere in the economy, where new lending remains subdued. The bank's 4 per cent rise in lending from the previous quarter compares with a 0.2 per cent rise throughout the UAE. Part of the large inflows and outflows can be explained with "linked lending", said Deepak Tolani, a banking analyst at Al Mal Capital. Corporations and government entities deposit money with ADIB, and receive financing for projects in return. With most of its business in Abu Dhabi, where government spending has hardly slowed, the bank has profited from the boom in capital-intensive infrastructure investments.
The bank's non-performing loans were barely higher than at the end last year, when they stood at 6 per cent. At Dh105m, only just higher than the first quarter last year, provisions also remained manageable. But the bank said in a statement it anticipated more to come. Back to the bright side: ADIB is one of the few UAE banks in the comfortable situation of having more deposits than outstanding loans. Its deposit-to-customer financing ratio now stands at 84 per cent, while most of its peers have handed out more than they have collected. HC Brokerage had expected the bank to report a Dh272m net profit, while the Kuwait-based Global Investment House had foreseen Dh284m. Most UAE banks are expected to report their first-quarter results next week.