For most regional lenders, positive first-quarter earnings reports have been mostly a reflection of their woeful run last year, but that is not the case with the largest lender in Abu Dhabi. The National Bank of Abu Dhabi (NBAD) should be the big winner as the capital's banks are poised for a strong recovery. NBAD has a healthy loan book, asset quality is improving on its balance sheet and its first-quarter net profit easily surpassed most analysts' expectations.
That adds up to a compelling case for the Swiss lender, Credit Suisse, which raised its target price of NBAD shares to Dh19, a 30 per cent premium on the current price of Dh11.95. The bank also raised its rating for the stock, which is traded on the Abu Dhabi Securities Exchange, from "neutral" to "outperform". Most regional banks were afflicted by many problems last year, including shrinking deposits, rising defaults on corporate and consumer loan portfolios, and deteriorating asset quality after the property market crash.
NBAD was no exception but coming out of the crisis the bank is demonstrating its fundamental strength and prudent management policies. Credit Suisse, in a note to investors yesterday, said NBAD's first-quarter non-performing loans ratio was relatively low at 1.33 per cent and coverage for the loans is at 161 per cent. Investors can also take comfort from the fact that the bank's exposure to Dubai World constitutes only 0.5 per cent of its loan book, according to a recent note by Shuaa Capital.
There was more to cheer regional investors in the Swiss lender's analysis. Credit Suisse has a positive view on two other lenders in the capital - First Gulf Bank and Union National Bank. They also had their ratings lifted to "outperform". The new target prices for Union National Bank and First Gulf Bank are Dh5.15, up from Dh3.33, and Dh28, up from Dh18.4, respectively. NBAD shares closed flat - as did Union National Bank at Dh3.30 - in a broadly negative market influenced by the global sell-off yesterday. First Gulf Bank retreated 1.4 per cent to Dh18.25.