x Abu Dhabi, UAEFriday 19 January 2018

ADCB sets pace in banking gains

Markets analysis: At a sector level there were strong gains from banks last month with Abu Dhabi Commercial Bank the best-performing stock, rising by 13 per cent.

Abu Dhabi Commercial Bank was the best-performing stock last month, rising by 13 per cent, after the lender started a share buyback programme. Fatima Al Marzooqi/ The National
Abu Dhabi Commercial Bank was the best-performing stock last month, rising by 13 per cent, after the lender started a share buyback programme. Fatima Al Marzooqi/ The National

At a sector level there were strong gains from banks last month.

Abu Dhabi Commercial Bank (ADCB) was the best-performing stock, rising by 13 per cent, after the lender started a share buyback programme.

On a year to date basis, ADCB and Emirates NBD are the best performers, with both stocks giving a 32 per cent return followed by Union National Bank (UNB) giving a 22 per cent return.

Almost all the banks in the UAE have now declared their fourth-quarter numbers and on balance the numbers were either better or in line with expectation.

Dividend payouts were also either better than expected or in line with expectation. During the fourth quarter, loan growth for UAE banks remained muted except for Dubai banks, where there was what is most probably a temporary spike. This year, loan growth of the UAE banking sector is expected to be about 5 per cent.

The overall liquidity in the system has improved with a loans to deposit ratio of 94 per cent at end of November from a high of 100 per cent at the end of 2011.

Banks such as National Bank of Abu Dhabi (NBAD) and First Gulf Bank have recently repaid Ministry of Finance deposits, thus indicating sufficient liquidity in the system. UNB and ADCB also announced partial repayment, raising the total money repaid to Dh12.6 billion out of Dh22.1bn given to Abu Dhabi banks.

On the provisioning side, provisions are now close to peaking, although non-performing loans might further increase slightly. Overall the asset quality of UAE banks is showing signs of stability and it is expected that provisioning will gradually decline.

Net interest margins of most UAE banks remained under pressure because of the low interest rate environment, while on operating costs most banks have maintained tight control, thus boosting profitability.

DP World handled 56.1 million TEUs (twenty-foot equivalent units) across its portfolio last year, representing a like for like annual growth rate of 3.7 per cent. Consolidated volume grew by 0.7 per cent last year compared with 2011.

The growth was mainly driven by good performance from the Americas, Asia Pacific and the Middle East. The UAE region (Jebel Ali port) continued to perform well on a very high capacity utilisation rate.

According to company management, the rise in demand from Jebel Ali port is less reliant on construction and property and mainly driven by strong performance from trade and hospitality segments.

DP World highlighted it would continue to focus on capacity expansions at higher Ebitda terminals, mainly in emerging markets. Its shares are up 12.4 per cent for the year to date on the Nasdaq Dubai.

While the Dubai property index was up by only 2 per cent last month following a 26.5 per cent rise in January, Emaar Properties remained one of the best performers, adding another 8 per cent to give a year to date return of 41 per cent, driven by new project launches.

Emaar's performance was mainly driven by a number of new project launches in Dubai despite a 37 per cent year-on-year fall in fourth quarter 2012 net profit.

 

The author is the head of equities at NBAD asset management