National Bank of Abu Dhabi says profits rose 72 per cent to Dh1bn on the back of loans for growth projects in the emirate.
Bank sees earnings soar 72%
National Bank of Abu Dhabi (NBAD) reported record profits and assets in the second quarter on the back of continued strong demand for loans to finance the emirate's ambitious growth projects. The nation's second-largest bank said last quarter's profits rose 72 per cent from the same period last year to Dh1 billion (US$272 million) and that assets grew 33 per cent from last year's second quarter to reach Dh165bn. Strong consumer demand for loans during the country's economic boom, as well as inflation, have fuelled the banking industry's loan growth, but NBAD has also benefited from large Government and corporate projects in the emirate. "The Government spending has been quite strong in Abu Dhabi, [so] I think the results should not have been any surprise to anyone, but a profit of Dh1bn is a very big surprise," said Mihir J Marfatia, an analyst at The National Investor. "The fact that Abu Dhabi is planning so many projects, much of which is being funded thorough banks - I think the obvious beneficiary would be NBAD." NBAD also returned strong results in the first quarter because of robust borrowing, and many observers guessed that the bank had succeeded in tapping into public corporations' insatiable appetite for financing.
NBAD's loan volume in the second quarter grew 63 per cent from a year ago, to Dh106bn. Consumer deposits grew 15 per cent, to Dh89bn. Meanwhile, Emirates NBD, the nation's largest bank, reported that its second quarter profit had increased by 45 per cent from a year ago as loans grew about 12.6 per cent since the end of the year, adding that consumer deposits had kept pace with loan growth. Domestic retail and corporate banking has remained a strong booster for the banking industry, as a growing population continues to use the banking industry, especially for mortgage and credit card facilities. NBAD, which has nearly 80 branches in the country and will expand to about 100 by the end of the year, said that domestic banking accounted for 50 per cent of its profits, followed by its activities in the financial markets, which saw its biggest jump in profits from a year ago. "The financial markets business has enjoyed an outstanding first half, with profits up 352 per cent on the 2007 comparable," NBAD said. The bank said in its earnings statement that operating expenses rose 44 per cent because of "planned and continued investment in expanding our network, enhancing our infrastructure, upgrading our systems and our people".
Despite increased spending, the company's cost-income ratio during the first half improved to 25 per cent, from 28 per cent in the same period last year, most likely a result of robust earnings growth. The company's half-year earnings reached Dh1.88bn, 58 per cent higher than the first half of last year, and revenues for the period shot up 61 per cent from the corresponding period last year, to Dh2.7bn. NBAD said that its property subsidiary, Abu Dhabi National Property Company, would become operational in the fourth quarter. @email:email@example.com