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Abu Dhabi, UAEWednesday 14 November 2018

Third-quarter profit for ADCB and Mashreq rises amid uptick in economy

ADCB's net income rose 5.5 per cent to Dh1.15 billion but missed analysts' estimates

The lender is in a three-way merger talks with a Sharjah rival and an Islamic lender in Abu Dhabi.Bloomberg
The lender is in a three-way merger talks with a Sharjah rival and an Islamic lender in Abu Dhabi.Bloomberg

Abu Dhabi Commercial Bank, the second-largest lender in the emirate, and Dubai's Mashreq on Sunday reported rise in year-on-year third quarter profit amid improving operating conditions.

ADCB's net income rose 5.5 per cent to Dh1.15 billion but missed analysts' estimates on lower income from fees, commission and trading. The quarterly income missed the Dh1.18bn consensus estimate of three analysts polled by Bloomberg.

Net fees and commission income dropped to Dh328.47 million at the end of September from Dh376.9m reported for the same period of 2017, the lender said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded. Income from trading also shrunk to Dh113.27m from Dh131m for the year-earlier period.

“Each business segment contributed to the strong underlying performance of the bank,” ADCB said in a separate regulatory filing to the bourse on Sunday.

The profitability of UAE banks is strengthening due to improvement in economic activity on the back of higher oil prices that breached a three-year high of $80 per barrel in recent weeks.

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Although margins are still under pressure, the financial profiles of GCC banks are expected to stabilise further in 2018 as the operating environment improves and credit growth gradually returns, according to analysts including those at rating agencies S&P Global Ratings and Moody’s Investors Service.

ADCB's net interest and Islamic financing income climbed 9 per cent to Dh5.4bn. Impairment charges to cover bad loans reached Dh1.12bn compared with Dh1.23bn reported at the end of the first nine months of 2017.

ADCB last month said it was exploring the possibility of a merger with Union National Bank and Sharia-compliant lender Al Hilal Bank, which could create the Gulf's fifth largest banking entity with about $114 billion (Dh418bn) in combined assets.

The talks “are at a very preliminary stage and may not result in a transaction,” ADCB said.

Mashreq, one of Dubai's oldest lenders that is controlled by the Al Ghurair family, said its third-quarter net income rose 4.6 per cent to Dh587m from Dh561m reported in a year-earlier period.

“With a firm focus on fostering innovation in each aspect of our business, Mashreq’s third quarter results are testament to the continuing success of our transformation," said Abdulaziz Al Ghurair, Mashreq chief executive. "We achieved solid growth in our balance sheet with a deposit growth of 8.1 per cent year-to-date, well above market norms. This was complemented by our strong liquidity position with high liquid assets to total assets ratio of 28.4 per cent.”