x Abu Dhabi, UAESunday 23 July 2017

Investors eye bigger picture at Emirates NBD

Encouraging signs of bank getting back on an even keel

As Emirates NBD prepares to announce its full-year results, investors are more focused on the bigger picture: is the bank getting back on an even keel?

There are encouraging signs that the UAE's biggest bank by assets will reap the rewards of an extensive effort to get its finances in order. The bank announced in December it would offload a 49 per cent stake in its subsidiary Network International, a payments card vendor, for Dh2 billion to Abraaj Capital, the Middle East's biggest private equity fund.

"The sale of this stake is expected to bring in one-off gains for Emirates NBD that could be in the range of Dh1bn to Dh1.5bn," said Faisal Hasan, the head of research at Global Investment House, based in Kuwait.

With the stock "trading at depressed multiples" he expected a "healthy upside in the bank's price".

However, the bank is expected to continue taking impairments on its stake in Union Properties, which took a hit after the onset of the property crash at the end of 2008, although the full extent will not be known until the results are released.

Global Investment House has a target price of Dh4.31 for the company. Emirates NBD shares were up 3.10 per cent yesterday, the highest intraday gain in almost a month, ending the day at Dh2.99.

Investors have generally been put off by the stock because of its illiquidity, but analysts put this down to the tiny free float on the company, that stands at just 3 per cent, rather than poor fundamentals.

"A lot of clients would look at the stock if it was liquid," said one analyst at an international bank, adding that investors buying into the stock would expect a premium for investing in a less than liquid stock. Clarity on the bank's exposure to Dubai Holding could also play into how well the stock is received ahead of results.

Like many regional banks, Emirates NBD lent significant sums to Dubai World and was forced to make substantial provisions on those loans.