x Abu Dhabi, UAEWednesday 17 January 2018

Foreign investors target First Gulf Bank

First Gulf Bank's share price has risen 12.5 per cent in six months.

First Gulf Bank (FGB), Abu Dhabi's second-largest lender, is increasingly attracting the attention of foreign investors. The stock, which has experienced increased interest from foreign buyers, is still attractively valued, analysts say.

The stock provides a return on equity of about 16 per cent, which compares favourably with the wider banking sector.

The bank has a buy rating with upside potential in excess of 50 per cent from its current levels, says Sophia el Boury, an analyst at Shuaa Capital, an investment bank based in Dubai.

"As investors are re-entering the market they are picking up FGB stock on attractive valuations compared to regional peers, expected 1.1 times price to book value in 2011," she said.

The stock has gained 12.5 per cent in the past six months, buoyed by buying from foreign investors who own 14.3 per cent of the floated shares on the Abu Dhabi Securities Exchange. The bank currently has a 15 per cent foreign ownership threshold. The company has also bought back some of its own stock over the course of the year.

Like many local lenders, FGB has been adversely affected by the rapid decline in house prices over the past two years as both an owner and lender to the property sector.

The bank's direct and indirect exposure to the property sector was the main reason behind the pressure on its stock price, Ms el Boury said.

The bank decided to postpone a plan to sell a US$500 million three-year dated bond, which would have paid a 4 per cent coupon last month because trading conditions were not favourable. The bank said it did not need to borrow funds immediately.

The bank recorded a third-quarter net profit of Dh849m, 8 per cent higher than the previous quarter.