x Abu Dhabi, UAEMonday 22 January 2018

Profit down but NBAD well placed for growth

One day of losses for National Bank of Abu Dhabi's stocks does not take the shine off the bank's growth prospects.

National Bank of Abu Dhabi (NBAD) shares fell 0.44 per cent yesterday to Dh11.40, the first time the stock has declined this month. The stock has gained 17 per cent since the beginning of this month.

But that is not to say the upward trend is grinding to a halt.

The bank's first-quarter net profit, reported after the close of trading yesterday, declined 10 per cent compared with the same period last year, to Dh927 million.

"The main culprit is the provisioning," said Naveed Ahmed, a financial analyst at Global Investment House.

Still, NBAD is more likely than its peers to reap the benefits of a burst of new spending in the Emirates, he said.

"It's one of the best positioned for future growth," said Jaap Meijer, a financial analyst at Alembic HC Securities. Higher loan loss charges had largely been contained, he said.

The bank has traditionally drawn on its ability to attract government contracts.

With high oil revenues flowing through the UAE as Brent crude futures hover around US$120 per barrel, increased investment is planned at a number of government-related entities.

Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, is planning capital and investment expenditure of about Dh60 billion next year, substantially higher than its average of Dh16.4bn for the past three years, according to a recent bond prospectus. International Petroleum Investment Corporation is also looking to follow suit.

A 14.6 per cent increase in deposits to Dh141.1bn leaves the bank with plenty of potential to increase lending in the months ahead, Mr Ahmed said.

The bank would benefit from "any increased expenditure from corporations or government, especially now that they're in a more liquid position than they were last quarter."