NBAD posts Dh1.27b Q1 profit

ABU DHABI - Loans growth flat while assets slip and customer deposits drop 6.6%

National Bank of Abu Dhabi, the nation's second biggest lender by assets, saw 10.7 per cent year-on-year drop in net profits to Dh1.271 billion for the March 31, 2016 reflecting lower investment gains and higher provisions.
However, the earning was up 23 per cent quarter-over-quarter, largely as a result of improvements in underlying fee income and Forex gains combined with a reduction in provisions.
Loans growth was flat year-on-year to Dh200 billion ; assets slightly slipped by 0.02 per cent to Dh399.7 billion year-on-year; and customer deposits dropped 6.6 per cent to Dh233 billion.
Results included further growth in retail lending, offset by the decline in loan portfolio, which resulted from a decision to switch deployment of core liquidity from short term trade finance assets into other higher yielding liquid alternatives, including investments, as part of our ongoing balance sheet optimisation initiatives. The bank continued to build its strong liquidity position and maintain a robust capital position with a Tier-1 ratio of 15.1 per cent as well as strong credit ratings.
Net interest income (including income from Islamic financing) (NII) was Dh1.831 billion in 1Q'16, up two per cent year-on-year. Net interest income improved year-over-year in the first quarter, reflecting the following factors: the decision to switch deployment of core liquidity from short term trade finance assets into better yielding alternatives, including investments; new lending to customers transacted at higher yields in our Retail and Commercial banking business; and a reduction in our commercial surplus and general tightening in the market in Wholesale banking.
Net fees and commissions for the quarter were Dh571 million, up 10 per cent year-on-year. Lending fees increased as a result of retail lending growth 27 per cent year-on-year.
Sequentially, income on investments and derivatives growth in Global Markets was offset by lower trade finance and credit card fees. Year-over-year increases in trade finance and credit card fees were partially offset by declines in brokerage and asset management fees due to challenging market conditions.
Year-over-year FX and investment income were down 32 per cent, primarily as a result of opportunistic gains taken on the sale of investment securities in 1Q'15 which did not repeat in 2016.
Nassar Al Sowaidi, chairman NBAD said, "Robust balance sheet and healthy liquidity position continue to insulate the bank from external shocks. The bank is on the right track and has a long-term strategy in place to continue delivering sustainable growth."
Alex Thursby Group chief executive officer of NBAD said given the local and international economic volatility, NBAD is prudent and conservative, prioritising the long-term health of the bank over any short-term gains. "Owing to its deep capital buffer and healthy liquidity position, NBAD is in a strong position," he added.
Global retail and commercial continued its trend of strong growth in revenues to record a double-digit y-o-y growth of 19 per cent, driven mainly by the increase in retail product sales and market share in the UAE along with the increase in commercial trade business.
Operating expenses were well-controlled and showed a slight drop compared to Q1'15, driven by the optimisation of the Bank's branch network and prudent cost control policy. Liquidity ratios continued to be strong.
Retail lending grew 20 per cent backed by strong sales performance and customer acquisition, particularly in personal loans, mortgages and credit cards.
Robust growth in the Commercial trade business drove a 70 per cent y-o-y increase in revenues from trade, contributing to higher fees and FX income.
- haseeb@khaleejtimes.com