NBAD first-quarter profit boosted by merger with FGB

National Bank of Abu Dhabi combined with FGB on April 1 to become First Abu Dhabi Bank. Ahmed Jadallah / Reuters

National Bank of Abu Dhabi said that its pro forma first-quarter profit that includes that of FGB, with which it merged this month, rose 12.4 per cent amid rising revenues and cost savings garnered from the combination.

The gain came as net interest income as well as net fees and commissions dropped in the first quarter.

Net profit rose to Dh2.93 billion in the first three months of the year compared with Dh2.6bn in the same period last year, the bank said. Net interest and Islamic financing income dropped 4.9 per cent to Dh3.2bn in the first quarter from Dh3.37bn in the same period last year. Net fees and commissions decreased 14.7 per cent to Dh799 million from Dh936m, while other non-interest income, understood to comprise largely of unspecified investment gains, surged 145.5 per cent to Dh1.2bn from Dh487m.

Meanwhile, money set aside to cover debt gone sour declined 3.9 per cent in the first quarter to Dh645m versus Dh671m, the bank said.

After the merger on April 1, FGB was delisted from the Abu Dhabi Securities Exchange. NBAD said that it would seek shareholder approval on April 24 to change the name of the combined entity to First Abu Dhabi Bank from National Bank of Abu Dhabi.

“With the merger of FGB and NBAD now effective, we are starting First Abu Dhabi Bank’s journey on a solid footing thanks to robust fundamentals at the end of Q1, 2017, positioning us well to successfully execute our integration plan,” said Abdulhamid Saeed, the group chief executive of the combined bank.

“We have already achieved a number of key milestones since the completion of the merger, which is a strong testament to the exceptional merits of bringing two highly complementary businesses together, as we already began to draw on our combined strengths and realise synergies for the benefit of all our stakeholders.”

The bank said this month that cost synergies are forecast at Dh1bn, twice the initial estimate of Dh500m. They would occur over a period of three years and would be driven by a reduction in branches and headcount.

At the same time, the bank said it was targeting a higher than expected return on equity, a measure of profitability, of 16 per cent to 17 per cent by 2020.

First Abu Dhabi Bank also said the cost of integration would rise to Dh1.1bn from Dh600m over three years.

Those costs will comprise mostly of write-offs of IT assets as well as severance packages. Analysts said the revision of these estimates should be regarded as investments that will pay off in the long run.

The merger, which was approved by both banks’ shareholders on December 7, was done in part to cut down on costs by removing duplicate posts and sharing resources.

Even though NBAD, the biggest bank by assets in the UAE, had made headway in building its consumer banking business, it will get a boost from joining forces with FGB, which has more loans to individuals on its books.

Retail lending accounts for about 40 per cent of FGB’s total lending book, while NBAD’s consumer lending portfolio makes up just 17 per cent of its outstanding loans.

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