ADCB shares up 30% this year as lender starts buy-back programme

What's Up: Abu Dhabi Commercial Bank's shares have roared ahead this year as it ups its dividend and launches a share buyback.

Abu Dhabi Commercial Bank's shares are on a tear as a share buy-back programme kicks into effect and the bank raises its dividend for the year.

The capital's second-biggest lender said last month it would recommend a 25 per cent cash dividend, an increase of 5 percentage points since last year.

A share buy-back programme approved by the Central Bank last month has come into force, with ADCB buying 1.1 million shares so far this month. The bank has approval to buy back 10 per cent of its share capital, which could give the shares a long way to travel yet.

ADCB might not make use of all of that, but the dividend increase and the buy-back would be welcomed by shareholders, said Shabbir Malik, a financial analyst at EFG Hermes.

"The signal that one should get from the buy-back is that they think the stock is still undervalued," he said.

The bank's stocks have risen 30.2 per cent so far this year to Dh3.93 per share. They slipped 0.2 per cent in trading yesterday.

Only Emirates NBD has performed better during the period among the UAE's big banks, gaining 33.3 per cent since the start of last month. ADCB's profits fell by 7.7 per cent last year to Dh2.8 billion compared with a year earlier, but profits of Dh680 million during the fourth quarter were stronger than had been expected by analysts and 32.2 per cent higher than the same period a year earlier.

The bank's liquidity remains tight, with a loans-to-deposit ratio of 112.8 per cent at the end of last year - the worst among the UAE's three biggest lenders.

ADCB is said to have hired banks for a dollar bond sale, as lenders in the emirate seek to attract new capital at record low borrowing rates.

Local rival National Bank of Abu Dhabi is also seeking to expand its existing borrowing facilities by US$4.37bn and launch a $500m convertible bond.