FGB forecasts modest growth in 2016

FGB, the Abu Dhabi-based lender, is forecasting “low single- digit” profit growth in 2016.

The chief executive Andre Sayegh said he was expecting low single-digit growth across the board in earnings, revenue and loan growth this year.

“I think it’s possible to maintain profitability because during the previous years there has been a squeeze on the net interest margin, so I think in 2016 you will see more reasonable net interest margin levels,” Mr Sayegh said after its annual general meeting.

“So you can probably generate more without necessarily increasing your balance sheet by the same size.”

Mr Sayegh said that net interest margins would improve because when oil prices were elevated there was a lot of cash circulating in the banking system – but now that deposits from the sale of crude are dwindling the reduction of the supply of cash would raise borrowing costs.

The bank’s net interest margin, or the profitability of the loans it grants, fell to 3.27 per cent at the end of December 2015 from 3.58 per cent at the end of December 2014.

At yesterday’s general meeting, FGB ratified a plan to distri­bute Dh1 per share to investors on 2015 profit, a 15 per cent increase compared with Dh0.86667 in 2014.

The bank’s earnings in 2015 rose 6 per cent to Dh6 billion, joining many of the other big banks in the UAE in posting higher overall growth last year.

However, the strain on the banking industry that is beginning to emerge from the fourth-quarter earnings suggests pain on the way, especially if the drop in the oil price – which has lost more than 70 per cent of its value – does not abate, analysts say.

“Although global economic conditions appear to be challenging in 2016, it is a market reality that the UAE has always overcome downturns, and re-emerged with a stronger mom­entum,” Mr Sayegh said.

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