First Gulf Bank cheered markets yesterday with its sixth straight quarter of profit growth, with analysts raving that the stock could have further to travel.
The Abu Dhabi bank generated net income of Dh1.05 billion during the third quarter of this year, an increase of 14.5 per cent compared with the same period a year earlier.
The bank's shares rose 1.5 per cent yesterday to Dh10.15 each, the biggest intraday gains for the stock in eight weeks.
"FGB posted an encouraging set of results for the quarter, albeit bottom-line figures were within expectations," wrote Naveed Ahmed, an analyst at Global Investment House, in a research report.
"Non-interest income was eye-catching with a jump of 52 per cent year-on-year but numbers seem inflated due to poor performance in [the third quarter of last year]."
First Gulf Bank's huge dividend payouts have made it a favourite among analysts. The bank surprised markets with a Dh1.5bn dividend payout this time last year, alongside a 1-to-1 share split.
Out of the 17 analysts covering the stock, all but one gave it a "buy" recommendation. The lone dissenter rated the stock a "hold".
On a price-to-earnings basis, First Gulf Bank's stocks are the second-cheapest of the UAE's big five banks, with a multiple of 7.56. Yesterday's rally pipped the bank ahead of Union National Bank, which reported a surprise growth in earnings last week and is the cheapest of the bunch.
"The bank has been delivering on all the key earnings metrics - loan growth continues to be one of the strongest in the sector, provisions are high but within expectations, and asset quality metrics are stable," said Shabbir Malik, a financial analyst at EFG Hermes.
The bank's loan growth had been rapid during the quarter, though its loan-to-deposit ratio of 104 per cent was now "on the high side", Mr Malik added.
First Gulf Bank has taken a different tack from rival UAE lenders, such as National Bank of Abu Dhabi, which have increased the number of countries where they operate, instead choosing to lend more to strong multinational companies.
That strategy was now starting to pay off, Mr Malik said.