Investment gains help NBAD beat estimates

National Bank of Abu Dhabi reports sharply higher earnings off the back of investment gains on financial assets, as the capital's biggest bank gears up for global expansion.

National Bank of Abu Dhabi (NBAD) smashed earnings estimates with a sharp rise in net profits for the fourth quarter, buoyed by substantial gains on investments as financial markets rallied.

The capital’s biggest lender reported net income of Dh4.3 billion (US$15.79bn) for last year, an increase of 16.8 per cent compared with a year earlier.

The bank's full-year income was boosted by a strong fourth quarter in which the bank generated profits of Dh1.1bn.
This represented a 54.8 per cent increase on the corresponding period a year earlier.

Analysts had expected profits of Dh913 million.

The year had presented numerous challenges but none had hindered revenue growth at NBAD, said Michael Tomalin, the bank’s chief executive.

“Our growth was a result of the success of our diversified business model, investment gains driven by favourable financial market conditions and successful hedging strategies,” he said.

“We also continued to expand our international presence by opening offices in China and Malaysia, and we have set a target of expanding internationally from 14 countries to 41 countries by 2022.”

The bank gave no details on the sale of a convertible bond that was due to be discussed at its board meeting yesterday.

The bank said it had recommended a cash dividend of 35 fils per share held and a distribution of one bonus share for every ten held.

Lending to customers had increased to Dh164.6bn, 3.2 per cent higher at the end of the year than a year earlier, which the bank said was a “slower than anticipated” level of growth.

Instead of generating increased lending, the bank reaped greater gains from its market investments, which rose to Dh537.2m from Dh93.5m during the previous year.

Deposits grew substantially faster than new loans to Dh190.3bn, an increase of 25.4 per cent during the year, which the bank attributed to inflows and outflows of government deposits during the fourth quarter.

Money set aside to cover the cost of bad debts fell by 10.8 per cent during the year to Dh1.3bn.

During the year, NBAD successfully challenged the Central Bank on a circular imposing limits on exposure to large government entities.

The lender declared that it would be in breach of the Central Bank’s limits when they came into effect at the end of September, but was able to negotiate a waiver before the regulations were postponed for further study.

NBAD said that it would seek approval at its annual general meeting for an increase to its existing bond programmes.

If all the measures were approved this would increase the bank’s dollar, yen and Malaysian ringgit bond programmes by a total of $4.37bn.

The bank is also seeking approval for the sale of a $500m convertible bond, debt which converts into equity at a predetermined date.

NBAD shares were unchanged at Dh11.10 in trading on the Abu Dhabi Securities Exchange before the release of earnings.