Lender rises in tough market conditions

Difficult market conditions do not seem to be a problem for National Bank of Abu Dhabi, which beat analyst forecasts for the second quarter in a row.

Difficult market conditions do not seem to be a problem for National Bank of Abu Dhabi (NBAD), which beat analyst forecasts for the second quarter in a row. Investors pushed the share price up 2.2 per cent to Dh11.25 at the close yesterday. NBAD shares are 15.6 per cent higher than their 52-week low in December and have added more than 12 per cent since the start of last month.

The lender, Abu Dhabi's biggest by market capitalisation, released earnings after the market close on Tuesday saying its second-quarter net profit reached Dh1 billion, an increase of 10 per cent from a year ago. Credit Suisse analysts had pencilled in a net profit of Dh967 million, while EFG-Hermes was expecting the bank to post Dh907m. The robust results also outperformed Shuaa Capital's expectation of Dh875m.

The significant deviation from Shuaa's estimate mainly stemmed from "improved interest margins and lower than expected cost of risk", said Sofia el Boury, the banking analyst at Shuaa Capital, in a note to investors. "NBAD is one of our favourite picks in the region," Ms el Boury said, adding the current prices suggested further improvement. The bank's first-half net earnings stood at Dh2bn, 21.1 per cent higher than the Dh1.6bn reported for the first half of last year.

"These are a strong set of results in difficult markets reflecting the resilience and strength of the bank," said Michael Tomalin, the chief executive of NBAD. Analysts at Credit Suisse said although there was some acceleration in non-performing loans NBAD remained the least affected among local peers at just 1.5 per cent of the total loans. The bank also has the lowest exposure to Dubai World among the top UAE banks, Credit Suisse said in a note yesterday. The Swiss lender said the investment case was supportive of stronger share performance and it maintained its "outperform" rating. Credit Suisse suggested a target price of Dh19, close to 70 per cent above its current price.