Lending resurgent in Abu Dhabi

Abu Dhabi banks are reporting lending growth at levels not seen since prior to the global financial crisis as they expand into fast-growing Asian economies and personal borrowing swells.

June 23, 2012 (Abu Dhabi) First Gulf Bank in Abu Dhabi June 23, 2013. (Sammy Dallal / The National) *** Local Caption ***  sd-062313-gulfbank-15.jpg
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Abu Dhabi banks are reporting lending growth at levels not reached since before the global financial crisis as they expand into fast-growing Asian economies and personal borrowing swells.

First Gulf Bank (FGB) and Abu Dhabi Islamic Bank (ADIB) beat analysts' estimates after reaping returns from growing trade between the Middle East and Asia, while National Bank of Fujairah increased quarterly profits by a third as it expanded East.

FGB, Abu Dhabi's second-biggest lender by market capitalisation, reported net profits of Dh1.16 billion for the second quarter, 14.7 per cent higher than the same period last year.

The bank, which reported the fastest loan growth in five years, is seeking "deeper domestic and international expansion through a larger physical presence", said Andre Sayegh, the bank's chief executive.

"Our geographic expansion over the coming quarters remains focused on Asia," he added.

The bank's net loans and advances grew by 7.3 per cent to Dh123bn, the highest rate since the third quarter of 2008.

The Abu Dhabi-based bank purchased Dubai First, a consumer finance company, from Dubai Group last month in a deal worth Dh601 million.

ADIB beat estimates with profits for the second quarter of Dh370.9m, an increase of 15.1 per cent compared with the corresponding period a year earlier.

ADIB's net customer financing assets increased by 3.9 per cent during the quarter to Dh56.1bn, the fastest rate of growth in three years. Deposits grew by 5.4 per cent to Dh66.8bn.

ADIB, which said its focus is becoming a "top tier global Islamic bank", has a "moderately positive" outlook for the rest of the year, said Tirad Mahmoud, the bank's chief executive.

"However, since we continue to have concerns about the sustainable recovery of the global economy we remain focused on our remedial and problem credit management processes," he said.

"Until there is a meaningful improvement in the non-performing portfolio we will continue to take provisions as is prudent and necessary."

Separately, analysts at Global Investment House expressed concerns over FGB's rapid increase in its loan book, despite better-than-expected profits and "whopping" non-interest income growth, saying the bank "did not book high enough provisions" to act as a buffer against bad debts. FGB declined to comment.

The growth was not limited to the capital, with National Bank of Fujairah reporting net profits of Dh183.5m for the first half. The results suggest second- quarter profits of Dh92.9m, an increase of 30.8 per cent compared with the same period the year earlier.

The amount of loans increased 7.2 per cent during the quarter to Dh13.3bn. The bank has been seeking to grow its trade finance business and established a presence in Hong Kong through a tie-up with Wells Fargo last year.

All three banks are growing loans faster than the average in what has been the best year for loan growth across the sector in many years.

More than Dh32bn in new loans were extended during the first five months of the year, outstripping the entirety of 2012, according to the most recent data from the Central Bank.

Commercial Bank of Dubai reported net profits of Dh251.2m for the second quarter, a 3.5 per cent increase over the same period a year earlier and in line with estimates.

But lending expanded at 4.4 per cent during the three months, the fastest rate since the third quarter of 2008.

NBAD, which missed profit estimates on Tuesday, also reported the fastest rate of loan growth in two years, with lending expanding 6.8 per cent during the quarter to Dh173bn.

"Loan growth came from both the UAE and internationally," the bank said in a presentation to investors yesterday.

Alex Thursby, NBAD's new chief executive, said during the call he is rolling out a new strategy utilising the bank's size and perceived safety to gain more customers overseas. The bank said yesterday it appointed a new head of global financial markets for Europe from HSBC.

Also yesterday, Emirates Islamic Bank said it had hired Yakub Bobat as head of corporate banking from HSBC Amanah. The bank stated that the intent of the hire was to "position the business as a premier corporate bank within the region".