Business

Mixed results for local banks

Abu Dhabi Islamic Bank and Union National Bank see profits for the full year rise, but provisions remain a drag on earnings at UNB.

Gregor Stuart Hunter

February 15, 2011

Profit at Union National Bank (UNB) fell in the fourth quarter of last year as provisions for bad debts weighed on earnings.

Abu Dhabi Islamic Bank (ADIB), a smaller lender, returned to profit as its problems with defaulting debtors started to ease.

UNB's net profit for the fourth quarter of last year was Dh174 million (US$47.37m), a fall of 23.9 per cent compared with the same period in 2009. But it booked robust profits for the year, with earnings rising 16.6 per cent to Dh1.35 billion compared with 2009.

ADIBreturned to profit for the fourth quarter of last year, with profits of Dh114.1m compared with a loss of Dh623.3m the year before.

The Sharia-compliant lender booked a 48.3 per cent fall in credit provisions and impairment charges to Dh749m, which it attributed to its pre-emptive provisioning when the global economic crisis began.

"During this extended period that has witnessed the vulnerability to the vagaries of the global economy, where various economic indicators and business confidence have remained persistently muted, it is encouraging to note that the financial and business performance of the UNB Group has been satisfactory over the full economic cycle, with the group continuing to grow in a measured manner in 2010," said Mohammad Nasr Abdeen, the UNB chief executive.

UNB booked impairment charges of Dh482.4m, a rise of 67.2 per cent, including impairments for Dubai World and Saad and Al Gosaibi groups, two Saudi conglomerates that defaulted in 2009.

The bank stopped short of revealing its total exposure to those groups, saying only that non-performing loans accounted for 4.3 per cent of the bank's loan book.

Jaap Meijer, a financial analyst at Alembic HC Securities, said compared with expectations, UNB's results were "pretty decent". "The loan losses were less than expected and non-performing loans are very well controlled. Exposure to Dubai World was less than expected," he added.

Mr Meijer said it was possible to calculate the bank's total exposure to Dubai World as Dh1.6bn. But he added the bank's exposure to Dubai Holding, which is still undisclosed, was weighing heavily on it share price.

ghunter@thenational.ae

OPTA'S PREDICTED TABLE

1. Liverpool 101 points

2. Manchester City 80 

3. Leicester 67

4. Chelsea 63

5. Manchester United 61

6. Tottenham 58

7. Wolves 56

8. Arsenal 56

9. Sheffield United 55

10. Everton 50

11. Burnley 49

12. Crystal Palace 49

13. Newcastle 46

14. Southampton 44

15. West Ham 39

16. Brighton 37

17. Watford 36

18. Bournemouth 36

19. Aston Villa 32

20. Norwich City 29

 

 

 

 

 

 

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16 Indoor cricket matches are 16 overs per side

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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6.05pm: Maiden Dh165,000 (Dirt) 1,200m; Winner: Good Fighter, Richard Mullen, Satish Seemar.

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