NBAD bows to investor pressure with dividend hike

The move highlights the dilemma UAE banks face in continuing to reward shareholders at a time when the impact of lower oil prices is squeezing business.

National Bank of Abu Dhabi (NBAD), the UAE’s largest lender by assets has hiked its 2015 dividend after investor pressure, the bank’s chairman Nasser Ahmed Al Sowaidi said on Tuesday.

The move highlights the dilemma UAE banks face in continuing to reward shareholders at a time when the impact of lower oil prices is squeezing business and could put pressure on capital.

The UAE Central Bank has already flagged concerns about dividend payments and safeguarding bank liquidity, telling lenders they would need to get payouts approved.

NBAD’s new figure of Dh0.45 per share, announced at the bank’s annual shareholder meeting, is up from the Dh0.40 the bank proposed paying when it unveiled its annual results in January.

The move was a direct response to a request from shareholders, Mr Al Sowaidi told the meeting, without elaborating.

Hiking the dividend brings it closer to the 2014 yield, when NBAD distributed a Dh0.40 cash dividend as well as a 10 per cent stock dividend.

It also puts it in line with Abu Dhabi Commercial Bank, which is paying Dh0.45 for 2015, and ahead of Dubai-based Emirates NBD, which gave shareholders Dh0.40 a share.

NBAD chief executive Alex Thursby told reporters after the meeting there had been a “bloom” in deposits so far this year.

“There’s liquidity in the system,” Mr Thursby said. “We are in a good position.”

NBAD was hit hard in the second and third quarters of 2015 by deposit outflows as the UAE government drew upon reserves with local banks to help shore up its finances.

Mr Thursby said the bank had no plans to enter new markets in 2016, marking a “change in pace” for NBAD which has been expanding in recent years, including in Egypt, India, Hong Kong and Malaysia in a bid to capture growth.

In October 2015, it snapped up Royal Bank of Scotland’s offshore loan book in India for Dh3 billion shortly before it started operations there.

However, UAE banks including NBAD have been seeking to cut costs, including staff redundancies, to manage the expected slowdown due to lower oil prices.

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