National Bank of Abu Dhabi said its first quarter net income grew almost 1 per cent, missing analysts expectations as low interest rates coupled with intensifying competition and an increase in costs hit profits.
Net income increased to Dh1.42 billion in the first three months of 2015 from Dh1.41bn in the same time frame last year, the bank said. Revenues gained 7 per cent to Dh2.68bn from Dh2.5bn. Operating expenses grew 28 per cent year-on-year in the first quarter to Dh1.01bn from Dh789 million last year as the bank spent more on technology and hiring.
“These are good financial results in the context that the market is a little bit tougher at home but the way that we want to grow the business, that is growing,” Alex Thursby, the bank’s chief executive, told reporters on a conference call after the results were released.
“What’s very pleasing is that our pillar one, retail and commercial, had a very good quarter and we see that as continuous strength going forward.”
Net interest margin was unchanged year-on-year at 1.84 per cent, but slipped 12 basis points from 1.96 per cent in the fourth quarter. Still, customer loans grew 12.1 per cent to Dh200.2bn at the end of March compared to Dh178.5bn at the end of March last year.
Five analysts polled by Reuters forecast an average net profit of Dh1.49bn for the quarter.
“Earnings missed expectations mainly because of tighter net interest margins,” said Shabbir Malik, a Dubai-based bank analyst at the Egyptian investment bank EFG Hermes.
“The key thing for me was that loan growth was quite healthy and provisioning came in better than expected. That suggests to me that credit appetite is still intact and credit quality isn’t showing signs of stress.”
UAE banks registered record high profits in the past couple of years as the UAE's economy recovered from the financial crisis of 2008. But banks are focusing more on making money from higher-yielding individual customers and small and medium-sized enterprises in the aftermath of the oil price slump.
That is because government corporations sensitive to oil price fluctuations may not have a big appetite for tapping debt. Lenders are also beefing up their fee-generating businesses such as trade finance, wealth management and securities brokerage.
mkassem@thenational.ae
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