NBAD quarterly profit rises 32%

Increasingly, NBAD is relying on trade finance, brokerage and asset management to boost its bottom line amid record low interest rates.

NBAD has focused more on getting profit from other services such asset management, securities brokerage, foreign exchange and trade finance. Silvia Razgova / The National

National Bank of Abu Dhabi (NBAD) said its third-quarter profit jumped 32 per cent as the emirate’s largest lender by assets pushed ahead with efforts to diversify its sources of revenue.

Increasingly, the bank is relying on trade finance, brokerage and asset management to boost its bottom line amid record low interest rates.

The bank said its third quarter net income advanced to Dh1.37 billion from the same period the previous year. Loans increased 8.9 per cent quarter-on-quarter to Dh198bn, while customer deposits gained 11.5 per cent in the same time frame to Dh264.7bn. NBAD said its net fees and commissions jumped 25 per cent year on year.

The lender joins the country’s other big banks, including Emirates NBD, FGB and Abu Dhabi Commercial Bank, in beating the expectations of analysts. NBAD’s profit for the quarter surpassed the Dh1.35bn average estimate of six analysts polled by Reuters. Shares of NBAD have gained 12 per cent this year.

“Our performance in the first three quarters of 2014 reflects the successful execution of our long-term strategy and we continue to see positive underlying trends,” said Alex Thursby, the bank’s chief executive. “We are achieving these strong results while also maintaining a conservative approach to risk management.”

Banks in the UAE have been prime beneficiaries of a revival in which the economy grew by more than 4 per cent last year as interest rates reached new lows and credit growth rebounded.

At the same time, the banks’ competition for retail customers has become especially fierce in a country where more than 50 banks, not all of them catering to individual clients, serve a population of 9 million.

That has led NBAD to focus more on getting profit from other services such as asset management, securities brokerage, foreign exchange and trade finance.

It is also tapping a US$137bn market for corporate banking in a so-called West-East emerging market corridor where many companies have cross-border needs. NBAD believes it is well positioned to exploit this, being at the geographical crossroads.

“In addition to our solid performance in the first three quarters of the year, we are also beginning to raise our profile – in the UAE and around the world – and we are playing an increasingly more prominent role in connecting global investors in the UAE and across the West-East corridor in 2014,” said Mr Thursby.

The chief executive cited the bank’s work on the recent Emaar Malls initial public offering, the first sukuk sold by the governments of the UK and Hong Kong, as well as an Islamic bond sold by the US investment bank Goldman Sachs, as some examples of the bank connecting investors across continents.

UAE banks are expected to end the year on a high note, with lending anticipated to pick up as the Government boosts spending on infrastructure for Expo 2020, according to analysts.

While banks are flush with cash, so too are companies after a year of either refinancing existing debt or taking out fresh loans to fund expansion.

It is expected, however, that government-related entities involved in mega-projects ahead of Expo 2020 will tap into banks for financing in a big way next year.

At least Dh30bn of funding is needed to build infrastructure, government officials have said.

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