NBAD reports AED 927 million net profits in Q1 2011

The National Bank of Abu Dhabi (NBAD) reported 27% increase in net profits to AED 927 million for the quarter ended 31 March 2011 compared with AED 732 million earned in the last quarter of 2010.

Net profits were lower by 10% over the first quarter of the previous year on higher provisions.

The annualised return on shareholders’ funds for the quarter is 17.2% in line with the targets for 2011. 

Mr Nasser Alsowaidi, Chairman of NBAD said, “Economic recovery in UAE and in Abu Dhabi continues, amidst global recovery, driven by the various initiatives undertaken by the government and government-related institutions in UAE. Despite NBAD’s good performance, we remain cautious to the challenges posed by the regional and global environment. Longer term prospects for the Bank remain clear and bright as we continue to implement our strategies aligned with the growth of Abu Dhabi and UAE.”

Mr Michael Tomalin, Group Chief Executive commented, “Although net profits for the current quarter are below the first quarter of 2010 as a result of higher provisions, top line revenues, operating profits, assets, loans and deposits are all at record levels. The Group remains well placed and continues to invest in its people, network, systems and brand”.

Operating Income

Operating income for the quarter reached AED 1,881 million, up 6.2% compared with AED 1,772 million for the corresponding period of 2010 and higher by 3.5% over the fourth quarter of 2010. Net interest income and net income from Islamic financing contracts for the quarter rose 11.2% to AED 1,378 million compared with first quarter of 2010 while non-interest income was lower by 5.6% to AED 503 million.

Net interest margin was 2.48% for 1Q 2011, almost matching the levels recorded in 1Q 2010 albeit lower as compared to 2.57% for the full year 2010.

Expenses

Operating expenses for the quarter were AED 566 million, higher by 14.6% compared with the corresponding period, but lower by 10.4% compared to the last quarter of 2010.

The cost to income ratio was 30.1% for the first quarter of 2011. The ratio remains below the Group’s medium-term cap of 35%.

During the quarter, we expanded our domestic presence to 113 branches and cash offices and 421 ATMs. NBAD launched three Business Banking Centers in UAE in its ongoing effort to expand its services to small- and medium-sized enterprises (SMEs).

Our investments in the franchise, network and systems, products and people shall continue in line with our vision to be recognised as the World’s Best Arab Bank.

Operating Profits (by business segment)

The Group’s individual businesses delivered good performances in challenging market conditions, contributing operating profits of AED 1,315 million for the quarter.

Impairment Charges

The gross impairment charge for the quarter was AED 446 million, which after AED 81 million of recoveries reduced to a net charge of AED 365 million, comprising of collective provisions of AED 84 million, net specific charges of AED 261 million and other provisions for impaired assets of AED 20 million. Our collective provision of AED 1,976 million is 1.39% of the credit risk-weighted assets, in line with Central Bank’s requirement for banks to have a collective provision of 1.5% of credit risk-weighted assets by the end of 2014.

Non-performing loans increased to AED 3,775 million representing 2.56% of the loan book.

Balance Sheet

Total Assets reached AED 233.5 billion as at 31 March 2011, 10.4% up on 31 December 2010 and 16.3% up on 31 March 2010 mainly driven by the growth in deposits.

Loans and advances to customer increased to AED 143.2 billion, up 4.7% on 31 December 2010 and 7.2% on 31 March 2010.

Customer deposits at AED 141.1 billion jumped 14.6% compared to the year end and by 23% compared to 31 March 2010.

Capital resources stood at AED 32.4 billion after dividend payments of AED 120 million on Government of Abu Dhabi (GoAD) Tier-I capital notes and AED 718 million to shareholders as a cash dividend for 2010. Capital resources consist of shareholders’ funds of AED 20.1 billion, GoAD Tier-I capital notes of AED 4 billion and subordinated convertible notes of AED 8.3 billion. Our capital adequacy ratios remain well above the minimum required by the UAE Central Bank and Basle-3.

Awards and Recognition

During the quarter, NBAD was awarded the Best Corporate Social Responsibility programme by emeafinance and won the Best Arranger of Middle Eastern Loans award from Euroweek being the first bank from the region to win this award.

We also won 3 awards at the 5^th GCC Regulators Summit under the auspices of Emirates Securities and Commodities Authority (ESCA) – Compliance Officer of the Year, Most recognised International Compliance Officer of the Year and Effective Implementation of Compliance Training Programmes (NBAD Academy).

The Gulf’s first exchange traded fund launched by NBAD in March 2010 - ‘OneShare Dow Jones UAE 25’ - was named the Best Investment Product by ‘Banker Middle East’.

In addition to being recognised among the World’s 50 safest banks by Global Finance, NBAD’s long term ratings continue to remain amongst the strongest combined ratings of any financial institution in the MENA region with ratings from Moody’s Aa3, Standard & Poor’s A+, Fitch AA-, RAM (Malaysia) AAA and R&I’s (Japan) rating of A+.