Bloomberg News

Abu Dhabi Commercial Quarterly Net Jumps on Lower Interest

October 25, 2011

(Adds CEO’s comment in third paragraph)

Oct. 25 (Bloomberg) -- Abu Dhabi Commercial Bank PJSC, the United Arab Emirates third-biggest lender by assets, reported a 91 percent jump in third-quarter profit, topping analysts’ estimates, helped by a fall in interest expense and provisions.

Net income rose to 607.6 million dirhams ($165 million), or 9 fils a share compared with 317.7 million or 4 fils a year earlier, the bank said in a statement to the Abu Dhabi bourse today. The median estimate of three analysts was for a profit of 322 million dirhams, according to data compiled by Bloomberg.

“We are seeing good momentum in business whilst maintaining a disciplined approach to risk management,” Ala’a Eraiqat, the bank’s chief executive officer said in a separate statement. “Our capital position remains strong and positions us well to leverage opportunities for the growth in the U.A.E.”

U.A.E. banks are recovering after the global financial crisis slowed lending, hurt investment banking and led to an increase in bad loans. National Bank of Abu Dhabi PJSC, the U.A.E.’s second-biggest bank by assets, posted a 12 percent rise in third-quarter profit, while First Gulf Bank PJSC, another Abu Dhabi-based lender, reported an 8 percent rise.

Abu Dhabi Commercial is one of the biggest lenders to Dubai World, the state-owned holding company. The bank in June sold its 24.9 percent stake in Malaysian lender RHB Capital Bhd to Abu Dhabi’s state-owned Aabar Investments PJSC and earned a profit of 1.31 billion dirhams from the sale.

Interest Cost Drops

Abu Dhabi Commercial said its interest expense declined 41 percent to 575.9 million dirhams, helped by a decline in the Emirates interbank offered rate. Net interest margin, the difference between what the bank earns on loans and pays out on deposits, improved to 3.47 percent in the quarter from 2.43 percent in the same year ago period, it said.

The bank’s ratio of non-performing loans to gross loans fell to 10.8 percent at the end of September from 11.1 percent at the end of December, according to the statement.

U.A.E. banks’ revenue from their retail business will probably decline 10 percent to 15 percent because of new central bank rules that took effect in May, Arup Mukhopadhyay, the bank’s executive vice president and head of consumer banking said Oct. 2.

The central bank in March capped personal loans at 20 times a borrower’s monthly salary and said repayment periods can’t exceed 48 months to help control lending and curb excessive charges. Overall monthly installments for all loans, including personal, car, housing loans and credit cards, must not exceed 50 percent of a customer’s gross salary and any regular income, it said.

--Editors: Inal Ersan, Peter Branton

To contact the reporters on this story: Stefania Bianchi in Dubai at sbianchi10@bloomberg.net; Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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