World Economy

Higher Impairments Squeeze Abu Dhabi Lenders

The National Bank of Abu DhabiThe National Bank of Abu Dhabi

Performance of leading Abu Dhabi based banks in the third quarter were clouded by the relatively higher cost of funds and increased delinquencies.

National Bank of Abu Dhabi reported net profits of Dh1.32 billion ($35.9 million) for the third quarter of this year, flat year-over-year and down 4% sequentially, Arabian Business reported.

During the period, strong underlying growth trends and solid investment income were offset by a seasonal slowdown and ongoing challenging market conditions. For first nine months of the year, net profits were down 5% due to lower investment gains and higher impairment charges, despite growth in strategic businesses and overall stronger operating profits.

Analysts attributed flat earnings over the year higher loan loss charges. Non-payable loan formation increased in its retail segment, whilst SME/commercial credit quality remains challenging. “Growth remains subdued as balance sheet re-engineering continues, while deposit growth was entirely driven by its international operations during the quarter, making up for the government deposit outflow,” Arqaam Capital wrote in a note.

Abu Dhabi Commercial Bank missed analysts’ forecasts, after posting a 17% fall in third-quarter profit due to higher impairments and lower interest income. Three analysts polled by Reuters had on average forecast a net profit for the quarter of Dh1.10 billion. The bank made a net profit attributable to shareholders of Dh999.1 in the third quarter compared to Dh1.2 billion in the same period last year.

Union National Bank posted a 15% drop in third-quarter net profit. It was the sixth successive quarter of weaker earnings. The bank reported a net profit of Dh410 million the third quarter compared to Dh483 million in the same period a year ago.

“UNB beat our expectations on lower than expected credit costs but margins continue to decline 47 bps year on year to 2.64% during the 9-month period due to higher deposit costs and elevated delinquencies in its SME portfolio, ”Arqaam Capital said.

Abu Dhabi Islamic Bank reported Dh508.9 million in net profit for the third quarter of this year, inching up 1.1% over the Dh503 million reported in the same period last year.

First Gulf Bank reported a nine-month net profit of Dh4.5 billion, up 5% compared to the same period last year. In the third quarter group net profit grew 31% to Dh1.86 billion with revenues up 28% to Dh2.81 billion.

While the banks continue to maintain profits at same level as last year, despite the challenging environment, rising provisions have significantly impacted profit growth.


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