National Bank of Abu Dhabi (NBAD) reported net profits of AED1.271 billion for 1Q’16, up 23 per cent sequentially (q-o-q), largely as a result of improvements in underlying fee income and F/X gains combined with a reduction in provisions.  

Net profits were down 11 per cent year-over-year (y-o-y), reflecting lower investment gains and higher provisions, despite growth in strategic businesses and stronger net interest income, the UAE bank said. 

Expenses were down 3 per cent sequentially and slightly lower y-o-y as the Bank continued to tightly control expenses whilst also investing in talent, operations and infrastructure. 

Loans were AED200 billion, down 3 per cent q-o-q and flat y-o-y.  Results included further growth in retail lending in line with Pillar 1 of our strategy, offset by the decline in our loan portfolio, which resulted from a decision to switch deployment of core liquidity from short term trade finance assets into other higher yielding liquid alternatives, including investments, as part of our ongoing balance sheet optimisation initiatives.

The bank continued to build its strong liquidity position and  maintain a  robust capital position with a Tier-1 ratio of 15.1 per cent as well as strong credit ratings.  

Return on equity (RoE) of 12.0 per cent in 1Q’16 was impacted by challenging market conditions and lower non-core revenues.

“The steady growth of NBAD’s core business is a sign of strength in this challenging global economic environment. NBAD’s robust balance sheet and healthy liquidity position continue to insulate the bank from external shocks. The bank is on the right track and has a long-term strategy in place to continue delivering sustainable growth,” said Chairman Nasser Alsowaidi. “NBAD recognises that it has a responsibility to deliver value for not only our customers and shareholders but also the UAE as a whole. That is why I am pleased to see the bank continuing to support the people, small and medium sized businesses, and institutions that have made the UAE what it is today by providing them with effective and responsible banking services.”

“In the first quarter of 2016, NBAD’s core lines of business activity generated top- and bottom-line growth. Our domestic business has extended its leading position in the UAE by bringing more products to more customers – both on the retail and commercial sides of the business. At the same time, our global wholesale bank has generated enhanced revenue from flow products as well as increased income from its debt origination and distribution platform,” said CEO Alex Thursby.

“Given the local and international economic volatility, NBAD is prudent and conservative, prioritising the long-term health of the bank over any short-term gains. Owing to its deep capital buffer and healthy liquidity position, NBAD is in a strong position and I am confident that we are continuing to build a better bank for our customers, shareholders and employees.” 

The bank said that forecasts for global growth have been revised downwards in recent months, with the IMF currently expecting to see 3.2 per cent GDP growth in 2016. 

“This has primarily been a result of advanced economies being unable to emerge from a prolonged period of low-to-moderate growth, China facing some headwinds in its transition into a consumer-driven economy, as well as lower commodity prices adversely impacting emerging economie,” it said in a report. 

“In the first quarter of 2016, the GCC has continued to feel the effects of the global slowdown, with low oil prices weighing on the region. That said, there are signs of greater stability, and although oil price recovery could be protracted, it does seem increasingly likely the low point in prices for this cycle has passed.

“During this period of low oil prices, the UAE has benefited from its diversified economy. Furthermore, the UAE has been the regional leader in the implementation of measures, such as subsidy reductions, which have insulated the economy as a whole. 

“Other GCC nations have subsequently taken similar steps to better control their fiscal deficits and to diversify revenue sources.  The region, with overall low levels of public debt and a high level of foreign assets, is well positioned to come through the transition successfully.”

Global Wealth revenue was down 7 per cent sequentially and 11 per cent y-o-y to AED 222 million in 1Q’16 due to continued challenging market conditions.  

“As investors have become more risk averse, negative sentiment has resulted in declines in trading volumes.  The correction in Mena regional financial markets has acted as a significant headwind, particularly within the securities and asset management businesses.  Nevertheless, the Global Private Banking business continues to focus on NBAD’s strategy to be the best private bank for the Arab world and is building momentum with strong client acquisition and an increasingly diverse client base,” the bank said.