First Gulf Bank PJSC led Abu Dhabi’s stock index to the highest level in more than a month after the United Arab Emirates lender said it would distribute a 2011 dividend that exceeded expectations.
The shares soared 9.9 percent, the most since December 2009, to 17.15 dirhams at the 2 p.m. close in Abu Dhabi. The bank, controlled by the emirate’s ruling family, recommended a cash dividend of 1 dirham a share and a free stock for every one held. The ADX General Index rose 1.3 percent to 2,453.98, the highest since Dec. 12. Union National Bank PJSC, a state-controlled lender, had the third-biggest gain on the gauge, rising 1.7 percent.
“Retail investors are considering the positive news of the dividend payout as more important than net income,” said Sebastien Henin, who helps oversee $100 million at The National Investor in Abu Dhabi. “The news will encourage investors to buy shares now, especially as valuations are attractive.”
Banks in the U.A.E., the second-largest Arab economy, are starting to recover from a slowdown in credit growth after the 2008 financial crisis triggered a slump in real estate prices, slowed tourism and investment banking revenue plunged. First Gulf yesterday said that fourth quarter profit rose 18 percent to 1.02 billion dirhams ($278 million). The median estimate of three analysts was for net income of 865 million dirhams, according to Bloomberg data.
First Gulf trades at 6.5 times estimated earnings. That compares with 7.9 times for Abu Dhabi Commercial Bank PJSC, the U.A.E.’s third-largest lender. First Gulf shares advanced 11 percent this month, compared with a 2.4 percent gain in the ADX Banks Index. The index rose 2.3 percent today to the highest level since Sept. 14.
Seventeen analysts recommend investors “buy” the bank’s shares, while none have a “sell” rating, according to Bloomberg data.