First Gulf Bank PJSC surged to a record on bets the United Arab Emirates lender, whose second-quarter profit beat analysts’ estimates, will benefit from a recovery in loan growth in the country.
Shares of the bank known as FGB, which is controlled by Abu Dhabi’s ruling family, increased 3.6 percent, the most since May 2001, to 17.45 dirhams at the close in Abu Dhabi. The stock was the biggest gainer on the Bloomberg GCC 200 Index and the benchmark ADX General Index, which climbed 1.1 percent, taking its gain this week to 2.3 percent.
FGB yesterday reported quarterly net income of 1.17 billion dirhams ($319 million), beating the 1.08 billion-dirham average estimate of six analysts compiled by Bloomberg. Net interest income and income from Islamic financing grew 9 percent, according to its financial statement. The bank’s net interest margin of 3.6 percent compares with 2.54 percent for Commercial Bank of Qatar QSC, whose shares have retreated 4.7% since it reported results yesterday.
“FGB is the bank of choice for institutional and foreign investors because of stock liquidity and because it doesn’t have any fat tail concerns on asset quality and capital adequacy,” Digvijay Singh, a Dubai-based analyst at VTB Capital, said in an e-mailed response to questions. The stock is a good “play on credit growth and asset quality recovery in U.A.E.,” he said.
The second-largest Arab economy is picking up after suffering from one of the world’s worst property crashes. Loans and advances at the nation’s banks grew 5 percent in the year to May, compared with expansion of 2.6 percent in December, according to central bank data.
The economy is poised to grow 4.6 percent, on average, between 2012 and 2015, more than twice as fast as the prior four years, according to government forecasts. Abu Dhabi, the U.A.E. capital, sits on about 6 percent of the world’s proven oil reserves.
Twelve analysts recommend investors buy FGB shares, while six have a hold rating on the stock and one advises selling it, according data compiled by Bloomberg.