Abu Dhabi's NBAD Misses Estimates as First Quarter Profit Drops

  • Non-interest income at largest U.A.E. lender declined 8%
  • Bank says investment gains decreased and provisions gained

National Bank of Abu Dhabi PJSC posted an 11 percent decline in first-quarter profit, missing analysts’ estimates, as earnings at the largest bank in the United Arab Emirates’ were hurt by a drop in non-interest income, higher provisions and lower investment gains.

Net income rose fell to 1.27 billion dirhams ($346 million) from 1.42 billion dirhams a year earlier, the state-controlled lender said in a statement Wednesday. The bank was expected to post profit of 1.35 billion dirhams, the median estimate of 3 analysts compiled by Bloomberg. Non-interest income fell 8 percent to 819 million dirhams, while impairments rose to 295 million dirhams from 170 million dirhams.

Banks in the U.A.E. are prepared for deteriorating conditions as oil prices remain lower for longer, leading to a decline in government spending, slower economic growth and falling asset quality, Standard & Poor’s said Jan. 11. Emirates NBD PJSC, the country’s second-biggest bank, reported a lower-than-expected 8 percent rise in first quarter profit as higher funding costs eroded gains from increased lending and a decline in provisions.

Banks from the U.A.E. to Saudi Arabia are facing liquidity pressures as a more than halving of oil prices over approximately the past two years slowed deposit growth and pushed up funding costs. The three-month Emirates Interbank Offered Rate, a benchmark used to price some loans, climbed 33 basis points in the past year to its highest in three years. Government deposits in the banking system have declined 14 percent in the 12 months through February or by 26 billion dirhams, according to central bank data.

NBAD’s loan book was flat at 200.2 billion dirhams, compared to 199.6 billion dirhams a year earlier, and deposits fell by 6.6 percent to 233.3 billion dirhams, according to the statement. Net interest margin, the difference between what the bank earns on assets such as loans and what it pays on liabilities such as deposits, narrowed slightly to 2.02 percent in the quarter from 2.04 percent a year earlier. Impairments rose to 295 million dirhams from 170 million dirhams a year earlier.

Before it's here, it's on the Bloomberg Terminal.