NBAD net profits up 19% to Dhs2.5bn

Operating income reached Dhs3,665bn, 24% up on 2006. Net Interest income, which represented 66% of operating income rose 19%; fee and other operating income rose 35% reflecting our focus on fee generating businesses. Operating costs increased within plan to Dhs1,054m up 51% on 2006, reflecting the increased investment in our network, brand, products, people, systems and society. The cost income ratio of 28.8% is low by international standards, and lower than the 35% average cost income ratio the bank expects over the medium term.

The 4th quarter profits were Dhs744m, up 59% on the 4th quarter of 2006. Businesses performed well across the board in the 4th quarter with operating income increasing by Dhs1.1bn and operating expenses increasing by Dhs0.3bn.

Total assets reached Dhs140bn at the end of 2007, up 38% from year end 2006 with customer deposits up 16% to Dhs82bn and loans up 39% to Dhs80bn. Total capital resources reached Dhs13.7 bn, up 20%, including Dhs2.5bn of subordinated convertible debt and without any new shareholder contributions. The ROE at 26.3% in 2007 is ahead of the 25% average target set in the bank's 5 year plan. Capital adequacy ratios remain comfortable.

Net new provisions for bad and doubtful debts were Dhs42m which reflects the strong quality of our assets. Provisions were not required as a result of the US sub prime crisis as the Bank had no direct or indirect exposure to CDOs, SIVs or the US sub prime mortgage market. Impaired loans are 106% covered by specific and collective impairment provisions. The actual level of impaired loans has fallen from Dhs949m at the end of 2006 to Dhs859m at year end 2007. The tax provision charge was Dhs64m, in line with growing overseas earnings.

Net profits from the domestic banking business increased 19% to Dhs1,454m in 2007 which represented 58% of the group profit. NBAD continued to grow its domestic operations and during the year, 9 more branches were opened to reach 74 branches spread over all 7 emirates. An SME business was added to the existing retail, corporate, elite and leasing business.

The investment banking businesses contributions to the group profits were AED 556 million of which Dhs283m, or 11.3% of group profit, came from the Financial Markets Group, and Dhs82m, or 3.3%, from the Corporate Finance business, which in 2 years moved NBAD from not being ranked in the top 30, to number one in the Bloomberg league tables for MENA transactions. Asset Management contributed Dhs72m or 2.9% and our brokerage business, Abu Dhabi Financial Services, Dhs119m or 4.7%. Active equity markets affected positively the asset management and brokerage businesses although performance remains below historic levels.

Profits from international banking business reached Dhs354m, representing 14% of the group profit and 7% over 2006. Our International banking business continues to do well and is expanding fast. During 2007 we opened 7 new branches in Egypt and Oman to be followed by a branch in Bahrain in the 1Q of 2008. We also have plans to open in Libya, Jordan and Hong Kong to increase our international reach. Our licence to open in Qatar is still pending.

Profits from the brand new private banking business were Dhs19m. We offer full private banking services through our Geneva subsidiary which started in June 2007, aided by local private teams in UAE and in locations where we operate.

The remaining profit is accounted by the head office which is run as a business, providing services to the front line businesses and employing the Bank's capital.

NBAD has one of the highest credit ratings in the region comparable with many medium sized European banks.

Commenting on the results, the Chief Executive of NBAD, Michael H Tomalin, said: "These are solid results with a compound average growth rate of 30% since 1999. The Bank has progressed across a broad front investing in its franchise, its people and its systems and we remain well placed to take advantage of the huge growth opportunities in Abu Dhabi and the region, and play a significant part in the economic development of the UAE. We are a responsible corporate entity providing financial support to the communities where we live and work.

Recovering local equity markets helped our results this year and our brokerage and asset management businesses remain well positioned to take advantage of the improving regional equity markets. The return on equity of 26.3% is one of the best in the industry, both locally and internationally, and in line with our 25% medium term objective." Michael Tomalin added.

Looking to the future, Tomalin said, "In line with our strategy, we expect positive growth in 2008. Our fully owned Islamic and real estate subsidiaries will be operational in the 1st quarter of 2008 and we plan to continue to invest more in the business. Although we have done well, there remains a great opportunity to grow much larger still."

The directors recommended a cash dividend of Fils 40 (40%) per share and a stock dividend of 20%.