National Bank of Abu Dhabi's net profits rise 22% to Dhs3,683m in 2010

Net profits for the fourth quarter of 2010 increased 71% to Dhs732m from Dhs429m in the fourth quarter of 2009.

Mr. Nasser Alsowaidi, Chairman of NBAD said, "Global economic activity continued to recover in 2010 supported by accommodative monetary and fiscal policy around the world. Economic activity in the United Arab Emirates rebounded modestly reflecting global trends. NBAD continues to perform strongly in a subdued and still challenging local and international operating conditions. The Group's business model has been the underlying strength to its sturdy and consistent performance."

Total assets reached Dhs211.4bn as at 31 December 2010, 7.4% up on 31 December 2009. Deposits stood at Dhs123.1bn on 31 December 2010, up 6.5% on previous year. Loans and advances to customers increased by 3.5% to Dhs136.8bn compared with Dhs132.3bn as at 31 December 2009 reflecting our prudent lending policies.

The quality of the loan book remains good with non-performing loans of Dhs3,249m representing 2.3% of our portfolio. Net impairment charges of Dhs1,207m for the year consist of collective provisions of Dhs288m, net specific charges of Dhs826m and other provisions on land and investments of Dhs93m. In line with UAE Central Bank directives to banks to raise the level of collective provisions from 1.25% to 1.5% of credit risk weighed assets by 2014, we increased our collective provisions by Dhs288m in 2010 to Dhs1,892m representing 1.39% of credit risk weighted assets.

NBAD's capital resources during the year strengthened to Dhs32.4bn (includes conversion of MoF deposits of Dhs5.6bn into Tier-2 capital), 39.2% up from Dhs23.3bn at the end of December 2009. Capital adequacy ratio increased to 22.6% from 17.4% a year earlier and the Tier-I capital ratio was 16.2% as at 31 December 2010. NBAD is already well above the current UAE Central Bank minimum requirements as well as on the proposed Basel-III guidelines.

Net interest margin was 2.57% for the year 2010, slightly over the levels recorded for 2009.

Operating income for the full year 2010 reached Dhs7.2bn, 12.2% up compared with Dhs6.4bn for 2009. Net interest income and net income from Islamic financing contracts for the same period rose 14.8% to Dhs5.2bn compared with 2009, net fees and other non-interest income increased by 5.6% to Dhs1,929m notwithstanding subdued market conditions.

Operating expenses for the financial year 2010 increased by 15.2% to Dhs2,186m compared with the corresponding period. The Group remains committed to its long-term organic growth and its continued investment in its franchise and infrastructure to deliver quality products and services to its customers.

The cost to income ratio of 30.5% for 2010 remains below the 35% cap, which the Group expects to be maintained in the medium term.

The Group's annualised return on shareholders' funds at 19%, which excludes the Tier-I capital of the Government of Abu Dhabi, is in line with the 20% objective for 2010 and the medium term.

The Group's individual businesses delivered good performances in difficult market conditions, contributing operating profits of Dhs5.0bn for the year 2010, a 10.9% increase over the 2009 performance. Domestic Banking earned Dhs1,131m representing 22.7% of operating profits; Financial Markets contributed 14.3% or Dhs712m; International Banking delivered Dhs588m, representing an 11.8% contribution and Corporate and Investment Banking's contribution was 49.5% or Dhs2,474m. The contribution from Islamic Banking was Dhs96m and Dhs11m by Global Wealth, a combined contribution of 2.1%.

NBAD received various accolades during 2010. It was ranked among the 'World's 50 Safest Banks in 2010' by Global Finance and the safest bank in the UAE for the second consecutive year. We also received two very prestigious His Highness Sheikh Mohamed Bin Rashid Al Maktoum awards winning the 'Best in Finance' and the 'Most Outstanding Performance Award in UAE'. These awards are a testimony of our constant drive towards customer service excellence and achieving our long-term objectives.

In a tough year for banks, characterised by the tight job market conditions, NBAD recruited 393 UAE nationals in 2010, thus increasing Emiratisation to 39% from 36% a year earlier. The committment to Emiratisation is rooted in the Bank's corporate culture as it is the core DNA of Abu Dhabi and committed to support the Abu Dhabi 2030 Vision and the development of the nation's human resources.

NBAD's long term ratings are amongst the strongest combined ratings of any financial institution in the MENA region with ratings from Moody's Aa3, Standard & Poor's A+, Fitch AA-, RAM (Malaysia) AAA and R&I's (Japan) rating of A+.

Mr. Michael Tomalin, Group Chief Executive, commented, "2010 was not the easiest year for banking and we have continued to make substantial provisions for non-performing loans. Notwithstanding this, the robustness of our business model has been demonstrated in a 22% increase in net profits, which, for the first time in the history of NBAD, reached the equivalent of $1bn."

The Board of Directors is recommending to shareholders a 30% cash dividend and a 20% stock dividend in the light of this year's record results.