National Bank of Abu Dhabi reports first half earnings

Annualized earnings per share were AED 2.84, the return on equity was 47.4% compared with 22.7% in the 1st half of 2004. For the second quarter, net profits at AED 835 Million, were up 191% on the corresponding quarter of 2004.

Total assets reached a record AED 65 Billion at the end of the first half of 2005, up 33% on the same period in 2004, with customer deposits up 22% and loans up 30%. Shareholder's equity, reached AED 6.1 Billion, up 37% from the corresponding period in 2004.

"We are delighted with this outstanding record breaking performance driven by the underlying strong performance of our domestic and investment banking businesses, and the growth in the UAE economy and local equity market", said Michael H. Tomalin, Chief Executive of NBAD.

Operating income for the 1st half of 2005 was AED 1.78 Billion including non-interest income of AED 1 Billion, 225% up on the corresponding period in 2004, reflecting the concentration on diversifying our fee earning sources. Operating income rose 133% year on year, outpacing the expense growth of 31%, which resulted in a cost income ratio of 16.5% compared with 29.2% in the first half of 2004.

Going forward, the bank will continue to invest, as planned, in infrastructure, systems, network and people and strike a balance between investing for the future and rewarding shareholders.

Domestic banking profits were up 103% over the first half of 2004. Investment banking earnings were up 621% over the counter period in 2004, and International banking profits up 3% over the prior year period. Investment banking earnings were strongly influenced by the performance of the broking and asset management businesses which both benefited from the very sharp rise in domestic equity markets this half year.

Net impaired asset provisions were AED 123 Million in the first half of 2005 against AED 22M for the same period in 2004. We added AED 74 million, in the second quarter, to our portfolio
provision as a prudent measure and to reflect the growth of our credit portfolio. Overall, provisions are modest in comparison with the size of the Bank's business and reflect our relatively conservative credit strategy.

The first half 2005 performance has been flattered by strong local equity markets. The return on equity and the cost income ratio are substantially above trend-line, and are unsustainable in the medium term at these levels. Nevertheless, the bank's underlying performance continues to be strong, and the result for the full year is likely to demonstrate this.

NBAD received the "Euromoney Best Bank in the UAE Award for 2005". This is the third year NBAD has received this prestigious award.