First Gulf Bank 2012 net profit rises by 12% to Dhs4,154m

The net profit of core banking activities against other subsidiaries of the group was split at 95% to 5%, in which the UAE businesses contributed 96% compared to 4% overseas.

Commenting on the bank's strong performance in 2012, Andre' Sayegh, CEO of First Gulf Bank, said, "This strong financial performance is attributed to the solid foundation of First Gulf Bank, whereby the various bank businesses are dynamically aligned with market conditions. Our priority is to continue to manage a strong balance sheet, which results in achieving a solid profitability year after year. We are proud to state that over the past few years, FGB has been successful in building a power house of diversified and stable revenue generating businesses, while our overseas presence will gain an important momentum going forward. It is important to note that this strong performance is closely associated with prudent Risk Management across the bank."

Q4'2012 income statement highlights
The Net Profit for FGB's fourth quarter in 2012 was Dhs1,149m, an increase of 12% over Q4'2011, and 9% higher than Q3'2012.

Net Interest and Islamic Financing operations generated Dhs1,470m, thereby contributing to 73% of the Total Revenue. The remaining 27% of Total Revenue was generated through Corporate and Retail fees and commissions, Treasury and Investment Income and Income from Subsidiaries and Associate Companies.

Full year 2012 income statement highlights
FGB recorded a net profit of Dhs4,154m in 2012, 12% higher than the previous year. Revenue increased by Dhs787m, while expenses rose by Dhs203m and Provisions increased by only Dhs100m.

"One of the core pillars of our strategy remains diversifying our sources of revenue geographically and across different business sectors. This diversity in revenue streams has been a major factor in FGB's strong results, aligned with the bank's strong capital position and liquidity, providing the bank with a robust platform for future growth," Sayegh said.

Corporate, Retail and Treasury businesses all witnessed positive growth in Revenue during 2012 and contributed 38%, 41% and 11% each respectively to the Total Revenue sum. Net Interest and Islamic Financing grew by 9% during the year and Net Interest Margin was maintained at 3.7%.

FGB's strategy of international expansion continued to yield positive results. The bank's international branches in Singapore, India, Qatar and Libya generated Dhs307m in revenue, increasing by 163% compared to Dhs116m in 2011 and increasing by 339% from Dhs70m in 2010. International operations continue to show positive results with an important growth momentum planned for the future.

In line with FGB's efforts to continuously build its capabilities and invest in its people, the bank's expenses during the year increased by Dhs203m or 17%, resulting in a controlled cost to income ratio of 19.6%. In addition to hiring new talent for the organisation, expenses notably covered training schemes and initiatives, such as the recently launched the FGB Business School, which aims to promote best practices within the banking sector in the UAE.

The FGB Business School offers tailored solutions to meet the professional requirements of FGB's businesses, resulting in enhanced skills, and supporting employees' career growth. Strengthening the bank's products, its sales force, the International expansion and investing in technology enhancements accounted for further cost increases.

Cash Dividend
FGB's Board met today and reviewed the audited financials. The Board has analysed the financial position of the bank, the current capitalisation level and the bank's potential for future growth and investments, accordingly the Board has proposed the distribution of a cash dividend of Dhs0.83 per share. This makes the total proposed cash dividend at Dhs2.5bn compared to Dhs1.5bn in 2011, a 67% increase over the previous year. The cash dividend proposal is subject to the approval of the Central Bank of UAE to be followed by the approval of the Ordinary General Assembly of Shareholders.

Abdulhamid Saeed Board Member and Managing Director, First Gulf Bank, commented, "First Gulf Bank remains committed to providing superior returns to our shareholders, and the bank has consistently paid a cash dividend since year 2000. Given our current strong capital and liquidity position, we are very comfortable with the proposal. It is indeed rewarding our long term shareholders' support and their confidence in FGB's bright future. The proposed dividend represents 60% of the current year Net Profit up from 16% in 2008, 20% in 2009, 26% in 2010 and 40% in 2011."

Balance Sheet - Liquidity
The balance sheet, by end of year 2012, showed a comfortable liquidity position. In line with the UAE Central Bank's planned new regulations, Liquid Assets Ratio stood at 10.3% for all local and international locations. The loan to deposit ratio was at 96% by the end of 2012, down from 101% by end of 2011. This was a direct result of the Dhs15.8bn increase in customer deposits during 2012, which outpaced the increase in loans of Dhs9.9bn.

Furthermore, the loans and advances book grew by 9.5% to reach to Dhs114.6bn, equivalent to the growth witnessed during the year in 2011. The Central Bank Advance to Stable Deposit Ratio was at 76%, well below the maximum of 100%.

During the year 2012, the bank was successful in rising medium and long term funding to support the growth of the balance sheet and to reduce reliance on short term customers' deposits. The bank raised US$500m from the regional and international capital markets in the form of a 5 year Sukuk, US$650m in the form of 5 year Conventional Bond and US$900m in the form of a 3 year syndicated loan. The bank also raised CHF 100m worth of 3 year conventional bonds during Q4'2012.

Capitalisation and Earnings per Share
Shareholders' equity by the end of 2012 and before cash dividend distribution stood at Dhs29.9bn, 12% higher than the previous year. Following the proposed cash dividend distribution this year, the Capital Adequacy Ratio would be at 21.3%, and the Tier 1 Capital Ratio would be at 18.8%. Earnings per share for the full year 2012 of Dhs1.33 are 16% higher than 2011.

Provisioning
The quality of the loan book improved in 2012, this is reflected in the 90 day overdue Non Performing to Gross Loans ratio. By the end of the year 2012, the NPL ratio was 3.3%, lower than 3.5% at end of Q3'2012. The Provision Coverage Ratio has also improved significantly from 89% by end of Q3'2012 to 96% by end of 2012.

"Our position of a low NPL ratio and high provision coverage ratio is a result of our internal credit criteria, our dedicated NPL management team and to our strong risk management platform. Over the past couple of years, we have witnessed an overall stabilisation of the Non Performing Loan ratios due to improved efficiency in managing cash flows and additional liquidity available to customers. We continue to look positively at the future for a further gradual improvement in the asset quality," Sayegh said regarding the bank's loan book.

Outlook
Abdulhamid Saeed added, "Moving into 2013, the bank possesses a strong standing with a positive outlook moving forward. FGB's solid capital adequacy ratio, one of the highest in the UAE banking industry, and a consistently strong performance history, places the bank in a strong position against the future requirements of Basel III with significant potential for growth. The bank's rating was affirmed at A+ by Fitch in May 2012 and affirmed at A2 by Moody's in August 2012 both with Stable Outlook."

He concluded, "First Gulf Bank will continue to focus on growing its balance sheet and on providing high returns for shareholders, whilst investing in its resources and employees in line with global best practices. We will continue to deliver innovative offerings that meet the needs of our customers, and that reflect our commitment to the UAE community."