National Bank of Abu Dhabi reports Dhs4.3bn net profits in 2012

Net profits for the fourth quarter of 2012 were Dhs1,120m, up 54.8% from Dhs724m in the fourth quarter of 2011.

The growth for both fourth quarter and full year 2012 was due primarily to higher investment and interest income.

The annualised return on shareholders' funds for the year was 16.5%, which represents a slight improvement over 16.3% for 2011.

H.E. Nasser Alsowaidi, Chairman of NBAD, said, "In the face of ongoing global challenges, NBAD continued to deliver strong, consistent performance whilst maintaining a strong balance sheet. In 2012, we repaid a significant portion of the Ministry of Finance notes and also issued the first ever issuance of a subordinated debt by a non-Malaysian financial institution in Malaysia. These actions serve as a testament to both the success of our global business model and the strength of our balance sheet. I am proud of our leadership team and our staff and their ability to deliver impressive results in this challenging environment and look forward to more success to come in 2013."

Mr. Michael Tomalin, Group Chief Executive, commented, "2012 was a year in which we continued to see challenges across the globe. Despite these difficult conditions, NBAD delivered record profits by growing net earnings 17% whilst also expanding revenues by 10%. Our growth was a result of the success of our diversified business model, investment gains driven by favorable financial market conditions and successful hedging strategies. We also continued to expand our international presence by opening offices in China and Malaysia, and we have set a target of expanding internationally from 14 countries to 41 countries by 2022."

Tomalin said, "Our capital and liquidity positions remain pillars of strength, and we are very confident in our ability to comply with all upcoming changes in the regulatory framework. In 2012, we were once again ranked as one of the "World's 50 Safest Banks" and the safest bank in the Middle East by Global Finance. We are well positioned for continued success in 2013 as a result of our solid business model, and most importantly, our talented team of dedicated staff."

Operating Income

Operating income increased by 10% to Dhs8,671m from Dhs7,881m in 2011. Net interest income and net income from Islamic financing grew at a steady pace throughout 2012, up 5.1% to reach Dhs6,096m. Net fees and commissions grew by 10.9% to Dhs1,546m in 2012 compared to Dhs1,394m in 2011. Overall, non-interest income grew strongly by 23.9% in 2012 to Dhs2,575m driven largely by an increase of Dhs444m in investment income over 2011. Total investment gains of Dhs537m reflect improvement in the financial markets as well as successful hedging strategies.

Net interest margin declined to 2.14% for the full year 2012, lower than 2.43% for the corresponding period of 2011 due to an increase in short-dated secured lending and a more liquid balance sheet. The percentage lent (loans and advances to total assets) at the end of 2012 was 55% compared with 62% at year end 2011.

Expenses

Operating expenses for the year ended 2012 were Dhs2,870m, up 11.9% compared with the corresponding period, reflecting continued investments in our business.

The cost to income ratio was 33.1% for the period under review. This is slightly more than the 32.5% recorded for the full year 2011 but remains below the Group's medium-term cap of 35%.

The Bank further extended its network, which is already among the largest in the UAE, to 121 branches and cash offices, 571 ATMs and 13 business banking centres. The Bank also continued to invest in other distribution channels such as e-banking and 24x7 call centres, enhancing customer service capabilities. Our international footprint now consists of 57 units across 14 countries and 4 continents.

Our investments in our franchise, network and systems, products and people are in line with our vision to be recognised as the World's Best Arab Bank.

Operating Profits By Business Segments

Operating profits grew 9.1% to Dhs5,801m for the current year compared to Dhs5,317m recorded in 2011. Operating profits for our International businesses grew by 26% to Dhs935m, while investment gains drove Head Office's contribution higher by Dhs130m. Financial Markets Group and Global Wealth businesses also performed well. Operating profits from our domestic businesses were almost flat, reflecting tougher local conditions.

Impairment Charges

Net impairment charges were lower by 10.8% to Dhs1,337m for the year and lower by 24.2% to Dhs365m for the fourth quarter of 2012 as compared to the corresponding period in 2011. The increase in gross specific provisions of Dhs418m was neutralised by the increase of Dhs408m of recoveries and write-backs. Collective provision charge for 2012 was lower by Dhs136m compared to 2011.

The Bank continues to be fully compliant with the Central Bank of UAE's requirement of 1.5% for collective provisions, well ahead of the effective date (year end 2014).

Non-performing loans increased to Dhs5,781m, representing 3.4% of the loan book and in line with our indications at the beginning of the year that non-performing loans should plateau at between 3.5% and 3.75%. Total provisions represented 95.4% of non-performing loans.

Balance Sheet

Total Assets were Dhs300.6bn as of 31 December 2012, up 17.6% versus 31 December 2011 and down by 1.3% versus 30 September 2012.

Loans and advances to customers were Dhs164.6bn as of 31 December 2012. Loan growth of 3.2% year on year for the Group was slower than anticipated.

Customer deposits were Dhs190.3bn, up 25.4% as of 31 December 2012. Similar to first and third quarter this year, the fourth quarter also had significant inflows and outflows of government deposits, some of which are of a short-term nature. These deposits have been placed across various classes of liquid assets on similar tenors.

Capital resources of Dhs36.8bn were higher by 7.0% over 31 December 2011, consisting of shareholders' funds of Dhs27.1bn (including a Dhs1.6bn increase in fair value reserve on investments due to favorable market movements), GoAD Tier-I capital notes of Dhs4.0bn and subordinated notes of Dhs5.7bn.

The Bank repaid a further Dhs1.6bn of the original Dhs5.6bn Ministry of Finance (MoF) subordinated notes during the quarter, having repaid Dhs1.0bn during the third quarter of 2012. The remaining outstanding balance now stands at Dhs3.0bn. The Bank also issued a notice to exercise its call option on its LSE-listed Dhs2.0bn subordinated convertible notes due 2018. The outstanding principal amount was Dhs808.5m as of 7th January, 2013. The Bank successfully issued an MYR 500m (Malaysian Ringgit) Sukuk (equivalent $163.4m) with a coupon of 4.75% for a term of 15 years. This was the first ever issuance of a subordinated debt by a non-Malaysian financial institution in Malaysia.

Basle-II ratios remain strong and well above the minimum 12% and 8% (Tier-I) required by the UAE Central Bank, with a capital adequacy ratio of 21% and a Tier-I ratio of 17% as of 31 December 2012.

Credit Ratings

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

Accolades & Recent Developments

The Bank received several accolades during the last quarter:

• The Arab Bankers Association in London chose Michael Tomalin, the Group Chief Executive as the first recipient of the distinguished service award to Arab Banking and as such the Arab Bankers Association's (ABA) "Banker of the Year".

• The Bank's Asset Management Group was named the "Fixed Income Fund Manager of the Year" by Global Investor magazine.

NBAD was judged as the "Best Private Bank in UAE for 2012" at the 4th Annual Global Private Banking Awards by The Banker & Professional Wealth Management Magazine.

• The Bank's Group Chief Compliance Officer was named the Compliance Officer of the Year 2012 at the ACC Achievement Awards

Other highlights in the last quarter:

• As a Lead sponsor of the 4th Annual Abu Dhabi Investment Forum held in London, organised by Abu Dhabi's Department of Economic Development, NBAD highlighted investment opportunities in Abu Dhabi to global investors.

• The Bank signed an MoU (Memorandum of Understanding) with Seoul Metropolitan Government (SMG) to promote and develop Seoul International Financial Center (SIFC) into a financial hub of Northeast Asia.

• The Bank launched the Fursati (which translates "my opportunity") - Economic Empowerment programme, a first of its kind initiative in the UAE which includes educational seminars for women and aligning NBAD products and services to meet the needs of women in business.

• The Bank was the Gold sponsor at the 1st ever Abu Dhabi Corporate Games where more than 2500 teams and individuals represented private and government companies from Abu Dhabi and outside the UAE.

Dividends

The Board of Directors has recommended a cash dividend of 35% (or 35 fils per share) and stock dividend of 10% (1 bonus shares for every 10 shares held) for the financial year ended 31 December 2012 subject to approval by the shareholders at the Annual General Meeting and the UAE Central Bank.