The annualised return on shareholders' funds for the nine month period of 2012 is 16.8% below our 20% medium-term target, but acceptable given continuing elevated provisions.
H.E. Nasser Alsowaidi, Chairman of NBAD said, "The Bank continues to deliver a strong performance in an ever dynamic and challenging banking environment. We continue to focus on our long-term strategy and this year's expansion of our international footprint in Asia is in line with our vision to be the World's Best Arab Bank."
Mr. Michael Tomalin, NBAD Group Chief Executive, commented, "We experienced continued growth in the 3rd quarter and are on track to meet our expectations for the full year. Top line growth was solid, and our expenses reflect the continuing investments we are making in our people, technology and new business opportunities. Both our liquidity and capital positions remain strong."
Operating income increased by 7.8% to Dhs6,351m from Dhs5,889m recorded in the nine months of 2011. Operating income of Dhs2,251m for the third quarter was higher than the corresponding quarter of 2011 by 12.5%. Net interest income and net income from Islamic financing contracts grew by 5.3%, net fees and commissions by 11.9% and net investment income 140% from a low base. Non-interest income of Dhs1,812m was higher by 14.8% in the nine months of 2012 over the corresponding period of 2011.
The net interest margin declined to 2.2% for the nine months of 2012, lower than 2.5% for the corresponding nine months of 2011 due to an increase in short-dated secured lending and a more liquid balance sheet. The%age lent (loans and advances to total assets) at the end of the nine months of 2012 was 54% compared with 64% this time last year. The Group comfortably met both of the transitional liquidity ratios (LAR and USRR) set by the Central Bank for 2013 implementation.
Operating expenses for the first nine months of 2012 were Dhs2,079m, up 15% compared with the corresponding period, reflecting our continued investments in our business.
The cost to income ratio was 32.7% 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%.
At the end of September 2012, our domestic network spanned 122 branches and cash offices, over 566 ATMs and 11 business banking centres. We opened our first business banking centre in Ras-al-khaimah during the third quarter. Our international footprint now boasts 55 units across 14 countries with our offices in Shanghai and Kuala Lumpur the latest additions.
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 grew 4.6% year to date compared to the corresponding period in 2011 mainly driven by the international and Global Wealth businesses, which achieved a growth of 27% and 102% year-on-year, respectively. Operating profits in our domestic banking business were almost flat reflecting a tougher domestic market.
Collective provisions of Dhs2,451m represent 1.52% of the performing credit risk-weighted assets (Central Bank's 2014 target - 1.5%). The Bank's internal expected loss model produces lower collective provisions than the UAE Central Bank's required ratio.
Non-performing loans increased to Dhs5,578m representing 3.31% of the loan book 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 represent 96.5% of non-performing loans.
Total Assets exceeded the Dhs300bn for the first time to reach Dhs305bn as of 30 September 2012, up 19.1% on 31 December 2011 and up 25.8% on 30 September 2011.
Loans and advances to customers were Dhs163bn as of 30 September 2012. Loan growth for the Group has been slow at 4.6% year on year and 2.1% year to date.
Customer deposits were Dhs194bn, up 27.5% in the nine months of 2012 and were higher by 35.9% as compared to 30 September 2011. During the third quarter, deposits increased by Dhs33bn or 20.7%. This was mainly due to a receipt of significant amount of government deposits, some of which may flow back during the fourth quarter. These deposits have been placed across various classes of liquid assets on similar tenors.
Capital resources were higher by 6.6% over 31 December 2011 at Dhs36.6bn consisting of shareholders' funds of Dhs25.7bn, GoAD Tier-I capital notes of Dhs4.0bn and subordinated notes of Dhs6.9bn. The Bank repaid Dhs1bn of the Dhs5.6bn Ministry of Finance (MoF) subordinated notes during the quarter.
Capital adequacy ratios (Basle-II) remain well above the minimum 12% and 8% (Tier-I) required by the UAE Central Bank, with a capital adequacy ratio of 20.1% and a Tier-I ratio of 15.8% as at 30 September 2012 on Basle-II principles.
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
NBAD and aircraft manufacturer Boeing have signed an agreement to develop aircraft financing and leasing opportunities of mutual benefit in the Middle East market, representing a landmark collaborative effort aimed at increasing investment opportunities for financial institutions in the UAE and the broader Middle East region.
The Bank was named the Best Asset Management House in Middle East by International Takaful Awards.
NBAD has been ranked for the fourth consecutive year one of the "World's 50 Safest Banks", and the safest bank in the Middle East, by Global Finance.