Complex Made Simple

NBAD announces financial resutls for nine months ended 30 September 2014

National Bank of Abu Dhabi (NBAD) earned Dhs4.195 billion for the nine months ended 30 September 2014, up 14.7 percent over the corresponding period in 2013. In 3Q 2014, net profits were Dhs1.366 billion; up 32.0 percent year-over-year and down 3.7 percent sequentially. Results for both periods reflected underlying business improvement. Diluted EPS was Dhs0.84 for 9M 2014, up 16.3 percent.

The annualised return on average equity for 9M 2014 was 15.6 percent, up 42bps from 15.1 percent in 9M 2013.

H.E. Nasser Alsowaidi, Chairman of NBAD said, “In the third quarter of 2014, NBAD continued to generate solid momentum across its multiple lines of business. Our year-to-date results reflect continued strength in underlying revenue and earnings growth, and we have continued to maintain a strong balance sheet and solid capital position whilst achieving these results.”

Mr. Alex Thursby, Group Chief Executive said, “Our performance in the first three quarters of 2014 reflects the successful execution of our long-term strategy, and we continue to see positive underlying trends in our Global Wholesale, Global Retail & Commercial and Global Wealth businesses. We are achieving these strong results whilst also maintaining a conservative approach to risk management. During the 3rd quarter, we were ranked 25th – up from 35th – amongst the World’s 50 Safest Banks by Global Finance magazine, marking the 6th consecutive year we have been on this prestigious list. During the third quarter, we continued the process of exiting certain businesses which are not aligned with our long-term strategy from either a customer product or risk perspective. We continued to invest in our front office sales and relationship banker teams in all of our businesses with a large emphasis on Retail & Commercial. As part of building a world class bank, we are investing in “building the spine” to ensure we are positioned to grow safely and build a sustainable customer value proposition as competition intensifies. This investment will continue into the 4th quarter as we build for the future.

In addition to our solid performance in the first three quarters of the year, we are also beginning to raise our profile – in the UAE and around the world – and we are playing an increasingly more prominent role in connecting global investors in the UAE and across the West-East corridor in 2014. One example of connecting investors was our key role in the recent Emaar Malls IPO, which was a high profile transaction completed in the 3rd quarter of 2014; bookrunning the first ever sukuk issuance by the UK and Hong Kong governments; Goldman Sachs’ debut USD sukuk, the first ever by a Western financial institution; and Agricultural Bank of China’s recent CNH issue, the first CNH new issue and first Asian financial instiution offering bookrun by NBAD.

We are raising our profile and the service proposition to clients is our recently announced exclusive banking partnership with Real Madrid. The two organisations share a lot in common as both NBAD and Real Madrid are premier brands, heritage is the foundation for both organisations and, both NBAD and Real Madrid have a history of commitment to excellence. We are confident that this partnership will support NBAD’s continued commitment to deliver the best products in the market to the clients.

Collectively, our achievements over the past several quarters have been remarkable from both a business and reputational standpoint, and we expect much more in the years to come. Our plan for 2015 and beyond will further enable us to continue the growth and momentum we have begun to see as we continue to execute against our longer-term strategic objectives,” Mr. Thursby concluded.

In 3Q 2014, US GDP data was higher than expected, business sentiment indicators are now signaling expansion, and the latest statement by the FOMC indicated that asset purchases would most likely end in October 2014 as inflation is nearing Fed target levels. Offsetting strong news from the US are negative headlines from around the world, including hardening of sanctions against Russia, Argentina’s debt default and ongoing instability in the MENA area. In Europe, recent data indicated weak growth and low inflation, and the ECB is focused on medium term targets and planning a bond purchase program, which is expected to start toward the end of October 2014. Divergence of Fed and ECB quantitative easing (QE) policy is raising market uncertainty.

In the UAE, the economy is expected to grow 5 percent in 2014 and around 4.5 percent in 2015, driven primarily by the non-oil sector. Several factors are currently contributing to a decline in oil prices including increased oil supplies, reduction of transportation issues, recovery in Libyan refineries and weaker demand. These factors are being partially offset by the upward price pressure being created by geopolitical risks during 2014. The UAE currently has substantial foreign assets and a fiscal surplus, and annual growth rates of 4.5-5 percent are expected to continue for the next several years.

In 2014, deposit growth and liquidity have strengthened, and lending growth has increased. Overall, the UAE banking sector is comfortably capitalized, and loan to deposit and non-performing loan ratios have been steadily declining. The 2015 budget has been drafted and will focus on harnessing financial resources in a sustainable way to serve citizens and provide them with better health, education, and social services.

* Due to effective hedging strategies, the offsetting impact of hedging instruments is reflected in the net investments gains on the hedged items.

Net interest income (including income from Islamic financing) (NII) was up 5.7 percent in 9M 2014. In 3Q, NII was up 2.7 percent sequentially and up 9.5 percent year-over-year. Net interest margin for the nine months of 2014 was 1.89 percent, down 11 bps compared to corresponding period of 2013. Third quarter NIM was 1.92 percent, down 5 bps sequentially and 3 bps year-over-year as both periods were impacted by the timing of large government deposits. NIM continues to remains under pressure from several factors including abundant liquidity, re-pricing of risk as the economy recovers and increased deposits placed across highly liquid but lower-yielding asset classes.

Net fees and commissions were up 26.3 percent in 9M 2014, driven by increases in trade finance, retail, brokerage and lending related fees. In 3Q, they were up 25.2 percent year-over-year, while slightly lower by 5.5 percent sequentially on lower brokerage income. Net FX income was down in 9M 2014 and in 3Q results, both sequentially and year-over-year with offsetting impact presented in net investment gains, which were up in 9M and in 3Q, both sequentially and year-over-year as we took advantage of favorable market conditions and hedging strategies.

Other operating income was down significantly in 9M 2014, largely due to exceptional gains from hedging strategies in 1H 2013 which did not repeat in 2014.

Operating expenses for 9M 2014 were Dhs2.597 billion, up 11.8 percent, reflecting continued investment in the business partially offset by the benefit of efficiencies generated from restructuring costs.

The cost to income ratio was 33.9 percent in 9M 2014, reflecting an increase from 32.9 percent in 9M 2013.

Our continuing 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 and our mission to be ‘core to our chosen customers’.

Operating profits in 9M 2014 grew to 5.061 billion, up 6.7 percent. Operating profits by segment in 9M 2014 were Dhs2,944 million (58 percent) in Global Wholesale Banking, Dhs588 million (12 percent) in Global Wealth and Dhs1,207 million (24 percent) in Global Retail and Commercial. Head Office had a net contribution of Dhs322 million (6 percent).

Net impairment charges in the 9M 2014 were Dhs668 million, down Dhs254 million and reflecting continued improvement in asset quality and recovery in collateral values. Specific provision charges also reflected significant improvement and were lower by Dhs240 million in 9M 2014.

The Bank continues to be fully compliant with the Central Bank of UAE’s minimum requirement of 1.5 percent for collective provisions since the end of 2011 and ahead of the effective date (year end 2014).

Non-performing loans increased by Dhs45 million in 3Q 2014 to Dhs6.232 billion. As of 30 September 2014, NPL ratio improved to at 3.05 percent of the loan book, improving from 3.16 percent at year-end 2013. The ratio has gradually come down from a peak of 3.55 percent in 1Q 2013. Total provisions represented 104.4 percent of non-performing loans.


Assets were up 15.3 percent year-over-year and 14.2 percent sequentially, primarily due to an increase in lending and liquid assets.

Net Loans and advances increased 8.4 percent year-over-year and 8.9 percent sequentially, due to a combination of underlying growth and the impact of short-term financing related to the Emaar Malls IPO.

Customer deposits grew 15.3 percent year-over-year and 11.5 percent sequentially. The Bank continues to experience a strong and encouraging buildup of CASA (Current accounts and savings deposits) with growth of 33.9 percent year-over-year and 7.0 percent sequentially.

Trade contingencies were Dhs118.6 billion, up 51.9 percent year-over-year and 24.7 percent sequentially as the Bank continues to gain momentum and execute against its growth strategy of generating more non-funded revenue from the flow of trade across the West-East corridor.

Equity, consisting of shareholders’ funds of Dhs33.3 billion and GoAD Tier-I capital notes of Dhs4.0 billion, was up 11.9 percent year-over-year and 3.5 percent sequentially.

Basle-II ratios remain strong and well above the minimum 12 percent and 8 percent (Tier-I) as required by the UAE Central Bank, with a capital adequacy ratio of 16.3 percent and a Tier-I ratio of 14.8 percent as of 30 September 2014. As planned the Bank made further progress toward its targeted Tier-1 ratio of approximately 15 percent.


NBAD’s long term ratings are now amongst the strongest combined ratings of any global financial institution with ratings from Moody’s Aa3, Standard & Poor’s (S&P) AA-, Fitch AA-, RAM (Malaysia) AAA, R&I’s (Japan) rating of A+, and now ranked 25th among the World’s 50 Safest Banks by Global Finance.


• The National Bank of Abu Dhabi (NBAD) has become the exclusive banking partner of Real Madrid in the UAE. Real Madrid is the world’s most valuable football club in terms of revenue and holds the most record titles in the world, including FIFA team of the century and winner of the 2014 UEFA champions league. NBAD-Real Madrid cards will offer customers exclusive priveleges and premium benefits, and NBAD is working in full partnership with Real Madrid to develop further co-branded products , create joint merchandise and collaborate on future programmes and events.

• Global Finance ranked NBAD 25th among the World’s 50 Safest Banks, up 10 positions from the number 35 spot in the previous year. The prestigious international financial magazine has ranked NBAD in its World’s 50 Safest Banks for the sixth consecutive year. The banks for this list are selected through an evaluation of long-term credit ratings-from Moody’s, Standard & Poor’s, and Fitch-and total assets of the 500 largest banks worldwide.

• NBAD has launched NBAD Shari’a MENA Dividend Leader Fund, which invests in select dividend-paying companies traded on the most promising MENA equities markets. The Fund is inspired by and modeled after NBAD MENA Dividend Leader Fund (MDL), an accomplished, award-winning fund. Inspired by the success of NBAD MENA Dividend Fund, the new fund is a comparable product for investors who are interested in Shari’a-compliant investment. Recently, MENA Dividend Leader Fund was voted Newcomer Fund of the Year 2013 by Zawya at the MENA Asset Management Conference and Awards 2014.

• NBAD was the first financial institution in the Middle East to select NCR SelfServ 91, a new hardware platform that will help NBAD transform its branches and extend its retail banking footprint. This modern, sleek, in-branch ATM can help migrate low-value transactions from the teller line to self-service, freeing branch staff to focus on sales and customer support.

• NBAD has appointed Susan Yuen as its CEO in Asia. In this new role, Ms. Yuen will be responsible to define and implement NBAD’s strategy in Asia and have oversight of the bank’s current presence in Hong Kong, Malaysia and Shanghai and consider future expansion plans to Singapore. Ms. Yuen will work with NBAD’s global businesses to develop a client focused business for NBAD in Asia with a key emphasis on building and enhancing our relationships and putting our clients at the core of our business in region. She is a highly experienced and proficient banker with nearly 30 years’ experience in multiple areas of banking and a deep understanding of Asian markets.