National Bank of Abu Dhabi records a 7.9 per cent surge in H1 2014 net profits, according to July figures.
With stock markets reaching record levels, the first half of 2014 has been a positive one across all sectors. And although Eurozone problems continue, IMF directors have defined the years ahead with ‘cautious optimism’, something that seems to have worked well for NBAD, as it boasts some of the most positive banking results in the UAE.
Operating profits in H1 2014 grew to AED3.4 billion, up by 2.2 per cent. Operating profits by segment reached AED2,010 million (59 per cent) in global wholesale banking, AED401m (12 per cent) in global wealth and AED858m (25 per cent) in global retail and commercial. Head office had a net contribution of AED155m (4.5 per cent).
Basle-II ratios remain strong and well above the minimum of 12 per cent and eight per cent (Tier-I) as required by the UAE Central Bank, with a capital adequacy ratio of 16.2 per cent and a Tier-I ratio of 14.7per cent as of June 30, 2014.
NBAD’s long-term ratings are among the strongest combined ratings of any global financial institution; with ratings of Aa3 from Moody’s, AA- from Standard & Poor’s (S&P), AA- from Fitch, AAA from RAM (Malaysia), A+ from R&I (Japan). It also ranks among the World’s 50 Safest Banks by Global Finance.
In saying this, there have been a number of notable changes in management across the bank. Marc Mollema, the current managing director and global head of energy and resources, was appointed to help NBAD stretch across the energy sector, while Jonathan Macdonald was named managing director and head of syndicated finance. Both appointments came in July 2014 and serve as a good illustration of the bank’s intentions in the coming year.
Commenting on the banks performance in H1, Nasser Alsowaidi, chairman at NBAD, says: “In the second quarter of 2014, NBAD continued to generate solid momentum across business lines. The bank’s results reflect continued strength in underlying revenue and earnings growth. As we enter the second half of 2014, NBAD will continue to focus on generating long-term growth, while maintaining its strong balance sheet and solid capital position.”
Although positive financial results allow for a debacle of growth, the UAE’s financial services industry must not forget the woes of the 2008 crash. Many analysts still claim that dependency on real estate investments keeps banks in a vulnerable position. Speaking with POLICY, former CEO of Green Crescent Insurance, Dr Hazem Al Madi, says: “Real estate has proven to be extremely volatile and, similarly, the stock market, which was hit hard during the recession, made it clear, more so than ever, that investment fixed deposits and convertible bonds are more appropriate.”
Overall, while the growth of local banks can only be a positive forecast for the industry, it must be weary of investment strategies to ensure protection from volatile markets, such as real estate, to avoid repeats of 2008.
However, for now, it seems NBAD is standing out as a positive indicator of the UAE’s banking sector.
(First published on AMEInfo’s sister publication POLICY)