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28 March 2024

Abu Dhabi banks perform better

All five state-controlled banks performed well. (FILE)

Published
By Staff

Banks in Abu Dhabi recorded a 2.6 per cent increase in their net income in the first nine months of 2010 despite a sharp fall in the earnings of the Abu Dhabi Commercial Bank (ADCB), their balance sheets showed on Friday.

From around Dh7.4 billion in the first nine months of 2009, the combined net profits of the emirate’s five banks grew to nearly Dh7.6 billion in the first nine months of this year, an increase of about 2.6 per cent.

The banks’ strong performance was underscored in the third quarter, when their net income soared by around 15.5 per cent to Dh2.87 billion from Dh2.49 billion in the third quarter of last year, their figures showed.

Besides the government-controlled ADCB, the other Abu Dhabi banks are National Bank of Abu Dhabi (NBAD), First Gulf Bank (FGB), Union National Bank (UNB) and Abu Dhabi Islamic Bank (ADIB).

A breakdown showed ADCB’s profits slumped by around 97 per cent to Dh19 million in the first nine months of this year from nearly Dh700.6 million in the first nine months of 2009. The Bank was the star performer among the Abu Dhabi banks in the third quarter as its net earnings rocketed by nearly 600 per cent following losses in the second quarter.

ADIB reported the highest profit growth in the first nine months of 2010, with its earnings swelling by about 29 per cent to Dh909.5 million from Dh701.3 million while those of UNB surged by around 26.5 per cent to Dh1.18 billion from Dh935.5 billion. NBAD’s income grew by 14 per cent to Dh2.95 billion from Dh2.59 billion and that of FGB by only around 2.4 per cent.

The five banks, all of which are controlled by the Abu Dhabi government, performed well despite massive non-performing loans (NPL) provisions, which have totalled around Dh7.6 billion, nearly a fifth of the combined bad loan provisions take by the country’s 23 national banks and 28 foreign units.

Many other banks in the UAE have also reported higher profits in the third quarter and analysts believe the finial results for 2010 would be slightly better than in 2009, when the net earnings of national banks slumped by nearly 20 per cent to around Dh14.87 billion from Dh18.7 billion in 2008.

Analysts said the lower income in 2009 and an expected slow profit growth this year was a result of low domestic credit by banks and a sharp rise in NPL provisions following the 2008 global fiscal crisis and regional default problems.

Central Bank figures showed UAE banks are pushing ahead with a post-crisis provisioning drive because of their exposure to Dubai World, the domestic real estate sector and two Saudi financially troubled family businesses.

In June alone, the country’s 23 national banks and 28 foreign units chopped nearly Dh1.7 billion off their coffers for non-performing loans, bringing their total NPL provisions to nearly Dh36.9 billion at the end of the first half. At the end of September, the provisions peaked at Dh37.8 billion.

Analysts believe the banks need to take more NPL provisions as they appear to be heavily exposed to the real estate and construction sector because of a sharp downturn in the aftermath of the 2008 global fiscal crisis.

According to a key Western financial institution, UIAE banks have emerged as more vulnerable to real estate downturns than those in other Gulf oil producers because of their massive lending for that sector.

The Washington-based Institute of International Finance (IIF) said overexposure to real estate and Saudi businesses has eroded the Gulf banks’ asset quality.

“In the UAE, the banking system is significantly exposed to the construction sector and the highly speculative real estate sector. Several banks in the UAE are exposed to high levels of credit risk in connection with the family-affiliated conglomerates in Saudi Arabia and government-related entities in Dubai.”