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29 March 2024

NBAD expects 2015 costs to moderate after Q1 profit hit

UAE’s largest lender by assets posted a marginal increase in first-quarter net profit. (File)

Published
By Reuters

National Bank of Abu Dhabi (NBAD) expects growth in its operating expenses to moderate in the remainder of 2015, says its chief financial officer, after surging by 29 per cent in the first quarter.

Along with lower non-interest income, expenses dragged on earnings as the UAE’s largest lender by assets posted a marginal increase in first-quarter net profit.

Under chief executive Alex Thursby, the bank has been building up its focus on emerging markets from West Africa to East Asia, recruiting staff, refurbishing branches and investing in information technology systems.

But most of the year's hiring was completed during the quarter, said Thursby in a conference call.

"Our approach is to invest into transforming the bank early and let the revenues catch up," chief financial officer James Burdett said.

Costs would stabilise around the figure posted in the first quarter, reaching around Dh4.1 billion ($1.12 billion) for the whole year, he said.

That equates to a climb of around 10.9 per cent in costs from the previous year, according to Reuters' calculations.

NBAD made a net profit of Dh1.42 billion in the three months to March 31, the bank said in a statement.

This was up on the Dh1.41 billion in the same period of 2014, but fell short of the Dh1.49 billion forecast by analysts polled by Reuters.

Helping to bolster results was net interest income, derived from activities such as lending, which climbed 13.4 per cent year on year. Impairment charges sank 32 per cent over the same period as asset qualities improved.

The bank's performance was also hit by a 3.9 per cent dip in non-interest income. It blamed lower investments and derivatives income because of one-offs during the same period of last year and smaller brokerage income from adverse market conditions.

The earnings came against a broadly-positive results season for banks in the country.

Dubai's Emirates NBD led the way with a 60 per cent rise in net profit, while First Gulf Bank, another big Abu Dhabi lender, missed analysts' forecasts.

Thursby said liquidity in the market was starting to tighten, but the bank was well positioned to cope.

The bank expected to build up its Tier 1, or core, ratio to 15 per cent in coming quarters after it dipped slightly to the first quarter level of 14.3 per cent following its recent dividend payout, said Burdett. It would consider issuing a Tier 1 bond if required, he said.