The Abu Dhabi Commercial Bank (ADCB), one of the UAE lenders that were seriously hit by the global fiscal crisis and regional default problems, is expected to have boosted its net earnings by at least nine times in 2011 because of a sharp rise in interest income and lower provisions.
Forecasts by a Kuwait investment bank showed the net profits of the government-controlled ADCB will dive in 2012 before sharply rebounding in the following two years on the back of lower provisions and an upsurge in interest and non-interest income.
After posting a net loss of Dh559 million in 2009, ADCB returned to profits and netted around Dh381 million in 2010.
The profits are projected to have rocketed to nearly Dh3.29 billion in 2011, according to Global Investment House (Global).
It attributed the surge to a sharp rise in ADCB’s interest income to around Dh4.66 billon last year from Dh3.68 billion in 2010. Non-interest income is also expected to have grown to Dh1.75 billon from Dh1.65billion.
Global said the rise in net earnings was also due to lower NPL provisions, which dropped to around Dh2.26 billon in 2011 from Dh3.28 billon in 2010.
“ADCB is expected to see a slowdown in asset deterioration in 2012 which is also when we see the NPL ratio reaching an inflexion point. We believe that most of the bank's asset quality troubles are over. But provisions expense is forecast to remain high in 2012 before dropping off in later years,” Global said.
“We believe that the bank’s ability to maintain spreads and loans growth will make it stand out as a smart investment choice.”
It projected ADCB’s profits to fall back to Dh1.89 billion in 2012 on the back of an increase in provisions to Dh2.38 billion and higher expenses, which it forecast to rise to Dh2.38 billion in 2012 from Dh2.1 billion in 2011.
There report showed the Bank’s net profits would rebound to nearly Dh2.99 billon in 2013 and a record high of Dh3.6 billion in 2014.
It also expected assets to edge up from Dh178 billion at the end of 2010 to Dh179 billion at the end of 2011 and continue their climb to peak at around Dh213.3 billion at the end of 2014, maintaining its position as one of the largest banks in the Middle East.