NBAD plans bonds issue for staff - Emirates24|7

NBAD plans bonds issue for staff

Dealers expect the NBAD convertible bonds issue for staff to exceed Dh50 million and the notes probably would not bear interest (PIA TORELLI)

The National Bank of Abu Dhabi intends to issue convertible bonds to more than 2,500 employees following a series of capital increases and a surge in its net earnings, the company said on Thursday.

The government-controlled bank – one of the five largest in the Middle East in terms of assets – said it would convene an extraordinary general assembly meeting early next month to approve the bond issue and decide on a new increase in its paid-up capital. It said the bonds would account for up to 2.5 per cent of paid up capital in July 2011, but it did not specify the exact total value of the issue.

"The board of directors of NBAD invites its shareholders to attend the extraordinary general meeting, which will be held on July 8," NBAD said in a statement published at Abu Dhabi Securities Exchange. "The meeting is to approve the board's proposal of issuing convertible notes to the bank employees provided that the total value of shares issued to the staff in July 2011 does not exceed 2.5 per cent of the paid-up capital in July 2011."

Dealers said the issue is expected to exceed Dh50 million on the grounds NBAD's capital is expected to increase within five years as part of an ongoing strategy to enhance its financial position and expand operations inside and outside the UAE.

The bank has been locked in a wave of convertible bond issues to boost its capital, the latest of which was in April. The increase by about Dh329m pushed up the bank's capital to a record Dh1.97 billion at the end of May.

"The announcement by NBAD to issue convertible bonds to its employees means the bank is offering incentives to its staff as other global banks usually do. This expected issue has nothing to do with any capital increase but is intended to reward the staff by providing them with some incentives," said Karim Helmi, a stockbroker at Emirates Commercial Centre in Abu Dhabi. "Such bonds are normally issued by big banks to reward their employees for their performance. These bonds will likely bear no interest and their holders will largely benefit when they sell them after they mature in 2011, when their price is expected to have gone up sharply. It gives them the choice to keep these bonds and remain shareholders or sell them at a much higher price."

Dealers noted that NBAD's management has already drawn up long-term plans for the bank's performance, activities and planned capital increase.

The incentives for the employees follows a surge in NBAD's profits and major plans to penetrate new markets abroad, including Libya where the bank will set up a branch.

Its balance sheet showed the bank's net profits leaped by 45.4 per cent to Dh874.5m in the first quarter of 2008 compared to the same period in 2007. The bank's earnings jumped by about 19 per cent to a record Dh2.5bn in 2007.

The total assets rocketed by about 41 per cent to Dh157bn at the end of March while the bank's market capitalisation stood at Dh42.9bn on Thursday.