NBAD plans Malaysia unit, sees more in Asia

National Bank of Abu Dhabi, the second largest lender in the UAE by assets, plans to set up a new bank in Malaysia as it seeks to expand its Asian operations, its chief executive said on Wednesday.

NBAD has secured a licence to set up a new bank in Malaysia with a capital of 300 million ringgits ($96 million) that will open in 2011, Michael Tomalin told Reuters in an interview.

"It is part of our strategy to grow our franchise in Asia in the next five to 10 years as the movement of the world goes eastwards," Tomalin said.

"Over the next three to five years we will look at two or three or four more Asian countries, even another bank perhaps in Asia," he said.

The bank also plans to grow in the Middle East by expanding in Jordan and Egypt and entering at least three new markets in the Arab world.

In June this year NBAD sold Islamic bonds worth 500 million ringgit in Malaysia. The bank also has a presence in Hong Kong.

In line with its aim of becoming a leading Arab bank, NBAD plans to open its second branch in Jordan "imminently" and is awaiting a licence in Qatar.

Recently the bank said it plans to open 22 more branches in Egypt in the near term to bring the total there to 50.

"We are looking at expanding our reach in the Arab countries over the next four to five years.  We are looking at at least three new markets," he said, declining to name them.

The bank will continue with its organic growth on the retail front by adding three more branches in the UAE before the end of 2010.

The bank has 107 branches locally.

The lender made a net profit of Dh1 billion in the second quarter, up 10 per cent on the same period last year. 

Asked about profitability Tomalin said revenues were growing strongly but costs were going up.

"But the big variable is provisioning. The net number will depend on provisions," he said.

NBAD's net impairment charges stood at Dh463 million ending June 2010 after it booked Dh238 million in the second quarter.

Further provisioning is likely to be reduced, he said, with credit growth likely to remain in single digits in terms of percentage, not due to lower demand but because of a lack of liquidity.

"Although the interbank market has improved a lot, we need more liquidity in the system and over the medium term you must have sufficient credit growth in a fast growing economy," he said. 

S&P downgrades ADCB

Ratings agency S&P downgraded ADCB on Wednesday, citing the local lender's large real estate loans and exposure to Dubai World.

Banks in the UAE have suffered from substantial exposure to bad loans due to the region-wide property slump.

"We are lowering our long and short-term ratings on the bank to 'A-/A-2' from 'A/A-1', and assigning a stable outlook," the agency said in a statement.

"High single-party concentration in ADCB's loan book has exacerbated asset quality erosion faster than we expected," it added.

In July, ADCB said it had Dh6.6 billion ($1.80 billion) worth of exposure to Dubai World.

The bank made a net loss of Dh531 million in the three months to June 30, compared to a Dh225 million net profit in the first quarter.

"The bank's large proportion of construction and real estate (CRE) loans, its exposure to Dubai World, and its high single-party concentration increases the challenges it faces, and in our view, is hindering management's ability to tackle problems," S&P said.

UAE banks are exposed to a falling real estate sector and non-performing loans, with analysts forecasting a slow loan growth in 2010.

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