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Abu Dhabi Islamic Bank Q2 provisions jump 75 pct

Non-performing loans, loan growth disappoint; Q2 profit climbs 5 pct to 316.6 mln dirhams

August 9, 2011 8:29 by

Surging provisions and a high number of non-performing loans took the shine off a slight boost to second quarter earnings at Abu Dhabi Islamic Bank on Monday.

Credit provisions and impairments jumped 75 percent to 235.8 million dirhams from the year-ago period.

Non-performing loans also grew in the second quarter, said Raj Madha, MENA banking analyst at Rasmala Investment Bank, who calculated an adjusted NPL figure of 12.5 percent, accounting for 91-plus days of delinquency on a loan.

“ADIB is primarily a retail bank and the retail NPL cycle is improving at most of the banks,” he said. “It’s interesting and a little bit disappointing that it doesn’t seem to be improving at ADIB.”

ADIB officials were not immediately available for comment.

ADIB took a further 86.9 million dirhams in impairments against its real estate portfolio and said it expects the real estate portfolio to post further losses in 2011.

ADIB said in April that it will see provisions going forward and expects to post single-digit credit growth in 2011.

The lender, the second biggest Islamic bank in the United        Arab Emirates, posted a profit of 316.6 million dirhams, up 5 percent from 301.6 million in the year-ago period.

Two analysts polled by Reuters forecast profit of 279 million and 350 million dirhams.

Overall financial results were mixed, analysts said, with weakness in loan growth and loan quality, while fee income was boosted by credit card revenue and strong spreads.

The lender reported revenue rose to 909.6 million dirhams, up 22.2 percent from 744.2 million dirhams in the same quarter last year.

Net loans were flat sequentially and loan loss provisions were higher than expected although stronger revenues bolstered the quarter, added Jaap Meijer, senior analyst at HC Securities.

ADIB Chief Executive Tirad Mahmoud said global economic uncertainty and regulatory oversight on the market would make the year ahead a challenging one, adding he expects single-digit growth in both assets and liabilities this year.

ADIB said its transaction banking and investment banking operations posted a 62-percent rise in fee and commission income.

The lender said is stock brokerage unit had a challenging quarter due to low volumes and market uncertainty, but posted a profit of 800,000 dirhams in the second quarter.

ADIB is 41-percent owned by National Holding through the Emirates International Investment Co.

ADIB was flat at 1024 GMT after rising in earlier trade.           (Reporting by Shaheen Pasha; Editing by David Cowell)

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