• Net Profits were AED 1.4 Billion, up 31% sequentially (q-o-q) and flat year-over-year (y-o-y)
• Revenues were AED 2.5 Billion, up 8% q-o-q and flat y-o-y
• Total Assets grew to AED 361 Billion, up 11% q-o-q and 12% y-o-y
• Loans were AED 178 Billion, down 3% q-o-q and up 10% y-o-y
• Customer Deposits increased to AED 235 Billion, up 11% q-o-q and 14% y-o-y
• Trade contingencies were AED 95 Billion, up 15% q-o-q and 23% y-o-y
• Strong capital position with CAR at 16.1% and Tier-I ratio at 14.5%
National Bank of Abu Dhabi (NBAD) earned AED 1.406 billion for the quarter ended 31 March 2014, up 31% sequentially from AED 1.077 billion in 4Q 2013 and relatively flat year-over-year, reflecting improving underlying fee income, FX income and investment gain trends. This represents diluted EPS of AED 0.27 for 1Q 2014, which was flat with 1Q 2013.
The annualised return on average equity for 1Q 2014 was 16.2%, up from 12.7% in 4Q 2013 and down from 18.1% in 1Q 2013.
H.E. Nasser Alsowaidi, Chairman of NBAD said, “In the first quarter, NBAD once again delivered solid financial results. The Bank’s results reflect continued strength in underlying revenue and earnings growth. As we enter 2014, NBAD will continue to focus on building a sustainable business model for the long term, maintaining its strong balance sheet and solid capital position.”
Mr. Alex Thursby, Group Chief Executive said, “Our results in the first quarter of 2014 reflect a continuation of the momentum we began to see in the third and fourth quarters of 2013. Overall, we produced very good ‘business as usual’ results in a marketplace in which we continue to see margin compression. Our strategy enables us to generate growth at acceptable returns for our shareholders in this competitive environment. In the medium-term, our focus on becoming ‘core to our chosen customers’ with multiple product cross sales allows us to be prudent and optimise our loan balance sheet growth while activating cross-sell in FX, markets, Global Wealth and trade finance. In addition, we continue to shift our loan assets into our retail segments while continuing to grow our customer deposits and CASA. As always, our top priority is the strength of the balance sheet, and we remain intently focused on maintaining strong liquidity and capital positions.
During Q1, we hosted our 6th annual Global Financial Markets Forum (GFMF). The GFMF has become the premier financial markets forum in the region and is a great way to showcase the ‘best of NBAD’ to our clients from around the globe. At this year’s GFMF, we laid out the details of our 5-year strategy in our first ever Analyst & Investor Day. During the presentation, members of my top team and I explained our strategy to become ‘core to our chosen customers’ and capitalise on our unique positioning at the heart of the ‘West-East Corridor’.” We also established performance metrics upon which we will measure ourselves over the next 5 years.
As we look toward the remainder of 2014 and the years to follow, I am confident that we will continue to execute against our strategy and achieve sustainable growth over time,” Mr. Thursby concluded.
ECONOMIC OVERVIEW
Global economic activity grew approximately 3% y-o-y in 2013, down from around 3.3% y-o-y in 2012. There are several trends which are favorable for the near-term economic outlook including easy monetary policy, record low interest rates and stimulus by major central banks. While risks to growth are still present, they seem to be diminishing. Looking forward, emerging markets are expected by many economists to register stronger growth performance in comparison to advanced economies in the coming years.
The UAE, which has the 2nd largest economy in the Arab world and 29th largest GDP in the world, will become part of the MSCI Emerging Market Index in June 2014, and has continued to benefit from its safe haven status during periods of instability in the region. The economy has shown signs of resilience amidst global and regional uncertainty and is beginning to generate returns from its diversification efforts. Last year, the non-oil sector constituted nearly 60% of nominal GDP, with strength coming from a recovery in real estate, trade and tourism. Over time, the objective is to continue to increase the contribution from the non-oil sector to the overall UAE economy.
OPERATING INCOME
Net interest income (including income from Islamic financing) was down 5.0% sequentially and up 2.7% year-over-year. The net interest income results reflect continued pressure on margins. Net interest margin for 1Q 2014 on an average total assets basis was 1.84%, down 14bps sequentially and 13bps year-over-year, resulting from abundant liquidity, re-pricing of risk as the economy recovers and increased deposits placed across highly liquid but lower-yielding asset classes.
Net fees and commissions, a key focus area for the bank, continued to grow and were up 3.8% sequentially and 28.7% year-over-year. Net FX income and investment gains were up sequentially as a result of continued momentum in our flow businesses. Both FX and investment income were down on a reported basis when compared with 1Q 2013; however, the underlying trends in both businesses continue to improve. Other operating income was AED 78 million in 1Q 2014, which reflected an increase from AED 22 million in 4Q 2013 and a decline from AED 163 million in 1Q 2013, which included exceptional gains from hedging strategies which did not repeat in 1Q 2014.
EXPENSES
Operating expenses for the quarter were AED 793 million, down 13.4% sequentially and higher by 9.1% year-over-year. Expenses were down sequentially when compared to 4Q 2013, a quarter which included restructuring costs. In 1Q 2014, the Bank began to see the benefits of the efficiencies generated from those restructuring costs. The Bank does expect to continue to invest in the business and therefore expenses are expected to increase over the course of the year.
The cost to income ratio was 31.6% for 1Q 2014, a reduction from 39.3% in 4Q 2013 and an increase from 29.0% in 1Q 2013.
Our continuing investments in our franchise, network and systems, products and people are in line with our vision to be recognised as the World’s Best Arab Bank and our mission to be ‘core to our chosen customers’.
OPERATING PROFITS
Operating profits grew 21.3% sequentially to AED 1.716 billion in 1Q 2014 versus 4Q 2013. Operating profits by segment were AED 998 million (58%) in Global Wholesale Banking, AED 185 million (11%) in Global Wealth and AED 455 million (26%) in Global Retail and Commercial. Head Office had a net contribution of AED 78 million (5%).
IMPAIRMENT CHARGES
Net impairment charges were AED 251 million in 1Q 2014, down 12% versus 4Q 2013 and 22% versus 1Q 2013, driven by improving asset quality and recovery in collateral values. Specific provision charges were lower by AED 110 million sequentially and AED 339 million year-over-year, partially offset by increases in collective provision charges of AED 44 million sequentially and AED 247 million on growth in credit risk-weighted assets.
The Bank continues to be fully compliant with the Central Bank of UAE’s minimum requirement of 1.5% for collective provisions since the end of 2011 and ahead of the effective date (year end 2014).
Non-performing loans increased by AED 111 million to AED 6.124 billion in 1Q 2014 from YE-2013. As of 31 March 2014, NPL ratio stood at 3.31% of the loan book and has gradually come down from a recent high of 3.55% recorded in 1Q 2013. Total provisions represented 104.6% of non-performing loans.
BALANCE SHEET
Asset growth of 11.1% sequentially and 12.2% year-over-year to AED 361.3 billion in 1Q 2014 was primarily led by increased liquidity.
Net Loans and advances decreased 2.9% sequentially and grew 9.9% year-over-year to AED 178.5 billion; the sequential decline was due to maturing loans and repayments while y-o-y growth was driven by loan growth across domestic and international businesses.
Customer deposits grew by 11.3% sequentially and 14.3% year-over-year to end the year at AED 235.0 billion. There was a significant inflow of government-related entities deposits in the first quarter. The Bank continues to experience a strong and encouraging buildup of CASA (Current accounts and savings deposits) with growth of 9.2% q-o-q and 37.4% y-o-y.
Trade contingencies were AED 95.2 billion, up 15.5% sequentially and 22.9% year-over-year as the Bank continues to gain momentum and execute against its growth strategy of generating more non-funded revenue from the flow of trade across the West-East corridor.
Equity, consisting of shareholders’ funds of AED 30.6 billion and GoAD Tier-I capital notes of AED 4.0 billion, was flat sequentially as dividends were paid in 1Q and grew by 10.7% year-over-year to AED 34.6 billion at the end of Q1 2014.
Basle-II ratios remain strong and well above the minimum 12% and 8% (Tier-I) as required by the UAE Central Bank, with a capital adequacy ratio of 16.1% and a Tier-I ratio of 14.5% as of 31 March 2014.
As a result of temporary timing and back-to-back placement related to a significant inflow of customer deposits received at the end of the quarter, the Bank reported higher credit-risk weighted assets in 1Q. This impacted both Tier-I and CAR ratios by approximately 75-85bps at quarter-end. In addition, the Bank was required to record higher collective provisions. We do not see this as a recurring item.
CREDIT RATINGS
NBAD’s long term ratings are now amongst the strongest combined ratings of any global financial institution with ratings from Moody’s Aa3, Standard & Poor’s (S&P) AA-, Fitch AA-, RAM (Malaysia) AAA, R&I’s (Japan) rating of A+, and ranked among the World’s 50 Safest Banks by Global Finance.
ACCOLADES & RECENT DEVELOPMENT
• The National Bank of Abu Dhabi (NBAD) took part in Tawdheef Career Fair at the Abu Dhabi National Exhibition Centre (ADNEC) as part of its Emiratisation drive to attract and develop the skills of UAE nationals. NBAD plans to recruit over 100 UAE nationals in 2014.
• The National Bank of Abu Dhabi (NBAD) has hosted the first meeting of the Business Continuity Institute (BCI) UAE Regional Forum at the Bank Head Office. The meeting brought together professionals from different organisations and experts in the field of business continuity management to discuss and analyse challenges and share the best practices of business continuity management.
• The National Bank of Abu Dhabi (NBAD) has been ranked the “Best Bank for Payments and Collections” in the Middle East by Global Finance, the international financial magazine. To rank the best Treasury and Cash Management Banks and Providers 2014, Global Finance used a multi-tiered assessment process which included a readers’ poll, input from industry analysts, corporate executives, technology experts and independent research.
• The National Bank of Abu Dhabi (NBAD) OneShare MSCI UAE ETF has been named “Best Exchange-Traded Fund” by judges at the MENA Fund Manager Performance Awards 2014.
• The National Bank of Abu Dhabi (NBAD) celebrated National Environmental Day event by launching ‘Paper Tree’ initiative on February 4th at its Head Office on Khalifa Street.
• The National Bank of Abu Dhabi (NBAD) hosted Global Financial Markets Forum 2014 (GFMF), the region’s unparalleled platform to discuss, analyse and debate global events and their impact on the direction of the markets, at Emirates Palace Hotel in Abu Dhabi. Speakers included Former Chairman of the US Federal Reserve Dr. Ben S. Bernanke, Jean-Claude Trichet, former President of the European Central Bank and many other other highly respected thinkers and influential policymakers, offering delegates a broad and balanced analysis of world market conditions and potential in 2014.
• The National Bank of Abu Dhabi (NBAD) was named the Best Bank in the UAE in 2014 for the second consecutive year by Global Finance, the prestigious international publication. NBAD was selected by Global Finance editors with input from industry analysts, corporate executives and banking consultants. Criteria for choosing the winners included growth in assets, profitability, strategic relationships, customer service, competitive pricing, and innovative products; as well as a poll of readers for the first time.
• The National Bank of Abu Dhabi (NBAD) lead-sukuk that was issued by the Dubai Department of Finance has been named the UAE Deal of the Year at the recent Islamic Finance News Awards. The US$750 million 10 year Sukuk issuance was priced at a profit rate of 3.875%. The oversubscription level of 14.6 times was the largest ever for a sovereign Sukuk transaction.
• The National Bank of Abu Dhabi (NBAD) has won two awards at the recent Islamic Finance News Awards. Named the Deal of the Year and Sukuk Deal of the Year, the inaugural US$490 million International Islamic Liquidity Management Corp (IILM) Sukuk programme, in which NBAD acted as one of the primary dealers, was highly successful.
• The National Bank of Abu Dhabi (NBAD) joined other ADX-listed companies on the Abu Dhabi Securities Exchange (ADX) Roadshow in New York to attract greater investment into the UAE securities market. NBAD joined eight other ADX-listed companies in the delegation and met with a number of US investors; including fund managers, asset management and investment management companies, to highlight the opportunities in the Abu Dhabi stock market.
• The National Bank of Abu Dhabi (NBAD) inaugurated The Abu Dhabi National Islamic Finance (ADNIF) Wahat al Hili Branch, its second branch in Al Ain, and its sixth in the country. is part of ADNIF’s rapidly growing network. ADNIF, the Shari’a-compliant finance arm of the National Bank of Abu Dhabi (NBAD), operates branches in Abu Dhabi, Dubai, Sharjah and Ras Al Khaimah.
