ADCB to double earnings, plans acquisition frenzy

ACQUISITION FRENZY: ADCB plans to double revenue and profit over the next two years through buying firms abroad. (ITP Images)

Abu Dhabi Commercial Bank (ADCB) plans to double profit during the next two years by making acquisitions in countries such as Malaysia and entering the Islamic finance industry, it said on Monday.

The bank, the third-largest by market value in Abu Dhabi, also plans imminently to sell as much as 4.8 billion dirhams ($1.31 billion) of bonds to finance acquisitions.

"ADCB plans to double revenue and profits by 2010," Chief Executive Eirvin Knox told shareholders at a meeting in the UAE capital.

"The strategy is built on entering Islamic banking through a separate subsidiary in the third quarter," he said. "We are also looking at inorganic growth in markets that are similar to the UAE, such as Malaysia."

Profit last year was 1.99 billion dirhams, according to data from newswire Reuters.

Chief Financial Officer (CFO) Vijay Kasturi said the bank had set aside about 560 million dirhams this year to cover exposure to the US subprime mortgage market and any possible writedowns. Total exposure was 1 billion dirhams, he said.

Like other Gulf banks, ADCB is expanding abroad as competition in its home market intensifies.

The bank said last month it won ministerial approval to buy 25% of Malaysia's fourth-largest lender, RHB Capital, to tap growing Asian demand for Islamic financial services.

ACBD Deputy CEO Ala Eraiqat told Reuters last week the bank plans to set up a unit this year offering services that comply with Islamic law, including arranging the sale of Islamic bonds.

The project is about a year behind schedule. Knox said in July he hoped to get the unit operational by the end of 2007. Operations will now start in the fourth quarter, Eraiqat said.

ADCB said last month it could borrow up to 4.8 billion dirhams by selling bonds to help finance expansion and lending.

Knox said in January the lender expects profit this year to rise by at least 20% on higher lending to consumers and projects.

Shares of ADCB fell 1.2% on Monday, paring gains this year to less than 6%, compared with a near 10% advance in Abu Dhabi's main stock index.

Goldman Sachs last week started coverage of nine UAE companies, recommending a "neutral" rating for ADCB and a price target of 9.41 dirhams. The stock last traded at 6.75 dirhams. (Reuters)

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