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ADCB set for recovery after weak Q2
Abu Dhabi Commercial Bank beat most earnings forecasts in the second quarter and analysts said the UAE's third-largest lender by market value was poised to end five straight quarters of declining profit.
The bank's profit in the three months to June 30 fell 12% from the year-earlier period to AED506 million ($137.8 million) as income from initial public offerings dried up, it said in a statement.
The earnings beat two out of three forecasts in a Reuters survey last month in which analysts predicted profit of between AED471 million and AED577.30 million.
Profit was also higher than the first quarter's AED253.5 million, signalling that the bank could return to growth next quarter, said Mohamed El Nabarawy, assistant vice-president of research for Dubai investment bank Shuaa Capital.
"The first and second quarters of 2006 were exaggerated by income from leveraging in IPOs," Nabarawy said.
"I think from now on we will see steady increases in earnings quarter-to-quarter because you have growth in core operations," he said.
The bank made AED409.41 million in the third quarter of last year, giving it a lower base to grow from, Nabarawy added.
LENDING GROWTH
Excluding IPO income, the bank's profits grew 21% in the six months to June 30 to AED976 million, the bank said. Operating profit rose 7% to AED1.48 billion in the first half, when the bank concluded more than 20 syndicated loans, it added.
"Strong growth in project finance, treasury and investment banking" led to the core operational profit growth, Chief Executive Eirvin Knox said in a statement.
But non-recurring IPO-related income of AED393 million in the first half of 2006 weighed on relative profits, the bank said.
Dubai's bourse fell 44.4% and Abu Dhabi's 42.3% last year, the second and third worst performers in the Gulf.
The market slump prompted many Gulf Arab companies to drop IPO plans, halving the value of IPOs expected through to 2010, Abu Dhabi private equity firm Gulf Capital said in a report this month.
"All segments of consumer banking performed well," Knox said. Deposits in the first half grew 12% to AED48.5 billion and advances rose 9% to AED67.8 billion in the same period, the bank said.
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