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Wed 27 Jan 2010 07:32 PM

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ADCB may take longer to turn around - Shuaa

Concerns raised over the impact the bank's Q4 loss will have on the market.

Shuaa Capital raised concerns over Abu Dhabi Commercial Bank's ability to return to profitability in the short term, after the UAE bank posted a wider than expected fourth quarter loss on record provisions.

In a note dated Jan 26, Shuaa Capital said: "We believe ADCB posting its first annual loss ever will have a negative impact on the market, while concerns will intensify regarding the bank's capacity to return to profitability in the short term, especially in such a challenging environment."

Separately, however, Al Mal Capital said the high 2009 provisions at the third largest UAE bank by market value may leave it with a stronger footing to start 2010, as margin expansion continues.

The company on Tuesday posted a fourth quarter loss of $326.7 million after booking impairments of $544.5 million in the last period alone.

Also, analysts at Credit Suisse believe that unless there is stability in net provision on losses and until the impact of Dubai World restructuring can be discerned, the bank's valuations will remain depressed for the next few quarters.

Abu Dhabi Commercial Bank has at least $2.1 billion to $2.4 billion of exposure to Dubai World and related entities, a senior executive of the bank said last November.

Credit Suisse maintained its "neutral" rating and price target of $0.65 on ADCB's shares.

Al Mal reiterated its short term "underperform" and long term "market perform" rating on Abu Dhabi Commercial Bank's shares, which closed at $0.38 dirhams on Wednesday. (Reuters)

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