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Mon 16 Apr 2007 09:09 AM

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IPO income slump damages ADBC profits

Declining stock markets in the UAE has dragged down income for the Abu Dhabi banking giant.

Abu Dhabi Commercial Bank (ADCB) posted its third decline in quarterly profit in a year as income from initial public offerings declined after a stock market slump.

Net income at the UAE's third-largest lender by market value fell 24.5 percent to Dhs470 million ($128 million) in the three months to March 31, matching the lowest of three forecasts from analysts polled by Reuters last month.

"After adjusting for initial public offering revenue in 2006, first-quarter profit increased 35 percent," ADCB said in a statement on Monday. It did not give details or earnings per share.

The two domestic UAE stock markets tumbled last year, discouraging companies from selling shares to the public. The number of IPOs in the six Gulf Arab nations fell to 22 from 23 in 2005, their first decline in at least two years, according to data compiled by Gulf Capital, an Abu Dhabi-based private equity company.

"In the first quarter of 2006 there was a substantial amount of income from financing IPO subscriptions," said Mohamed El Nabarawy, vice-president of research at Dubai-based Shuaa Capital, whose forecast the earnings accurately.

ADCB generated Dhs500 million from IPO-related activities in 2006. "A good portion of this was in the first quarter when we saw the Tamweel and du IPOs," Nabarawy said.

The six largest Saudi banks by market value also reported declines in first-quarter profit this month as the Riyadh market crash wiped out income from brokerage and asset management businesses.

The average oversubscription of Gulf Arab IPOs fell 32 percent to 50 times from 73 times in 2005, according to Gulf Capital.

ADCB's assets grew 8 percent to Dhs87.9 billion at March 31, and deposits 14.4 percent to Dhs49.7 billion, the bank said. Loans and advances rose 1.87 percent to Dhs64.3 billion.

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