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Wed 2 Feb 2011 07:52 PM

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UAE's First Gulf Bank Q4 profit mostly flat

The second-largest bank by market value in the UAE posts a modest rise in Q4 profit to 865 million dirhams

UAE's First Gulf Bank Q4 profit mostly flat
MARGINAL PROFIT: Quarterly profit at Abu Dhabis First Gulf Bank increased 1 percent beating analysts’ forecasts

A rise in net interest income and proceeds from its Islamic financing business helped Abu Dhabi's First Gulf Bank (FGB) to post a modest rise in quarterly profit on Wednesday.

Quarterly profit at Abu Dhabi's First Gulf Bank increased 1 percent, the lender said in a statement, easily beating analysts’ forecasts.

FGB, the second-largest bank by market value in the UAE, made a profit of 865 million dirhams ($235.6m) in the three months to Dec 31, compared with $233m in the same period last year.

Analysts polled by Reuters had estimated, an average fourth quarter profit of $160.6m.

The bank reported a record full year profit of $931.1m.

FGB's non performing loans (NPL), or bad loans, to gross loans ratio stood at 3.7 percent at the end of 2010, compared with 3.3 percent at the end of the previous year, the statement said, with a coverage ratio of 89.4 percent.

"Provisions are significantly lower than expected, down quarter on quarter," said Sofia al Boury, assistant vice president for research at Shuaa Capital.

The NPL ratio would rise to 4.6 percent of the bank's loan portfolio if exposure to indebted conglomerate Dubai World was included in the 2010 balance sheet, it said.

"As we are now applying the 90 days overdue rule, we are content with the provision coverage level, as these ratios do not take into consideration the substantial security and collateral that the bank is holding against its loan portfolio," said Andre Sayegh, chief executive, in the statement.

Net interest income and Islamic financing income grew 11 percent in 2010, and 9 percent in the fourth quarter from the prior-year period.

Loans and advances increased 6 percent and customer deposits grew 14 percent over the year, boosting the bank's liquidity.

The bank expects to continue to focus on its core operations and remain conservative in its expansion plans.

"Growth in profitability combined with strong balance sheet position and ratios remain the core of First Gulf Bank's financial model. Our policy favours a prudent and gradual overseas expansion," Sayegh said.

In January this year FGB sold five-year bonds worth 200m Swiss francs with a coupon of 3 percent after holding off on a benchmark $500m bond citing volatile market conditions, at the end of 2010.

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