Abu Dhabi: Abu Dhabi Commercial Bank (ADCB), the UAE's third largest bank by assets, on Tuesday reported a Dh1.2 billion loss in the fourth quarter of 2009 compared to a Dh262 million loss the previous year as it continued provisioning against non-performing loans.

"This has been a difficult year and net profitability has been impacted as a result of the current econ-omic crisis and additional provisioning requirements," ADCB chairman Eisa Al Suwaidi said in a statement. "The decision to take record provisions has resulted in the bottom line of the bank to go into negative territory."

The results came well short of analyst expectations. Al Mal Capital had projected a Dh33 million profit for the quarter assuming the bank would bring its provisions against exposure to Saudi Arabia's Saad and Algosaibi Groups up to the Central Bank requirement of 50 per cent.

In October, ADCB revealed it is owed $609 million (Dh2.2 billion) by Saad and Algosaibi, of which $405 million (Dh1.5 billion) is attributable to the Saad Group. The bank remains the highest exposed lender in the UAE to have reported the amounts it is owed.

Clean-up

"I think they are cleaning up all their books, taking all the hits this year and hopefully having a clean 2010," said Deepak Tolani, interim head of research at Al Mal Capital.

"Revenues are good, costs are under control, provisions are where they keep getting hit."

For full year, the bank recorded a loss of Dh513 million, compared to a Dh1.4 billion profit in 2008. Provisions against non-performing loans and investment losses accounted for the difference as they reached Dh3.9 billion in 2009, a 131 per cent increase over the previous year.

Provisions against bad loans in the fourth quarter alone reached Dh1.8 billion, more than double what the bank had set aside in the first nine months, and representing 27 per cent of all banks' provisions in the quarter, according to Central Bank data.

Provisioning might impact growth in the near term but it is necessary for the long term success of the bank, Tolani said.

"At some point they need to forget about the growth story and get their books clean," Tolani said.

Despite high provisioning, ADCB recorded a 9 per cent increase in annual revenue to Dh4.8 billion. Total assets, loans and deposits all increased by around 10 per cent, while capital adequacy rose to 17 per cent from 11 per cent in 2008.

"In light of both the global conditions and the local operating environment during 2009, the bank has chosen to adopt prudent practices to its renewed medium-term strategy," said CEO Ala'a Eraiqat in the statement.