Abu DhabI: National Bank of Abu Dhabi (NBAD), one of the region’s largest banks by assets said on Tuesday its fiscal second quarter net profit rose 2 per cent on the year to Dh1.05 billion.

For the fiscal first half, NBAD reported a 6.9 per cent increase year-on-year in net profit to Dh 2,087 million, the bank said in a statement.

Commenting on the bank’s second quarter financial performance, NBAD’s Group Chief Executive Michael Tomalin said : “The result for the first half is a reflection of our steady performance so far this year and is in line with our expectations. Loan growth appears more subdued due to some repayments and deposit growth appears lower mainly because of substantial deposit outflows which had been expected and factored into our cash flow positions. The Bank’s liquidity remains strong and we have the capacity to grow rapidly when markets improve.”

NBAD said its operating income crossed the Dh4 billion mark in the first half to reach Dh4,100 million, up 5.5 per cent over the corresponding period of 2011.

“Operating income of Dh2,071 million for the current quarter was higher than the second quarter of 2011 by 3.2 per cent. Higher net interest income and net income from Islamic financing contracts by 4.6 per cent in the first half of 2012 over 2011 continues to drive the increase in top-line revenues,” it added.

NBAD said the net interest margin was 2.3 per cent for the first half of 2012, lower than 2.5 per cent for the corresponding first half of 2011 due to an increase in short-dated secured lending and maintaining a more liquid balance sheet. The bank said its operating expenses for the first half were Dh1,350 million, 14 per cent higher than the corresponding period last year, while operating profit grew 1.8 per cent in the first half of 2012 mainly driven by the international and corporate and investment banking businesses.

NBAD said although gross specific provisions were up Dh170 million, net impairment charges were lower by 13.2 per cent to Dh605 million for the first half of 2012 on lower collective provisions and strong recoveries.

Analysing NBAD’s second quarter financial performance, Shabbir Malik, banking analyst at EFG-hermes told Gulf News: “In the case of NBAD, the main positive was provisions, which declined 7 per cent, quarter-on-quarter. The bank’s earnings were slightly higher than expectation, but loan growth in the second quarter was flat, which, when looked in context of FGB’s second quarter loan growth, failed to excite.”

Malik added: “Our expectation for NBAD’s full year loan growth is 10 per cent but, in order to achieve that, NBAD’s loan growth needs to rebound in the second half of the year.”

Naveed Ahmad, senior financial analyst at Kuwait-based Global Investment House said NBAD posted a stagnant bottom-line for 2Q 2012, growing by just 2 per cent, year-on-year.

“Provisions dropped 12 per cent year-on-year, but any positive impact from this source was offset by higher operating expense. The bank’s asset quality showed slight signs of deterioration but figures well under the guidance provided by the bank earlier and therefore very much within expectations. We remain neutral on the results,” Ahmad added.

NBAD’s stock on the Abu Dhabi Securities Exchange ended unchanged on Tuesday at Dh8.25.