Abu Dhabi: National Bank of Abu Dhabi expects non-performing loans (NPLs) to spike this year but sees its lending surpassing the market growth rate, its CEO told Reuters Wednesday.

Michael Tomalin also said the bank, which is majority-owned by the Abu Dhabi government, expects 10 per cent revenue growth in 2011 but sees profit growth depending on the level of provisions.

NBAD reported a second-quarter net profit of Dh1.03 billion last week, up 2.5 per cent over the same period last year.

Operating income was up 10 per cent year on year.

Non-performing loans increased to Dh4.17 billion, accounting for 2.65 per cent of its loan book.

Tomalin said the bank expects NPLs to rise to between 3 and 3.25 per cent of the loan book by the year end.

"We know our balance sheet, the number of restructured and other loans. We feel it might rise to that level," he said.

"The amount of provisions will depend on whether NPLs will rise to 3.25 per cent," he said, adding the bank will continue to book provisions but the pace of increase will slow.

NBAD will expand its retail, cards and small and medium enterprises (SMEa) businesses to boost top-line growth and supplement fee income from investment banking, private banking and asset management, he said.

The bank plans to boost lending as the economy of Abu Dhabi picks up, he said.

"We expect loan growth of 10 to 15 per cent this year. The system growth will be high single-digits but our growth will be above market growth," he said."Liquidity is better than what it was and EIBOR rates are continuing to fall with banks competing less for deposits. Deposit rates are falling and loan rates should also fall," he said.

As the first Gulf bank to tap Samurai bonds, Tomalin said the bank could issue more bonds in the Japanese currency.

"We have our toe in the water and always wanted to go to Japan. In the next few years, we will be issuing more in the Samurai markets," he said.

NBAD continues to look at issuing bonds in other markets such as Australia and New Zealand too, but on an opportunistic basis.

"When the markets are right and the window appears, we will move very quickly and get our ducks in a row," he said, declining to give more details.

The bank has an EMTN programme of $5 billion (Dh18.37 billion).

The majority government owned lender is yet to find the right takeover target and continues to look for acquisitions, Tomalin said.

The target must be a strategic fit, it must allow NBAD to own a majority stake and it must be affordable in terms of size and cost.