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First Gulf Bank keeps costs under control

First-quarter margins remain stable

Gulf News

Dubai: First Gulf Bank has managed to maintain margins higher than most peers at 3.63 per cent for the first quarter of this year, resulting in a robust 23 per cent on-year increase in net profit to Dh920 million, analysis of its financial statement shows.

"The balance sheet is still growing, margins are stable, operating costs remain under check and the capital base is extremely strong," said Al Mal Capital Vice-President Deepak Tolani, who has an "outperform" rating on FGB.

Revenue at Dh1.659 billion for the first quarter is 26 per cent higher than the first quarter of 2009. As much as 88 per cent of total revenue was generated by core banking businesses.

"Core banking lending activity continues to be robust and rewarding," Tolani said. "Loans and deposits both rose by more than 3 per cent on-quarter compared to a negative 1 per cent sector average. Along with margin stability, this resulted in net interest income crossing the Dh1 billion mark in a single quarter for the first time."

Tolani had expected FGB, the UAE's fourth-largest bank by assets, to post Dh800 million profit. Janany Vamadeva, banking analyst at HC Securities, had pencilled in Dh914 million.

"The quality of the loan book is in line with international standards during weak economic cycles," FGB said in its earnings statement. "During the quarter, the bank assessed all the risks pertaining to its loan book and booked provisions in accordance with conservative and prudent rules."

Solid performance

Andre Sayegh, Chief Executive Officer, said: "FGB is starting the year 2010 with a solid financial performance. We are right on our planned targets and these results portray the bank's sustained positive performance quarter after quarter."

Tolani said: "The first quarter results were evidence of solid revenue growth tempered by the asset quality issues plaguing the sector. Interest income has grown for 11 straight quarters on the back of robust loan growth supported by even stronger deposit growth."