ADIB posts Dh1b profit on strong growth fundamentals

Dubai: Abu Dhabi Islamic Bank (ADIB), the UAE's second largest Islamic bank in terms of assets, yesterday reported a net profit of Dh1.02 billion for 2010 compared to Dh78 million in 2009.

Net income for the fourth quarter of last year stood at Dh114.1 million after reporting a loss of Dh623.3 million in the same quarter in 2009. The bank's credit provisions and impairments for the quarter were down 68 per cent, at Dh343.8 million compared to Dh1.06 billion in the fourth quarter of last year.

Despite a significant decline in impairment charges, the quarterly result fell short of analysts' estimates.

EFG Hermes had forecast a net profit of Dh172 million, while Global Investment House had expected Dh192 million. The average of analysts' estimates was more than Dh190 million.

"Abu Dhabi Islamic Bank's fourth quarter net profit fell below our expectations. The bank reported a net profit of Dh114 million, whereas we were expecting a net profit of Dh172 million," said Chahir Hosni, sales manager with EFG-Hermes.

Dividend

The bank's board has recommended a Dh0.216 cash dividend per share, equivalent to 50 per cent of 2010 net profit.

"We didn't expect the bank to give out [a] cash dividend. This is surely going to be received well by the markets," Hosni added.

In the fourth quarter of 2010 ADIB took a conservative approach to the recognition of non-performing credit exposures and investments. As a result, the bank took an additional Dh224.4 million in credit provisions and impairments in the fourth quarter of 2010, thereby increasing total credit provisions to Dh2.28 billion, which now amount to 4.53 per cent of gross customer financing.

In addition a further 119.5 million in impairments was taken against Burooj Properties, the group's real estate subsidiary's portfolio. The real estate subsidiary posted a Dh196.1 million loss.

"The bank's profit was 7 per cent below our forecast of Dh1.1 billion due to real estate impairments, which are expected to continue in 2011," said Jaap Meijer, a senior financial analyst at Alembic HC Securities.

The bank's total credit provisions and impairments for the full year were Dh629.9 million, down 55 per cent from Dh1.4 billion in 2009.

"While the brunt of the legacy portfolio's cost of credit was absorbed in 2009, and we took further action in 2010, we will continue to take prudent measures," said Tirad Mahmoud, chief executive officer of ADIB.

The performance from the main banking business was particularly strong as the bank's net revenues grew to Dh3.04 billion on the back of strong customer, branch and financing growth.

"Our commitment to strong credit quality management allowed us to maintain our growth momentum while simultaneously managing the impact of the legacy portfolio," said Mahmoud.

ADIB maintained a robust liquidity position in 2010 as it successfully returned to the international capital markets in the fourth quarter of 2010 with a benchmark $750 million sukuk issue. It grew its customer deposits by 17.2 per cent to Dh56.5 billion.

The bank's net customer financing grew by 18.5 per cent to Dh48 billion compared to Dh40.5 billion as of December 31, 2009 and it reported a strong customer financing-to-deposits ratio of 84.8 per cent