NBAD profit hit by fall in IPO income

Abu Dhabi: A decline in income from initial public offerings (IPOs) dragged the National Bank of Abu Dhabi's (NBAD) profitability down by 18 per cent last year, company officials said yesterday.

Although its total assets exceeded Dh100 billion at the end of 2006, up 19 per cent from 2005 with deposits up 19 per cent to Dh71 billion and loans up 12 per cent to Dh58 billion, NBAD reported an 18 per cent decline in pre-tax profits to Dh2.15 billion last year compared to Dh2.6 billion in 2005.

NBAD's earnings per share stood at Dh1.72, while operating revenue reached Dh3 billion, with non-interest operating income representing 32 per cent of the total. It recommended a cash dividend of 40 fils per share and a stock dividend of 30 per cent.

"There are three main factors causing the decline in profits, including a decline in the IPO-related fees," NBAD chief executive Michael H. Tomalin told Gulf News.

"The year 2005 was a very exceptional year for all the banks, not only for NBAD. If you compare 2004 with 2005 you will find that profits doubled."

He said brokerage activities also fell sharply in 2006 compared to an "exceptional 2005".

"Most of the UAE banks launched investment funds in late 2005 while we launched ours in the beginning of last year," he said.

Tomalin added that the asset management results weren't as good as those of 2005. "The seed money, IPOs, and the investments in the stock markets declined last year," he said.

The cost/income ratio of 24 per cent is low by international standards, and lower than the 30-35 per cent average cost/income ratio the bank expects over the full economic cycle.

"Operating costs rose 12 per cent to Dh700 million," the bank statement said.