NBAD Reports 2nd Quarter / 1st Half 2016 Results

Strong Growth in Strategically Targeted Businesses

  • 2Q’16 Net Profits of AED 1.376 Billion, up 8% sequentially
  • 2Q’16 Revenues of AED 2.759 Billion, up 4% sequentially
    Continuing underlying strength in Retail & Global Wholesale flow products
  • Disciplined Expense Management: JAWS up 4% sequentially
    YoY JAWS turns positive for the first time since 1H’13
  • Customer Loans of AED 203 Billion, up 2% sequentially
    UAE Retail lending grows faster than market at 20% y-o-y
  • Strong Liquidity: Loans-to-Deposit ratio further improved to 83%
    International contributed 34% of total deposits; CASA 31% of total

National Bank of Abu Dhabi (NBAD) reported net profits of AED 1.376 billion for 2Q’16, up 8% sequentially (q-o-q), resulting from improvements in fee income, driven by continued momentum in Global Wholesale strategic flow products as well as Retail & Commercial outpacing the market. Net profits were down 5% year-over-year (y-o-y), reflecting lower investment gains and higher impairment charges, despite the growth in strategic businesses and overall stronger operating profits.

Expenses were essentially flat both sequentially and y-o-y as the Bank continued to tightly control expenses whilst also investing in talent, operations and infrastructure.

Loans were AED 203 billion, up 2% q-o-q and down 7% y-o-y. Results in both periods included further growth in retail lending offset by declines in Global Wholesale relationship loans. CASA improved 4% on both a q-o-q and y-o-y basis as the Bank continued to attract deposits, particularly from international Wholesale clients and the Government of Abu Dhabi.

In 2Q’16, the Bank continued to build its strong liquidity position and maintain a robust capital position with a Tier-1 ratio of 15.5% as well as strong credit ratings.

Return on equity (RoE) of 13.0% in 2Q’16 marked a sequential improvement of 103bps and continues to be impacted by challenging market conditions.


H.E. Nasser Alsowaidi
Chairman of NBAD

“This has been another strong quarter for NBAD with revenues growing and costs remaining flat. NBAD continues to have a healthy balance sheet, access to diverse sources of funding and a strong liquidity position, meaning the bank is still one of the safest and highly rated in the world.

This set of results strengthens the rationale of the proposed merger with FGB that was announced earlier this month. The combination of these two institutions is an exciting moment for NBAD and I am confident that the merger will allow us to create even more value for our customers, shareholders, investors, employees and the people of the UAE.”

Alex Thursby

Group Chief Executive.

“I am delighted with the performance of NBAD through the second quarter of 2016. Not least, the ongoing transition of revenue towards more diversified and stable sources, which underlines the merits of the strategic shift we are currently going through.

Here in the UAE, our Retail and Commercial business continues to outperform the market, while at the same time maintaining risk and cost discipline. I am particularly pleased to see the investment we have made in our distribution channels, especially e-banking, already coming through in our revenue.

Elsewhere in the bank, our Wholesale business is showing robust growth in strategic flow products with strong momentum in fee generation. The market volatility in the wake of the Brexit vote may have created macroeconomic uncertainty, but we supported our clients through it and saw Global Markets revenue grow 16% on a sequential basis.

“With a potential merger with FGB on the horizon, we are entering a new era for NBAD that will create new opportunities and allow us to serve even more customers with an even greater array of products and services. Ultimately, creating a bigger bank that complements the ambitions of the UAE.”

Global growth estimates for the remainder of 2016 were reduced slightly to 2.8% following Brexit, and a modest recovery is now expected in 2017. Given the reforms taking place in the UAE, economists remain confident in the strength and resilience of the domestic economy.  

Globally, the surprise Brexit decision led to some volatility in global asset prices. Although some degree of negative consequences are anticipated - both politically and economically – the extreme global market reaction to the Brexit decision was relatively short-lived. Nevertheless, the remainder of 2016 is expected to be a period of volatility, especially as investors now begin to focus attention on the U.S. general election.
Regionally, GCC oil producers have benefited from the rally in oil prices and are engaging in sensible reforms to respond to the ‘New Normal’ environment, and indications are positive that they are successfully making the necessary adjustments. In regard to the Brexit vote, any impact on the GCC is expected to be relatively muted with a potential slight marginal impact to tourism in Dubai and the UAE.

In the U.S., economic expansion appears to be continuing, although growth and labour productivity remain relatively low. Growth in the Eurozone remains lacklustre, as economists have further reduced their forecasts in the wake of the Brexit vote. Meanwhile, China is continuing to face economic pressures during its painful economic transition, despite its high domestic savings rate; debt in the system has grown markedly, and is causing increased concern amongst commentators.

Strong growth in strategic businesses impacted by challenging and volatile markets


Global Wholesale Banking revenues grew 2% sequentially to AED 1.3 billion over 1Q’16, driven by consistent performance in our strategic focus areas of flow, trade and value-added products with strong momentum in strategic flow product fees. Revenues grew 5% as compared to 2Q’15, and expenses continued to be tightly managed. The business continues to maintain a strong liquidity position, benefiting from local, regional and international sources of funding.

Global Banking continued to deliver best-in-class financing solutions, advisory and transaction banking through an originate-to-distribute model. Revenues in 2Q’16 were slightly down 1% sequentially and 4% y-o-y (vs 2Q’15). Core revenue growth from Global Project and Structured Finance at 14% q-o-q and Debt Origination & Distribution at 8% q-o-q was offset by lower revenues from Relationship Lending (-19% q-o-q).

We continued to strengthen our Cash Management proposition both locally and regionally.

Global Markets revenues during 2Q’16 were up 16% sequentially over 1Q’16 and up by 20% compared to 2Q’15. During the current quarter, the business generated strong performance in a highly volatile trading environment. Global Markets Sales continued to maintain revenue momentum with a focus on providing quality yield solutions for financial institutions, non-banking financial institutions and corporate customers as well as increasing flows across locations. The diversified nature of the business ensured that the flow trading and Investment book’s performance helped weather the heightened market volatility and credit conditions.

Highlights from 2Q’16 include:

  • 2016 Euromoney Award for Excellence for ‘Best Bank for Markets in the Middle East’.
  • “Most Impressive Borrower in the Middle East” from GlobalCapital Emerging Markets Bond Awards
  • “Most Impressive EM (ex-Asia) Financial Institution Borrower in the Middle East” from GlobalCapital Emerging Markets Bond Awards
  • NBAD ranked #1 Bookrunner in GCC Loans by the number of transactions
  • NBAD ranked #2 Bookrunner in MENA Loans by the number of transactions
  • NBAD ranked #5 Bookrunner in MENA and GCC Bonds & Sukuks

Global Retail and Commercial (GRC) continued its strong revenue momentum in 2Q’16, growing 3% sequentially and 15% y-o-y to AED 1.2 billion, driven by strong growth in retail product sales and market share gains in the UAE as well as growth in Islamic business. Year-to-date, GRC revenues have grown 18% in 1H’16 to AED 2.3 billion compared to the corresponding period in 2015. Expenses during the quarter (2Q’16) were down 3% q-o-q and 1% y-o-y to AED 559 million, driven by the optimisation of the Bank’s branch network and tight cost management. Liquidity ratios continued to be strong.

Retail conventional lending grew 18% y-o-y (20% y-o-y in the UAE and faster than the market), in line with Pillar 1 of the strategy, backed by strong sales performance and customer acquisition, particularly in personal loans, mortgages and credit cards. Robust growth in the UAE Commercial mid-market segment and trade products drove a 9% y-o-y increase in revenue in 2Q’16 over 2Q’15, contributing to higher fees and FX income as well as net interest income despite the drop in margins following the downsizing of programmed lending portfolio.

Highlights from 2Q’16 include:

  • Investment focused on digital platform enhancement, increasing distribution capacity and capability:
  • In the process of significantly upgrading online banking system as well as ATM / CDM platforms
  • Customers continue to join the new NBAD mobile banking platform
  • NBAD continues to support the SME sector as NBAD’s skill-based workshop series, “NBAD SME Academy”, delivered two sessions that were attended by over 145 SME delegates
  • NBAD was the Gold Sponsor of the SME Banking Egypt 2016 event, organized by Bloomberg Businessweek in May 2016

Although Global Wealth revenues were up 4% sequentially to AED 231 million, challenging market conditions continue to impact the revenues of the business on a y-o-y basis (down 20%). Resultant declines in local trading volumes and market volatility have impacted the Securities and Asset Management businesses in 2016. However, Asset Management continues to strengthen its distribution network and raising of Assets Under Management (AUMs) with new discretionary investment mandates. The Global Private Banking business remains focused on our strategy to be the best private bank for the Arab world and is building momentum with strong client acquisition and successful diversification of its client base. The business continued to attract both local and international deposits and grew them by 8% y-o-y. Costs remain tightly controlled.

Highlights from 2Q’16 include:
NBAD MENA Dividend Leader and NBAD MENA Bond Fund continue to be largest mutual funds in our tracked peer groups
NBAD Securities achieved 7.2% of market share during that time with AED 6.1bn of traded value
Asset Management & Securities businesses continue winning key industry awards

Strong core revenue growth despite lower investment income in 2016 vs 2015


Net interest income (NII) - including income from Islamic financing -  was AED 1.837 billion in 2Q’16, essentially flat both q-o-q and y-o-y. NII growth continued to be buoyed by growth in retail loans and the deployment of core liquidity into higher-yielding investments, partially offset by the strategic decision to reduce trade FI (financial institutions) loans in Global Wholesale.
Net fees and commissions for the quarter were AED 610 million, up 7% sequentially and 9% y-o-y. Growth in both periods was driven by continued strength in fee income on derivatives in Global Markets and growth in retail lending (including mortgages and credit cards), partially offset by declines in brokerage fees due to challenging market conditions. Asset management related fees improved significantly q-o-q but declined y-o-y.
FX and investment income was AED 307 million in 2Q’16, up 28% sequentially and 9% y-o-y, reflecting strong growth in the bank’s customer sales franchise as well as higher FX and trading gains during a period of increased volatility around the Brexit decision.
Other operating income of AED 5 million in 2Q’16 was down from AED 9 million in 1Q’16, and down from AED 35 million in 2Q’15. The y-o-y decrease was due primarily to one-time gains recorded in 2Q’15.


Discliplined cost management continues; expenses relatively flat over last 6 quarters


Net impairment charges in 2Q’16 were AED 298 million, relatively flat q-o-q, but up 79% y-o-y as impairments reflect prudent provisioning in line with guidance and reflective of the challenging environment in which we are currently operating.
Cost of risk (CoR) (annualised) was 57bps in 2Q’16 simialr to 1Q’16, but higher than 30bps in 2Q’15 as the Bank manages through a more challenging credit environment.
Collective provisions continue to be maintained above the Central Bank of UAE’s minimum requirement of 1.5%.
Non-performing loans, net of interest in suspense, were lower by AED 27 million at end of 2Q’16 to AED 5.765 billion. As of 30 June 2016, NPL ratio stood at 2.75% of the gross loan book.
Total provisions were AED 6.430 billion and represented 112% of non-performing loans.


NBAD’s balance sheet is characterised by strong liquidity, funding and robust capital position


  • Assets were AED 419 billion at the end of 2Q’16, up 5% sequentially and 3% year-to-date (ytd).
  • Net Loans and advances were AED 203 billion, up 2% sequentially, but down 1% ytd. Y-o-Y. loans were lower by 7% as the Bank reduced its trade finance FI (financial institutions) exposure as part of its ongoing balance sheet optimisation.
  • Customer accounts and other deposits were AED 243 billion, up 4% sequentially and ytd and up 6% y-o-y as the decline in government deposits, particularly in 1H’15, was offset by increases in core client deposits, generated in large part due to the strength of our international business and execution of our strategy. Government deposits increased notably in 2Q’16. CASA was AED 75 billion, up 4% q-o-q and y-o-y and up 5% ytd, representing 31% of total customer accounts and deposits.
  • Equity, consisting of shareholders’ funds of AED 36.3 billion and perpetual Tier-I capital notes of AED 6.75 billion, was up 3% q-o-q and y-o-y, but essentially flat ytd at the end of 2Q’16.
  • Basel-II ratios, in accordance with UAE Central Bank’s framework, remain strong and well above the minimum 12% and 8% (Tier-I), with a capital adequacy ratio of 16.4% and a Tier-I ratio of 15.5% as of 30 June 2016.
  • Liquidity & Funding: The Bank’s liquidity position remains robust and the Loan-to-Deposit ratio has slightly improved on a sequential basis. The Bank is continuing its focus on diversification and extending the liability profile, and has continued to print selective private debt transactions in 2Q’16. Additionally, the Bank is committed to supporting the UAE Central Bank in its implementation of the Basel-III liquidity ratios and will be looking to transition to the LCR (Liquidity Coverage Ratio) during 2016.

Following the Bank’s announcement of plans to merge with FGB, all 3 major rating agencies – Moody’s, S&P and Fitch Ratings – affirmed NBAD’s current ratings.
The Bank’s long term ratings continue to be amongst the strongest combined ratings of any global financial institution, and NBAD is ranked among the World’s 50 Safest Banks in addition to being ranked as the Safest Bank in Emerging Markets by Global Finance.

Alex Thursby
Group Chief Executive


NBAD ‒ FGB Merger : A transformational merger of equals
On 3 July 2016, First Gulf Bank PJSC (FGB) and National Bank of Abu Dhabi PJSC (NBAD) announced that their boards of directors voted unanimously to recommend to shareholders a merger of the two Abu Dhabi-listed banks. The proposed merger will create a bank with the financial strength, expertise, and global network to support the UAE’s economic ambitions at home and drive the country’s growing international business relationships.

The combined bank will create a leading bank in the region, with AED642 billion (US$175 billion) of assets and a combined market capitalisation of approximately AED106.9 billion (US$29.1 billion). It will be the leading financial institution in the United Arab Emirates (UAE), with a 26 percent share of outstanding loans, and will operate an international network of branches and offices spanning 19 countries. Both entities will continue to operate independently until the merger becomes effective, which is expected in the first quarter of 2017.

The proposed transaction is a merger of equals and will be executed through a share swap, with FGB shareholders receiving 1.254 NBAD shares for each FGB share they hold. Following the issue of the new NBAD shares, FGB shareholders will own approximately 52 percent of the combined bank and NBAD shareholders will own approximately 48 percent. The Government of Abu Dhabi and related entities will own approximately 37 percent. On the effective date of the merger, FGB shares will be delisted from the Abu Dhabi Securities Exchange.

The combined bank will retain NBAD’s legal registrations and the brand name of “National Bank of Abu Dhabi”. Its board will include four nominated directors of FGB and four nominated directors of NBAD. His Highness Sheikh Tahnoon Bin Zayed Al Nahyan, who is currently Chairman of FGB, is the Chairman designate. His Excellency Nasser Ahmed Alsowaidi, who is currently Chairman of NBAD, is the Vice Chairman designate, and Mr. Abdulhamid M. Saeed, who is currently Board Member and Managing Director of FGB, is the Chief Executive Officer designate for the combined bank.

The merger is subject to a number of conditions, including the approval of the merger by at least 75 per cent by value of the shares represented at quorate general assembly meetings of FGB and NBAD. The merger is also subject to receipt of all required regulatory approvals.

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