Five major financial institutions dominate the Abu Dhabi banking sector, which has expanded significantly over the recent decades.
NATIONAL BANK OF ABU DHABI (NBAD): With 15% of total sector assets in 2011, according to Kuwait-based Global Investment House, NBAD is the second-largest bank in the country and the largest of the Abu Dhabi-based lenders.
Majority-owned by one of Abu Dhabi’s sovereign wealth funds, the Abu Dhabi Investment Council (ADIC), its status as a quasi-government institution places it at the centre of the emirate’s economic development, and has enabled it to grow the largest lending book of all Abu Dhabi’s banks – at Dh164bn ($45bn) in 2011, according to its annual statement. The sizeable government interest in the bank has also helped it to maintain one of the strongest credit profiles in the region, with long-term credit ratings of “Aa3” from Moody’s, “A+” from Standard & Poor’s and “AA” from Fitch – all with “stable” outlooks.
As a universal bank it offers a full range of conventional banking and financial products, as well as operating a sharia-compliant division by means of an Islamic window – Abu Dhabi National Islamic Finance. It also has the largest international operations among the local banks, with a presence in the UK and France dating back to the 1970s, and more recently established operations in Switzerland, the US and Hong Kong. Closer to home, NBAD has 28 branches in Egypt and operates representative offices in Libya, Sudan, Jordan, Kuwait, Bahrain and Oman. In 2010, the bank became the first in the UAE to break through the $1bn net profit threshold, which it followed up in 2011 with a robust performance despite the challenging economic environment. Net interest income grew 11% year-on-year (y-o-y), although lower investment income and higher provisions taken during 2011 slightly impaired top-line growth, resulting in a 1% expansion of net profit to Dh3.7bn ($1bn). The bank’s relatively low exposure to the retail segment, which accounts for around 16% of its lending book, also protected it from the changes in retail regulation that have affected other lenders, allowing it to grow its fee income by 8% y-o-y.
ABU DHABI COMMERCIAL BANK (ADCB): ADCB is the second-largest bank in the Abu Dhabi market, with an 11% claim on the total assets of the UAE banking sector. Like NBAD, the bank is linked to the state by the sizeable interest ADIC holds in it. This advantage is reflected in its historical weighting towards wholesale business and a robust credit profile: a long-term rating of “A1” from Moody’s, “A” from Standard & Poor’s and “A+” from Fitch.
In recent years ADCB has successfully expanded from its largely corporate base into the retail segment. In order to do so it has invested heavily in alternative channels, such as online banking, which have allowed it to establish itself as a major player in the retail space with 50 branches in the UAE. It has also entered the sharia-compliant segment through its wholly owned subsidiary, Meethaq. To date, ADCB’s expansion strategy has been centred on organic growth within the UAE. It was, however, an early mover into the Indian market, establishing a branch in Mumbai in 1980 and Bangalore in 1996, both of which have successfully exploited the trade and investment connections between the UAE and its largest non-oil trading partner.
For 2011, ADCB reported a net profit of Dh3bn ($816.6m), a seven-fold increase (694%) on 2010, which was buoyed by a one-off gain due to the sale of its interest in Malaysia’s RHB Bank. However, even excluding this accounting gain, net profits were three times higher than the previous year thanks to significant top-line growth and a decline in provisioning levels, which were reduced by 27% y-o-y.
While its sizeable retail activity means that its non-interest income was negatively affected by retail lending regulatory changes, this was mitigated by a net interest income gain of 27% y-o-y, which was largely spread-driven, as lending activity grew relatively slowly over the course of 2011.
FIRST GULF BANK (FGB): With assets of Dh159.7bn ($43.5bn) as of March 2012, around 10% of the UAE total, FGB is the third-largest bank in Abu Dhabi and the largest privately owned lender. Established in 1978, the historically retail-focused lender had developed a universal set of services, encompassing consumer, corporate, treasury and investment, as well as the sharia-compliant products that it offers through its Islamic window, Siraj. It has also established a presence in the real estate finance segment through its property investment subsidiary, Mismak, and its Islamic mortgage company, Aseel. Although its sovereign links are more limited than some of its competitors, the sizeable stake in it held by Abu Dhabi’s ruling family and its emergence from the global economic crisis with improved capitalisation levels have helped it retain a long-term rating of “A2” from Moody’s, “A+” from Fitch and “A+” from Capital Intelligence. FGB’s international expansion strategy has so far included the opening of offices in Libya, India, Singapore and Qatar, and it has established a new international business division to lead its continued efforts toward geographical diversification. For now, its foreign operations are active exclusively in the corporate space.
In 2011 FGB managed to grow its net profit by 8% to reach Dh3.7bn ($1bn). Net interest income rose by 19% y-o-y, driven by both loan growth (10%) and the more favourable spreads the bank achieved by establishing a lower-cost deposit base. Non-interest income, however, was impaired by the exposure to the new retail banking regulations, which led to an 18% decline in commission and fee income and eroded the top-line gains.
UNION NATIONAL BANK (UNB): Abu Dhabi’s fourth-largest lender, UNB, holds a 5% claim of total sector assets. Established in 1982 and headquartered in Abu Dhabi, UNB is the only bank in the UAE to be jointly owned by the governments of Abu Dhabi and Dubai. It operates one of the oldest brokerage firms in the UAE as a wholly-owned subsidiary, while its Al Wifaq Finance Company offers sharia-compliant financial, commercial and investing services to both organisations and individuals. As of the end of 2011, its domestic branch network runs to 56 units, through which it offers conventional retail and corporate products. Recent years have seen the bank extend its presence to Egypt, through the acquisition of the Alexandria Commercial and Maritime Bank (now Union National Bank Egypt). It has also opened a full branch in Doha’s Qatar Financial Centre and a representative office in Shanghai, which made it the first Emirati bank to enter the Chinese market.
In July 2012, Capital Intelligence announced that it had maintained the bank’s long-term credit rating of “A+” on the strength of its capital base and rising profitability, which reached Dh1.6bn ($435.5m) in 2011, representing a growth of 11% y-o-y. This expansion came largely as a result of robust growth in net interest income, which rose by 11% for the year, and mitigated the effects of a 26% drop in non-interest income, the result of the implementation of the new retail regulations in May 2011.
The bank also showed a significant jump in its provisioning, which rose as the bank took additional collective provisions in to meet the 1.5% capital-to-risk-weighted-assets ratio obligation.
ABU DHABI ISLAMIC BANK (ADIB): ADIB is one of the more prominent Islamic financial institutions in the Gulf region, the largest sharia-compliant financer in Abu Dhabi and the fifth-largest bank in the emirate’s banking sector. Established in 1997 as a public joint stock company with a paid-up capital of Dh1bn ($272.2m), in 2010 it underwent a comprehensive rebranding, opened 14 new branches and installed a new management team that has since set about implementing a three-pillar strategy: to establish the bank as a top-tier lender in the UAE; to diversify and consolidate its businesses aligned to financial services, such as takaful and brokerage; and to export this model to the international arena. The bank’s efforts have met with considerable success in a short space of time. In 2011 it was named as the number one bank in the UAE in customer service, it has expanded its branch network to 70 units and launched a range of new products that have found favour in the market. In 2011, ADIB showed 17.3% y-o-y growth to reach a net profit of Dh1.4bn ($381.1m), despite the impact of the new lending regulations on its fees and commissions income and a 9.4% increase in non-performing assets. The bank’s conservative approach to non-performing asset recognition and provisioning has resulted in a healthy pre-collateral non-performing asset coverage ratio – a contributing factor to the robust long-term credit ratings it enjoys (as of July 2012) of “A2” from Moody’s and “A+” from Fitch. Net customer financing, or lending, grew slightly in 2011, to Dh40.8bn ($11.1bn), up from the Dh40bn ($10.9bn) of 2010.
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