National Bank of Fujairah (NBF) said its core income in the first quarter rose 34 per cent, but the impact of fair value losses on the investment portfolio restricted its profit to Dh55.4 million ($15 million).
Announcing the results for the three months period ending March 31, the bank said its profit dropped 31 per cent when compared to the corresponding period last year.
The net results were impacted by the global investment climate causing a significant decline in the fair value of the bank’s investment portfolio, said the newly-appointed NBF chief executive officer, Steve Mullins.
The core businesses maintained the growth in line with previous quarters on the back of strong growth in volumes despite pressure on margins due to excess domestic dirham liquidity and lower inter-bank interest yields.
"Operating income excluding investment income showed a growth of 33.9 per cent compared to corresponding quarter of 2007. Net interest income rose by 27.9 per cent and fee income grew by 33.0 per cent," Mullinms said.
The bank’s focus on foreign exchange sales contributed the best quarter ever with 76.3 per cent growth in exchange income compared to corresponding quarter last year, he added.
Investment losses for the quarter were Dh30.3 million as opposed to investment income of Dh22.5 million for the corresponding quarter of 2007.
The company management sees the fair value losses as industry driven and expects to see a recovery subject to global market conditions.
“Whilst first quarter results were affected by external factors, we are pleased to maintain the consistency of earnings in our core business areas and continued progress in Retail and SME businesses."
"NBF will continue to reap benefits of its ‘build and diversify’ strategy by making headway in SME and Retail segments. The focus will continue on adding value for shareholders and taking customer service experience to the next level”, said Mullins.
Total assets and liabilities grew by 42.1 per cent and 51.6 per cent at Dh12.3 billion and Dh10.6 billion respectively over March 31, 2007.
Return on average equity dropped from 19.8 per cent in 2007 to 12.7 per cent while return on average assets was down to 1.8 per cent for the quarter as opposed to 3.7 per cent in 2007 reflecting lower level earnings due to fall in income on account of investment’s fair value adjustment.
Total shareholders’ equity as of March 31, 2008 stood at Dh1.7 billion and the bank’s capital adequacy ratio at period end stood at 14.6 per cent against the Central Bank minimum of 10 per cent.
Operating expenses increased by 17.8 per cent which largely reflects investment in new business initiatives, governance and infrastructure and strengthening of human capital.
Cost to income ratio was 40.4 per cent compared to 27.7 per cent in the corresponding quarter of 2007 which reflects lower earning levels; however, adjusted for loss/income from investments the ratio would be 30.4 per cent and 34.5 per cent for respective periods.
NBF’s twelfth branch at Tawiun in the Emirate of Fujairah commenced operations in April this year.-TradeArabia News Service