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NBAD says lending selectively, plans branches

Abu Dhabi, May 12, 2009

National Bank of Abu Dhabi (NBAD) said it was selectively extending new loans to support development projects in the UAE capital and had plans to open new branches and expand its trade finance business.

Chief Executive Michael Tomalin said Abu Dhabi's biggest bank was 'comfortable' with the Dh1 billion ($272.3 million) it has set aside as collective provisions to guard against any future bad loans.

The bank, which wrote off Dh780 million worth of non-performing loans in 2008, posted a 12 per cent drop in first-quarter earnings and said a market revival was in sight.

'We've made very substantial collective provisions for problems that could come up in the future, we've taken these just in case things get worse,' said Tomalin.

'Liquidity has improved and frankly we never stopped lending but we will be selecting clients who we know well for projects that make sense.'

A property market crash in neighbouring Dubai and a downturn in real estate prices in Abu Dhabi have raise the spectre for a rise in consumer loan defaults at banks in the UAE that have adopted a more cautious approach to new loans.

The crash was triggered by the global financial crisis and an oil price collapse, which brought to an end an economic boom in the oil-exporting Gulf region last year.

Non-oil growth

Like other banks in the world's third-largest oil exporter, NBAD has taken advantage of state initiatives to boost banking sector liquidity and help them weather a downturn that had aggravated a mismatch between loans and deposits.

Among those were a Dh70 billion facility set up by the Ministry of Finance to pour money into bank deposits and an Abu Dhabi government move to inject Dh16 billion into five of its banks to help bolster their capital.

'I think a lot of money left the system after the crisis.

The full amount of that money hasn't been replaced,' Tomalin said, adding the loan-to-deposit mismatch was improving.

He said the bank's plans were 'consistent with' a central bank aim to see growth of 10 percent in UAE bank assets in 2009.

NBAD was not cutting costs or laying off staff and would open 13 new branches in the UAE before the end of the year, taking its total network to 100, Tomalin said.

'I think the whole outlook for the bank in the next two to three years is very positive,' he said, adding it would benefit from an Abu Dhabi plan to invest in building up its non-oil sector to reduce its reliance on volatile oil export revenues.

The emirate, holder of the bulk of the UAE's oil reserves, has said it is aiming for an average 7 per cent annual economic growth through to 2015.

'If we weren't positive then we wouldn't be investing in our good businesses, such as trade finance,' Tomalin said.

Shares of NBAD have risen about 16 per cent since the bank released first-quarter results on April 27. – Reuters




Tags: UAE | National Bank of Abu Dhabi | lending | trade finance |

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