National Bank of Abu Dhabi posts flat Q3 net profit growth

National Bank of Abu Dhabi (NBAD), the United Arab Emirates’ largest lender by assets, posted flat third-quarter net profit on Wednesday, in line with analysts’ forecasts, as the bank was hit by a rise in bad loans.

The lender was sticking to its forecast of low single-digit profit and revenue growth for 2016, group chief financial officer James Burdett said in a conference call after the release of the earnings.

The results are in line with a generally lacklustre earnings season for banks in the United Arab Emirates, reflecting a trickier operating environment as a more-than-two-year collapse in oil prices feeds through into higher levels of bad loans and compressed net interest margins.

NBAD, which is currently in a merger process with rival First Gulf Bank, made a net profit of Dhs1.32bn ($359.4m) in the three months ending September 30, it said in statement.

This compared with Dhs1.33bn in the same period a year earlier.

The results were broadly in line with the forecasts of three analysts polled by Reuters, who had on average estimated a net profit in the quarter of Dhs1.38bn.

The bank’s impairments jumped 68 per cent in the third quarter to Dhs287m compared with the same period a year ago.

Provisions for the bank’s retail and small- and medium-sized enterprise units were higher during the quarter, acting group Chief Executive Abhijit Choudhury said during the call.

“The Bank’s impairments are reflective of the ongoing challenging operating environment,” NBAD said in the statement, adding that the results “continue to reflect NBAD’s prudent provisioning approach”.

The tough economic environment may continue to impact the lender with net profit and earnings forecast to be in low single digits for the rest of the year, Burdett said on the analysts call.

NBAD’s loan book totalled Dhs205.3bn ending September 2016, down 0.3 per cent from Dhs205.9bn in December 2015.

Customer deposits were Dhs242.9bn, versus Dhs233.8bn, up 3.9 per cent during the same period.

Merging NBAD and FGB, as recommended by the boards of the two lenders in July, would create one of the largest banks by assets in the Middle East and Africa. The deal is expected to be completed in the first quarter of 2017.

Read: NBAD, FGB shareholders to meet in Dec for bank merger approval