UAE’s top bank FAB cautious after flat second quarter profit

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First Abu Dhabi Bank (FAB), the United Arab Emirates’ biggest lender, struck a cautious tone on the second half of the year on Thursday, as it reported broadly flat second quarter profit.

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Gulf banks have been supported by high crude prices, which historically boost economic activity in the oil-rich region. But they are increasingly wary of a possible global economic downturn as central banks hike interest rates to fight inflation.

“Although the supportive regional economic backdrop and the diligent execution of our strategy represent significant tailwinds, we remain cautious in the context of heightened market volatility, persistently elevated global inflation and rapidly evolving monetary policy,” James Burdett, group chief financial officer, said in a statement.

FAB made second quarter profit of $792 million (2.91 billion dirhams), just under 1 percent higher than a year earlier.

Arqaam Capital and EFG Hermes had forecast profit of about 2.8 billion dirhams.

The result was down 43 percent on the first quarter, when FAB posted its highest ever quarterly net profit, helped by the sale of a majority stake in its payments business Magnati.

FAB said net profit was up 13 percent on a quarterly basis when excluding that sale.

The lender said first-half net profit, at 8 billion dirhams, was 50 percent above the first half of 2021, helped by a 3.1 billion dirhams net gain on the Magnati stake sale. FAB had reported a 2.8 billion dirhams net gain from Magnati in the first quarter.

Burdett said the second quarter saw double-digit growth in investment banking and corporate and commercial banking, “which is a strong result in the context of adverse global market conditions.”

“This was helped by strong volumes, early benefits from rising interest rates, and healthy client activity in Global Markets consistent with our strategy to enhance cross-sell.”

Operating expenses, up 10 percent in the quarter to 1.6 billion dirhams, rose due to “continued investments in franchise growth and transformation,” he said.

The bank’s non-performing loans ratio was at 3.6 percent in the quarter, down from 3.9 percent a year earlier and 3.8 percent in the first quarter. Its liquidity coverage ratio was 135 percent, up from 119 percent a year earlier.

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