Monday, Feb 15, 2010

Gulf News

Abu Dhabi Abu Dhabi Islamic Bank (ADIB) yesterday announced a fourth quarter loss of Dh623 million compared with a Dh114 million profit in 2008 because of heavy provisioning against nonp-erforming loans.

The bank set aside more than Dh1 billion in the quarter in provisions, almost triple the amount allocated through the first nine months. In a statement, ADIB Chief Executive Officer Tirad Mahmoud said the bank had established two collection units to recover loans.

"Where this fails we have a responsibility towards our shareholders to use the full scope of remedies that are available to us, including resorting to the justice system to collect past dues," Mahmoud said.

ADIB is one of more than a dozen UAE banks exposed to the struggling Saudi groups Saad and Algosaibi.

The bank has declined to disclose its exposure to the Abu Dhabi Stock Exchange, citing customer confidentiality agreements.

The provisioning amount came as a surprise to analysts, especially since ADIB lowered third-quarter provisions by almost Dh50 million from the Dh171 million recorded in the second quarter.

Still, by raising its coverage the bank pought its collective provisions, or funds set towards possible repayment failures as opposed to accounts already in default, to 1.25 per cent of its loan book. Besides ADIB, only National Bank of Abu Dhabi has met the threshold expected to be formally issued by the Central Bank.

"We like the bank's move to start putting aside this bulk provisions ahead of the market," said Germaine Benyamin, banking analyst at HC Securities in Dubai. She had projected Dh242 million in profit on provisions of Dh123 million.

Foreign ownership

On the year, provisioning has pought ADIB profit down to Dh78 million, or about one-tenth of the 2008 figure.

The results came the same day ADIB's board approved up to 25 per cent foreign ownership of its shares.

The Abu Dhabi Stock Exchange, where ADIB is traded, relies on foreign investment for about 40 per cent of its daily trading.

Shares of ADIB closed at a two-month high of Dh3.01 on Thursday, the last trading day before its earnings release, in anticipation of the board's decision.

By Ahmed A. Namatalla

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