Abu Dhabi Commercial Bank 3Q 2009 Results

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Provisions impact bottom line growth significantly in 3Q 2009
Abu Dhabi Commercial Bank (ADCB)Abu Dhabi Commercial Bank (ADCB) (share price: AED2.29, earnings per share FY09e: AED0.20) reported the financial results for the 3Q 2009 ending September 30th.

-The bank achieved a 3Q 2009 net profit of AED35 million, 88% lower than the AED295 million reported in 2Q 2009 and 92% lower than the AED420 million reported in 3Q 2008.

-9M 2009 net profit reached AED683 million, 54% lower than the AED1.5 billion reported in 9M 2008. The main reason behind the y-o-y drop is the surge in booked provisions and the decline in investment income.

- Gross loan reached AED119 billion as of end of September 2009, increasing by 14% y-o-y (2% q-o-q and 7% YTD), while customer deposits reached AED84 billion, increasing 19% y-o-y (increasing 1% q-o-q and declining 1% YTD).

- Consequently, the bank’s liquidity deteriorated, as loans to deposits increased to 143% at end of September 2009, compared to 141% in June and 132% at December end 2008.

-The bank’s NPL ratio jumped to 4.2% (2.6% excluding the two Saudi entities) as of end of September 2009. Even though the bank booked AED1.7 billion in provisions for YTD 09, higher 179% y-o-y, the provision coverage dropped to 52.3% (70.7% excluding the two Saudi entities) in September 2009, versus 157.9% in December 2008, due to the surge in NPLs.

- ADCBADCB reported a CAR of 19.4% as of the end of September 2009, however, this figure is still pending the confirmatory documentation for the Tier II conversion. The bank’s Tier I ratio stood at 14.3% as of the end of September 2009.

We maintain our target DECF price of AED1.181, and assign the bank a “Sell” recommendation.
ADCB’s results are clearly affected by the surge in booked provisions. If the high provisioning continues in Q4 2009, the bank might fail to reach our projected net income for FY09e of AED1 billion. Further, we are concerned about the bank’s asset quality as the NLP ratio jumped to 4.2% in September 2009. The bank is currently trading at P/E FY09e of 10.6x and a P/B FY09e of 0.5x, compared to a regional average of 11.0x and 1.9x, respectively. We maintain our target DECF price of AED1.181, and assign the bank a “Sell” recommendation.

For further questions, please contact your usual sales contact on the numbers listed below, or Beltone Research, through research@beltonefinancial.com or / and +202 2792 6610.

- Ends -

For more information, please contact:
Sales and Trading
Cairo
Ahmed Kassem
Email:akassem@beltonefinancial.com

Ahmed Hashem
Email:ahashem@beltonefinancial.com

Amr Reda
Email:areda@beltonefinancial.com

Gamal Rashed
Email:grashed@beltonefinancial.com

Hassan Afifi
Email:hafifi@beltonefinancial.com

Ibrahim Abou-Elkheir
Email:iabouelkheir@beltonefinancial.com

Mostafa Abdel-Aziz
Email:mabdelaziz@beltonefinancial.com

Mostafa Fawzy
Email:mfawzy@beltonefinancial.com

Sherif Wahdan
Email:swahdan@beltonefinancial.com

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Chamel Fahmy
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Qatar

Ahmed Mourad
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Beltone Financial Qatar LLC
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© Press Release 2009