Sunday, Jun 12, 2016

Dubai: National Bank of Fujairah (NBF) is working on a number of new business opportunities to strengthen its books and profitability while it addresses issues pertaining to a recent spike in bad loans.

“While a number of new opportunities are in front of us, we are focused on building a strong and sustainable business. It is not growth for the sake of growth,” Vince Cook, NBF chief executive officer, said.

Although the bank faced a spike in non-performing loans (NPLs) in the first quarter of 2016, the NPL ratio was 4.8 per cent compared to 4.7 per cent as of December 31, 2015.

The total provision coverage ratio was maintained at 107.3 per cent as of March 31, 2016, compared to 107.7 per cent at the end of 2015.

“The good news so far is that we have not witnessed a second round of spike in NPLs. As long as remains that way, it should be fine and we expect it to take its course to rectify,” Cook said.

“We don’t think this is going to result in any major long term disruptions in the market. The credit is still available and we are still seeing robust activity in the market. Although the overall level is still lower there is still good business.”

Last year the bank witnessed strong double-digit growth on both assets and liability side. In the first quarter of 2016, loans & advances as well as Islamic financing receivables of Dh20.8 billion were up 5.9 per cent from Dh19.7 billion at the end of 2015, and up 17.7 per cent from March 31, 2015.

Customer deposits and Islamic customer deposits of Dh23.1 billion were up by 7.1 per cent from Dh21.6 billion at the end of 2015, and up 25.4 per cent from March 31, 2015.

On the funding side, the bank is comfortable with its deposit base. “We organise our growth in a balanced way. Our growth on the loans side is predicated by growth in deposits. We tend to let the deposits side lead growth rather than growth [lead] assets and then [look] for funding.”

In response to some pressures on credit quality, the bank has not made any drastic adjustments to its credit standards.

“There hasn’t been a huge change. But obviously when the going is not good in the market it is but natural to ask a few extra questions before lending. But we don’t see the need for any drastic change in our lending policy as there is enough space to acquire healthy assets,” he said.

Fees and commissions continue to be a strong contributor to the bank’s bottom line. This segment is largely supported by the arranging and structuring side of the business. The trade finance and contracting business are also major contributors to this income stream for the bank.

While priority banking is a new area the bank is poised to enter, its treasury business is on a strong growth trajectory.

“We are seeing softness in one area of business, but it is being more than compensated in other areas,” Cook said.

By Babu Das Augustine Banking Editor

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