ADCB’s $981m NMC exposure risks wiping out 80% of profit

Abu Dhabi Commercial Bank’s $981m of exposure to troubled hospital operator NMC Health risks wiping out more than 80 per cent of the lender’s estimated profit for this year.

The liabilities as of the end of March represented less than 1 per cent of the bank’s total assets, according to a statement.

With an estimated profit of Dhs4.35bn ($1.18bn) this year, according to four analyst forecasts, the exposure represents about 82 per cent of projected profit, according to Bloomberg calculations. It also represents about 1.44 per cent of Dhs250bn of net loans.

Abu Dhabi Commercial Bank is seen as one of the biggest creditors to NMC, people with knowledge of the matter said on Tuesday.

It’s also a lender to payments firm Finablr, which is linked to NMC through its founder and cross-ownership, the people said. The bank is said to be working with Lazard Ltd. to try to recover some of the funds from the struggling companies.

The credit was provided to London-listed NMC through a combination of facilities by ADCB, as well as by Union National Bank and Al Hilal Bank prior to the merger of the three banks last year, it said.

ADCB had total assets of Dhs405bn at the end of last year.

Limit Down
ADCB shares fell 5 per cent on Wednesday, the maximum decline allowed. The stock has traded limit down in almost every session over the past week, extending losses this year to 44 per cent, the most among lenders in the bourse.

• ADCB said it’s not in a position to quantify anticipated impairments at this time due to evolving developments at NMC
• The bank has initiated discussions with NMC and other substantial creditors to implement appropriate solutions to address the company’s financial defaults, governance and other issues

NMC’s known debt pile has more than tripled in recent weeks to $6.6bn, up from the $2.1bn reported at the end of June, after it successively uncovered borrowings that hadn’t been disclosed to the board.

The company found evidence of suspected fraud and debt that had been used for unknown purposes. Its chief financial officer and chairman have resigned.

The crisis at NMC, founded by Indian entrepreneur Bavaguthu Raghuram Shetty, has shaken investor confidence in the Middle Eastern business world and raised questions about the oversight of London-listed companies.

NMC shares have been suspended since February, and the company has been removed from the UK benchmark index.