First Gulf Bank Q2 Net Profit Up 14%

First Gulf Bank, the second-largest lender by market value in the UAE, posted a 14 per cent rise in second-quarter net profit on the back of increased lending and a better net interest margin, beating analysts’ forecasts.

The lender, majority-owned by Abu Dhabi’s ruling family, made a net profit of Dhs1.02 billion ($278 million) for the three months ended June 30, compared with Dhs890 million in the prior-year period, it said on Tuesday.

Analysts polled by Reuters had estimated an average profit of Dhs950.1 million for the second quarter.

Profit for the first six months of the year grew 11 per cent over the same period last year to Dhs1.95 billion.

FGB’s net interest margin expanded to 3.8 per cent at the end of the second quarter from 3.6 per cent at the end of March. The bank attributed the rise to a new strategy for managing its balance sheet.

Loans and advances rose six per cent in the first half of the year to Dhs110.9 billion. Deposits at the end of June were one per cent higher than at the end of 2011.

The rise comes at a time when lending in the wider United Arab Emirates’ banking system has been subdued, growing only 0.3 per cent over the first five months of this year, according to the latest figures from the central bank.

Liquid assets at FGB stood at 12 per cent at the end of June, which put the bank “in a very solid position to be fully compliant” with new central bank guidelines, according to Andre Sayegh, chief executive of FGB.

Last month, the country’s regulator announced that banks would have to hold high-quality liquid assets equal to 10 per cent of their liabilities from Jan. 1 next year, a move aimed at preparing the sector to comply with Basel III global standards.

Provisions for non-performing loans rose marginally in the second quarter, by one per cent from a year earlier to Dhs413.9 million.

Costs rose 20 per cent in the first half of the year to Dhs667 million. No reason for the rise was given in the statement, although the bank said its cost-to-income ratio remained the lowest in the UAE at 19.3 per cent.

In June, Bahrain-based SICO Investment Bank named FGB as one of its top picks in the UAE banking sector and warned the industry faced slower but more sustainable growth due to tough central bank regulations aimed at controlling excessive lending.

SICO maintained its long-term “buy” rating on First Gulf Bank as it expects the lender’s low operating costs and deployment of liquid assets to help sustain its profitability.

Shares in FGB didn’t trade on Tuesday ahead of the results announcement. They have risen 10.9 per cent this year, compared to a 2.8 per cent rise by the main Abu Dhabi share index.