First Gulf Bank PJSC, (FGB), the leading financial partner of choice in the UAE, today posted a net profit of AED 920 million for the third quarter (Q3) of 2011. This result is an increase of 8% compared to the same quarter of 2010 (AED 849 million). FGB has achieved consistent growth in net profit for the fifth consecutive quarter registering a growth of 3% over the previous quarter (Q2, 2011). Core banking revenue stood at AED 1,599 million which represented 98% of total revenue and was 6% higher than the same period of last year.

Commenting on the strong financial performance, Andre’ Sayegh, CEO of First Gulf Bank said: “These results confirm the effectiveness in implementing our strategy for 2011 and beyond. This success can be attributed to our cautious yet diverse approach to the financial and business markets. We like consistency, over the past few quarters we have witnessed consistent growth in our core businesses which have been on an ascending curve since Q2, 2010. We are on the right path with this continuous progress to meet our set targets for 2011.”

Sayegh added, “The UAE medium and long term fundamentals are clearly very strong, and with our in-depth understanding of the UAE banking sector, we are well placed to witness future growth in this market. During the first nine months of 2011, the Core banking revenue represented 98% of total revenue and was at AED 4,729 million, an 8% jump compared to last year. These numbers are reflection of a solid balance sheet management by FGB. Between December 2010 and September 2011, the net interest margin improved to 3.75% from 3.60%, the non-performing loans to gross loans ratio gradually decreased from 3.7% to 3.4% and the cost to income ratio slightly increased to 18.3% from 17.8%. With our dynamic business strategy, we are in a privileged position to continue offering our customers optimized products and services while at the same time generating sustainable returns for shareholders by maintaining our strong business fundamentals.”

Q3 2011 income statement highlights
The net interest and Islamic financing revenue for the quarter stood at AED 1,356 million which is 26% higher than last year. The Net Interest and Islamic financing represented 84% of the total Operating Income compared to 69% in Q3’10. Fees and commissions at AED 261 million for the quarter were 10% lower than the previous quarter and 40% lower than Q3’10 mainly due to regulatory changes in retail lending implemented this year by the UAE Central Bank.

Performance for the first nine months of 2011
FGB has recorded the highest net profit for the first nine months of 2011 with a net profit at AED 2,686 million which is 5% higher than last year on the back of increase in core revenues by 8% and decrease in provisions by 5%. Net interest margin for first nine months of 2011 is at 3.75%, higher than the 3.60% for the same period in 2010. Expenses for the first nine months increased 10% to AED 880 million, in part due to a renewed internal focus on investment in human capital. Loans provisions booked during the first nine months were at AED 1,249 million, which is a drop of 5% compared to the same period of last year, this marks an overall improvement in our asset quality.

Abdulhamid Saeed, Managing Director of First Gulf Bank stated: “building on our historical performance, FGB has performed as per set plans for the first nine months. Our sound credit and risk strategy as well as the emphasis we place on our core banking activities means that we have a strong revenue generating power, which will reflect into greater values for our shareholders.”

Balance Sheet – Liquidity
By the end of September 2011 Total Assets were at AED 156 billion showing a growth of 11% over the past nine months and 14% growth over the past 12 months. Customer Loans and Advances were at AED 102 billion and grew by 7% during the first nine months of 2011 and customer deposits were at AED 96 billion. Although the Loan to Deposit ratio was at 106%, , FGB liquidity is at a comfortable level as liquid assets represented 13% of the total assets and the central bank advance to stable deposits ratio was, by end of September 2011, at 85% far lower than the maximum allowed of 100% .

During the third quarter, FGB demonstrated its ability to raise medium term funds, which is part of the bank’s strategy to diversify its funding sources along with its customer deposits. The bank concluded a successful transaction recently with the issuance of Sukuk worth of US$650 million to mature after five years. The deal was over-subscribed by six times. During the quarter the bank raised also two year funds worth of US$ 200 million through a bi-lateral loan granted by an international bank.

Capitalisation and Earnings per Share
Total shareholder equity stands at AED 25.7 billion; the bank is solidly capitalized with total capital adequacy ratio at 22.3% and Tier 1 capital ratio at 19.2%. It remains one of the highest within the UAE banking sector and globally as well.

Earnings per share for the first nine months of this year stood at AED1.69, 8% higher than AED 1.56 for the same period at the end of September 2010.

Saeed added: “FGB enjoys a favourable position in terms of liquidity and capitalization and this gives us great confidence moving towards the end of the financial year and beyond to reach our targets. Similar to last quarter our balance sheet growth is a reflection of the continued improvement of operating conditions in the UAE banking sector which is indicative of the overall confidence in the UAE banking sector. ”

Provisioning
According to the Central Bank 90 day’s classification of loans and provisioning, the ratio of Non-performing loans (NPLs) to gross loans after excluding Dubai World exposure was at 3.4% by end of Q3 2011, which was a decrease from 3.5% by end of June 2010 and the 3.7% at the end of December 2010. However, the Provision Coverage Ratio improved from 89% by end of December 2010 to 105% by end of September 2011.

“In general we see the NPL formation on a gradual declining trend and this is reflected in decreasing provisions from one quarter to another. During this quarter, the bank booked provisions of AED 379 million, which is lower than the AED 411 million booked in Q2’11 and AED 459 million booked in Q1’11. We are very comfortable with these levels of provisioning and coverage” said Sayegh.

Andre’ Sayegh concluded: “We are strong believers of maintaining a strong balance sheet position irrespective of business cycles. On the revenue side, we have once again seen a strong performance from our Corporate and Retail businesses during the third quarter which yielded reasonable returns. We now enjoy an even stronger position looking ahead to the next quarter and the year ahead aiming at increasing steadily our business growth locally and internationally in selective markets who have close links to the UAE. We will continue to drive our organic expansion plans forward, building and growing our existing international branch network and looking selectively to new overseas markets as an additional source of sustainable business growth.

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