First Gulf Bank PJSC, (FGB), the leading financial partner of choice in the UAE, posts a net profit of AED 890 million in the second quarter (Q2) of 2011. This represents an increase of 13% over Q2 2010 (AED 787 million). The bank maintained consistent positive growth in net profit for the fourth consecutive quarter with a growth of 1.7% over the previous quarter (Q1 2011). Core banking revenue at AED 1,550 million represented 97% of total income and was 11% higher than the same period of last year.

FGB’s first half (H1) 2011, net profit stood at AED 1,765 million, 3.4% more than the AED 1,707 million recorded in H1 2010.

Commenting on the continued growth in financial performance, Andre’ Sayegh, CEO of First Gulf Bank said: "The last quarter’s performance has confirmed that we are indeed one of the best established banks in the UAE. Our extensive understanding of the market has enabled us to capitalize on market opportunities and posted significant gains in our core banking portfolio which represented a 11% jump in revenue over the second quarter of 2010. These numbers are a reflection of solid balance sheet management by FGB. The net interest margin stabilized at the 3.7% level, the non performing loans to gross loans ratio decreased from 3.7% in Q1 2011 to 3.5% and the cost to income ratio was maintained below 18%. Our performance justifies our business strategy, which is based on a dynamic model, resulting in a consistent solid financial performance looking to create optimized and sustainable returns for shareholders by maintaining strong business fundamentals."

Capitalisation and Earnings per Share
After cash dividend distribution of AED 900 million in March 2011, total shareholder equity stands at AED 25 billion and capital adequacy ratio is at 22.3% which is one of the highest within the UAE banking sector. Tier 1 capital ratio at 19.1% places the bank in a very solid position against future requirements of Basel III norms.

Earnings per share for the first six months of this year stood at AED1.15, 11% higher than AED 1.04 for the same period at the end of June 2010.

Abdulhamid Saeed, Managing Director, First Gulf Bank, comments: "FGB has a very strong position in terms of liquidity and capitalisation and is on track to achieve its 2011 targets. Our balance sheet growth is a reflection of the improvement in the UAE banking sector indicators and the increased stakeholders’ confidence. Our financial position and asset quality are improving every quarter. Success at aligning our strategies with new market realities has helped us steadily improve the overall financial performance."

Q2 2011 income statement highlights
Net Interest and Islamic financing income continued to grow in Q2 2011 at AED 1,220 million, 6% higher than previous quarter and 17% higher than Q2 2010. Net interest and Islamic financing represented 77% of operating Income compared to 71% in Q2 2010. Fees and commissions at AED 291 million for the quarter were 28% lower than previous quarter and 18% lower than Q2’10 mainly due to regulatory changes in Retail lending implemented recently by the UAE Central Bank. However, the increase in Net Interest and Islamic Financing (AED 177 million) due to asset growth was much higher than the decrease in fees and commissions (AED 66 million). .

Performance in the first half of the year (H1 2011)
FGB recorded its highest H1 net profit in the history of the bank at AED 1,765 million, an increase of 3% over H1 2010, driven by an increase in the core banking revenue by AED 271 million, which is equivalent to 9% compared to the same period last year.

Saeed added: "This historical achievement can be attributed to the sound investment in our core banking activities, which have provided the highest returns. This is highly encouraging as we push forward in this financial year."

Net interest margin by end of H1 2011 is at 3.73%, slightly higher than the 3.60% achieved in the first half of year 2010. Expenses for the first six months stood at AED 557 million, 8% higher than last year as the bank continued its expansion and investments in people and infrastructure. Loans provisions for H1 2011 were at AED 870 million, 4% lower than H1 2010 reflecting an improvement in the asset quality.

Balance Sheet – Liquidity
FGB liquidity is at very comfortable levels as the central Bank advance to stable deposits ratio was, by end of June 2011, at 87%, far better than the prescribed maximum of 100% and marginally higher than the same ratio of 86% in H1 2010. During H1 2011, customer loans and advances increased 3% to AED 98.6 billion. Deposits exceeded the 100 billion mark for the first time in the bank’s history and stood at AED 100.4 billion, Deposits grew by 2% during the first half of 2011 and by 13% over the past twelve months improving the loan to deposit ratio to 98%. This is better than the 107% achieved at end of June 2010.

Provisioning
According to the Central Bank 90 day’s classification of loans and provisioning, the ratio of Non Performing Loans (NPLs) to gross loans was at 3.5% by end of Q2 2011(4.3% including Dubai Word exposure), which was a decrease from 3.7% (4.6% respectively) held at the end of Q1 2011 the same as the end of December 2010. However, the provision coverage ratio improved from 89% by end of December 2010 to 102% by end of June 2011.
"In general we see a declining trend in our NPL’s and we are very comfortable with our level of provisioning. It is important to note that our coverage ratio does not take into consideration any of the collaterals possessed by the bank against its loan portfolio. We would like to highlight as well to our stakeholders of the substantial security and collateral that the bank holds against its loan portfolio. Now as we enter the third quarter and H2 of 2011, our provisioning level reflects the market reality whereby our provisioning reduced by 4% to AED 870 million in the first half of 2011 as compared to the same period last year," said Sayegh.

Andre’ Sayegh concluded: "We are satisfied that our strong business fundamentals coupled with the strong growth in our business operation, will now place us in a firmer position to increase lending to the targeted sectors in the coming quarters of 2011 and beyond. The UAE economy has demonstrated robust growth so far and this has been aided by the revised growth forecasts from the IMF upwards to 3.6% in 2011 from 2.1% in 2010. Finally we would like to reiterate that we are confident that our economic growth targets for the coming quarters will be surpassed. In this process we will also cultivate our organic expansion, building up our existing international offices and branches and expand our geographical footprint."

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