UAE’s top bank FAB beats profit estimates on higher interest income

First Abu Dhabi Bank (FAB), the United Arab Emirates’ biggest lender by assets, on Thursday beat estimates with a 46 percent jump in third-quarter net profit, boosted by higher interest income.

Net profit was 4.3 billion dirhams ($1.17 billion) in the three months to September 30, up from 2.9 billion a year earlier.

That topped the roughly 3.7 billion dirhams expected by analysts, LSEG data showed.

Its net interest income – the difference between earnings on loans and payouts on deposits – jumped 26 percent to about 4.6 billion dirhams.

Gulf banks are reaping windfalls after the US Federal Reserve raised borrowing costs to try to control stubborn inflation as their currencies are pegged to the dollar.

But the Fed’s aggressive monetary policy has made it difficult for customers to borrow and repay debt, prompting lenders to provision more for potential defaults.

FAB’s shares rose 1.8 percent in early trade to 13.5 dirhams a piece on Thursday after the earnings were released. But they are down 21 percent year-to-date, underperforming the broader Abu Dhabi equities market which is down 6.9 percent.

FAB’s net impairment charges jumped 20 percent to 2.1 billion dirhams in the nine months to September 30. Third-quarter provisions were down 13 percent at 605 million dirhams, reflecting higher recoveries.

Customer deposits rose 5 percent to 785 billion dirhams while loans were up 3 percent on a yearly basis but down 1 percent quarter-on-quarter at 478 billion dirhams. The bank said the decline was a result of drawdowns offset by a few large repayments.

Total assets reached 1.2 trillion dirhams, a growth of 7 percent year-to-date, the bank said, led by sizeable deposit inflows deployed across loans, investments and central bank placements.

Earlier this year, FAB said it had considered a bid for London-listed Standard Chartered but was no longer doing so. Last year, it withdrew a bid to buy Egyptian investment bank EFG Hermes.

The bank hired a group head of global markets and group head of mergers and acquisitions and corporate development, as the bank sharpens its focus on expansion.

FAB has been disappointing investors since the last two years, analysts at AlphaMena said in a report on September 29, adding that a bank as big as FAB “has to put in place an ambitious external growth plan, as the UAE market is insufficient” in their eyes.