Mubasher Trade and Research issued a report on Abu Dhabi Commercial Bank , stating that ADCB reported its Q4-13 results, revealing a 28% YoY earnings surge (-9% QoQ) to AED793mn, 1% above market consensus. The increase in net profit came mainly as a result of a drop in provision charges by 51% YoY (-36% QoQ). The bank has managed to improve its asset quality, with its NPLs ratio sinking to 4.1% in 2013 vs. 5.4% in 2012, while also succeeding in comfortably covering provisions at 110% (vs. a coverage of 82% in 2012), beating the peers' average of 82% for Q3 2013. This freed up the bank to lower provisioning in Q4 2013. ADCB recorded a 14% YoY increase (-3.1% QoQ) in operating profits to AED1.76bn, boosted by both NII and Non-Interest Income as follows: A. Net Interest Income (NII) increased 6% YoY (-2% QoQ) to AED1.34bn, mainly due to a 7% YoY increase in loans, in addition to improved yields when compared to 2012, as ADCB's interest spread in Q4 2013 was up to 3.33% from 2.97% in Q4 2012. However, on a QoQ basis, NII was down 2% on a slight QoQ decline in yields on assets, which fell to 4.35% in Q4 2013 from 4.40% in Q3 2013. This led to higher Net Interest Margin (NIM) to 3.42%, a YoY gain from 3.13% in Q4 2012, but down from 3.44% in Q3 2013. B. Non-Interest Income increased 50% YoY (-7% QoQ) to AED420mn mainly due to gains arising on retirement of financial liabilities and related hedges on the repayment of Tier 2 loan in addition to higher net trading income primarily due to consolidation of funds. ADCB is currently trading at a discount relative to local and regional peers, at a 2014e PBV of 1.6x vs. a local and regional peer average of 1.7x. We have included ADCB in our MENA favourites list, generating a return of 27% since inception on 25 November 2013.; All Rights Reserved - Mubasher Info
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