NBK Capital issued a report on National Bank of Abu Dhabi (NBAD), defining a 12-month fair value at AED 12.90, and recommending a "Sell". National Bank of Abu Dhabi (NBAD) reported a net profit of AED 1.1 billion in 4Q2013 (-4% YoY, +4% QoQ). The key drivers for the sequential increase in net profit were higher fee income and investment income. Net profit for FY2013 came in at AED 4.73 billion, up 9% YoY but 2% below forecast on higher-than-expected provisioning. Total operating income came in at AED 2.33 billion in 4Q2013 (nearly flat YoY, +6% QoQ), resulting in an operating income of AED 9.4 billion in FY2013, 8% above FY2012 and nearly matching forecast. Net interest income increased 7% YoY and 1% QoQ in 4Q2013, resulting in 7% growth in FY2013. The NIM declined in FY2013 driven a by combination of declining asset yields, increased liquidity, and stronger competition. "We view that strong and consistent growth in fee income is encouraging, while weaker than expected loan growth is a concern. Following a 22% rally in the stock price in one month, we downgrade our recommendation on the stock from "Hold" to "Sell." We view that the recent price rally, combined with NIM pressure, little room for the cost of risk to decline from current levels, slower growth for GRE-lending, and rich valuations (1.7x 2014 P/B) justify our recommendation", according to NBK Capital .; All Rights Reserved - Mubasher Info
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