English Version - National Bank of Abu Dhabi

On behalf of the Board of Directors of National Bank
of Abu Dhabi, I would like to commend and thank
our senior management and staff for their efforts in
enabling the group to produce good results in a challenging
year characterised by difficult economic conditions.
Economic conditions in 2009
The year began on a sombre note as uncertainty clouded
prospects for global economic activity. This was reflected in
a reduction in the price of oil from a high of US$ 140 per
barrel in mid-2008 to US$ 42 per barrel at the start of 2009.
Forceful policy action pulled the world economy from more
dire consequences. Policymakers undertook expansionary
fiscal policy to offset the decline in household consumption
expenditures and investment expenditures by corporates,
while Central Banks lowered interest rates significantly to jumpstart
private sector demand for goods and services. Extensive
measures to ensure financial stability were also taken.
The United Arab Emirates entered the global economic crisis
in a position of strength having accumulated a substantial net
external asset position, but nevertheless faced macroeconomic
challenges.
United Arab Emirates cut production of oil as part of the
reduction in OPEC quotas in order to bring supply of oil in line
with global demand. The oil price decline in conjunction with
lower output is expected to have contributed to a moderate
decline in nominal GDP for the UAE in 2009.
Non-oil growth was also more subdued than in past years
because of a lingering credit slowdown against the regional
backdrop of rising bad loans, real estate and debt concerns.
The Central Bank of the United Arab Emirates and the Ministry
of Finance responded forcefully to support economic activity
by providing various facilities to the financial system and
support to local governments. The Government of Abu Dhabi
provided AED 16 billion in the form of Tier I capital notes to
five Abu Dhabi banks.
Food price and rent increases had been the primary drivers of
double digit inflation in 2008. The same factors reversed in
2009 in the UAE and low single digit inflation should remain
in the near to medium term.
Looking forward, the fiscal and current account balance
outlook remains positive given prospects for a global recovery
in activity, with both figures comparing favourably versus
2009. Abu Dhabi, with about 60% share of nominal GDP
in 2009, should play an increasingly larger role in economic
activity in the region.
Financial Performance of the Group
I am pleased with NBAD’s profits which were achieved in
extremely difficult local and international operating conditions.
The Group’s business model and its businesses once again
proved their resilience.
Our stringent risk strategies have shielded the Group from
the turbulent conditions that swept through our region and
internationally. We moved fast to tighten credit control and
applied stricter credit criteria across our products.
At the end of 2009, we took a rigorous review of all the group’s
portfolios and are confident that our collective provisions
are at appropriate levels to cushion us against future credit
challenges.
We continued our organic growth drive and extended our
international expansion in Hong Kong and Jordan and we
broadened our franchise in the UAE to 100 branches. This
expansion should advance our long-term strategy to position
the group as the Number One Arab Bank.
The bank reported flat net profits of AED 3.0 billion for the
financial year ended 31 December 2009 and operating profits
were up 18% at AED 4.5 billion. Accordingly, the Board of
Directors has recommended the distribution of a 10% cash
dividend and 10% bonus shares to shareholders.
The Bank’s operating income for the year 2009 reached AED
6.4 billion with net interest income up 27% over last year.
Non-interest income increased by 8% year-on-year reflecting
the bank’s diversification of sources of income and despite the
weak local equity markets which affected income in both the
Bank’s asset management and brokerage businesses. Expenses
increased within plan by 27% to finance the organic growth in
the Bank’s franchise, network, IT systems and staff.
The return on equity for the year is 20% realising our target for
2009. NBAD’s medium term strategic objective is to maintain
an average return of 25% over the full economic cycle.
Total assets reached AED 196.8 billion, 19.6% above 2008
levels. Loans and advances reached AED 132.3 billion, up
18.3%, and customer deposits increased 17.1% to AED 121.2
billion during the year.
All the bank’s businesses performed well with operating profit
contributions of AED 2,133 million from our Corporate &
Investment Banking business, AED 912 million from Domestic
Banking, AED 546 million from International business and
AED 691 million from Financial Markets division. Islamic
banking’s activities contributed AED 59 million to the Group’s
AED 4.5 billion.
We are a socially responsible bank and we contribute to good
causes. In 2009, our donations and charity contributions
amounted to AED 19 million.
My colleagues on the board and its committees have played a
critical role in our efforts during 2009. I value their depth of
experience and express my appreciation to them and sincerest
thanks to all our stakeholders for their continued support.
Finally, on behalf of the shareholders, the members of the
Board of Directors and the management and staff of the Bank,
I wish to extend our most sincere appreciation and gratitude to
His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President
of the UAE and Ruler of Abu Dhabi, to His Highness Sheikh
Mohammed Bin Rashed Al Maktoum, Vice President and
Prime Minister of the UAE and Ruler of Dubai, and to His
Highness Sheikh Mohamed Bin Zayed Al Nahyan, Abu Dhabi
Crown Prince and Deputy Supreme Commander of the UAE
Armed Forces, for their continued support and interest in the
Bank’s activities.
Nasser Ahmed Khalifa Alsowaidi
Chairman
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