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UAE lender FAB posts 19% drop in third-quarter net profit

First Abu Dhabi Bank (FAB), the United Arab Emirates' biggest lender, reported a 19% fall in quarterly profit on Monday, dragged down by a double-digit drop in net interest income and higher impairment charges.

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DUBAI, Oct 26 (Reuters) - First Abu Dhabi Bank (FAB) FAB.AD, the United Arab Emirates' biggest lender, reported a 19% fall in quarterly profit on Monday, dragged down by a double-digit drop in net interest income and higher impairment charges.

Gulf banks face an uphill task over the next 18 months due to the protracted nature of the economic recovery and the gradual withdrawal of regulatory relief measures, rating agency S&P said earlier this month.

FAB said its third-quarter net profit reached 2.51 billion dirhams ($682 million) versus 3.11 billion a year earlier.

CI Capital had expected a net profit of 2.5 billion dirhams, while EFG Hermes had forecast 2.2 billion.

FAB's net interest income dropped 14% to 2.85 billion dirhams, as the bank said it continued to face headwinds from low interest rates and the challenging environment brought about by the pandemic.

Impairment charges in the quarter were 504 million dirhams, up 7% from a year earlier but down significantly from the second-quarter's 1.06 billion.

Shabbir Malik, a banking analyst at EFG Hermes, said asset quality risk for FAB is lower than the other banks given its track record and loan mix - it has a higher proportion of lending to government and public sector entities.

"Lower rates would mean that their margins will be under pressure," Malik said.

Rival lender Emirates (NBD) ENBD.DU last week posted a 69% slump in quarterly profit, as bad debt charges rose due to the COVID-19 crisis, while earnings suffered in comparison with last year, when they were swelled by an asset sale.

FAB said it continued to accelerate its digital initiatives, citing its partnership with Abu Dhabi state-owned holding company ADQ to set up a digital bank.

($1 = 3.6728 UAE dirham)

(Reporting by Saeed Azhar Editing by Kirsten Donovan and David Holmes)

((Saeed.Azhar@thomsonreuters.com; +971 44536787; Reuters Messaging: saeed.azhar.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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