Total assets reached AED81 Billion at the end of the first half of 2006, up 25 % on the same period in 2005, with customer deposits up 19% and loans up 17%. Capital resources reached AED 10.3 Billion, up 69% from the corresponding period in 2005.
Operating income for the 1st half of 2006 reached AED 1.5 Billion including non-interest income of AED 0.5 Billion. Operating expenses grew by 12%, which resulted in a cost income ratio of 22%, far better than our target 30/35%. Going forward, the bank will continue to invest, as planned, in infrastructure, systems, network, people and brand, and strike a balance between investing for the future and rewarding shareholders.
Domestic banking contributed 57% to the first half of 2006 profits. Domestic banking profits increased 37% half year on half year to AED 648 Million reflecting a solid performance in both the retail and corporate businesses. International banking contributed 14% and International profits increased to AED 162 Million or 33% over the corresponding period. Our International banking business continues to do well and is expanding fast. In Egypt we have opened an 18th branch in Luxor, making NBAD one of the largest foreign banks operating in Egypt. Investment banking contributed 22% to group profits with profits falling 69% to AED 249 Million. Falling equity markets affected both its asset management and equity broking businesses. Nevertheless, Investment banking profits are still above 2004 levels.
Net impaired asset provisions were AED 24 Million in the first half of 2006 against AED 123M for the same period in 2005. Impaired assets are more than 100% provided. Overall, provisions are modest in comparison with the size of the Bank’s business and reflect our relatively conservative credit strategy and strong asset quality.
Commenting on the overall results, the Chief Executive, Mr Michael Tomalin said: “Although top level profits are down 15% in the first half of 2006, our underlying performance is strong and we remain well positioned. In the second quarter of 2005, the bank earned a remarkable profit of AED 835 Million buoyed by strong equity markets. I commented on this in my review of the first half of 2005 saying the level of profits was unsustainable in the medium term. First half 2006 earnings represent core earnings and are above core earnings in the first half of 2005.The return on equity for the first half of 30% represents one of the best in the industry, both locally and internationally.”
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