Financial Highlights

Annual Report 2007

CHAIRMAN'S MESSAGE  

I am profoundly honored to present the 32nd annual report of the bank.

The Bank is witnessing a tremendous growth in all areas, profit , deposits, loans and advances, investments, expansion of branches network and information technology. The dedication, perseverance and unchallenged resolve of the Board of Directors, Management and employees are the driving force behind that success.

Net Profit is at a historical level in 2007 as it has reached an unprecedented AED 311.4 million an increase of AED 100.8 million with a remarkable increase of 48% than the year 2006 while operating income before provisions is AED 371.8 Million. Customers’ deposits increased by AED 1,016 Million (31%), while loans and advances to customers have been increased by 58% from AED 2.51 Billion as at the end of 2006 to AED 4 Billion as at the end of 2007. As a result of the above, the bank has achieved a growth in net interest income of 17% compared to 2006.

Trade Finance activities, letters of credit and letters of guarantee have risen by 64% over 2006. In addition remittance services has increased significantly and income from real estate investments also has increased due to sharp rises in the local property market during the year 2007. Consequently, the non-interest income generated from services income has shown an increase of 34%. Investments increased over 450% than prior year.

Earning per share jumped from AED 5,541 in 2006 to AED 6,186 in 2007.

 The Shareholders have also contributed a great deal to this success momentum by increasing the capital by AED 740 Million during 2007 by way of injecting fresh funds by the shareholders reaching our paid-up share capital to AED 1.5 Billion. This represents a good start and puts the bank in a better position for the expected competition and a solid base for the implementation of Basel II.

The bank is planning to open new branches in Muraqabat (Dubai) and Khalidiya (Abu Dhabi) during February 2008 and more branches in Fujairah, Sharjah and Ras Al Khaimah is underway to broaden our business in the UAE.

We have gone a long way in the field of diversifying our portfolio. The necessary applications have been submitted to regulatory authorities to open a real estate company. The main purpose of which is the management of properties belonging to the bank as well as its customers, hence enhancing the fee income. The final steps of licensing share dealing and brokerage company is underway. Its aim is to serve our customers who have exposures to the securities market, and give them technical and fundamental analysis required, that will increase the bank’s fee income. During the first quarter of 2008 we will be launching our credit cards to diversify retail products and provide a complete package of services to our dear retail customers. The preliminary steps for the establishment of a Islamic Finance subsidiary is underway to meet the increasing needs of Sharia-compliant products.

The bank is in the lead among its counterparts in Emiritisation arena, with a 38% per cent Emiritisation level by the end of 2007 in comparison to 32% in 2006. Training courses are continuously provided to recruits as to raise their standards.

The UAE is set to continue to strengthen its position as a primary regional trade, business and investment powerhouse. The strategy will continue in part thanks to higher oil revenues and a zerodeficit budget, while keeping a close-eye on sound public spending, economic diversification drive.

The UAE’s real gross domestic product will grow at an annual average of seven percent over five years between 2008 and 2012 while inflation is seen to gradually drop and will average five percent for the same period.

Abu Dhabi will pump USD 200 Billion into various infrastructure and real estate projects to develop the city in the coming five years, taking advantage of its solid economic growth and diversifying investments in the non-oil industries such as tourism.

Between Dubai and Abu Dhabi, the UAE has so far committed USD 512 Billion in major leisure development projects, according to the findings of a region wide research.

Dubai continuing to play the role as a region trading centre and entry port.

The UAE is to issue first government bonds with long-term maturities, in order to control the inflation as the falling US Dollars pushes up import prices. Inflation is said to have accelerated to a record 9.8 percent in 2007, from 9.3 percent in 2006.

Six oil-rich Gulf countries are setting up a common market with a combined economy of USD 715 Billion in the new year of 2008.

Kuwait was the first Gulf Arab state to drop its currency’s peg to the US Dollar in May 2007 when it began linking it to a basket of currencies, including the US Dollar, Euro, Yen and GBP. Other Gulf states, including the UAE, are under pressure to revalue or to de-link their ties to the dollar.

More challenges were outlined for the Middle East, including the impact of the credit crunch crisis in the US and Europe, the vulnerability of emerging markets, inflationary pressures, and the currency dilemma.

The US economy will continue to slow during the first half of 2008, which happened during 2007 due to the sub-prime crisis, despite the lowering of interest rates, negatively affecting the growth of the global economy. The consistent growth of emerging markets, especially China and India, will give these countries the most influential positive impact on global growth in 2008.

Looking forward, some positive signs are giving a glimpse of hope in the US, for although investments in the housing sector have plunged 20 percent on an annualized rate, consumer spending has not yet followed the trend, and a weaker dollar helped to strengthen USD exports. Investors worldwide are assessing the reality of a recession in the United States, expecting surprise Fed-rate reductions estimating from 0.75 to one percent during the first quarter of 2008.

According to the Organization of Economic Co-operation and Development (OECD), three major risks lie ahead in 2008, namely the cooling of the housing markets, the soaring prices of oil and commodities, and the turmoil in the financial sector.

Oil prices remain well supported, with most analysts forecasting more record highs in the near future, beyond USD 100 per barrel, propelled by the weak greenback (Dollar), soaring demand from Asia and geopolitical risks.

The gold price is expected to hit an all time peak of USD 900 per ounce as the precious metal is benefited from its safe-haven status amid record high oil price and a struggling dollar.

Finally, I would like to take this opportunity to thank the shareholders and my colleagues in the Board and customers for their continued loyalty and trust; and the management and staff for their dedication and hard work which have contributed to this remarkable achievement.