ADIB wants 'clean slate' to start year

Abu Dhabi Islamic Bank (ADIB) set aside more than Dh1 billion (US$272.2 million) in provisions in the final quarter of last year as the country's second-largest Sharia-compliant lender said it was starting the year with a "clean slate". Overall provisions reached almost Dh1.5bn last year, cutting the bank's full-year profit to Dh78m. ADIB had also set aside "voluntary" or general provisions, which are usually taken against still-performing loans.

In the fourth quarter alone, the bank set aside almost Dh1.1bn in provisions leading to a loss of Dh623m for the period. The loss compares with a profit of Dh114m a year earlier. ADIB reported solid operating profits, however, which were further lifted by a Dh100m one-off gain from the sale of property. "Like many others, the impact of the economic downturn also affected some of our customers," said Tirad Mahmoud, the chief executive. "It was our commitment to best practice that prompted our pre-emptive decision to accrue substantial provisions."

Mr Mahmoud said the bank had "prudently reviewed its portfolio of old investments and credits from the past five years". He said the large provisions would allow it to start this year with a clean slate. "While the brunt of the legacy portfolio's cost of credit has been absorbed in 2009, we don't rule out the need to take further measures and - this may include further credit provisions and impairments. We are confident that 2010 will see a restoration of profitability."

The bank also warned that it would not rule out taking legal action to collect outstanding loans from customers, although it would prefer to work with them. It said it had established two management units to work with customers. ADIB is believed to have lent Dh245m to the Saad Group in 2007 to finance the investment of a warehousing company in Abu Dhabi, which never became operational. @Email:uharnischfeger@thenational.ae