ADCB bought back shares worth Dh1.15bn ($313.1mn) at the end of last week, in by far the largest transaction completed by the bank since the regulator gave it permission in January to purchase up to 10% of its share capital.

AFP/Dubai

 

Abu Dhabi Commercial Bank, the United Arab Emirates’ third-largest lender by market value, bought back shares worth Dh1.15bn ($313.1mn) at the end of last week, the bank said in a statement yesterday.

The trade of 261.87mn shares represented 4.68% of the lender’s total share capital and is by far the largest transaction completed by the bank since the regulator gave it permission in January to purchase up to 10% of its share capital.

 The shares were bought at Dh4.40 each, the statement added, equivalent to a 5.6% discount to Wednesday’s closing share price. ADCB’s shares hit a 4-1/2 year high on Wednesday; the bank posted a 5% increase in first-quarter net profit.

United Arab Emirates stocks, in particular banks, have benefited in recent months from renewed optimism toward the local economy. The Abu Dhabi index was up 24.4% in the first four months of this year, while ADCB jumped 52.8% in the same period.

Meanwhile, ADCB was raised to overweight at JPMorgan Chase & Co after it cut exposure to low quality assets.

“ADCB management has commendably turned around the franchise over the last two-three years by cleaning up the asset book, prudently managing liquidity while conserving spreads better versus regional peers and strengthening the capital base by disposal of non-core assets,” analysts including Naresh Bilandani wrote in a research report. This has made “the business model much simpler — simplicity receives a plus from bank investors in the current regulatory scenario.”

ADCB said last week it settled lawsuits against Morgan Stanley, Standard & Poor’s, Moody’s Investors Service and others over its purchase of Cheyne SIV notes. The bank reported a 4% increase in first-quarter profit to Dh830mn ($226mn), beating analysts’ estimates.

JPMorgan raised the recommendation from neutral and increased the price estimate to Dh5.50 from Dh5. The stock closed at Dh4.61 last week. It has surged 55% this year, outpacing the 30% climb for Abu Dhabi’s ADX Banks Index.

JPMorgan also raised the price estimate of First Gulf Bank, its top pick among banks in the Middle East and North Africa, to Dh18 from Dh13.50. The overweight recommendation was maintained. The stock has risen 25% this year to 14.55 dirhams last week.

National Bank of Abu Dhabi, the UAE’s biggest bank by assets, was cut to neutral from overweight at JPMorgan, saying the shares are “trading close to their June 2014 fair value and the relative valuation of NBAD looking stretched versus peer regional names.” The stock gained 31% this year to Dh12.25 last week.