National Bank of Abu Dhabi (NBAD) reported 6.9 per cent increase in net profits to AED 2,087 million for the first half of 2012 compared with AED 1,953 million earned in the first half of 2011. Net profits for the second quarter of 2012 at AED 1,046 million were also higher by 2 per cent compared to the second quarter of the previous year at AED 1,026 million. The annualised return on shareholders' funds for the first half is 16.9% in line with the targets for the medium-term. Nasser Alsowaidi, Chairman of NBAD said, "The Bank had another good quarter and continues to deliver a strong set of financial results. We have also maintained our strong credit ratings in an environment in which well known financial groups across the globe have experienced downgrades to their ratings." Michael Tomalin, Group Chief Executive, commented, "The result for the first half is a reflection of our steady performance so far this year and is in line with our expectations. Loan growth appears more subdued due to some repayments and deposit growth appears lower mainly because of substantial deposit outflows which had been expected and factored into our cash flow positions. The Bank's liquidity remains strong and we have the capacity to grow rapidly when markets improve. Our international and wealth businesses enjoyed strong growth. The Group has not changed its forecasts for 2012: assuming continuing current market conditions, mid to high single digit growth in earnings for the year with non-performing lLoans peaking round 3.75 per cent of performing loans by year end or early 2013." Operating income crossed the AED 4 billion mark in the first half to reach AED 4,100 million, up 5.5 per cent over the corresponding period of 2011. Operating income of AED 2,071 million for the current quarter was higher than the second quarter of 2011 by 3.2 per cent. Higher net interest income and net income from Islamic financing contracts by 4.6 per cent in the first half of 2012 over 2011 continues to drive the increase in top-line revenues. Though non-interest income was slightly lower sequentially from the 1st quarter of 2012, it remains 7.8 per cent higher in the first half of 2012 than the corresponding period of 2011 led by a strong 12.2 per cent increase in net fees and commissions. The net interest margin was 2.3 per cent for the first half of 2012, lower than 2.5 per cent for the corresponding first half of 2011 due to an increase in short-dated secured lending and maintaining a more liquid balance sheet. The percentage lent (loans and advances to total assets) at the end of the first half of 2012 was 60 per cent compared with 62 per cent this time last year. Operating expenses for the first half were AED 1,350 million, higher by 14 per cent compared with the corresponding period driven primarily by higher staff costs reflecting our continuing investment in talent, learning and development. The cost to income ratio was 32.9 per cent for the first half of 2012. This is slightly more than the 32.5 per cent recorded for the year 2011 but remains below the Group's medium-term cap of 35 per cent. At the end of the first half this year, domestic network spanned 121 branches and cash offices, over 550 ATMs and 11 business banking centres, while we extended our international presence to 14 countries by opening up our offices in Shanghai (China) and Kuala Lumpur (Malaysia). The global headcount increased to 5,822 staff as on 30 June 2012. The investments in the franchise, network and systems, products and people are in line with NBAD vision to be recognised as the World's Best Arab Bank. Operating profits grew 1.8 per cent in the first half of 2012 mainly driven by the international and corporate and investment banking businesses, which achieved a growth of 28 per cent and 6 per cent year-on-year, respectively. New products, clients and assets under management (AUMs) coupled with some recovery in capital market activities enabled Global Wealth businesses to almost double its operating profits to AED 61 million from AED 31 million in the previous year. Total Assets were AED 270.0 billion as of 30 June 2012, up 5.6 per cent on 31 December 2011 and up 9.5 per cent on 30 June 2011. Loans and advances to customers were AED 162.8 billion, up 2.1 per cent on 31 December 2011 and up 6.4 per cent on 30 June 2011. Customer deposits were AED 160.5 billion, up 5.7 per cent in the first half of 2012 and were higher by 9 per cent as compared to 30 June 2011. During the second quarter, deposits declined by AED 27.2 billion or 14.5 per cent. This was mainly due to a significant portion of short-term government deposits, which were received in the first quarter, being withdrawn in the second quarter. These deposits had been placed across various classes of liquid assets and hence did not impact the liquidity of the Bank. Excluding this inflow-outflow, core deposits grew by a net 5.7 per cent in the year to date. Capital resources were higher by 5.2 per cent over 31 December 2011 at AED 36.2 billion consisting of shareholders' funds of AED 24.3 billion, GoAD Tier-I capital notes of AED 4.0 billion and subordinated notes of AED 7.9 billion. Capital adequacy ratios (Basle-II) remain well above the minimum 12 per cent and 8 per cent (Tier-I) required by the UAE Central Bank, and (prospective) Basle-3, with a capital adequacy ratio of 21 per cent and a Tier-I ratio of 16.3 per cent as at 30 June 2012.