NBK Capital issued a report on First Gulf Bank (FGB), defining the stock’s 12-month fair Value at AED 15.00, and recommended a “Hold”.

First Gulf Bank (FGB) reported a net profit of AED 1.33 billion in 1Q2014, up 28% YoY but down 3% QoQ. The YoY increase in net profit was on higher operating income, which came in at AED 2.25 billion (+20% YoY, -9% QoQ) and exceeded forecast by 7.9% driven by higher-than-expected non-interest income.

Core banking revenue performed well. The key positive surprise at the operating income level came from fee income (+26% YoY, +14% QoQ) while investment income continued its strong momentum in 1Q2014, reaching AED 99 million, and contributing 4% of operating income. Net interest income was also strong, increasing 16% YoY and came slightly ahead of forecast.

“Overall, we believe this is a good set of results, which came above our expectations in terms of operating income, especially fee income. However, weak loan growth has put a damper on these positive results. For now, we maintain our fair value per share and our “Hold” recommendation on the stock. However, we will issue an update report on FGB after discussing the results with the bank’s management”, NBK Capital stated.