Introduction to Finance

ContentsTable of Figures1Company Profile2Head Quarter2CEO & CFO2Formation2STOCK Information3Primary Business Line4Size of ADCB4Total Assets4Total Sales4Total Number of Employees4Biggest Competitors of ADCB5Financial Ratios6EPS6PE Ratio7Dividend Yield7Market Price of Stock8ROA and ROE9Debt Ratio10Opinions and Recommendations10Bibliography11Appendix12

Table of FiguresFigure 1- History of Stock Price of ADCB from 2009 till 20113Figure 2 - Source: Moody's Analytics March 2011 (Market Share by Total Assets YE 2009)5Figure 3 - EPS past three years, ADCB & NBAD6Figure 4 Source: ADX Market Index history8

Table 1- EPS comparison ADCB & NBAD6

Company ProfileAbu Dhabi Commercial Bank P. J.S.C. abbreviation (ADCB) is a public joint stock company with limited liability.

Head QuarterThe head office of ADCB is located in:Abu Dhabi Commercial Bank Building,Sheikh Zayed Street,P.O. Box: 939, Abu DhabiUnited Arab Emirates

CEO & CFOThe chief executive officer (CEO) of the ADCB is Mr. Alaa Mohamed Atta Khalil Eraiqat.The chief financial officer (CFO) of ADCB is Mr. Deepak Khullar

FormationADCB was formed on 1st of July 1985.Date of Incorporation: 1st of July 1985

0

1

STOCK Information

Stock Symbol: ADCBStock Exchange: Abu Dhabi Securities Exchange (ADX).Date of Listing: 24 April 2001

Figure 1- History of Stock Price of ADCB from 2009 till 2011

Primary Business LineADCB is one of the leading banks of Abu Dhabi and the industry of ADCB is Banking Industry.

Size of ADCB

The size of ADCB could be determined with the help of following:

Total Assets

The total assets of ADCB are:Total Assets 2012 = AED 180,795,723Total Assets 2011 = AED 183,725,630

Total Sales

The total Sales of ADCB are:Total Sales 2012 = 7,469,680Total Sales 2011 = 7,365,090

Total Number of Employees

The number of employees of ADCB as reported in 2011 is as follows (Farah, 2011):Total Number of Employees = 3,800Emirati = 1,123Expatriates = 3,800

Biggest Competitors of ADCBThere are 51 banks in UAE out of which 28 are foreign banks and 23 are domestic banks, as per Moodys Analytics report Assessing the UAE Bank Market (Moody's Analytics, 2011). The competitors of ADCB are highlighted in the following pie chart of Market Share by total Assets in 2009. The Pie Chart clearly shows that ADCB comes third with respect to the market share (10.5%), after NBAD (National Bank of Abu Dhabi) and ENBD (Emirates NBD). Therefore the biggest competitors of ADCB are:1- ENBD (18.5% Market Share)2- NBAD (13% of Market Share)

Figure 2 - Source: Moody's Analytics March 2011 (Market Share by Total Assets YE 2009)

Financial RatiosThe following section compares past three years of EPS of ADCB with its competitor NBAD. The financial statements were retrieved from the company website of ADCB (ADCB, n.d.). The financial statements for NBAD were retrieved from ADX.EPSThe EPS (earning per share) of the two firms have been obtained from the financial statements of ADCB and NBAD (ADX, 2013). The following table shows the EPS of past three years, comparing ADCB with its competitor NBAD.Table 1- EPS comparison ADCB & NBADEPS

ADCBNBAD

20100.041.20

20110.511.21

20120.451.06

The following graph represents the comparison of EPS for last three years.

Figure 3 - EPS past three years, ADCB & NBADNBAD certainly outperforms ADCB in the above graph, also it shows that the banking industry is recovering from the recent credit crunch of 2008 as the EPS graph is upward from 2010 to 2011 and follows a slowdown in 2012. EPS figures of 2012 are still far better than 2010 showing the signs f recovery from the economic recession.

PE RatioThe price earnings ratio is calculated as follows (Brigham & Ehrhardt, 2011):Price/Earnings (P/E) Ratio = Price Per Share/Earnings Per ShareThe banking industry PE average is 13 in UAE (Nair, 2002). The price earnings ratio of ADCB and its competitor NBAD, is presented below with the help of the following table and the graph.

P/E Ratio

ADCBNBAD

201211.712.1

20111210.7

2010109.8

Dividend YieldThe dividend yield is calculated as follows:Dividend Yield = Annual Dividends Per Share/Price Per ShareThe following table and graph represent the dividend yield for the past three years of ADCB comparing with NBAD.Dividend Yield

ADCBNBAD

2012493%265%

2011423%168.00%

2010300%140.00%

Market Price of StockThe following chart represents the history of ADX index (ADX, 2013).

Figure 4 Source: ADX Market Index historyComparing this graph with the figure-1 above showing the graph for the stock price movements of ADCB, both the graphs show symmetrical movements for the period starting from 2009 to 2011.

ROA and ROEThe ROA and ROE of ADCB and NBAD for the past three are represented below with the help of the graph and tables:ROA = Profit Margin x Total Assets Turnover = Net Income/Sales x Sales/Total AssetsROE = ROA x Equity Multiplier = NI/Total Assets x Total Assets/Common EquityROE

ADCBNBAD

201213.00%15.50%

201116.70%15.40%

20101.50%13%

ROA

ADCBNBAD

20121.37%1.49%

20111.56%1.54%

20100.14%0.70%

Debt RatioCompanys and competitors past three years graph.Debt Ratio = Total Liabilities/Total AssetsBoth ADCB and NBAD have 0 debt ratio.Opinions and RecommendationsThe financial ratios of the bank revealed that ADCB outperforms NBAD when ROA is concerned at certain point in time, even after having lesser market share with respect to total assets of NBAD.As of April, 2012 Moodys the rating agency has also changed the outlook of ADCB to stable from negative. The same is reflected in the graphs above the performance starts getting better in 2010 and the development continues in 2011 with a slowdown in 2012. This clearly shows that the bank has improved its financial fundamentals since 2009 with an improved risk management and improved funding profile. ADCB has also increased its liquidity which is a major contributor in the performance of the bank in 2012.

BibliographyADCB. (n.d.). Earnings Releases. Retrieved May 9, 2013, from ADCB: http://www.adcb.com/about/investorrelations/er/ersummary.aspADX. (2013, May 9). ADCB. Retrieved May 9, 2013, from Abu Dhabi Securities Exchange: http://www.adx.ae/English/Securities/Pages/FinancialReports.aspx?Symbol=ADCBADX. (2013, May 5). Trading. Retrieved MAy 5, 2013, from ADX: http://www.adx.ae/English/Trading/Pages/ChartsCenter.aspxBrigham, E. F., & Ehrhardt, M. C. (2011). Financial Management theory and practice (13th ed.). Mason: South Western Cengage Learning.Farah, N. (2011, January 25). Business. Retrieved May 9, 2013, from Gulf News: http://gulfnews.com/business/banking/adcb-s-emirati-staff-level-hits-1-123-1.751624Moody's Analytics. (2011, March). Assessing the UAE Banking Market. Retrieved May 9, 2013, from Moodysanalytics: http://www.moodysanalytics.com/~/media/Regional/Middle-East/2011/11-01-03-Banking-Challenges-Emerging-Markets-Assessing-the-UAE-Banking-Market.ashxNair, M. (2002, September 1). News. Retrieved May 9, 2013, from Gulf News: http://gulfnews.com/news/gulf/uae/general/adcb-share-price-could-cross-dh60-1.397596

AppendixThe following graphs were used in this project:

P/E Ratio

Dividend Yield

ADX Index

ROE

ROA