Abu Dhabi Commercial Bank -Equity Report -07-06-2012

12-Month Fair Value: AED 3.40
Recommendation: Accumulate – Risk Level**:4

We maintain our “Accumulate” recommendation on ADCB, with a fair value per share of AED 3.40, which is 15% above the last closing price and 3% above our prior fair value. ADCB’s share price has increased by 6% YTD, the second-highest among its UAE peers. However, we believe the stock remains undervalued, trading at a 2012 P/B of 0.7x compared with 0.9x for its UAE peers, asset quality remains a concern at ADCB, which witnessed an 18% spike in NPLs in 1Q2012, the highest among its UAE peers. Furthermore, lending was muted in 1Q2012, declining by 0.7%, the weakest among its peers.