Abu Dhabi – Mubasher: The National Bank of Kuwait Capital, the research arm of the National Bank of Kuwait (NBK), said it has reduced the fair value (FV) of the National Bank of Abu Dhabi (NBAD) by 10% to AED 11.80 per share.

Despite the reduction, the FV remains 11% higher than the share’s last closing price, the firm said, adding that it maintains a ‘Hold’ recommendation for the stock. NBAD closed 31 May at AED 10.65 per share.

The main reason behind the revision to forecasts “were increased pressure on the NIM (driven by lower asset yields) and higher costs,” NBK Capital said in its report, adding that it expects the loan book to grow at a compound annual growth rate (CAGR) of around 8% over the next three years, which is in line with the sector.

“We expect costs to increase quicker than revenues, at a CAGR of 10% versus 7% in the three years ending in 2018, as the bank continues to invest in its local and international franchises,” the research firm noted, adding that it forecasts the cost-to-income ratio to rise 38% during its forecast horizon (versus 36% in 2014).