A fall of 4.3 per cent in second-quarter profits was yesterday announced by First Gulf Bank (FGB), an Abu Dhabi-based lender; after it set aside Dh260 million as a precaution against bad loans, including loans to two troubled Saudi conglomerates.

The bank specified via a statement that profits of Dh775 million in the quarter ended June 30 were booked by the bank, down from Dh808.41mn in the second quarter of last year.

Yesterday, FGB became the first lender in the UAE to inform in its second-quarter earnings announcement that provisions have been made by it in order to specifically cover exposures to the Saad Group and Ahmad Hamad Algosaibi and Brothers, both of which are undergoing large debt restructurings.

The bank said: "Provisioning, or money set aside to account for expected defaults on loans, stood at Dh1.6 billion at the end of the second quarter, representing 1.8 per cent of the value of all the bank's loans. This includes an adequately earmarked provision for FGB's exposure to Al Gosaibi and Saad groups."

It should be noted that the bank owes $30 million in two term loans to Algosaibi and one of its subsidiaries, and $25 million in a syndicated loan to a Saad Group subsidiary. In June, FGB clarified that its exposures were not material.

The bank affirmed that first-half profits grew by 3 per cent, compared to the same period last year, to Dh1.52 billion, although the second-quarter profits declined. It also confirmed the increase in deposits by 13% in the first half of the year, while loans increased by 8 per cent during the period.