HC Research cut its share-price target on Abu Dhabi-based First Gulf Bank on rise in loan loss provisioning owing to an expected non-performing loan (NPL) regulation, and economic conditions.

The brokerage raised its fiscal 2010 forecast for loan loss provisioning to factor in the effect of the expected new provisioning regulatory requirement, which requires banks to classify loans as bad if they are due for more than 90 days, compared with 180 days earlier.

HC Research, which cut its price target to Dh23.3 ($6.34) from Dh24.5 on the stock, in a note said it believes the bank took additional provisioning to meet the expected new NPL regulation, leading the NPL ratio to rise to 1.6 per cent from 1.4 per cent in the third quarter of 2009.

"We expect loan loss provisioning to be high this year, similar to 2009, mainly due to its corporate book as the economy is still recovering," said the brokerage, which maintained its "buy" rating on the stock.

However, the core operating performance was in line with the brokerage's expectations, while earnings were stronger on gains from development properties.

The lender, Abu Dhabi's second-largest by market value, reported a fourth-quarter net profit of Dh855 million, up 27 per cent from a year earlier, beating analysts' estimates.

Shares of First Gulf Bank closed up 1.8 percent at Dh17 Thursday. – Reuters