UPDATE 1-National Bank of Abu Dhabi to expand Islamic banking

(Adds expansion plans)

KUALA LUMPUR, Oct 8 (Reuters) - The National Bank of Abu Dhabi , the second-largest bank in the United Arab Emirates (UAE) by assets, plans to triple its contribution from Islamic banking by introducing sharia-compliant services in Egypt, Oman and Malaysia.

NBAD aims to derive up to 10 percent of its operating income from Islamic banking by 2020, from 3 percent currently, chief executive Michael Tomlin told reporters at the launch of its Malaysian subsidiary on Monday.

NBAD has invested 310 million ringgit ($101.5 million) in paid-up capital to establish a wholly-owned subsidiary in Malaysia where it will focus on conventional products for wholesale clients.

NBAD issued a 500 million ringgit sukuk, or Islamic bond, in Malaysia two years ago that earned a coupon rate of 4.9 percent after its orderbook was oversubscribed by more than two times.

NBAD is 70.5 percent owned by the government of Abu Dhabi and recently expanded into Malaysia and China, taking its global presence to 14 countries. The contribution to group operating profit from its overseas businesses rose to 28 percent in the first half of 2012, compared with 16.3 percent last year.

"Our strategy is to take the bank from a presence in 14 countries to around 41 countries in the next ten years," senior general manager of NBAD's international banking division Qamber Ali Al Mulla said.

It aims to open 30 branches in Malaysia within the next decade. Malaysia has also been named as a regional hub for NBAD, with plans to expand into Indonesia and Singapore.

"Malaysia represents a strategic importance for us given its ideal geographical location, stability and healthy market climate. Malaysia was chosen given its significant economic clout in the region and its robust trading activities with the Gulf," said the company in a statement.

($1 = 3.0545 Malaysian ringgit)

(Reporting by Al-Zaquan Amer Hamzah; Editing by Matt Driskill and Mark Potter)