Finance & Capital Market

ADCB reports $390.97m net profit for H1

Abu Dhabi Commercial Bank (ADCB) has reported a net profit of  AED1.436 billion ($390.97 million) for the first half (H1) of 2020, a 48% decrease compared to AED2.782 billion in H1 2019.
 
The second quarter (Q2) net profit was at AED1.227 billion (AED209 million in Q1 2020), representing a return on average tangible equity of 13.2% for the quarter. The Q2 net profit was 15% lower than AED1.448 billion reported for Q2 2019. 
 
The bank achieved a strong operating performance despite macro-economic headwinds and saw significant improvement in the cost-to-income ratio resulting from a disciplined approach to cost management and delivery of synergies, a statement said.
 
The bank's net interest and income from Islamic financing was 2% lower at AED5.136 billion amid a low growth environment and a contraction in the loan book on account of large corporate repayments in late June’20, it said.
 
Interest expense improved by 37% to AED2.783 billion in H1’20 due to a significant improvement in the cost of funds supported by increased CASA balances, reduced reserve requirements and declining benchmark rates.
 
Operating profit increased 2% year-on-year to AED4.066 billion, underlining the resilience of the ADCB franchise through multiple challenges including Covid-19, lower oil prices and declining benchmark rates, it said
 
Operating expenses (including integration costs) decreased 12% year on year to AED 2.351 billion in H1’20, while operating expenses in Q2’20 were down 25% year-on-year and 23% sequentially to AED1.025 billion.
 
Cost to income ratio (including integration costs) improved to 34.9% in Q2’20 from 42.0% a year earlier, an improvement of 710 basis points (7.1%), supported by the bank’s on-going cost initiatives and realisation of synergies related to the combination with Union National Bank (UNB) and Al Hilal Bank (AHB).
 
Impairment charges were AED2.551 billion in H1’20 compared to AED1.174 billion in H1’19. Total impairment allowances related to NMC Health Group, Finablr and associated companies stood at AED1.231 billion at the end of H1’20, which includes AED159 million recorded in Q2’20. The bank continues to work closely with the joint administrators of NMC Health Group to ensure repayment of debt.
 
The bank is in comfortable liquidity and capital positions and has increased CASA deposits by AED12 billion during H1’20, it said. CASA deposits increased to AED114 billion as at 30 June 2020, up 12% from year end, and accounted for 46% of total customer deposits as at 30 June 2020 compared to 39% at year end.
 
The bank had period end net loans of AED239 billion and customer deposits of AED250 billion as at 30 June 2020. Average loan balance was AED248 billion and customer deposit was AED259 billion during H1’20.
 
The results for H1’19 are based on the pro forma financial statements for the combined entity, following the merger between ADCB and Union National Bank (UNB) and the subsequent acquisition of Al Hilal Bank on May 1, 2019. 
 
Total shareholders’ equity stood at AED53 billion as at 30 June 2020, up from AED49 billion at the end of Q1’20, driven by an increase in the net fair value of reserves on debt instruments designated under FVTOCI over Q1’20 and retained earnings for Q2’20.
 
Khaldoon Al Mubarak, Chairman of ADCB Group, commented: “ADCB displayed considerable resilience in a difficult operating environment in the first half of this year, as the impact of Covid-19 and low oil prices disrupted economic activity in the UAE and around the world. A robust balance sheet, as well as disciplined financial and risk management, ensured the bank remained in a position of strength to serve the interests of its stakeholders through this challenging period.
 
"The bank also adapted quickly to the new circumstances in order to serve its current and future client base. Having successfully completed the fast-tracked integration of Union National Bank and Al Hilal Bank in April, ADCB became the first bank in the UAE to roll out a support package for customers and the wider community in response to Covid-19. The bank also acted quickly to modify its operations to promote the health and safety of its customers and employees, while ensuring full continuity and service excellence. As the UAE takes thoughtful steps to return to normality, ADCB will continue to play an important role in supporting the country's economic recovery, ” he said.
 
Ala’a Eraiqat, Group Chief Executive Officer and Board Member, said: “I am pleased to report that ADCB produced a good set of financial results and a robust operating performance, especially given the operational and economic challenges raised by the Covid-19 global pandemic.
 
"Through this period, we have maintained a singular focus on delivering continuous, high quality service to customers, at select branches and through our popular digital platforms, which have seen a sharp rise in usage over the last four months.
 
In the second quarter, the bank reported a net profit of AED1.227 billion, which translates to a strong return on average tangible equity of 13.2%. The underlying business has remained stable, with operating profit before impairment allowances rising 2% in the first half of 2020. This was predominantly driven by our sustained focus on managing the cost base, which has reduced operating expenses and helped to decrease cost of funds. - TradeArabia News Service