Dubai
Abu Dhabi Commercial Bank (ADCB) yesterday reported a 16 per cent year-on-year decline in net profit attributable to equity shareholders to Dh4.15 billion in 2016, down from Dh4.9 billion in 2015.
The figure puts net profit for the fourth quarter of 2016 alone at Dh1 billion, also down 16 per cent over the Dh1.19 billion recorded in the fourth quarter of 2015.
The bank’s board proposed to distribute cash dividends to shareholders in a sum equal to 40 per cent of ADCB’s capital. An annual general meeting is planned for March 7.
In its analysis report, the bank attributed the profit decline to the “lingering effects of low oil prices on economic activity and tightened liquidity, which resulted in higher funding costs and cost of risk for the bank.”
“2016 was a challenging year. The UAE’s diversified economic base as well as structural reforms helped to soften the impact somewhat. However, liquidity in the region remained tight as government and public sector deposits declined,” the report said.
ADCB’s impairment allowances rocketed 203 per cent year-on-year to reach Dh1.5 billion in 2016. In the fourth quarter of 2016 alone, impairment allowances were Dh437 million — an increase by almost fourfold from the Dh110 million in the same quarter of 2015.
Eissa Al Suwaidi, chairman of ADCB, said in a statement that he expected “heightened economic challenges” to persist in 2017.
“The bank has delivered another year of strong performance, particularly in light of the challenges [posed] by the low oil price environment, tightened liquidity, and volatile markets, which have impacted the industry,” he said.
Total customer deposits increased to Dh155 billion as of December 31, 2016, up 8 per cent year-on-year. Loans and advances were also up 8 per cent year-on-year, reaching Dh158 billion in 2016, compared to Dh146 billion in 2015.
Sanyalaksna Manibhandu, director of research at the National Bank of Abu Dhabi Securities, said he expected slow growth to persist among banks in 2017.
“Liquidity is now looking like it’s stabilising and it could be improving, so if liquidity is not going to get worse, then I think impairment is not going to get much worse either.” You may see stabilization in the first four months, and improvement in the second half of the year,” he said.
Manibhandu added that if crude oil prices remain stable between $53 and $60 a barrel this year, the banking sector could see improved liquidity, and thus, relatively better performance compared to 2016.
“Net interest margins should also improve, particularly with the US raising interest rates. But if those two assumptions (crude prices and interest rate hikes) don’t hold, then the improvement would be less than expected,” he said.
