Dubai: Islamic banks across the GCC have been facing a gradual weakening in their operating outlook for 2015-2016 alongside their conventional counterparts, largely due to declining oil prices and their impact on the over all macroeconomic environment.
Despite such a challenging economic environment, leading UAE-based Islamic banks proved their resilience by reporting a strong set of results for the first three quarters of the year.
Overall the UAE’s Islamic banks have been ahead of their regional and conventional counterparts in terms of assets, profit growth and continued improvement in asset quality.
Dubai Islamic Bank (DIB) reported a group net profit of Dh2.8 billion for the first nine months of 2015, up 36 per cent from the Dh2 billion reported for the same period in 2014. The bank’s performance was supported by strong growth in all income streams and a consistent decline in impairments.
For the third quarter of the year, the bank reported a net profit of Dh1 billion, up 38.3 per cent compared to Dh722.97 million during the same period last year.
Total income increased to Dh5.52 billion, up 20 per cent year-on-year from Dh4.61 billion. DIB’s net revenue increased to Dh4.78 billion, up 19 per cent compared with Dh4 billion last year.
“The strong year-to-date business performance of DIB was helped by solid revenue growth across all core businesses, with total income up by 20 per cent to Dh5.5 billion and net profit [up] 36 per cent to Dh2.8 billion,” said Dr Adnan Chilwan, DIB’s group chief executive officer.
Tightening liquidity across the GCC banking sector is expected to squeeze asset growth. On the liability side, funding is becoming tighter after growth in customer deposits lost momentum in the first half of this year.
Despite such broad regional trends, DIB’s net financing assets at Dh92.3 billion, were up by 25 per cent at the close of the third quarter ended September 30, 2015, compared to Dh74 billion year-on-year. Total assets rose 19 per cent from Dh123.9 billion at the end of 2014 to Dh147.5 billion.
DIB’s asset quality continued to improve as its NPL ratio improved to 5.9 per cent, compared to 8 per cent at year-end 2014. Its impaired financing ratio also improved, falling from 6.5 per cent in the same period last year to 4.5 per cent. The bank’s provision coverage ratio improved to 84 per cent, compared to 78 per cent at the end of 2014.
Emirates Islamic announced a net profit of Dh534 million for the first nine months of 2015, an increase of 109 per cent over the same period in 2014. The bank’s financing book receivables grew by 24 per cent to Dh32 billion from Dh26 billion as at year-end 2014.
“Emirates Islamic’s strong results for the fourth year running [are] a successful culmination of our transformation journey. With a firm focus on innovation, we are at the forefront of exciting developments in the UAE’s Islamic banking sector as the industry grows in strength,” said Jamal Bin Galaita, chief executive officer of Emirates Islamic.
At the close of the third quarter, the bank reported a provisions coverage ratio of 107 per cent and a non-performing financing ratio of 7.6 per cent.
Abu Dhabi Islamic Bank (ADIB) recorded a net profit of Dh503.2 million in the third quarter of this year, marking a 5.5 per cent year-on-year increase. For the nine months ended September 30, ADIB reported a net profit of Dh1.45 billion — up 8.2 per cent compared to Dh1.33 billion in the same period last year.
Revenues also went up 9.7 per cent to reach Dh1.28 billion in the third quarter. Total assets increased by 7.3 per cent year-on-year to stand at Dh116.9 billion while customer deposits grew 7.8 per cent to Dh89.4 billion.
Net customer financing rose 7.8 per cent to Dh77.2 billion, highlighting a conservative approach to new credit extension.
“Despite a more challenging operating environment and the increasing competition among banks in the UAE, we have seen continued growth in our customer numbers as we remain focused on our strategy,” said Tirad Al Mahmoud, ADIB’s chief executive officer.
Reinforcing its financial strength and comfortable liquidity position, ADIB recently repaid its $750 million (Dh2.75 billion) sukuk from its own sources.
