First Abu Dhabi Bank, the UAE’s largest listed bank with a market cap of Dh183.67 billion, reported net profits of Dh5.4 billion in the first-half of this year. That’s from a 11 per cent increase year-on-year.
This was primarily driven by growth from core businesses despite headwinds such as the continued rate cuts. There was increased contributions from international operations following a recent acquisition in Egypt.
The bank demonstrates a solid balance-sheet structure, with cash-on-hand at Dh239 billion, a 24 per cent. FAB thus has sufficient funds to consider more diversification strategies and maintain consistent dividend payouts. FAB has a dividend yield of 4.39 per cent with an annual payment frequency.
A substantial cash reserve also increases shareholders’ confidence of timely payouts despite pandemic-induced market factors. Operating costs jumped 7 per cent to Dh2.8 billion, reflecting ongoing investments in strategic and digital initiatives. FAB's total assets rose 3 per cent year-on-year to Dh944 billion, while customer deposits were up 6 per cent to Dh575 billion.
One of the bank's central revenue source - loans and advances - increased 3 per cent to Dh399 billion. The bank maintained a strong liquidity position with Liquidity Coverage Ratio (LCR) at 119 per cent. This proves that efforts to navigate the many challenges presented by COVID-19 are reaping benefits, and the banking behemoth can withstand the macro hiccups coming its way.
Higher credit card spends are also helping the Abu Dhabi bank, while recording a robust 24 per cent increase in quarterly revenues from the corporate and investment banking division on account of renewed IPO activity in the Gulf. The bank has made excellent progress in its strategy to gain marketshare and increase penetration in the region.
Upsizing in Egypt
Revenue from MENA grew 67 per cent in the second quarter and 51 per cent in the first-half, with Saudi Arabia and Egypt representing almost half of revenues generated from international operations.
The bank is making significant efforts to enhance its digital servicing as well as mobile banking capabilities. Magnati, a wholly-owned FAB subsidiary, is expanding in the payments space. The digital transformation agenda has led to a 104 per cent surge in users.
In April, the bank acquired 100% of the share capital of Bank Audi SAE (Egypt), which will make FAB one of the biggest foreign banks in Egypt. FAB's first international acquisition will increase the size of Egyptian business to more than $8 billion in assets, reaffirming the bank's vision to create a leading position in the region.
Even with rate cuts in place, First Abu Dhabi Bank could deliver double-digit profit growth. From now on, the bank is confident that their distinct competitive strengths will to unlock opportunities for itself and shareholders alike.