UNB and Al Hilal Bank will now both become ADCB in $114 billion merger Image Credit: Gulf News Archives

Abu Dhabi Commercial Bank (ADCB) reported yesterday an 11 per cent decline in its net profit for the second quarter of 2019 as interest and non-interest incomes both decreased.

The bank’s profits reached Dh1.4 billion in the quarter, bringing profits in the first half of 2019 to Dh2.78 billion – down 15 per cent year-on-year.

The results are the first to be released by the bank since it merged with Union National Bank and then acquired Al Hilal Bank on May 1. They represent the earnings of ADCB as a separate entity in April, together with its earnings in May and June as a merged entity with the two other banks.

The drop in profits came as non-interest income fell by 9 per cent year-on-year in the second quarter to Dh656 million on the back of lower fees and commission income. Net interest and Islamic financing income also slid by 1 per cent to Dh2.6 billion.

Operating expenses rose in the quarter by 5 per cent, but impairment allowances dropped by 42 per cent.

Integration process

On the integration of the three banks following the merger, ADCB said it is “processing rapidly and on track for completion by the end of 2020.” Treasury functions of the three entities have already been fully integrated, and the integration of Al Hilal Bank is now “mostly completed.” Cost synergies are expected to reach Dh615 million by the end of 2021 – of those, Dh69 million have been realized, the bank said.Eisa Al Suwaidi, group chairman of ADCB, said in a statement the combination of the three banks is still at an early stage, but marks a “significant development” for the UAE.

“The new banking group has the strength and expertise to play a central role in the country’s economic development in the years ahead,” he said. “The bank is making good progress on the execution of a well-planned integration, while continuing to pursue new initiatives for growth.”

Meanwhile, Alaa Eraiqat, group chief executive officer of ADCB, said the bank’s performance in the quarter came against “a backdrop of weaker operating conditions.”

He also pointed that “certain matters arose” during the due diligence process and the bank will quantify their impact at the end of the year, but did not elaborate on what the issues were.

On the balance sheet, ADCB’s total assets fell by 2 per cent as the values of both loans and deposits dropped. Loans and advances declined by 4 per cent to Dh251 billion while deposits dropped by 4 per cent to Dh273 billion.