Abu Dhabi Commercial Bank (ADCB) headquarters in Abu Dhabi. ADCB reported a net profit of Dh3.8 billion for 2020 down 27 per cent from Dh5.24 billion reported in 2019. Image Credit: Gulf News Archive

Abu Dhabi: Abu Dhabi Commercial Bank (ADCB) reported a net profit of Dh3.8 billion for 2020 down 27 per cent from Dh5.24 billion reported in 2019.

In the fourth quarter of the year the bank reported a net profit of Dh1 billion, down 4 per cent compared to the same period in 2019.

“In testing times, ADCB has drawn on its strengths – a robust balance sheet, disciplined governance and a high-performance culture – to navigate the complex issues raised by the global pandemic, softening global economic activity and low oil prices,” said Khaldoon Al Mubarak, Chairman of the Board of ADCB.

The Board of Directors has recommended a cash dividend of Dh0.27 per share, translating to a pay out of Dh1.87 billion, equivalent to 49 per centof net profit.

Lower operating expenses

Steady operating performance, with lower cost of funds and an improved cost to income ratio cushioned the impact of low interest rates and subdued economic activity due to Covid-19 to a great extent.

“At a time when stable and powerful institutions are needed to support our businesses and communities through unpredictable challenges, I am pleased to report that ADCB has remained resilient during a challenging year and has emerged as a stronger banking group,” said Ala’a Eraiqat, Group Chief Executive Officer and Board Member.

For the full year 2020 operating profit before impairment allowances held steady at Dh7.94 billion, compared with Dh7.97 billion in 2019.

Operating expenses decreased 14 per cent year on year to Dh4.52 billion, driven by aggressive realisation of merger synergies, reduction of the branch footprint to pre-merger levels, and a wider programme of digitisation and cost control measures.

Cost to income ratio excluding one-off integration costs stood at 35.1 per cent 2020, an improvement of 190 basis points over the previous year.

Higher provisions

Net impairment charges were Dh3.99 billion in 2020, significantly higher than in the prior year, to reflect the challenging macro-economic environment and due to provisions taken on NMC Health Group, Finablr and associated companies.

Bank reported non performing loans (NPL) ratio of 6.04 per cent and provision coverage ratio of 94.3 per cent while the coverage ratio with collateral was 151 per cent as at 31 December 2020. Including net POCI (purchase or originated credit impaired) assets, the NPL ratio was 7.70 per cent.

Robust balance sheet

Bank’s balance sheet remains robust with capital and liquidity positions improved and comfortably within regulatory limits. Current and savings account (CASA) deposits increased by Dh26 billion during 2020 to account for 51 per cent of all customer deposits at yearend.

Total customer deposits decreased 4 per cent year on year to D 251 billion as at 31 December 2020, as the Bank continued to replace expensive time deposits, while the average deposit balance was Dh252 billion during the year.

Net loans decreased 4 per cent year on year to Dh239 billion as at 31 December 2020, reflecting the low growth environment in the banking sector plus significant provisioning levels. The average loan balance was AED 245 billion during 2020.

Liquidity and capital

Capital adequacy (Basel III) and CET1 ratios improved to 17.22 per cent and 13.91 per cent respectively at the end of 2020 from 16.30 per cent and 12.93 per cent as at 31 December 2019.

Bank’s liquidity coverage ratio (LCR) improved to 156.8 per cent from 127.3 per cent as at 31 December 2019, remaining comfortably above the current minimum regulatory requirement of 70 per cent.