Abu Dhabi Commercial Bank (ADCB) reported nine month net profit of Dh2.8 billion, down 46.4 per cent compared to Dh4.1 billion in the previous year. Image Credit: Gulf News

Dubai: Abu Dhabi Commercial Bank (ADCB) reported nine month net profit of Dh2.8 billion, down 46.4 per cent compared to Dh4.1 billion in the previous year.

The bank reported a net profit of Dh1.36 billion in the third quarter of 2020, up 11 per cent quarter on quarter and 3 per cent lower year on year.

“ADCB continues to deliver a robust performance, responding effectively to a difficult operating environment with renewed focus on building resilience and a solid platform for future growth. The Group produced a net profit of Dh1.366 billion in the third quarter, which translated to a double-digit return on tangible equity of 12 per cent. This was delivered through a stable loan book, which displayed modest growth in the third quarter, solid fee income and a significant decrease in the cost base over the last year,” said Ala’a Eraiqat, Group Chief Executive Officer and Board Member of ADCB.

Incomes and costs

Operating income increased 2 per cetn sequentially to Dh2.99 billion in Q3. Non-interest income increased 19 per cent quarter on quarter to Dh706 million, with net fee and commission income up 21 per cent, partially offsetting a 3 per cent sequential decline in net interest income to Dh2.28 billion due to lower volumes amid subdued macro-economic conditions.

ADCB’s cost to income ratio excluding one-off integration costs stood at 34.3 per cent for the nine month period, an improvement of 335 basis points year on year, while operating expenses (excluding integration costs) were down 14 per cent year on year in the nine-month period due to disciplined cost control and realisation of cost synergies related to the combination with Union National Bank (UNB) and Al Hilal Bank (AHB).

Operating expenses in the third quarter were 14 per cent lower year on year at Dh1.102 billion, but were 8 per cent higher sequentially due to one-off costs related to strategic optimisation of the Bank’s branch network.

Asset quality

Gross impairment charges on loans and advances were Dh913 million in Q3, 18 per cent higher sequentially. Net impairment charges were Dh504 million, 25 per cent lower quarter on quarter on account of higher recoveries and releases. The Bank recorded an additional Dh148 million of impairment charges related to NMC Health Group, Finablr and associated companies in the third quarter, bringing the cumulative total to Dh1.37 billion. ADCB continues to work closely with the joint administrators of NMC Health Group to ensure repayment of debt. The bank reported NPL ratio of 5.54 per cent and provision coverage ratio at 93.9 per cent as at 30 September 2020. However, including net POCI (Purchase or originated credit impaired) assets, NPL ratio was 6.96 per cent

Loans and deposits

Net loans increased 2 per cent quarter on quarter to Dh243 billion as at September 30, 2020, and were 2 per cent lower year to date on account of large corporate repayments in June and de-risking of the retail portfolio. Average loan balance was Dh245 billion during the nine-month period.Low-cost current and savings account deposits increased to AED 116 billion as at 30 September 2020, up 14% from the end of 2019, and accounted for 48% of total customer deposits compared to 39% at year end. Total customer deposits stood at AED 244 billion as at 30 September 2020 and average deposit balance was AED 255 billion during 9M’20

Capital and liquidity

Capital adequacy (Basel III) and CET1 ratios improved to 16.69 per cent and 13.36 per cent respectively from 16.3 per cent and 12.93 per cent as at yearend 2019. Enhanced liquidity position, with liquidity coverage ratio (LCR) improved to 136.4 per cent from 127.3 per cent as at December 31, 2019, remaining comfortably above the current minimum regulatory requirement of 70 per cent