Dubai: Commercial Bank of Dubai (CBD) on Wednesday reported a net profit of Dh816 million for the nine-month period ended September 30, 2020, down 23.3 per compared to the same period in 2019.
The bank attributed lower profits to Covid-19-linked contraction in business conditions, leading to historically low interbank interest rates and increased specific and forecast credit losses.
“CBD has delivered a significantly improved quarter-on-quarter performance while navigating the challenging market environment. Despite the lower overall performance for the first 9 months of 2020 compared to 2019, CBD continues to deliver on its strategy and is poised to end the year on a strong footing,” said Dr. Bernd van Linder, Chief Executive Officer of CBD.
Income and expenses
Operating income for the nine-month period amounted to Dh2.1 billion, posting a decline of 6 per cent, attributable to lower net interest income (NII) by 8.7 per cent as a result of significantly lower interest rates and a 0.5 per cent decrease in other operating income.
Operating expenses were Dh591 million, down 9.4 per cent compared to the nine-month period of 2019. The cost to income ratio improved to 28.1 per cent from 29.2 per cent in December 2019.
Strong balance sheet
CBD’s total assets were at Dh92.8 billion as at the September 30, 2020, an increase of 12.4 per cent compared to Dh82.5 billion as at the September 30, 2019. Net loans and advances were Dh63 billion, registering an increase of 11.7 per cent to Dh56.4 billion compared to the same period last year.
Customers’ deposits improved 8.4 per cent year on year to Dh64 billion in the first nine months of 2020 compared to last year. Low cost current and savings accounts (CASA) constitute 43.4 per cent of the total deposit base, while the financing-to-deposits ratio stood at 98.4 per cent.
The non-performing loan (NPL) ratio increased to 6.97 per cent , up from 5.94 per cent at the end of 2019.
In accordance with IFRS9 accounting standards, the bank increased credit provisions on the back of several specific credit events and forecast expected credit losses associated with the impact of Covid-19. As a result, the net impairment charge totaled Dh699 million for the first nine months of 2020.
The coverage ratio was 64.16 per cent (105.09 per cent inclusive of collateral for stage 3 loans), down from 83.14 per cent at the end of 2019. As at September 30, 2020, total allowances for impairments amounted to Dh3.51 billion.
Liquidity and capital
The bank’s liquidity position remained robust with the advances to stable resources ratio at 91 per cent at the close of the third quarter of 2020. Capital ratios remained strong with the capital adequacy and common equity Tier 1 (CET1) ratios at 14.4 per cent and 13.24 per cent, respectively.