Commercial Bank of Dubai (CBD) has reported a net profit of Dh1.12 billion for the full year of 2020. Image Credit: supplied

Dubai: Commercial Bank of Dubai (CBD) has reported a net profit of Dh1.12 billion for the full year of 2020, down 20 per cent against full year of 2019.

The COVID-19 pandemic has caused a contraction in business conditions and confidence, leading to historically low interbank interest rates and increased specific and forecast credit losses. Consequently, impairment allowances taken were Dh 1.05 billion for the full year of 2020, up by 40.5 per cent on the full year of 2019.

“Global and domestic business conditions and confidence continue to be weak, the impact of the COVID-19 pandemic has been truly unprecedented and will be felt for quite some time to come,” said Dr. Bernd van Linder, Chief Executive Officer of CBD.

“Against this backdrop, CBD has delivered a commendable full year performance while navigating the challenging market environment.”

Income statement

Operating income for full year of 2020 amounted to Dh2.97 billion, a decrease of 1.8 per cent, attributable to lower net interest income (NII) by 4 per cent as a result of significantly lower interest rates and a 2.2 per cent increase in Other Operating Income (OOI) on the back of higher lending volumes.

Operating expenses were Dh807 million, down 8.8 per cent compared to full year of 2019. The cost to income ratio improved to 27.1 per cent from 29.2 per cent in December 2019.

Balance sheet

Total assets were Dh97.4 billion as at the December 31 2020, an increase of 10.6 per cent compared to Dh88.1 billion as at the December 31, 2019.

Net loans and advances were Dh65.3 billion, registering an increase of 8.5 per cent compared to Dh60.2 billion as at the December 31, 2019.

Customers’ deposits were Dh69.8 billion in 2020 was 10.1 per cent compared to Dh63.3 billion at yearend 2019. Low cost current and savings accounts (CASA) constitute 41.5 per cent of the total deposit base, while the financing-to-deposits ratio stood at 93.6 per cent.

Asset quality

The non-performing loan (NPL) ratio increased to 6.77 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 Dh1.05 billion for the full year of 2020.

Liquidity and capital

The bank’s liquidity position remained robust with the advances to stable resources ratio at 86.33 per cent on December 31, 2020 compared to 87.96 per cent at yearend 2019.

CBD’s capital ratios remained strong with the capital adequacy ratio (CAR) at 16.65 per cent, Tier 1 ratio at 15.5 per cent and Common Equity Tier 1 (CET1) ratio 12.71 per cent.