Dubai: Commercial Bank of Dubai (CBD) on Sunday reported a net profit of Dh530 million for the first half of 2020, down 24.3 per cent year on year.
The Covid-19 pandemic has caused a severe contraction in business conditions leading to historically low interbank interest rates and increased specific and forecast expected credit losses. Consequently, impairment allowances taken were Dh495 million for the first half of 2020, up by 30.1 per cent compared to the same periodin 2019, CBD said in a statement.
“CBD has delivered a lower performance for the first six months of 2020 primarily attributable to the unprecedented challenging market environment. Notwithstanding these very difficult operating conditions, we continue to execute on our strategy and are positioned well for improved business conditions in the quarters ahead,” said Dr. Bernd van Linder, Chief Executive Officer.
Incomes and costs
CBD’s operating income for the first half of 2020 amounted to Dh1.41 billion, a decrease of 6.5 per cent attributable to lower net interest income by 7.1 per cent as a result of significantly lower interest rates and a 5.4 per cent decrease in other operating income as business conditions deteriorated sharply during the economic lockdown.
Operating expenses at Dh386 million were down 9.9 per cent year on year. The bank accelerated transformation activity as the economy experienced an unprecedented downturn. The cost to income ratio improved to 27.4 per cent from 29.2 per cent in December 2019.
Balance sheet
The bank reported total assets of Dh93.7 billion as at the June 30, 2020, an increase of 19.4 per cent. Net loans and advances were Dh63.4 billion, registering an increase of 15.6 per cent compared to Dh54.8 billion as at the June 30, 2019.
Customers’ deposits were Dh65.3 billion at the close of first half 2020, up 18.2 per cent year on year. Low cost current and savings accounts (CASA) constitute 42.1 per cent of total deposit base, while the financing-to-deposits ratio stood at 97.1 per cent.
Asset quality
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 as a result of several specific credit events and forecast expected credit losses associated with the impact of Covid-19. As a result, the net impairment charge totalled Dh495 million for the first six months of 2020. The coverage ratio was 60.88 per cent (105.89 per cent inclusive of collateral for stage 3 loans), down from 83.14 per cent at the end of 2019.
Liquidity and capital
The bank’s liquidity position remained robust with the advances to stable resources ratio at 90.2 per cent as at the of June 30 2020. Capital ratios remained strong with the capital adequacy and common equity Tier 1 (CET1) ratios at 14.03 per cent and 12.87 per cent, respectively.
