Improved operating performance coupled with lower expected credit losses have supported CBD's net profit growth. Image Credit: supplied

Dubai: Commercial Bank of Dubai (CBD) has delivered a net profit of Dh676 million for the first half of 2021, up 27.5 per cent against the first half of 2020.

Improved operating performance coupled with lower expected credit losses have supported the growth in net profit.

Despite the continuous decline in interbank interest rates, net interest income is up by 8.7 per cent compared to H1 2020 primarily from lower funding costs and strong business growth. The increase in business activity was reflective of the economic recovery which positively impacted fees and commission income.

“CBD has delivered an improved set of results with the bank’s net profit increasing by 27 per cent compared to the first half of 2020. The ongoing COVID-19 pandemic has been managed admirably by the UAE, enabling the community and businesses to move forward positively and with confidence,” said Dr. Bernd van Linder, Chief Executive Officer.

“Looking ahead, we remain hopeful that the pandemic situation continues to improve globally, enabling improved health and economic conditions for all.”

CBD’s operating income was at Dh1.57 billion, up by 11.4 per cent in H1, 2021 compared to the prior comparative period, primarily due to improved fee and commission income and higher net interest income.

Net Interest Income (NII) grew by 8.7 per cent as a result of lower funding costs and higher volumes, and a 16.6 per cent increase in Other Operating Income (OOI) as business activities recovered.

Operating expenses were Dh409 million, up 5.8 per cent compared to the first half of 2020. The cost-to-income ratio remains market leading at 26.01 per cent.

Balance sheet

Total assets were Dh112.8 billion as at June 30 2021, an increase of 20.4 per cent compared to Dh93.7 billion in the first half of 2020. Net loans and advances were Dh74.0 billion, registering an increase of 16.8 per cent compared to Dh63.4 billion in the same period last year.

Customers’ deposits were Dh79.8 billion as at June 2021, up 22.2 per cent year-on-year. Low cost Current and Savings Accounts (CASA) constitute 40 per cent of the total deposit base, while the financing-to-deposits ratio stood at 92.8 per cent.

Asset quality

The Non-performing Loan (NPL) ratio decreased to 6.44 per cent, down from 6.77 per cent at the end of 2020.

In accordance with IFRS9 accounting standards, the net impairment charge totalled Dh487 million for the first half of 2021. The coverage ratio was 72.67 per cent (118.12 per cent inclusive of collateral for stage 3 loans), up from 69.70 per cent at the end of 2020. As at June 30, 2021, total allowances for impairments amounted to Dh4.24 billion.

Liquidity and capital

The bank’s liquidity position remained robust with the advances to stable resources ratio at 87.60 per cent at the close of H1 2021. CBD’s capital ratios remained strong with the capital adequacy ratio (CAR) at 15.69 per cent, Tier 1 ratio at 14.52 per cent and Common Equity Tier 1 (CET1) ratio 12.04 per cent.