190707 dubai islamic bank dib
Dubai Islamic Bank , the largest Islamic bank in the UAE, on Thursday announced a net profit of Dh1.1 billion for the first quarter of 2020. Image Credit: DIB

Dubai: Dubai Islamic Bank (DIB), the largest Islamic bank in the UAE, on Thursday announced a net profit of Dh1.1 billion for the first quarter of 2020, posting a decline of 18 per cent year on year from Dh1.35 billion reported in the first quarter of 2019.

The bank’s annual general meeting of shareholders held on April 29 approves foreign ownership limit increase from 25 per cent to 40 per cent.

The bank said the Q1 profitability has been achieved despite a deliberate, conservative and prudent approach adopted by the bank to create additional provisions and buffers of nearly Dh1.5 billion.

The bank said it is focused on exercising prudence and building up provisions to ensure adequate cushions to protect the financial position of the bank from any expected impacts emanating from the COVID-19 pandemic, oil price volatility and low interest rate environment.

“The Covid-19 pandemic is destined to create significant headwinds and force a rethinking and recalibration of our strategies. Growth, or at the very least, quantum of growth is sure to be impacted. Our focus will be more on protection and continuity of business and ensuring that the long term returns are there for all stakeholders,” said Dubai Islamic Bank Group Chief Executive Officer, Dr. Adnan Chilwan.

Balance sheet

DIB’s total assets now at Dh276 billion, grew 19 per cent from year end 2019. Financing and sukuk investments grew by 17 per cent to nearly Dh216 billion. This includes consumer financing of Dh52 billion and corporate financing of Dh133 billion.

Customer deposits reached nearly Dh200 billion from Dh159 billion in Q1 2019 and Dh164 billion at yearend 2019 reflecting a growth of 26 per cent year on year and 22 per cent year to date.

Current and savings account (CASA) deposits now stand at Dh73.3 billion, up from Dh54.8 billion in year-end 2019. This currently represents about 37 per cent of customer deposits.

Asset quality

After consolidation of Noor Bank, non-performing financing (NPF) ratio and impaired financing ratio stood at 4.3 per cent and 4.1 per cent respectively. The slight increase in the ratios is attributed to the current macro-economic situation. Cash coverage stood at 100 per cent, and overall coverage ratio, including collateral at discounted value reached 138 per cent.

“We have adopted a highly conservative approach to provisioning in this quarter building coverage and protection against any impacts on asset quality arising out of the current environment,” said Dr. Chilwan.

Liquidity and capital adequacy

DIB’s net financing to deposit ratio stood at 90 per cent at the close of the first quarter signifying ample liquidity. Capital adequacy ratios remain healthy with overall CAR at 16.5 per cent and CET 1 ratio 12.1 per cent respectively. Despite the relaxed capital requirements due to Covid 19 outbreak, the bank continues to have healthy capital ratios above regulatory thresholds.