Abu Dhabi: Abu Dhabi’s biggest lender joined its regional Gulf competitors in setting aside higher provisions to cover a spike in bad loans brought on by the coronavirus pandemic.
First Abu Dhabi Bank increased impairments to Dh1.06 billion in the second quarter from Dh467 million year ago. That resulted in second quarter profit dropping 25 per cent.
Second-quarter net profit was Dh2.41 billion versus Dh3.22 billion a year earlier. In the first quarter, net impairment charges were Dh738 million, 81 per cent higher year-on-year.
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Banks in the Gulf region are raising provisions to offset an expected increase in sour loans due to the twin shock of plunging oil prices and the coronavirus fallout. First Abu Dhabi Bank follows Emirates NBD and Dubai Islamic Bank in increasing impairments charges.
The challenges are renewing the prospect for further consolidation among banks in the Middle East. First Abu Dhabi Bank was created with the merger of two banks in 2016.
Group CFO James Burdett said: “In the context of a challenging and uncertain environment, we continued to build our provision buffers, leading to a substantial increase in impairment charges, while our high-quality portfolio and conservative asset mix are key differentiators”