Mashreq Bank branch in Dubai Internet City 20190313
A Mashreq Bank branch in Dubai Internet City. Mashreq has reported a net loss of Dh1.3 billion in 2020 compared to Dh2.1 billion profit reported in 2019. Image Credit: Pankaj Sharma/Gulf News

Dubai: Mashreq, one of the leading financial institutions in the UAE, has reported a net loss of Dh1.3 billion in 2020 compared to Dh2.1 billion profit reported in 2019.

The bank reported decline in revenue by 14.1 per cent year on year to Dh5.1 billion.

The decline is mainly driven by the low interest rate regime, the impact of the pandemic and slower economic activities as a result of the lower oil prices.

“COVID-19 has been both a significant disruptor as well as a catalyst for positive change in business operations. The pace of vaccine rollout in the UAE as well as in other countries provides us with cautious optimism that the regional and global economies will steadily recover as the year progresses, fuelling future growth,” said AbdulAziz Al Ghurair, Chairman of Mashreq.

Non-interest income to operating income ratio remained strong at 48 per cent, an industry leading position in the UAE. Newly introduced digital channels supported a 55 per cent increase in the client base, where CASA balances witnessed a 23.5 per cent year on year increase of Dh8.9 billion.

Expenses & revenues

The bank continued to invest in transformation programmes across all verticals. Operational costs saw a drop of 5 per cent driven mainly by the digitization efficiencies. However, overall costs position was up by 12.3 per cent due to one off cost associated with branches rationalisation in UAE and enablement of remote working for our global staff during the pandemic.

Income from operations before risk charges was Dh2.2 billion, which is down 34.6 per cent year on year, a result of the drop in revenue and one-off operational costs.

Asset quality

The bank reported impairment charge of Dh3.4 billion, up from Dh1.2 billion 2019. Despite the pandemic, the quality of the international corporate book along with that of retail banking remained intact. However, the UAE Corporate portfolio was impacted over the course of the year, particularly within a few sectors such as contracting and healthcare.

NPL ratio is 5.1 per cent and coverage is 130 per cent reflecting prudent measures taken to maintain the quality of the portfolio.

“Over the course of 2020, we actively managed our position and took a prudent approach to safeguard Mashreq’s position, whilst doing everything in our power to help our customers prosper. We expect to see a challenging first half in 2021, but are cautiously optimistic for a recovery in the second half,” said Ahmed Abdelaal, Group CEO, Mashreq Bank.

Liquidity & capital

Capital adequacy ratio at year-end 2020 was at 16 per cent and Tier 1 capital ratio at 14.9 per cent. At year-end liquidity coverage ratio (LCR) stood at 160 per cent and loans to deposits (LTD) ratio is 81 per cent signifying a solid liquidity position.