Dubai: National Bank of Fujairah (NBF) reported a net loss of Dh475.3 million for the year 2020 compared with a profit of Dh552 million in 2019.
Operating income stood at Dh1.4 billion down 18.9 per cent compared to Dh1.7 billion in 2019 reflecting the exceptionally challenging operating conditions and economic climate.
“Margin compressions, recessionary trends across global economies and depressed economic activity with the persistence of COVID-19 caused the drop in income,” the bank said in a statement.
“Our underlying core business remains robust, our liquidity is in good shape, helped by our short term trade finance business, and our capital adequacy is at a recent high; enabling us to face these exceptional times with confidence and providing us a good platform for our recovery,” said Sheikh Saleh Bin Mohamed Bin Hamad Al Sharqi, Chairman of NBF.
Net interest income and net income from Islamic financing and investment activities and net fees, commission and other income stood at Dh948.9 million and Dh291.7 million respectively compared to Dh1.2 billion and Dh393.7 million in 2019.
Foreign exchange and derivatives income reached Dh125 million compared to Dh151.2 million in 2019.
Operating expenses reduced by 12.8 per cent to Dh491.0 million compared to Dh562.9 million in 2019. Operating profit was Dh894.6 million compared to Dh1.1 billion in 2019.
The bank made net impairment provisions of Dh1.4 billion in 2020 compared to Dh593.0 million in 2019.
"The losses stem primarily from a 131 per cent increase in credit provisioning charges that covered the impact of a fraud case at one of the largest corporates and the COVID-19 economic fallout in the UAE The results are weaker than our forecasts, since the bank prudently booked additional provisions on group exposures in fraud cases in 2020 and for higher-than-expected credit losses. We see the fraud case as a one-off event and do not anticipate defaults of other large exposures. If that were the case, the rating on NBF could come under pressure,” said Puneet Tuli,an analyst at Standard & Poor’s
The NPL ratio stood at 10.1 per cent compared to 5.4 per cent as at 31 December 2019. Excluding the few exceptional group exposures, the NPL ratio would reduce to 7.3 per cent.
“Whilst our 2020 results, are very disappointing in terms of profitability, they highlight the Group’s financial strength and ability to withstand a truly exceptional shock to the economic system, underpinned by its strong capital base and the unwavering support of our principal shareholders,” said Raja Al Gurg, Deputy Chairperson.
The bank’s capital adequacy ratio (CAR stood at 19.2 per cent with tier 1 ratio of 18.1 per and CET 1 ratio of 14 per cent at year end 2020.