Dubai: National Bank of Ras Al-Khaimah (RAKBank) on Wednesday reported a consolidated net profit of Dh306.6 million for the first half of 2020, down 44.7 per cent year on year.
The bank attributed decline in profits to higher IFRS 9 provisions that are set aside as precautionary measures to combat the possible economic impact of COVID-19.
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Bank’s total income of Dh1.9 billion for H1 2020 was down by 4.5 per cent on a year-on-year basis. As at June 30, 2020, total assets stood at Dh54.3 billion, decreasing by 5.1 per cent year-on-year and by 4.9 per cent year-to-date.
“While the increased IFRS 9 provisions at RAKBank have weighed down on our net profit, our overall performance for the 1st half was solid. In fact, if we exclude the IFRS overlay set aside for potential future bad debts our operating profit including ordinary provisions was very similar to the 1st half of 2019,” said Peter England, CEO of RAKBank.
Incomes and costs
Total operating income decreased by 4.5 per cent to Dh1.9 billion as compared to the same period of the previous year. Total income was down by Dh89.8 million compared to the first half of 2019, mainly due to decrease in non-interest income by Dh72.9 million and the decline of Dh16.9 million in net interest income and net income from Islamic products.
Net interest income and net income from Shariah-compliant Islamic financing weakened by 1.2 per cent year-on-year to Dh1.36 billion and the non-interest income reduced by 11.9 per cent to Dh541.3 million, mainly due to the year-on-year decrease of Dh65.2 million in net fees and commission income and Dh22.9 million in forex and derivative income respectively.
Bank’s operating expenditures were reduced by 9.5 per cent year-on-year, which resulted in an improvement in cost income ratio to 37.1 per cent
Total assets decreased by Dh2.8 billion or 4.9 per cent year-to-date and by Dh2.9 billion year-on-year mainly due to the reduction in customer loans and advances and cash & balances with central bank.
Gross loans and advances dipped by 2.2 per cent year-on-year; down 4.7 per cent year-to-date. Total deposits at Dh35.1 billion was down by 4.8 per cent year-to-date, as the bank required less funding for its lending activities.
Provisions for credit loss increased by Dh232.9 million year-on-year and this was mainly due to additional precautionary provisions taken in view of the expected deterioration of the current economic and operating environment.
The non-performing loans and advances to gross loans and advances ratio closed at 4.5 per cent compared to 4 per cent as at year-end 2019. Additionally, the annualised net credit losses to average loans and advances ratio closed at 5 per cent compared to 3.8 per cent in H1 2019 due to the higher provisions under IFRS 9.
Capitalization and liquidity
The bank’s total capital Ratio as per Basel III, after the application of the prudential filter, was 18.3 per cent compared to 16.8 per cent at the end of the previous year. The regulatory eligible liquid asset ratio at the end of the period was 9.8 per cent compared to 12.9 per cent at December 31, 2019. Similarly, the advances to stable resources ratio stood comfortably at 89.6 per cent compared to 89.1 per cent at the end of 2019.