Dubai: Abu Dhabi Commercial Bank (ADCB) reported on Thursday a 9 per cent increase in its net profit for the first quarter of 2018 as net interest income and income from Islamic financing rose.
The bank reported Dh1.2 billion in profit for the first three months, up from the Dh1.1 billion in net profit in the same period of 2017. The earnings are marginally higher than analyst expectations, with EFG Hermes forecasting a profit of Dh1.14 billion.
In its management report, ADCB said the increase in profits was supported by higher margins and a disciplined cost base. The bank’s impairment costs fell 2 per cent year-on-year to reach Dh380 million in the first quarter.
ADCB said it is “positively positioned to benefit from a rising rate environment,” as the US Federal Reserve is expected to continue hiking interest rate. Monetary policy in the UAE is in line with that of the US as the UAE dirham is pegged to the dollar, meaning the UAE Central Bank is likely to be raising rates further this year.
Deepak Khullar, ADCB’s group chief financial officer, said that the bank has so far this year made “significant progress in several key areas” including increased margins and improvement in its funding portfolio.
He added that ADCB has maintained robust liquidity despite “the strengthening regulatory environment” and with “a challenging operating environment.”
During the first quarter, net interest income jumped 10 per cent year-on-year to reach Dh1.56 billion, driven by increasing benchmark rates. Net income from Islamic financing rose 22 per cent to Dh270.8 million.
Opportunistic trades
Meanwhile, non-interest income fell 12 per cent in the quarter to Dh526 million, mainly due to weaker trading income and lower net fees and commission income, ADCB said. Trading income was Dh131 million, a decrease of Dh35 million. The bank attributed the decline predominantly to “lower FX income against a strong prior year, which benefited from opportunistic trades.”
Operating expenses went up 4 per cent year-on-year to Dh770 million, spurred by higher staff costs and investments into digital infrastructure.
In terms of balance sheet, ADCB’s loans to customers inched up 2 per cent over the first quarter of 2017 to reach Dh162.8 billion as loan growth remains relatively slow in the UAE. Deposits from customers also inched up 3 per cent to reach Dh166.9 billion at the end of the March 2018.
“Despite the healthy drawdown levels seen in both wholesale and consumer banking, net loans to customers remained flat due to significant repayments over the course of the first quarter of 2018,” ADCB’s Khullar said.
The ratio of non-performing loans was at 2.2 per cent in the first quarter, compared to 2.1 per cent at the end of December 2017, with non-performing loans at Dh3.95 billion.
