• June 29, 2017
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Abu Dhabi Commercial Bank releases 1st half 2017 financial results

Abu Dhabi Commercial Bank PJSC reported its half year financial results for the period ended 30 June 2017 (“H1’17”).

Key highlights

Strong underlying performance and disciplined cost management despite turbulent markets

Half year comparison (H1’17 vs. H1’16)

‒ Net profit of AED 2.114 billion was 2% lower, primarily on account of lower non-interest income and higher impairment allowances reflecting the current market conditions. H1’16 benefited from significant impairment allowance releases on loans which were not repeated in the first half 2017
‒ Total net interest income of AED 3.305 billion was up 7%
‒ Operating income of AED 4.338 billion was up 2%
‒ Operating profit before impairment allowances of AED 2.926 billion was up 3%, benefiting from a tightly managed cost base
‒ H1’17 operating expenses were AED 1.411 billion, a slight increase of 1% over H1’16, which resulted in an improved cost to income ratio of 32.5% in H1’17 compared to 33.0% in H1’16
‒ Non-interest income of AED 1.032 billion was 11% lower year on year, mainly on account of lower net trading income of AED 137 million compared to AED 302 million in H1’16, due to unrealised FX translation losses impacted by the adverse market conditions. This was partially offset by net fees and commission income of AED 755 million, which was 3% higher year on year

Optimising balance sheet with continued focus on risk management, delivering sustainable growth
‒ Total assets grew 8% to AED 259 billion and net loans and advances to customers increased 6% to AED 164 billion over 30 June 2016
‒ Deposits from customers increased 9% to AED 162 billion over 30 June 2016
‒ Low cost CASA (Current and savings account) deposits comprised 44 % of total customer deposits

Secure and diversified funding base with a robust capital structure
‒ As at 30 June 2017, capital adequacy ratio was 18.07% compared to 18.92% as at 30 December 2016 and Tier I ratio was 14.84% compared to 15.66% as at 30 December 2016
‒ Liquidity coverage ratio (LCR) of 110% compared to a minimum ratio of 80% prescribed by UAE Central Bank
‒ Net lender of AED 12 billion in the interbank markets and maintain a strong liquidity ratio of 23.4%

Maintain a prudent and conservative approach to risk management
‒ As at 30 June 2017, NPL and provision coverage ratios were 2.8% and 123.8% respectively, compared to NPL ratio of 2.7% and provision coverage ratio of 129.9% as at 31 December 2016
‒ Cost of risk for the first half of 2017 was 0.81% compared to 0.83% in 2016
‒ Collective impairment allowances were 1.76% of credit risk weighted assets, above the minimum 1.5% stipulated by the UAE Central Bank

Commenting on the results, Eissa Mohamed Al Suwaidi, Chairman said:

“Our financial performance in the first half of 2017 reflects continued growth and resilience during a period of market uncertainty. Each of our businesses continue to perform well, while delivering a superior customer service remains the cornerstone of our strategy. The Bank navigates through turbulent markets with confidence. We are confident that the Bank’s unchanged strategic pillars and strong balance sheet leaves us well placed to manage any economic headwinds, whilst continuing to deliver good returns for our shareholders.”

Ala’a Eraiqat, Member of the Board and Chief Executive Officer, commented on the results:

“The bank delivered a good set of results, including a return on equity of 15.5% for the first half of 2017. This demonstrates the benefits of our diversified and robust business model against a backdrop of challenging market conditions. Increased revenues in the first half 2017, combined with our relentless focus on cost discipline has driven our cost to income ratio lower and operating profit 3% higher year on year. We are also pleased with the 15% growth in interest income in the first half of 2017; achieved in the absence of significant interest in suspense reversals recorded in 2016. This was primarily on account of higher volumes. While the Bank’s fundamentals and underlying performance remained healthy, our bottom line was impacted by adverse market conditions, which resulted in higher impairment charges and a lower non-interest income in the second quarter.

Despite this backdrop, the Bank has made meaningful progress in a number of other key areas; including year on year loan growth of 6% compared to system wide growth* of 4%, and customer deposits growth of 9% compared to system wide growth* of 7%. CASA deposits increased 6% over 30 June 2016 and comprised 44% of total customer deposits. Our funding base and capital structure remain solid to support consistent and sustainable growth. As at 30 June 2017, our capital adequacy ratio was 18.07% compared to 12% minimum stipulated by the UAE Central Bank. Our asset quality indicators remain strong, as we continuously emphasise risk-return balance with a conservative risk appetite.

In line with our strategic priorities, we continue to invest in our businesses and capitalise on exciting opportunities to invest for the future to better serve our customers, as we grow our franchise in a measured and disciplined manner.”

Re-disseminated by The Asian Banker