Sunday, Oct 23, 2016

Abu Dhabi: Abu Dhabi Commercial Bank’s (ADCB) profits plunged 17 per cent year-on-year to Dh999 million in the third quarter of 2016 as impairment costs jumped by around six fold to Dh380 million from Dh66 million in the same quarter last year.

The figures bring profits attributable to equity shareholders for the first nine months of this year to Dh3.14 billion - down 16 per cent from the Dh3.73 billion reported in the same period in 2015.

Impairments for the first nine months of 2016 were Dh1 billion - up 177 per cent year-on-year.

A significant rise in loan impairment costs has been taking a toll on the earnings of most banks in the UAE over the past few quarters amid slower economic growth, which is causing lenders to make higher allowances for loans to default.

“The current impairment cycle started sometime in mid-2015. Given the challenging macro-economic backdrop, it is difficult to call it peak of the cycle; there is still room for further impairments, in my view,” said Vijay Harpalani, fund manager at Al Mal Capital.

He said the overall earnings were mostly in line with expectations, with the Bloomberg consensus for profits at Dh1.03 billion.

“Third quarter performance was satisfactory considering macro-economic headwinds. Strong growth in non-interest income couples with lower operating expenses has helped offset the spike in funding costs and higher impairments charges,” Harpalani said.

The bank’s operating income in third quarter rose marginally by three per cent year-on-year to reach Dh2.07 billion, as operating expenses dropped 10 per cent to Dh663 million in the quarter.

ADCB’s total net interest and Islamic financing income reached Dh1.5 billion in Q3 2016 - down one per cent year-on-year. Non-interest income rose, however, by 16 per cent year-on-year to Dh541 million.

Cost of funds went up to 1.27 per cent in the first nine months of 2016 from Dh0.87 per cent in the same period in 2015.

“While the challenging operating environment and the turbulent markets have impacted our industry, our underlying performance and fundamentals remain strong and we continue to grow our businesses. Our balance sheet remains resilient and registered a healthy growth in net loans and customer deposits year to date, 10 per cent and 7 per cent respectively,” said Alaa Eraiqat, ADCB’s group chief executive officer and member of the bank’s board of directors.

The bank’s total assets reached Dh254.7 billion at the end of September 2016 - up 18 per cent year-on-year.

In its management report, ADCB said it increased its time deposits by 32 per cent in the first nine months of 2016, driven by the tighter liquidity environment. CASA (Current Account, Savings Account) deposits comprised 42.2 per cent of total customer deposits at the end of September 2016.

By Sarah Diaa Staff Reporter

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