RAKBank's H1 profit drops 44.7% due to Covid-19 provisions

The National Bank of Ras Al Khaimah's (RAKBank) first-half net profit dropped 44.7 per cent to Dh306.6 million as compared to the first half of 2019 due to higher IFRS 9 provisions set aside to combat Covid-19 impact.

Total income fell 4.5 per cent to Dh1.9 billion for H1 2020, mainly due to decrease in non-interest income by Dh72.9 million and decline of Dh16.9 million in net interest income and net income from Islamic products. As at June 30, 2020, its 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 first-half 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 RAK Bank.

He said spending habits of consumers and businesses overall have been subdued which is reflected in the bank's gross loans and advances, which contracted by 2.2 per cent year-on-year.

Peter England said the lender's credit quality has been stable throughout the first half of 2020 and the increase in the impairment provisions is largely a precautionary measure taken to protect from the potential deterioration in credit quality for the impending quarters.

"As a proactive step, the Bank reserved additional ECL provision amounting to Dh232 million. The bank is constantly taking the necessary steps to optimise operating costs as much as possible without impacting our operations or business, with the ultimate aim of increasing efficiency and utilizing appropriate technologies," he added.