Abu Dhabi Commercial bank reportsfirst quarter 2019 net profit

Abu Dhabi: – Abu Dhabi Commercial Bank PJSC (“ADCB” or the “Bank”) today reported its financial results for the first quarter of 2019 (“Q1’19”). The results are for the standalone ADCB entity for the first quarter of 2019, prior to the merger with Union National Bank and the subsequent acquisition of Al Hilal Bank.

 Key highlights (31 March 2019)

• Strong operating performance underpinned by robust growth in gross interest and Islamic financing income and non-interest income

 (Q1’19 vs. Q1’18) 

• Gross interest and Islamic financing income of AED 3.116 billion was up 17%
• Net interest and Islamic financing income of AED 1.707 billion was 7% lower, primarily attributable to a change in the composition of the liability base over Q1’18 and competitive pricing, partially offset by rising benchmark rates and higher volumes
• Non-interest income of AED 566 million was up 8%
• Net fees and commission income of AED 379 million was up 8%
• Operating expenses of AED 793 million were up 3%, mainly attributable to ongoing investments in digital transformation initiatives and integration related expenses
• Impairment allowances of AED 330 million were 13% lower
• Net profit of AED 1.152 billion was 5% lower, impacted by higher cost of funds, partially offset by higher non-interest income and lower impairment charges

• Customer deposit growth continued to outpace loan growth; significant growth in CASA* deposits at the end of the quarter
  • Total assets grew 4% to AED 292 billion and net loans to customers increased 2% to AED 169 billion over 31 December 2018
  • Deposits from customers increased 4% to AED 184 billion over 31 December 2018
  • Low cost CASA (current and savings account) deposits increased by AED 10 billion to AED 80 billion over 31 December 2018 and comprised 3% of total customer deposits compared to 39.4% as at 31 December 2018
  • Loan to deposit ratio improved to 91.7% from 94.2% as at 31 December 2018

• Strong capital and liquidity position
  • Capital adequacy ratio (Basel III) of 15.76% and common equity tier 1 (CET1) ratio of 12.07% compared to minimum capital requirements of 13.50% and 10.00% (including buffers) respectively prescribed by the UAE Central Bank
  • Liquidity coverage ratio (LCR) of 193% compared to a minimum ratio of 100% prescribed by the UAE Central Bank (LCR as at 31 December 2018: 186% compared to a minimum ratio of 90% prescribed by the UAE Central Bank)
  • Liquidity ratio of 30.3% compared to 28.3% as at 31 December 2018
  • Net lender of AED 16 billion in the interbank markets

• Current and Savings account

• Asset quality metrics remain strong, committed to maintaining a disciplined risk profile
  • NPL ratio of 3.09% compared to 2.88% as at 31 December 2018
  • Provision coverage ratio of 118.9% compared to 130.2% as at 31 December 2018
  • Cost of risk of 0.64% compared to 0.57% as at 31 December 2018
  • Collective impairment allowances were 2.10% of credit risk weighted assets, above the minimum 1.5% stipulated by the UAE Central Bank 

On 1 May 2019, ADCB combined with Union National Bank (UNB) and Al Hilal Bank to form a larger and stronger banking group called ADCB. Al Hilal Bank continues to operate as a separate Islamic banking entity within the group under its own brand, mainly providing Shari’ah-compliant retail banking products and services through digital platforms.

The Bank’s operations, processes and infrastructure will be integrated in phases over the next 18 to 24 months. The combination is expected to deliver annual cost synergies of approximately AED 615 million. ADCB will continue to keep the market fully apprised of progress with the integration. 

Commenting on the Bank’s performance Ala’a Eraiqat, Group Chief Executive Officer and Board Member said:

“Following our strong results in 2018, we are pleased to announce a net profit of AED 1.152 billion in Q1’19. We have made good progress in a number of key areas in the first quarter of 2019. In particular, we have delivered a strong and sustainable return on equity, increased fee income and continued to grow our market share in deposits. In a rising interest rate environment, our low cost CASA deposits grew by AED 10 billion to AED 80 billion, reporting an increase of 15% over the year end.

The Bank maintains a robust risk governance structure. Our prudent approach to risk management has given us the flexibility to adjust to the challenges of the operating environment in an increasingly competitive market. We remain committed to preserving and protecting the long-term financial strength of the Bank and continue to place high priority on maintaining adequate sources of funding and liquidity.

Fast-paced changes in technology continue to impact customers’ expectations and behaviour, and the Bank’s strategy is evolving in parallel to maintain our position as a progressive player. We have sustained our investment in digital transformation, with key initiatives such as the recent launch of the “Hayyak” onboarding app for new customers, which offers instant account opening.

I am also pleased to announce that the combination of ADCB with UNB and Al Hilal Bank has taken effect, and we are already making rapid progress in integrating the three organisations. Looking ahead to the future of the Bank, our priorities are to maintain the highest standards of customer service throughout the integration, while delivering cost synergies and sustainable long-term growth.” 

Deepak Khullar, Group Chief Financial Officer, commented on the results:

“We have delivered a strong set of results in the first quarter of 2019. The Bank’s fundamentals remain solid. Bottom line was impacted by higher cost of funds underpinned by a conscious decision to increase long term time deposits and wholesale funding to meet the evolving regulatory liquidity requirements.

This was partially offset by higher non-interest income as the Bank remains committed to diversifying its revenue stream. Non-interest income contribution to operating income was 25% compared to 20% in Q4’18 and 22% compared to Q1’18.

Loan to deposit ratio at 91.7% stands at its lowest levels, reporting a significant improvement as deposit growth continued to outpace loan growth. Year to date, Wholesale Banking loans increased 4%, while Consumer Banking loans contracted 1% resulting from the continued de-risking of the unsecured retail loan portfolio.

Balance sheet remains strong, whilst our liquidity and capital positions are comfortably above the minimum regulatory requirements.”

-Ends-

About ADCB (1 May 2019): 

ADCB Group is a leading UAE banking group that provides a full suite of award-winning products and services, spanning Consumer Banking, Wholesale Banking, Treasury & Investments and Property Management.

On 1 May 2019, ADCB and Union National Bank merged and the combined entity acquired Al Hilal Bank, which operates as a separate Islamic banking entity under its own brand within the Group. The transaction reinforced ADCB’s position as the third largest bank in the UAE, with assets of AED 423 billion based on pro forma financial information as at 31 December 2018.

The Group serves approximately 1 million customers.

ADCB Group, which is 60.2% owned by the Government of Abu Dhabi through the Abu Dhabi Investment Council, trades on the Abu Dhabi Securities Exchange (ADX) under the ticker of ADCB. As at 1 May 2019, ADCB’s market capitalisation was AED 67 billion.

Further information on ADCB can be found at adcb.com and information on the transaction between ADCB, UNB and Al Hilal Bank can be found at www.beyondambition.com  

For further details please contact:
Investor Relations
Denise Caouki                                                                      
E: adcbir@adcb.com  

Corporate Communications                                                                                                             
Majdi Abd El Muhdi                                                                                                            
E: majdi.a@adcb.com 

This document has been prepared by Abu Dhabi Commercial Bank PJSC (“ADCB”) for information purposes only. The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. This document is not intended for distribution in any jurisdiction in which such distribution would be contrary to local law or reputation.

The material contained in this press release is intended to be general background information on ADCB and its activities and does not purport to be complete. It may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. It is not intended that this document be relied upon as advice to investors or potential investors, who should consider seeking independent professional advice depending on their specific investment objectives, financial situation or particular needs.

This document may contain certain forward-looking statements with respect to certain of ADCB’s plans and its current goals and expectations relating to future financial conditions, performance and results. These statements relate to ADCB’s current view with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond ADCB’s control and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon ADCB.

By their nature, these forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond ADCB’s control, including, among others, the UAE domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory and Governmental authorities, the impact of competition, the timing impact and other uncertainties of future acquisition or combinations within relevant industries.

As a result, ADCB’s actual future condition, performance and results may differ materially from the plans, goals and expectations set out in ADCB’s forward-looking statements and persons reading this document should not place reliance on forward-looking statements. Such forward-looking statements are made only as at the date on which such statements are made and ADCB does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.

© Press Release 2019