The National Bank of Ras Al Khaimah (RAKBank) reported on Thursday that its first nine-month net profit dropped to Dh438.6 million from Dh839.4 million during the same 2019 period.
Third quarter earnings fell to Dh132 million from Dh284.5 million quarter-on-quarter "due to reduced income resulting from a subdued loan demand and higher provisions that are set aside as precautionary measures to combat the economic impact of Covid-19."
The bank said in a statement that its total income declined by Dh241.9 million to Dh2.8 billion on a year-on-year basis due to a decline in net interest income and net income from Islamic financing as well as a lower non-interest income.
Total assets declined by Dh4.8 billion or 8.4 per cent year-to-date Dh52.3 billion and by Dh3.9 billion year-on-year, mainly due to the reduction in customer loans and advances and cash & balances with the Central Bank of the UAE offset by higher balances with banks.
Peter England, the bank’s CEO, said since the gradual reopening of the business, there are some signs of improvement in the UAE economy. However customer demand for loans has declined considerably as many SMEs and individuals continue to take a cautious stand. "This combined with a low interest rate environment is providing challenges for the bank’s top line income."
England said the bank has taken a very proactive approach to cost optimisation to help cushion some of this impact. "This is evident with the bank’s operating expenditures reducing by 12.2 per cent year-on-year, which has resulted in an improvement in cost to income ratio of 37.4 per cent."
Total income dropped by 8.1 per cent to Dh2.756 billion, as compared to the same period of the previous year, mainly due to a decrease in non-interest income by Dh114 million on account of the lower business activity and the decline of Dh127.9 million in net interest income and net income from Islamic products because of a declining balance sheet and lower margins, the bank said.
Customer deposits decreased by Dh2.6 billion to Dh34.2 billion compared to 31 December 2019. The reduction was mainly in time deposits, which decreased by Dh4.7 billion.
"The third quarter has remained challenging for RAKBank, and we have to expect this trend to continue for next few quarters at least as it takes time for the gradual recovery to flow through the economy and begin to translate into improved performance at the bank," said England.
The bank’s total capital ratio as per Basel III, after the application of the prudential filter, improved to 19.4 per cent compared to 16.8 per cent at the end of the previous year.
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