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ADCB’s 2020 profit drops 27% to Dh3.81b

Dubai - The bank said it booked significantly higher provisions including new ones for troubled hospital operator NMC, for which it had nearly $1 billion in lending exposure

Abu Dhabi Commercial Bank reported on Sunday a 27 per cent drop in net profit to Dh3.81 billion for 2020, down from Dh5.24 billion a year earlier.

The bank said it booked significantly higher provisions including new ones for troubled hospital operator NMC, for which it had nearly $1 billion in lending exposure. Its fourth quarter net profit fell 4.0 per cent year-on-year to Dh1.01 billion. It was down 26 per cent compared to the third quarter.

In a statement, the lender said steady operating performance, with lower cost of funds and an improved cost to income ratio cushioned the impact of low interest rates and subdued economic activity due to Covid-19.

Operating profit before impairment allowances held steady at Dh 7.945 billion, compared with Dh7.977 billion in FY’19.

“Operating profit before impairment allowances of Dh1.99 billion was 5.0 per cent higher sequentially. This was driven by improved cost of funds, lower operating expenses and a 16 per cent rise in net fees and commission income, mainly from higher income from loan and card-related fees, reflecting increased economic activity,” said the bank.

“Net impairment charges were Dh3.993 billion in FY’20, significantly higher than in the prior year, to reflect the challenging macro-economic environment and due to provisions taken on NMC Health Group, Finablr and associated companies,” it said.

Total customer deposits decreased 4.0 per cent year on year to Dh251 billion as at 31 December 2020, as the bank continued to replace expensive time deposits, while the average deposit balance was Dh252 billion during the year

Net loans decreased 4.0 per cent year on year to Dh239 billion as at 31 December 2020, reflecting the low growth environment in the banking sector plus significant provisioning levels. The average loan balance was Dh245 billion during 2020. Total shareholders’ equity stood at Dh57 billion as at 31 December 2020.

Capital adequacy (Basel III) and CET1 ratios improved to 17.22 per cent and 13.91 per cent respectively at the end of 2020 from 16.3 per cent and 12.93 per cent as at 31 December 2019, said the statement.

Khaldoon Al Mubarak, chairman of the Board of ADCB, said in testing times, ADCB has drawn on its strengths – a robust balance sheet, disciplined governance and a high-performance culture – to navigate the complex issues raised by the global pandemic, softening global economic activity and low oil prices.

“Our priority through this difficult period has been to extend support to our communities in many forms. In particular, ADCB was the first bank to introduce a wide-reaching relief package for customers, in conjunction with the UAE Central Bank’s TESS programme, which has provided individuals and businesses with a clear route to stability and recovery,” said Al Mubarak.

He said the bank also completed its fast-tracked integration with Union National Bank and Al Hilal Bank in April 2020, within only 11 months of the legal close of the merger. “As a unified, powerful and streamlined banking group, ADCB is now embarking on a five-year strategy centred on accelerated digital transformation, which will elevate customer experience and enhance efficiency further.”

Ala'a Eraiqat, group CEO and board member, said ADCB has remained resilient during a challenging year and has emerged as a stronger banking group.

“Faced with the significant impact of Covid-19 on economic activity, the bank focused on continuity of service excellence, accelerating digital transformation and maximizing efficiencies. “Our balance sheet remains robust, with our capital and liquidity positions improving through 2020, and ADCB’s high investment grade ratings were reaffirmed by S&P Global and Fitch Ratings in December.”

Eraiqat said the bank benefited from an improved cost of funds, which was enhanced by its focus on increasing current and savings account (CASA) deposits to reach 51 per cent of total deposits at the end of 2020, compared with 39 per cent a year earlier.

— issacjohn@khaleejtimes.com