Abu Dhabi Commercial Bank, ADCB, today reported its half-year financial results for 2019, with a net profit of AED 2.782 billion, marking a 15 percent decrease from the same period last year.
According to a statement the financial results are based on six-month pro-forma financial statements for the combined entity, following the merger between ADCB and Union National Bank, UNB, and the subsequent acquisition of Al Hilal Bank on 1st May 2019. The combination, which reinforced ADCB Group’s position as the third largest bank by assets in the UAE, has created a resilient platform for sustainable growth through greater scale.
Overall ADCB reported strong growth in gross interest and Islamic financing income of AED9.611 billion (up 11 percent) and double digit return on tangible equity, while net profit was impacted by an increase in cost of funds and lower non-interest income.
Non-interest income of AED1.428 billion was down six percent, mainly on account of lower net fees and commission income and lower foreign exchange income, offset by higher gains from dealing in derivatives. Operating expenses increased by six percent, reaching AED2.671 billion, primarily attributable to integration-related expenses and continued investments in digital transformation.
Commenting on the results, Eissa Mohamed Al Suwaidi, Group Chairman, said, “The combination of ADCB, UNB and Al Hilal Bank, which is still at an early stage, is a significant development and landmark transaction for the UAE. The new banking group has the strength and expertise to play a central role in the country’s economic development in the years ahead.
“The enlarged ADCB Group has the power to invest significantly in its infrastructure to remain at the forefront of a fast-changing industry, providing the excellence and convenience that customers demand, while staying ahead of an evolving regulatory environment. The Bank is making good progress on the execution of a well-planned integration, while continuing to pursue new initiatives for growth,” he added.
Commenting on the Bank’s performance, Ala’a Eraiqat, Group Chief Executive Officer and Board Member said, “Following the merger, ADCB Group is pleased to report its first consolidated financial results, which reflect the scale and strength of our balance sheet. With AED417 billion of total assets and over one million customers, the Group is well-positioned to thrive in a highly competitive banking industry, and drive further shareholder value through greater efficiency and new opportunities.”
“Our performance in the first half,” Eraiqat explained, “demonstrates the robust fundamentals of the combined entity, against a backdrop of weaker operating conditions.”
“ADCB Group continues to deliver a double-digit return on equity, and benefits from healthy capital ratios and liquidity positions, with a liquidity coverage ratio of 163 percent, and a loan-to-deposit ratio of 92 percent as at 30th June 2019. As a Domestic Systemically Important Bank (DSIB), with a CET1 ratio of 12.52 percent, the Group remains well-capitalised,” he continued.
Eraiqate noted that the Bank reported a pro-forma half-year net profit of AED2.782 billion, compared to AED 3.259 billion in the same period 2018. “While gross interest income showed a solid increase in the first half, higher cost of funds weighed on the bottom line. The Bank has made a conscious decision to exit expensive time deposits, whilst continuing to focus on growing CASA deposits, which have increased to 36 percent of total deposits at the end of June, from 33 percent at year end. As would be expected in such transactions, certain matters arose during the due diligence process. ADCB Group will carry out a thorough assessment of the probable associated impact, which will be fully quantified and reported at the year end.”