Abu Dhabi Commercial Bank PJSC reports full year 2012 net profit of Dhs2,810m

Annual financial highlights
•Net profit of Dhs2,810m compared with Dhs3,045m in FY'11. FY'11 included Dhs1,314m non-recurring gain on the sale of ADCB's stake in RHB Capital Berhad in June 2011. Excluding the non-recurring gain, on a comparable basis, ADCB's net profit for FY'12 was up 62% over 2011.

•Total operating income at Dhs6,595m, up 9%.

•Operating expenses were maintained flat with cost to income ratio improved to 31.4% from 33.1% in FY'11.

•Operating profit before impairment allowances at Dhs4,526m, up 13%.

•Net impairment allowance at Dhs1,710m and provision coverage improved to 82.2% from 80.0% in FY'11.

•Capital adequacy and Tier I ratios significantly improved to 23.05% and 17.47% compared to 22.51% and 15.90% respectively in FY'11.

Commenting on the Bank's strong performance, Eissa Al Suwaidi, Chairman of ADCB, said, "We are pleased to report a net profit of Dhs2,810m. While the economic conditions remained challenging, excluding the non-recurring gain, ADCB's net profit in 2012 was up 62% compared to Dhs1,731m as at 31 December 2011. Our strategic pillars and business model provide a solid foundation to implement our objectives and have enabled us to generate steady returns in 2012."

We remain focused on maximising shareholder value and the Board of Directors has recommended a 25% cash dividend of Dhs1.4bn, equivalent to 50% of net profit. As per the Bank's normal dividend distribution strategy of 20%, the additional 5% represents a special pay out as a result of the Bank's strong capital base and financial performance in 2012.

I would also like to highlight our ongoing efforts to attract, train and retain high caliber national talent across all levels of the Bank and we are proud of the fact that 41% of our staff are UAE nationals.

We remain committed to corporate social responsibility and it is an inseparable part of our operations that helps us to accomplish sustainable business success. We have gone over and above the MOU signed with the UAE Nationals Defaulted Debts Settlement Fund and in 2012, the Bank waived 100% of receivables from debt-burdened nationals which totaled Dhs22.7m for 184 UAE nationals.

We reaffirm our commitment to contribute to the development of the UAE Banking Sector and on behalf of the Board, I would like to extend our most sincere appreciation and gratitude to His Highness Sheikh Khalifa Bin Zayed Al Nahyan, the UAE President and Ruler of Abu Dhabi, to His Highness Sheikh Mohamed Bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces, to His Highness Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs, and the UAE Central Bank for their continued support for ADCB and the future development of the UAE economy.

I would also like to extend my gratitude and appreciation to our shareholders, valued customers and the ADCB executive management team and employees.


Ala'a Eraiqat, Member of the Board and Chief Executive Officer commented on the results, "We are pleased with the steady growth in our operating income and sustainable profitability in 2012." I would like to highlight our main achievements in 2012 below:

•Continued to focus on maintaining a strong and conservatively positioned balance sheet driven by our strategy, which resulted in an improvement of our loans to deposit ratio from 114.27% in 2011 to 112.80% as at 31 December 2012.

•While subdued economic conditions persist, with average loan growth year on year reported at 2.6%¹ across all banks in the UAE and GDP growth projections² for UAE reported at 4.0% in 2012 and 2.6% in 2013, our loan book was stable and we continued to deliver strong operating performance, with operating income up 9% in 2012. Net interest income was up 11% driven primarily by an increase in the investment portfolio and cost of funds decline of 33 bps from 2.15% in 2011 to 1.82% in 2012.

•In addition to encouraging top line growth, a significant achievement of 2012 was the substantial improvement in our cost to income ratio. Operating expenses were held flat as a result of our improved operating efficiency and dedicated approach to pro-active cost management. This was achieved through aggressive sourcing initiatives and demand management, which resulted in a 170 bps improvement in our cost to income ratio year on year from 33.1% to 31.4% in 2012.

•As at 31 December 2012, our collective loan impairment allowance balance was Dhs2,257m and 1.76% of credit risk weighted assets, in excess of the UAE Central Bank Directive for banks to increase the level of collective provisions to 1.50% of credit risk weighted assets by 2014.

•Non-performing loan ratio was 5.4% compared to 4.6% as at 31 December 2011 and provision coverage improved to 82.2% compared to 80.0% as at 31 December 2011. Additionally, overdue but not impaired loans showed a significant decline of 61% to Dhs4bn (Dhs10bn as at 31 December 2011) and total impairment charges were 29% lower year on year in 2012.

•The Bank's continued improving financial fundamentals resulted in Moody's upgrading its outlook on ADCB, from negative to stable in April 2012, while other external ratings were retained and reaffirmed.

•The Bank has strong liquidity and was a net lender of Dhs15bn in the interbank markets as at 31 December 2012. We remain well capitalised at 23.05% and Tier I ratio improved significantly to 17.47% from 15.90% as at 31 December 2011. As at 31 December 2012, our liquidity ratio was 24.0% compared to 22.1% in 2011. Investment securities portfolio increased to Dhs19bn from Dhs15bn as at 31 December 2011, 99% of the portfolio was invested in bonds and government securities providing a liquidity pool for the Bank.

•Our funding structure remained well diversified. In 2012, investors demonstrated continued good appetite for ADCB's issuances, successfully executing its longest issuance (25 year) and tapping issuances in Swiss Francs and Chinese Renminbi despite turbulent international and local market conditions.

As we enter the new year, I would like to highlight a few initiatives currently underway:

•In April 2012, the Bank's shareholders approved a buyback of 10% of the bank's outstanding shares. I am pleased to inform you that the Central Bank of the UAE and ESCA have recently approved this request and we are proceeding as per their Directives.

•We continue to invest in new businesses and I am pleased to advise that we received a licence from the Insurance Authority to set up a Takaful insurance company which we aim to launch in 2013.

•Over the last two years we have added Dhs3.6bn in retained earnings before payment of interest on capital notes which has resulted in strong improvement in our Tier I capital ratios, and we are considering options of reducing the Tier-II loan from the Ministry of Finance with alternative sources of funding and improving our profitability.

I would also like to highlight that, in line with our current provisioning policies, the bank continues to reassess historical loss history, probability of default and loss given default in various portfolios at each reporting period and we remain prudent in building adequate provisions based on our experiences in the portfolio and current economic conditions.

We remain confident and continue to focus on our strategic objectives and take advantage of future improvements to capitalise on value-adding opportunities for our shareholders and to contribute to the UAE economy as a whole.

¹Source: UAE Central Bank, UAE monthly banking indicators, November 2012
² Source: IMF estimates

The Board meeting was also attended by Gerry Grimstone, who was recently appointed as adviser to the Board of Directors.

Awards in 2012:

Human Resources Award in the Banking & Financial Sector at the National Career Exhibition.
'Best Woman Award' in the Banking & Financial Sector at the National Career Exhibition.
'Most Improved Islamic Bank in the Middle East' by Euromoney.
Best SME Account Award for 'BusinessEdge Free Zone Platinum Account' for the second year in a row.
Best SME Trade Finance Offering for 'BusinessEdge Trade 360'.
'Best Retail Bank in the UAE' for the fifth year in a row by The Asian Banker and 'Best Retail Bank in the Gulf Region'.
The Freddie Award for 2012 for 'Best Loyalty Credit Card' in the Middle East, Asia and Oceania region.
'Best Premium Card' at the Middle East Smart Card Awards 2012.
The Hawkamah Bank Corporate Governance Award 2012.
The Banker Middle East Awards for 'Best Bank in the UAE', 'Best Transaction Bank' and 'Best Corporate Bank'.
The Best Domestic Cash Management Bank in the UAE and in the Middle East (Third best in the UAE and Middle East) in the Euromoney Cash Management Survey 2012.
'Elite' quality recognition award from Deutsche Bank, J.P. Morgan Chase and Commerzbank for exceptional international payment processing.
Best Premium Card in the International category for Etihad Guest Credit Card Publi-News France.
Best Investor Relations website in the UAE and Middle East by KW Digital Webranking survey.
Bank of the Year -UAE Award by The Banker Magazine.

Key Corporate Social Responsibility initiatives in 2012:

We have gone over and above the MOU signed with the UAE Nationals Defaulted Debts Settlement Fund and in 2012, the Bank waived 100% of receivables from debt-burdened nationals which totaled Dhs22.7m for 184 UAE nationals.

Launched 'The ADCB Tree of Hope' to raise awareness of Breast Cancer in the UAE and sponsored the fourth Pink Polo charity match in aid of Breast Cancer Awareness and in conjunction with Abu Dhabi Health Authority.

Participated in Tawdheef Exhibition and Sharjah Career Exhibition for UAE nationals to seize the career opportunities available in the financial and banking sector.

Donations made to Latifa Hospital and on behalf of Emirati Millionaire Saving Account (EMSA) customers to Zakat Fund.

Partnered with the Emirates Wildlife Society in association with WWF (EWS-WWF) to enrich the community and the environment.

Supported Abu Dhabi Art's 2012 Wings Project.