Abu Dhabi Islamic Bank (ADIB) Group has reported a net profit of AED 450.8 million for the first quarter of 2015, a 10.1 percent increase from a year earlier, as number of customers increased by 33.5 per cent reflecting the continued strength of the main banking activities across all customer segments.
Total assets increased by 9.8% to AED 114.1 billion vs Q1 2014. The Group increased deposits by 13.8% to AED 87.6 billion while, despite a focus on building capital and a continued conservative approach to new credit extension, net customer financing assets grew 13.3% to AED 72.3 billion vs. 31 March 2014.
The record first quarter financial performance was underpinned by the continued strength of the main banking business across all customer segments in the UAE. ADIB now serves almost 800,000 customers, and has achieved consistent improvement in overall asset quality levels.
Total non-performing accounts fell to 4.2 percent of gross customer financing as at 31 March 2015, from 7.6 percent a year earlier. Credit provisions and impairments for the first quarter therefore decreased by 6.4 percent year-on-year.
“ADIB is focused on creating value for shareholders and excellence in customer experience,” said Tirad Al Mahmoud, Chief Executive Officer at ADIB. “Our continued growth is balanced by investment in our extensive UAE retail network and leading digital platforms, and the requirement to maintain a strong capital base. Following the acquisition of Barclays’ retail assets in the UAE we continue to expand into the expatriate retail segment while remaining a strong focus on our UAE customer base. We are also making our presence felt in the commercial banking arena by providing growing companies with a full service offering, and have maintained our strong position in capital markets advisory.”
ADIB’s net revenue increased by 14.1 percent to AED 1.2 billion in the first quarter. Meanwhile, a clear focus on cost management saw the cost-to-income ratio decline to 46.6 percent in the first quarter, from a peak of 53.2 percent in the fourth quarter of 2014. The integration of the former Barclays UAE retail banking operation has started to deliver revenue and cost synergies and we expect to see the overall benefit by Q1 2016.
ADIB, as an early adopter of Basel III liquidity measures, maintained its position as one of the most liquid banks in the UAE while simultaneously continuing to manage its cost of funding. Customer deposits increased by 13.8 percent year on year and stood at AED 87.6 billion as of 31 March 2015, with Central Bank placements at AED 10.1 billion and the net interbank position at AED 1.6 billion.
Equity and capital resources were AED 18.7 billion as of 31 March 2015, an increase of 8.1 percent year on year.
However, because of customer financing growth, the acquisition of Barclays’ UAE retail banking business, and the introduction by the UAE Central Bank of a change of treatment of risk-weighted assets in mid-2014, ADIB’s capital adequacy ratio under Basel II principles reduced to 14.74 percent at the end of the first quarter from 15.71 percent a year earlier. The bank’s Basel II Tier 1 capital ratio stood at 14.25 percent at the end of the first quarter.
Although these ratios remain comfortably higher than the UAE Central Bank’s prescribed minimums of 12 percent for capital adequacy and 8 percent for tier 1 capital, ADIB intends to further enhance its capital across all classes, including common equity, to levels that support its future growth strategy and to fully meet Basel III requirements when they are introduced in the UAE.
“As ADIB continues on its strong and stable growth trajectory, underpinned by conservative risk management practices, it’s important for the bank to maintain high levels of capital as new regulatory requirements are introduced,” said Tirad Al Mahmoud. “Our common equity shareholders agreed this year with the need to retain a greater level of earnings than in prior years, by supporting the Board’s recommendation to reduce the dividend payout rate and we now look forward to inviting them, as well as our loyal capital market investors, to participate in increasing ADIB’s capital base so the bank can take advantage of our excellent opportunities for growth.”
ADIB is enhancing its strategic positioning as one of the top retail banks in the UAE, with a network of 88 branches, 709 ATMs and market leading mobile and internet banking platforms. Aiming to be the biggest retail bank by assets by 2020, ADIB is enhancing its customer experience to better serve its significant core UAE National individual and corporate customers, and to expand further into all major expatriate customer segments.
Meanwhile, fee income is also rising, increasing by 25.7 percent year on year in the first quarter, as ADIB’s Corporate Finance and Investment Banking, Transaction Services and Treasury units, along with Retail and Private Banking, successfully offered a full suite of services across clients.
“ADIB continue to invest appropriately to grow our market share in all major segments in the UAE, by delivering an award winning customer experience and service, and remain dedicated to conservative risk management,” Tirad Al Mahmoud said. “This is the way to succeed in a competitive landscape, and in today’s economic environment, which has undoubtedly been impacted by oil price volatility, and the differing monetary policy and interest rate outlooks from the Federal Reserve and the European Central Bank.”
ADIB employs nearly 2,428 people, and is one of the leading banks in advocating the recruitment, development and promotion of local talent in all the markets in which it operates. As a result, the bank employs 1,146 nationals in the UAE, with a resultant Emiratisation ratio of 47.2 percent.