2.4 fold rise in impairment allowance at AED1.4bn lands NBF in AED475 mn loss

BBN Report

Bank’s subsidiary NBF Capital is being liquidated

DUBAI/January 28-2021: A 2.37-fold increase in net impairment loss to AED1.37 billion against AED593 million a year earlier has pushed National Bank of Fujairah (NBF) to a loss of AED475.25 million for 2020 compared with a net profit of AED552.18 million in the previous year.

Operating income for the period stood at AED1.4 billion down 18.9 per cent compared with AED 1.7 billion in 2019 reflecting the exceptionally challenging operating conditions and economic climate.

Dr Raja Al Gurg (seen in the picture), Deputy Chairperson of the bank said though the bank’s 2020 results, are very disappointing in terms of profitability, they highlight the Group’s financial strength and ability to withstand a truly exceptional shock to the economic system, underpinned by its strong capital base and the unwavering support of the bank’s principal shareholders.

Meanwhile, the bank said NBF Capital Ltd is in the process of being liquidated and will be voluntarily wound up pursuant to the articles of association of the company and in accordance with regulatory requirements. NBF Capital Ltd was registered in the Dubai International Financial Centre (DIFC) as a private company under DIFC laws and regulations.

Management has been successful in its efforts to protect the core business, adapting its investment strategy and achieving operating efficiencies from its digitization efforts.

Net interest income (NII) and net income from Islamic financing and investment activities and net fees, commission and other income stood at AED948.9 million and AED291.7 million respectively compared with AED1.2 billion and AED393.7 million in 2019.

Cost-to-income ratio

Cost-to-income ratio for the bank stood at 35.4 per cent compared with 33 per cent in 2019 reflecting the lower operating income.

Operating profit was AED894.6 million compared with AED1.1 billion in 2019. NBF said it maintained its policy of prudent and transparent recognition of problem accounts and has taken the opportunity to enhance net impairment losses in response to the potential impact of COVID-19 and a few exceptional group exposures to support a meaningful recovery in 2021.

Total PCR or provision coverage ratio (including impairment reserves) stood at 91.8 per cent compared with 107.3 per cent as on December 31, 2019.

NPLs up

The NPL ratio soared to 10.1 per cent compared with 5.4 per cent as of December 31, 2019. “Excluding the few exceptional group exposures, the NPL ratio would reduce to 7.3 per cent,” the bank said.

A bank statement  said that the capital adequacy ratio (CAR) is being kept at a recent high for the bank to underpin the bank’s ability to ride out any further pandemic related challenges.

CAR stood at 19.2 per cent (Tier 1 ratio of 18.1 per cent and CET 1 ratio of 14 per cent) compared with 17.8 per cent (Tier 1 ratio of 16.6 per cent and CET 1 ratio of 12.9 per cent) at 2019 year-end.

Loans and advances and Islamic financing receivables stood at AED24.8 billion compared with AED27.1 billion at 2019 year-end.

 

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