BBN report
Impairment allowances grow 178 pc to AED3.36 bn
DUBAI/February 11-2021: The Dubai-headquartered Mashreqbank, the UAE’s ‘complete’ private-sector bank, will mark the financial year 2020 (FY20) as one of its worst years along with numerous others, thanks to the COVID 19 and its negative impact on the economy.
FY20 may be Mashreq’s first year that ended in ‘red’, at least in the past two decades, with a loss of AED1.21 billion against AED2.14 billion profit the bank posted a year earlier.
The board of directors that convened last week has also decided to not distribute dividend during the year.
While the bank earned an operating income of AED5.15 billion for the year – down from AED5.99 billion earned during last year, the allowances for impairment that grew by178 per cent to AED3.36 billion from AED1.21 billion a year earlier, has pushed the bank into a huge net loss of AED1.15 billion in the place of AED2.14 billion profit last year.
The leading private sector bank has reported a loss of AED183.11 million for the quarter ending September 30, 2020 as against a profit of AED535.75 million for the same period last year.
And that was the first quarterly loss in more than a decade since the bank reported AED119 million loss for the fourth quarter ending December 31, 2009, when the economy was yet to see off the global recession that gripped the world in 2008.
Low interest regime
The decline in revenue by 14.1 per cent to AED5.1 billion during the year was mainly driven by the low interest rate regime, the impact of the pandemic and slower economic activities as a result of the lower oil prices.
Non-interest income (NII) to operating income ratio remained strong at 48 per cent, an industry leading position in the UAE.
Expenses & Revenues
While the bank continued to invest in transformation programs across all verticals, which will be crucial for delivering future strategic objectives, the operational costs of the bank saw a drop of 5 per cent driven mainly by the digitization efficiencies. However, year-on-year overall costs position was up by 12.3 per cent.
NPL
NPL ratio of the bank as of December 31, 2020 was 5.1 per cent and coverage was at 130 per cent reflecting prudent measures taken to maintain the quality of the portfolio
AbdulAziz Al Ghurair (seen in the picture), Chairman of Mashreq, said that COVID-19 has been both a significant disruptor as well as a catalyst for positive change in business operations.
“The pace of vaccine rollout in the UAE as well as in other countries provides us with cautious optimism that the regional and global economies will steadily recover as the year progresses, fuelling future growth. These have been unprecedented times, and our focus throughout has been to work closely with our clients, and colleagues, delivering uninterrupted services,” he added.
Ahmed Abdelaal, Group CEO, Mashreq Bank, said the bank expects to see a challenging first half in 2021, but are cautiously optimistic for a recovery in the second half.
“As we begin to look forward, it is important to recognise that the future of banking is rapidly merging with the trajectory of technology. We believe investments in our digital platforms and operating model will deliver sustainable savings in the long term, and position us strongly for this existential change impacting our industry,” Abdelaal added.
