ADCB FY20 profit falls 27 pc to AED3.8 bn

BBN Report

27 pc dividend proposed; at AED1.87 bn, payout ratio works out to 49 pc

ABU DHABI/January 31-2021: ADCB, Abu Dhabi’s second largest bank, reported 27 per cent fall in its 2020 (FY20) net profit to AEDh3.8 billion compared with AED5.24 billion a year earlier.

However, the fourth quarter (Q4) profit at AED1 billion was only 4 per cent lower than that in the same period last year.

For the year ended December 31, 2020, the bank’s board of directors has proposed to pay a cash dividend of AED1.88 billion, being AED 0.27 dividend per share and representing 27 per cent of the paid up capital, equivalent to 49 per cent of net profit. The bank had paid AED0.38 dividend per share for 2019.

CASA deposits grow

The bank succeeded in bringing down its cost of deposits substantially following a substantial growth in its current account and savings accounts (CASA). The CASA deposits increased 25 per cent in FY20 to AED127 billion as of December 31, 2020 and accounted for 51 per cent of total customer deposits compared with 39 per cent a year earlier.

“In testing times, ADCB has drawn on its strengths – a robust balance sheet, disciplined governance and a high-performance culture – to navigate the complex issues raised by the global pandemic, softening global economic activity and low oil prices,” said Khaldoon Al Mubarak, Chairman of the Board of ADCB.

Operating expenses down

Steady operating performance, with lower cost of funds and an improved cost to income ratio cushioned the impact of low interest rates and subdued economic activity due to Covid-19 to a great extent.

“At a time when stable and powerful institutions are needed to support our businesses and communities through unpredictable challenges, I am pleased to report that ADCB has remained resilient during a challenging year and has emerged as a stronger banking group,” said Ala’a Eraiqat (seen in the picture), Group Chief Executive Officer and Board Member.

For the full year 2020, operating profit before impairment allowances held steady at AED7.94 billion, compared with AED7.97 billion in 2019.

Operating expenses decreased 14 per cent year-on-year to AED4.52 billion, driven by aggressive realisation of merger synergies, reduction of the branch footprint to pre-merger levels, and a wider programme of digitisation and cost control measures.

Cost to income ratio excluding one-off integration costs stood at 35.1 per cent 2020, an improvement of 190 basis points over the previous year.

Provisions up

Net impairment charges were AED3.99 billion in 2020, significantly higher than in the prior year, to reflect the challenging macro-economic environment and due to provisions taken on NMC Health Group, Finablr and associated companies.

Bank reported non-performing loans (NPL) ratio of 6.04 per cent and provision coverage ratio of 94.3 per cent while the coverage ratio with collateral was 151 per cent as of December 31, 2020.

The bank said that while taking into account the net POCI (purchase or originated credit impaired) assets, the NPL ratio was higher at 7.70 per cent.

Bank’s balance sheet remains robust with capital and liquidity positions improved and comfortably within regulatory limits. Total customer deposits decreased 4 per cent year on year to D 251 billion as at 31 December 2020, as the bank continued to replace expensive time deposits, while the average deposit balance was AEDh252 billion during the year.

Net loans decreased 4 per cent year on year to AED239 billion as of December 31, 2020, reflecting the low growth environment in the banking sector plus significant provisioning levels. The average loan balance was AED245 billion during 2020.

 

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