Large impairment allowance plays villain for bank
DUBAI/October 28-2020: National Bank of Fujairah (NBF) witnessed a sharp decline of 87 per cent in its net profit for the nine-month period ending September 30, 2020, to AED66.3 million, from AED511.6 million a year ago, thanks to substantial increase in provisions.
Operating profit for the said period was AED707.3 million compared with AED862.3 million in the corresponding period of 2019.
The bank said it maintained the 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 the current market conditions.
Large impairment provisions
“NBF secured net impairment provisions of AED641 million for the nine-month period compared with AED350.7 million in 2019,” the bank said in a statement.
NBF’s other comprehensive income increased by AED18.2 million and AED18.5 million for the nine- and three-month periods ended 30 September 2020 respectively on the back of improvement in investments designated as fair value through other comprehensive income (FVOCI).
Loans and advances and Islamic financing receivables stood at AED25.4 billion compared with AED27.1 billion as of 2019 year-end and AED 27.6 billion as of September 30, 2019.
Customer deposits and Islamic customer deposits stood at AED31.2 billion as of September 30, 2020, compared with AED31.9 billion as of 2019 year-end.
Current and Saving Accounts (CASA) deposits increased by AED372 million from 2019 year-end, a 3.8 per cent increase, to AED10 billion as of September 30, 2020.
PCR falls to 81.4 pc
Total provision coverage ratio (PCR) (including impairment reserves) stood at 81.4 per cent compared with 107.3 per cent as of December 31, 2019.
The NPL ratio stood at 8.5 per cent compared with 7.5 per cent as at June 30, 2020; 6.7 per cent as at March 31, 2020 and 5.4 per cent as at December 31, 2019, evidencing both the expected deterioration in credit quality and a reduction in the loan book.
The capital adequacy ratio (CAR) remained very strong and stood at 19.1 per cent (Tier 1 ratio of 18 per cent and CET 1 ratio of 14 per cent) as of September end, 2020, compared with 17.8 per cent (Tier 1 ratio of 16.6 per cent and CET 1 ratio of 12.9 per cent) as of 2019 year-end, significantly ahead of regulatory requirements.
Dr Raja Al Gurg (seen in the picture), Deputy Chairperson of the bank, highlighted the challenges the banking industry went through by way of the volatility and uncertainty that the COVID-19 pandemic has brought.
“However, NBF has maintained its resolute focus on the execution of its strategic priorities of delivering exceptional customer service, spearheading digital innovation, maintaining financial stability, continuing to meet compliance and regulatory standards and supporting communities,” Dr Al Gurg said.