Balance sheet contracts 8.4 pc to AED52 bn since Dec
The profit for the 9-month period ending September 30 also fell by 47.75 per cent, from AED839.4 million to AED438.6 million eves the asset book contracted by 8.41 per cent year to date from AED57.1 billion to AED52.1 billion, thus experiencing an overall downsizing of the bank during the year.
The bank said the third quarter earnings were lower due to reduced income resulting from a subdued loan demand and higher IFRS 9 provisions that are set aside as precautionary measures to combat the economic impact of COVID-19.
RAKBANK CEO, Peter England (seen in the picture) , said the customer demand for loans has declined considerably as many SMEs and individuals continue to take a cautious stand.
This combined with a low interest rate environment is providing challenges for the bank’s top line income.
“To help cushion some of this impact, RAKBANK has taken a very proactive approach to cost optimisation and this is evident with the bank’s operating expenditures (Opex) reducing by 12.2 per cent year-on-year, which has resulted in an improvement in cost to income ratio of 37.4 per cent,” England said.
Total income down
Total Income decreased by 8.1 per cent to AED2.76 billion, as compared with the same period of the previous year, mainly due to a decrease in non-interest income by AED114 million on account of the lower business activity and the decline of AED127.9 million in net interest income (NII) and net income from Islamic products because of a declining balance sheet and lower margins.
Total assets decreased by AED4.8 billion or 8.4 per cent year-to-date and by AED3.9 billion year-on-year, mainly due to the reduction in customer loans & advances and cash & balances with Central Bank of the UAE offset by higher balances with banks.
Provisions for credit loss increased by AED302.3 million year-on-year and this stemmed from the additional precautionary provisions adopted to combat the expected economic and operating slowdown in the environment resulting from the pandemic.
The non-performing loans (NPLs) and advances to gross loans and advances ratio closed at 5.1 per cent compared with 4 per cent as of December 31, 2019 as a repercussion of the decline in loans and advances.
Capitalisation and liquidity
The bank’s total capital ratio as per Basel III, after the application of the prudential filter, improved to 19.4 per cent compared with 16.8 per cent at the end of the previous year. The regulatory eligible liquid asset ratio at the end of the period was 9.7 per cent, compared with 12.9 per cent as at December 31, 2019.