Abu Dhabi Islamic Bank, the biggest Sharia-compliant lender in the emirate, said that its net profit fell 4.7 per cent in the fourth quarter as a weak economy pushed provisions for bad debt higher.
Tirad Al Mahmoud, the bank’s chief executive, yesterday said that while an improvement in oil prices could help the country as a whole, there was likely to be more bad debt from individual customers in 2017.
Net income fell to Dh455.1 million in the last three months of 2016 versus Dh477.4m in the same period of 2015, the bank said. Credit provisions and impairments for the fourth quarter increased by 1.2 per cent to Dh252.1m versus Dh249.3m during the fourth quarter of 2015.
The bank’s revenues for the fourth quarter decreased by 2 per cent to Dh1.34 billion compared to Dh1.37bn in the fourth quarter of 2015.
“The prospects for the UAE as a whole for 2017 are encouraging, and supported by a recovery in oil prices,” said Mr Al Mahmoud.
“Nonetheless, we continue to forecast modest customer financing growth in the UAE and an increase in provisions in the UAE retail banking.”
The dramatic drop in the price of oil, which has lost as much as 70 per cent of its value since it began its decline in the summer of 2014, has reduced demand for loans and increased the level of debt defaults.
For the whole of 2016, the bank’s profit rose 1 per cent to Dh1.953 bn versus Dh1.934bn in 2015 amid an 18 per cent increase in overall provisions in 2016 versus 2015.
“Our total credit provisions and impairments have increased to Dh970m given the slowdown in the economy and lower soft commodity prices that impacted the SME sector,” Mr Al Mahmoud said.
“While there are some encouraging signs of recovery we will continue with our conservative approach and we are actively engaged with our customers who have been impacted by the current economic conditions and are working with them to develop solutions that will enable them to meet their commitments.”
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