ADIB's nine-month profit up 43% as provisions fall and digitisation cuts expenses

Net income hits $436m amid a strengthening recovery as bank looks to become the most 'innovative' Islamic bank

ADIB's revenue during the first nine months jumped 4.1 per cent on annual basis to Dh4.09bn. Christopher Pike / The National

Abu Dhabi Islamic Bank reported a rise of about 43 per cent in its nine-month profit on the back of lower provisions for loan losses and a rise in revenue due to the continued economic recovery.

Net profit for the nine-month period to the end of September climbed to Dh1.6 billion ($436 million), the largest Sharia-compliant lender in the emirate said in a statement on Sunday to the Abu Dhabi Securities Exchange, where its shares are traded.

Revenue in the reporting period was up 4 per cent on annual basis to Dh4.09bn. Provisions for bad loans in the first nine months fell 21 per cent to Dh751m.

Continued cost discipline amid ADIB's continuing investment in digital initiatives pushed expenses down by 8 per cent, with the bank's cost-to-income ratio improving by 535 basis points to 42.2.

“The recovery from the pandemic continues to drive positive consumer sentiment as reflected in our strong performance across all business lines," said ADIB chairman Jawaan Al Khaili.

"ADIB’s financial performance reflects the continued success of our growth strategy and our ability to adapt to a challenging environment."

The UAE economy, which contracted about 6 per cent in 2020 on the back of the global economic slowdown, has made a strong recovery.

Bank earnings in the Arab world's second-largest economy have also improved as business sentiment picked up, with the assets of lenders forecast to grow between 8 per cent and 10 per cent in 2022, according to Abdulaziz Al Ghurair, chairman of the UAE Banks Federation.

The country's non-oil economy is expected to expand about 4 per cent this year and in 2022 while overall economic growth is expected to be 3.8 per cent next year, the UAE Central Bank said in June.

“Looking ahead and despite ongoing uncertainties, we believe that the UAE economy has the potential to have extremely robust, multiyear growth supported by positive consumer sentiment around the end of the pandemic," said Mr Al Khaili.

"Against this backdrop, we believe we are well positioned for a period of sustained growth for the last quarter of the year, leveraging on our strong market position, strategic initiatives and operational resilience.”

Customer deposits during the nine-month period grew 6.2 per cent to Dh107bn, gross financing rose 2.5 per cent to Dh89.1bn and total assets jumped 4.9 per cent to Dh133.4bn, it said in the bourse filing.

The bank said its net profit for the three months to the end of September slipped to Dh492.9m, from Dh533.8m reported a year earlier. Quarterly revenue climbed 5 per cent to Dh1.44bn.

Looking ahead and despite ongoing uncertainties, we believe that the UAE economy has the potential to have extremely robust, multiyear growth supported by positive consumer sentiment around the end of the pandemic

Jawaan Al Khaili,
chairman of ADIB

As with its global, regional and UAE peers, ADIB is pushing to digitise its services as part of the five-year strategic review and looking to take the lead in product and services innovation.

"We are now embarking on a new journey with a renewed purpose and a revamped vision to be the world’s most innovative Islamic bank," Mr Al Khaili said.

"Our redefined strategy brings considerable focus on innovating new products that will allow us to support customers in all important financial stages in their lives while attracting new segments where we can grow profitably, building on our strong brand and market position."

ADIB will continue to transform the bank digitally by "rigorously simplifying and centralising our operating model", he said.

In August, ADIB partnered with the UAE’s Ministry of Interior to allow customers to open accounts remotely and digitally through facial recognition, becoming the first lender in the country to offer this service.

The use of facial-recognition technology was approved by the UAE in February in a move to further develop digital services provided by private and government sector entities.

Lenders globally are looking at ways to use digital identity technology to sign up new customers. Many are increasingly using eye scans, fingerprint, voice, facial and vein-pattern recognition tools to authenticate a person's identity and give them access to their systems.

In the first nine months of this year, ADIB registered a 30 per cent rise in digitally-active customers. Currently, the lender has more than 700,000 digitally enabled customers, with a record 70 per cent active on a daily or weekly basis, it said on Sunday.