First Abu Dhabi Bank profit soars on income boost as UAE economic momentum continues

Net income for the three months to the end of June climbed to $1.14bn

First Abu Dhabi Bank is the largest bank in the UAE by assets. Chris Whiteoak / The National

First Abu Dhabi Bank, the UAE's largest lender by assets, reported an annual 45 per cent increase in its second-quarter net profit, amid an income boost from the country's continuing economic momentum.

Net income attributable to shareholders for the three months to the end of June climbed to Dh4.2 billion ($1.14 billion), the bank said in a filing on Thursday to the Abu Dhabi Securities Exchange, where its shares are traded.

Operating income for the reporting period climbed to Dh6.8 billion, up 37 per cent year on year, driven by double-digit growth in interest and non-interest income.

Net interest income increased 39 per cent to Dh4.3 billion in the second quarter from the same period a year earlier.

Total net interest income and income from Islamic financing and investing products for the second quarter rose by 33 per cent to Dh4.49 billion on an annual basis.

“The group’s achievements demonstrate steady progress against our growth strategy and strengthen our position as the financial institution of choice,” said Hana Al Rostamani, FAB group chief executive.

Positive growth momentum was sustained across all business lines, she said.

Throughout the period, “we have fulfilled our commitment to delivering the best financial and banking products and services to our clients across our diversified franchise, while empowering the UAE’s status as a global financial hub”, Ms Al Rostamani added.

Banks in the UAE, like their regional peers, are benefiting from a rise in interest rates. Most central banks in the six-member economic bloc of the GCC peg their currencies to the US dollar and follow the Federal Reserve's moves on interest rates increases.

The Fed has aggressively increased its benchmark policy rates over the past several quarters in a bid to bring inflation down to its 2 per cent range.

The Abu Dhabi-headquartered lender said its strong performance came amid a continued economic momentum in the Arab world’s second-largest economy.

The UAE's economy has bounced back sharply from the Covid-19-induced slowdown on the back of higher oil prices and measures to mitigate the impact of the pandemic.

After growing 7.9 per cent in 2022, the most in 11 years, according to official data, the country's economy is expected to expand 3.9 per cent this year and 4.3 per cent in 2024, as per the UAE Central Bank.

With economic momentum continuing this year and interest rates still on the rise, profitability of the four largest banks in the UAE is set to grow further this year, Moody's Investors Service said in March.

FAB said its net income for the first half of this year had risen to Dh8.1 billion.

On an underlying basis, excluding Magnati-related gains in the first half of last year, net profit was up 65 per cent year-on-year, FAB said in a statement.

The non-interest income contribution to group's revenue increased to 34 per cent, underlining continued strategic focus on revenue diversification, it said.

Assets at the end of June climbed to Dh245.86 billion from Dh228.36 billion at the end of 2022.

Loans and advances and Islamic financing rose 5 per cent year to date to Dh483 billion, and customer deposits for the reporting period rose to Dh745 billion, the lender said in the statement.

“FAB posted a very strong set of financial results, as evidenced by record underlying revenue and profits both in the second quarter and in the first half of 2023,” said Lars Kramer, group chief financial officer at FAB.

Improvements were recorded across all business lines “as a result of strong business volumes across our diversified franchise, underpinned by tailwinds from higher interest rates and continued focus on enhancing cross-sell”, he said.

“In the current high interest rate environment, we will continue to prudently manage risk, preserve a strong and resilient profile, and remain laser focused on enhancing group returns,” said Mr Kramer.

In June, FAB completed the merger of Bank Audi Egypt with its Egyptian operations, consolidating its market position in the most populous Arab country.

The lender is open to acquisition opportunities in the Middle East and North Africa and in markets beyond as long as the deals make commercial sense and create value for the bank.

FAB is also open to acquiring international banks if an opportunity presents itself, as it continues to expand its footprint in markets around the world, Ms Al Rostamani told The National in April.