First Abu Dhabi Bank's third-quarter profit climbs on revenue boost

Record underlying quarterly profit was driven by 27 per cent jump in operating income

First Abu Dhabi Bank says quarterly income was driven by a continued economic momentum in the UAE. Photo: FAB

First Abu Dhabi Bank, the UAE's largest lender by assets, reported a 46 per cent jump in its third-quarter net profit, as growth in core business boosted revenue amid continuing economic momentum in the UAE.

Net profit for the three months to the end of September climbed to Dh4.3 billion ($1.17 billion), the highest quarterly profit on an underlying basis, FAB said on Thursday in statement to the Abu Dhabi Securities Exchange, where its shares are traded.

Operating income for the reporting period climbed to Dh7 billion, up 27 per cent year on year, driven by growth in the lenders core business and double-digit growth in interest and non-interest income.

Net interest income increased by 26 per cent in the third quarter to Dh4.58 billion, compared with the same period a year earlier.

Total non-interest income for the reporting period also climbed by 29 per cent year on year to Dh2.4 billion.

“In the third quarter of 2023, we achieved solid results,” Hana Al Rostamani, group chief executive of FAB, said.

“Our international and diversified franchise, our financial strength and ample liquidity are among the distinct competitive strengths that position us well to continue our steady progress towards our strategic goals.”

Much in the same way as their peers in the GCC, banks in the UAE continue to benefit from a rise in interest rates.

Most regional central banks peg their currencies to the US dollar and follow the US Federal Reserve's moves on interest rates increases.

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

Continued economic momentum in the Emirates, the Arab world’s second-largest economy, also underpinned FAB’s record quarterly performance.

The UAE economy has made a sharp rebound from the coronavirus-induced slowdown on the back of higher oil prices and measures to mitigate the impact of the pandemic.

The country's gross domestic product grew by 3.8 per cent on an annual basis in the first quarter of this year, boosted by its strong non-oil sector extending the momentum of its 7.9 per cent expansion in 2022, its biggest in nearly 11 years.

The UAE's membership of the Brics bloc will also help the country to pursue its annual growth target of 7 per cent or more, as well double the size of its economy by 2031, Minister of Economy Abdulla bin Touq said in August.

With economic momentum continuing this year and interest rates staying higher for longer, the profitability of the four largest banks in the UAE is set to improve this year, Moody's Investors Service said in March.

FAB's net income for the first nine months of the year rose to Dh12.4 billion, a record on an underlying basis, excluding Magnati-related gains in the nine-month period of 2022, FAB said in a separate statement.

Revenue at the end of September jumped 38 per cent to Dh20 billion, “reflecting strong business volumes, improved margins and broad-based growth across all businesses”, the bank said.

Hana Al Rostamani, group chief executive of First Abu Dhabi Bank. Photo: FAB

The bank's quarterly and nine-month growth in revenue and bottom line builds on “the core growth momentum achieved since the start of the year”, said Lars Kramer, FAB's group chief financial officer.

“Operating income grew … from continued expansion in net interest income coupled with growth from diversified revenue streams, demonstrating our ongoing strategic focus on deepening client relationships across our global franchise.”

FAB said its growth was also driven by opportunities in sustainable financing opportunities.

The lender aims to mobilise $75 billion of sustainable finance projects by 2030 and has funded more than $18 billion in the first nine months of this year, which take the total amount to $27 billion to date from the 2022 baseline.

“Green finance and sustainable finance are growth markets, and the coming Cop28 forum will showcase our leadership in this area and accelerate our reach and capacity,” Mr Kramer said.

FAB's assets at the end of September climbed to Dh1.2 trillion, a 7 per cent increase since the beginning of this year.

Loans and advances and Islamic financing rose 3 per cent in the year to date to Dh478 billion while customer deposits for the reporting period rose 5 per cent on an annual basis to Dh785 billion, the lender said.