ADCB's Q3 profit hits record on strong loan growth

Net profit surges 22% to $528m as lender posts 10% net loan growth year-to-date

Abu Dhabi Commercial Bank posted net profit of $528 million in the third quarter. Khushnum Bhandari / The National

Abu Dhabi Commercial Bank, the UAE's third-largest lender, reported a 22 per cent increase in its third-quarter net profit, driven by strong loan growth and robust economic conditions in the UAE.

Net profit attributable to equity holders for three months ending September reached a record Dh1.94 billion ($528 million), up from Dh1.59 billion a year earlier, ADCB said on Wednesday in a regulatory filing to the Abu Dhabi Securities Exchange, where its shares are traded.

Total net interest income – what banks earn from their lending activities minus the interest they pay to depositors – surged 28.6 per cent to Dh2.65 billion, while net income from Islamic financing and investing products rose 6.2 per cent to Dh531 million.

Net interest margin – a key indicator of a bank's long-term profitability – climbed to 2.87 per cent, from 2.46 per cent a year earlier.

“In our core market, the UAE, the economy has remained resilient in the face of global headwinds,” said Ala'a Eraiqat, group chief executive of ADCB.

“ADCB is leveraging its strong franchise and digital proposition to serve a growing customer base amid robust consumer and business confidence.”

The bank has extended Dh52 billion of new credit year-to-date, driving net loan growth of 10 per cent during the first nine months of the year, he said.

In the nine months through September, net profit rose 23.6 per cent annually to Dh5.75 billion, while operating income jumped 22.7 per cent to Dh12.2 billion.

The bank had grown its assets by 7.8 per cent to nearly Dh537 billion at the end of September.

“Looking into 2024, we remain confident in the country's fundamentals and continued investment in its economic diversification strategy,” Mr Eraiqat said.

The UAE's banking sector has maintained its strength and has grown in parallel with the country's economy, which was able to strongly rebound from the effects of the Covid-19 pandemic.

Business activity in the Emirates' non-oil private sector expanded robustly in September as the addition of new clients, competitive pricing and sturdy underlying economic conditions increased demand, the seasonally adjusted S&P Global purchasing managers’ index showed earlier this month.

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.

With economic momentum continuing this year and interest rates staying higher for longer, the profitability of the four largest banks in the UAE – First Abu Dhabi Bank, Emirates NBD, ADCB and Dubai Islamic Bank – is set to improve this year, Moody's Investors Service said in March.

The UAE is also putting a particular focus on sustainability with its Net Zero by 2050 initiative, and businesses have been falling in line to adhere to its objectives and tap into its potential.

"Green bonds have become an integral part of our funding strategy, and our second issuance received strong demand from regional and global investors in September," said Deepak Khullar, group chief financial officer of ADCB.

The bank's $650 million green bond, which was 2.9 times oversubscribed and attracted more than $1.9 billion in orders from local, regional and international investors, will help it finance eligible projects that meet its environmentally friendly standards.

"ADCB is finalising an enhanced climate framework. Having completed a baseline assessment of financed emissions, we are now prepared to make clear and credible commitments on climate. Our immediate priority is to develop a suite of green products to support our customers in their transition journey," Mr Khullar said.

ADCB has updated its guidance for full-year 2023 "amid strong performance", with the bank targeting a 50 per cent cash dividend payout on this year’s earnings, "supported by its robust capital position".

The bank now expects a return on average tangible equity in the range of 14 per cent to 15 per cent, driven by net loan growth of between 10 per cent and 12 per cent, and a net interest margin of approximately 2.80 per cent.

ADCB group's UAE operations, including Al Hilal Bank, welcomed about 167,000 new retail customers in the third quarter, with 81 per cent on-boarded digitally, underlining the bank's online-centric strategy.

Digital engagement continued to grow as well, with the bank's mobile banking subscribers surging by a record 114,000 customers in the quarter.

The number of digital banking subscribers, from both internet and mobile banking platforms, were up by a third year-on-year.