ADCB chief hails 'robust' performance despite difficult economic climate

The lender reported 3 per cent decline in third quarter net profit to Dh1.36bn

Abu Dhabi Commercial Bank has reported a nine-month net profit of Dh2.8bn compared to Dh4.2bn in the previous year. Delores Johnson / The National

Abu Dhabi Commercial Bank, the UAE’s third-largest bank, delivered a "robust" performance in difficult economic circumstances during the third quarter, chief executive Ala'a Eraiqat said, as the lender reported a 3 per cent slide in net profit.

Profit attributable to the bank's owner stood at Dh1.36 billion for the three months to September 30, down from Dh1.4 billion in the same period last year. The lender also reported a 33 per cent decline in nine-month net profit to Dh2.8bn.
"ADCB continues to deliver a robust performance, responding effectively to a difficult operating environment with renewed focus on building resilience and a solid platform for future growth," Ala'a Eraiqat, group chief executive of ADCB, said in a statement on Wednesday to the Abu Dhabi Securities Exchange, where its shares trade.

Lenders globally are facing headwinds amid tough operating conditions with the majority taking on provisions for bad loans and an increase in defaults. Profit margins are under pressure as loan growth slows and interest rates remain low amid the pandemic-induced economic difficulties.

Operating income for the period fell 8.5 per cent to Dh3bn, but operating expenses were cut by 14 per cent to Dh1.1bn, despite incurring higher costs as a result of branch closures.

“While branch closures resulted in a rise in one-off costs in the third quarter, a fundamental shift towards digital banking will have a positive long-term impact on the bank’s cost base and productivity,” said ADCB's group chief financial officer  Deepak Khullar.

Impairment charges during the quarter fell 12 per cent year-on-year, as the bank managed to achieve higher recoveries and releases on loans.

The lender, which merged with Union National Bank and Al Hilal Bank, recorded an additional Dh148m of impairment charges related to NMC Health Group, Finablr and associated companies in the third quarter, bringing the cumulative total to almost Dh1.4bn.

A fundamental shift towards digital banking will have a positive long-term impact on the bank's cost base and productivity

The bank said it was continuing to work closely with the joint administrators of NMC Health Group to ensure repayment of debt.

ADCB has extended Dh9.96bn to support more than 67,000 retail and corporate customers through the UAE Central Bank’s Targeted Economic Support Scheme, designed to cushion the economic impact of Covid-19 and support the local economy.

ADCB's balance sheet "remains a source of institutional strength", Mr Khullar said, with a capital adequacy ratio of 16.67 per cent well within regulatory requirements.

"While it is clear that the challenges presented by the global pandemic this year will have a lasting impact on our communities, we are confident that ADCB remains in a robust position to support our key stakeholders," he said.