Covid-19 provisions hit RAKBank's bottom line

Non-performing loans edge up as SME customers face economic challenges

New RakBank branding. Photo Courtesy: RAKBANK *** Local Caption ***  on17oc-Rakbank.jpg

National Bank of Ras Al Khaimah reported a 54 per cent decline in full-year profit for 2020, reflecting the impact of the pandemic on its customers and the wider economy, the lender said.

Net profit fell to Dh505.4 million ($137.6m) last year, compared to more than Dh1.09 billion in 2019. Total income was 10 per cent lower at Dh3.56bn, according to a statement filed at Abu Dhabi Securities Exchange, where its shares trade.

"Overall, we came into this period in a very strong position so the bank has been able to continue to operate very effectively without interruption, but of course we have been impacted. As the pandemic unfolded, many of our SME customers were severely affected – and numerous personal banking clients faced salary cuts and other challenges. With the support of the country’s regulators, we were able to help our customers through deferrals on repayments and loan restructuring where required and reduced or eliminated a number of charges for clients,” RAKBank's chief executive, Peter England, said.

Banks across the world are facing tougher operating environments, with historically low interest rates making it difficult to earn profits and lenders having to make higher provisions in anticipation of potential loan losses from struggling customers.

RAKBank's provisions increased 27 per cent in 2020 to Dh1.66bn. Its non-performing loan ratio edged up to 5.2 per cent by year-end, compared to 4 per cent a year earlier. The lender said, however, that it is "well provisioned" against loan losses, with a coverage ratio of 129.4 per cent, excluding mortgaged properties and other collateralised loans.

The lender's total assets fell 7.6 per cent to Dh52.8bn as gross loans and advances declined by 11.2 per cent to Dh32.2bn. Customer deposits increased marginally to Dh36.9bn during the year.

The lender has been focused on "making sure we are consistently executing our strategy as well as ensuring we have an even stronger balance sheet so that we are in the best possible position to respond to a variety of different economic scenarios", chairman Mohamed Alshamsi said.