FAB's nine-month profit jumps 19% on lower provisions and higher interest income

Net impairment charges for loan losses fell 11 per cent to $472m

First Abu Dhabi Bank raised its economic growth forecast for the UAE economy. Photo: FAB

First Abu Dhabi Bank, the UAE’s largest lender by assets, said net income for the first nine months of the year soared 19 per cent as its core business improved significantly amid a rise in interest income and a fall in provisions for bad loans.

Net profit attributable to shareholders in the period to the end of September surged to about Dh11 billion ($3bn), the lender said in a statement on Wednesday to the Abu Dhabi Securities Exchange, where its shares are traded.

Total income at rose an annual 13 per cent to Dh18bn, driven by an 18 per cent increase in net interest income which jumped to Dh10.2bn.

Total income for the nine-month period includes a Dh3.1bn net gain on the sale of FAB's stake in the payments business Magnati to New York-listed Brookfield Business Partners.

“Our results in the first nine months of 2022 demonstrate excellent strategic progress, with the group delivering record revenue and net profit, and with our core businesses sustaining their positive momentum in the third quarter as they continue to capitalise on a favourable regional backdrop,” said FAB group chief executive Hana Al Rostamani.

“Our robust balance sheet fundamentals are enabling us to pursue our growth and transformation journey, both, regionally and in the UAE. In Egypt, we have completed our integration activities which will enable us to unlock new opportunities for our growing base in one of our priority markets.”

Total assets grew by 15 per cent in the year to date to more than Dh1.1tn, led by lending growth and sizeable deposit inflows, while loans, advances and Islamic financing increased 14 per cent to Dh465bn.

Customer deposits increased 21 per cent since the start of the year to Dh746bn.

Net impairment charges for loan losses fell 11 per cent to more than Dh1.73bn ($472 million), from the same period in 2021, reflecting the continued economic recovery in the Emirates, the lender said.

FAB expects the UAE economy to grow at it highest rate in more than a decade, supported by higher oil output, relatively moderate inflation and a recovery across key sectors such as property and tourism.

Continuing structural reforms are also driving growth and the diversification of the economy, it said.

The UAE economy expanded 8.4 per cent in the first quarter of this year, exceeding initial estimates, as higher oil prices and successful Covid-19 mitigation measures set it up for its fastest annual growth since 2011.

FAB projects the UAE's gross domestic product growth this year at 6.7 per cent, compared with a previous 5.7 per cent forecast, with the Arab world’s second-largest economy expanding 5 per cent in 2023.

Emirates NBD has raised its economic growth forecast for the UAE to 7 per cent for 2022, while Abu Dhabi Commercial Bank projects a 6.2 per cent expansion.

“The robust nature of the UAE and [the] Abu Dhabi government’s balance sheet are expected to lead to a return to fiscal surplus status” this year and the next, FAB said.

“Although not immune to global headwinds, we believe economic activity in the UAE and [the] broader GCC region will continue to outperform the global backdrop,” the lender said.

The UAE’s foreign trade for the first six months of this year exceeded Dh1 trillion, compared with Dh840bn for the same period before the pandemic.

Tourism sector revenue exceeded Dh19bn during the first half of this year and the total number of hotel guests in the same period hit 12 million.

Growth in the number of hotel guests climbed 42 per cent, compared with the same period before the pandemic.

The UAE's non-oil private sector economy improved at a “robust” pace in September, with the S&P Global purchasing managers’ index reading coming in at 56.1, as strong new business growth continued to drive increases in output and employment.

The rate of new order growth was faster than the trend observed since the survey began in August 2009.

A reading above the neutral level of 50 indicates growth while one below it points to a contraction.

“Looking ahead, the increasingly challenging global backdrop calls for caution, with recessionary risks looming over several economies,” Ms Al Rostamani said.

“As we navigate these headwinds, we are, nevertheless, confident in the resilience of this region, and we remain very well placed to deliver market-leading shareholder returns while being an engine for the region’s economic growth and diversification.”