Lower expenses help boost FAB profit by 2%
BANK SAYS IT IS ‘MAKING SIGNIFICANT PROGRESS’ IN INTEGRATION
First Abu Dhabi Bank (FAB) reported yesterday nearly Dh3 billion in net profit for the first quarter of 2018, a 2 per cent yearon-year increase as expenses dropped.
The increase came as operating costs and impairment charges fell, and as revenue from fees and commissions rose. Profits for the quarter are above forecasts, with analysts at EFG Hermes projecting Dh2.28 billion.
Net interest income was flat for the quarter, however, at Dh3.27 billion. Total operating income fell to Dh4.87 billion, down 6 per cent over the Dh5.19 billion in the first quarter of 2017.
Abdul Hamid Saeed, FAB Group chief executive officer, said in a statement that the bank was making strong progress in integration, a year after the merger between First Gulf Bank and the National Bank of Abu Dhabi that created FAB became effective. “As we enter our second year, FAB continues to make significant progress in delivering on its business objectives and integration milestones, with IT integration activities in particular moving forward at a steady pace and according to plan,” he said.
Integration costs
Integration costs in the first three months of the year alone were at Dh70 million. The bank had earlier said integration costs will total Dh1.1 billion.
In the first quarter of 2018, FAB’s impairment charges reached Dh439 million, down 31 per cent over the Dh641 million in the same quarter of 2017. They are also down on a quarter-onquarter basis by 22 per cent.
Fees and commissions income reached Dh934 million, up 19 per cent year-on-year, as FX and investment income plunged 40 per cent to Dh656 million.
Tareq Qaqish, managing director of the asset management division at Mena Corp, said he expected FAB to see more cost synergies following the merger.
“FAB is saying that the synergy in terms of systems integration [is still not complete], so we haven’t seen the full benefits of the merger. I think going forward, once the systems are integrated, we will see more synergies,” he said.
But besides gains from the merger that has created one of the largest banks in the Middle East by assets, Qaqish said he expected FAB to benefit from an overall pick up in the banking industry. “[The outlook] looks positive. Abu Dhabi is expected to spend more including on infrastructure … and FAB will definitely benefit from this exercise. Interest rate increases will also help expand net interest margin,” he said.
On the balance sheet, the bank’s loans and advances fell 2 per cent over the first quarter of 2017 to reach Dh338 billion, as customer deposits inched up 3 per cent to Dh404 billion. The ratio of the bank’s non-performing loans went up to 3.1 per cent from 2.6 per cent in the first quarter of 2017 but is nearly stable quarter-on-quarter.
Sanat Sachat, equity research analyst at Al Mal Capital, said FAB has been successful in materialising cost synergies post the merger.