ADCB profits rise 5% as impairment costs drop
BANK SAYS ‘NO CERTAINTY’ ON MERGER WITH UNB OR AL HILAL BANK
Abu Dhabi Commercial Bank (ADCB) yesterday reported a 5 per cent year-on-year increase in its profits for the third quarter of 2018, as net interest income grew and impairment costs dropped.
The bank reported Dh1.15 billion in profits for the quarter, up from the Dh1.09 billion recorded in the third quarter of 2017 and in line with the Dh1.17 billion in market projections. The earnings put profits in the first nine months of this year at Dh3.48 billion, a 9 per cent jump year-on-year.
The rise in profits was driven by an 8 per cent gain in net interest and Islamic financing income in the third quarter, and a 17 per cent decline in impairment costs, which stood at Dh347 million in the quarter. The drop in impairment costs came even as ADCB’s ratio of non-performing loans to total loans rose to 2.97 per cent, compared to 2.12 per cent at the end of 2017. The bank said the increase in non-performing loans to Dh5.3 billion was “led by a few corporate accounts.”
Net loans and advances remained flat year-on-year, at Dh165 billion at the end of September 2018. Meanwhile, deposits from customers rose 4 per cent to Dh169.8 billion.
“We remain positive on the outlook for the UAE economy as new reforms, initiatives, and economic stimulus launched by the government drive further growth,” said Alaa Eraiqat, group CEO.
Merger talk
In its management report, the bank said there were no updates on its talks about a possible merger with Abu Dhabi’s Union National Bank (UNB). The two had entered “exploratory talks” about possibly merging, as ADCB entered similar talks with Al Hilal Bank.
“At this time, there is no certainty that these negotiations will result in a transaction,” the report said, adding the bank will update the market if there are any “material developments.”
Sanat Sachar, equity research analyst at Al Mal Capital’s asset management unit, said he expects to see an improvement in ADCB’s cost of funds, assuming the merger with UNB and Al Hilal goes through. This would improve net interest margins.
Discussing earnings outlook otherwise, Sachar said he did not expect to see a decline in non-performing loans at ADCB until 2019’s second half. He added that he expected cost of risk to stabilise at current levels.
Meanwhile, ADCB’s Eraiqat said the bank plans to invest heavily in technology going forward. “The operating environment continues to be influenced by rapid changes in technology, transforming customer expectations and behaviour,” he said. “We are therefore investing heavily in digital transformation, talent development, and IT security to position ourselves as a progressive player.”