RAKBank reports flat profit in second quarter

RAKBank yesterday reported a slight drop in its second-quarter net profit as non-interest income dropped and operating expenses climbed amid challenging market conditions.

Net profit slipped to Dh226.6 million in the three months ending June 30 from Dh226.7m reported in the corresponding period of 2017, the lender said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded. Total income declined 2.7 per cent year-onyear to Dh940m in the quarter.

The flat quarterly net profit still beat a forecast by Egyptian investment bank EFG Hermes, which estimated RAKBank profit at Dh220m.

The bank’s financial performance reflects the ongoing shift of “business strategy to a more diversified balance sheet,” Peter England, chief executive of RAKBank said. “Funding cost has increased more than expected as a result of increased competition for deposits in the market.”

The lender’s executive management and board of directors will focus on rationalising operations and focusing on “cost optimisation to improve overall efficiency, which will show significant results in 2019”, the bank said in a separate regulatory filing.

Banks in the UAE and broader Arabian Gulf markets are expected to improve profitability amid a pick-up in economic activity on the back of a recovery in oil prices.

EFG Hermes forecast aggregate second-quarter earnings growth of 7 per cent year-onyear for Middle East and North African banks in a report released this month. It predicted an 8 per cent rise in profit for UAE lenders in the second quarter.

Impairment charges to cover bad loans grew 13.4 per cent year-on-year to Dh324.6m in the quarter, RAKBank said.

The lender said non-interest income dropped 13.4 per cent to Dh254.2m, while operating expenses grew 6.7 per cent to Dh389.4m mainly due to an increase in employment costs.

The bank, which received a stable outlook from credit rating agency Fitch this month, said its net fee and commission income was Dh686.3m, 2 per cent higher thban Dh672.8m a year ago.

“RAKBank’s new three-year strategy will focus on building the performance of improved business units and continuing to innovate through the introduction of a more diverse range of products, services, and initiatives,” Mr England said.

RAKBank’s new strategy will focus on building the performance of improved business units and continuing to innovate PETER ENGLAND RAKBank CEO