RAKBank posts Dh554m profit
dubai — National Bank of Ras Al Khaimah (RAKBank) reported on Thursday a consolidated net profit of Dh554.2 million for the nine months ended 30 September 2016.
The bank said its operating profit increased by 6.1 per cent to Dh1.9 billion as a result of reduction in operating cost by 11.7 per cent offset by a marginal drop in total operating income.
Total operating income dropped by 0.8 per cent to Dh2.9 billion due to a reduction in the net interest income and net income from Islamic financing by 6.1 per cent that is partially offset by the increase in non-interest income by 17.4 per cent.
The lender said its non-interest income grew by Dh115.5 million, and this is mainly due to a growth of Dh113.9 million in investment income and Dh8.6 million in income from the insurance segment, the bank said in a statement. Operating expenses declined by Dh134.2 million during the first nine months of the year compared to the previous year due to various cost saving initiatives taken by the Group. The Group improved its cost-to-Income ratio to 34.8 per cent compared with 39.1 per cent during the nine months of 2015, as it maintained its focus on cost optimization.
The consolidated operating profit before provision for impairment increased by Dh110.2 million to Dh1.9 billion, while the total provisions for impairment for the nine months increased to Dh1.3 billion. As a result, the Bank recorded a net profit of Dh554.2 million for the nine months ended September 30, 2016.
Total assets grew by Dh275.3 million to Dh40.8 billion as compared to 31 December 2015, mainly as a result of growth in gross Dh463.7 million to Dh29.0 billion. Customer deposits grew by Dh544.9 million during the nine months of 2016 to Dh28.4 billion as compared to Dh27.8 billion as on 31 December 2015.
The bank’s capital adequacy ratio as per Basel II requirement that comprises entirely of Tier 1 capital is 23.9 per cent, compared with 24.4 per cent at the end of the previous year. This is against a current minimum total capital ratio of 12 per cent prescribed by the Central Bank in the UAE.
Describing 2016 as a very challenging year for RAKBank with the bank seeing a significant increase of provisions in its legacy SME Business loans portfolio, Peter England, RAKBank chief executive officer, said from 2008 until early 2015 the bank’s core focus had been on SME lending and therefore is it understandable that, as the largest SME bank in the UAE, it would be adversely affected by the very challenging market for SME’s due to a number of factors including a global economic slowdown.
“On the positive side, the banks diversification strategy commenced in early 2015 has been showing exceptional results with solid growth coming in our Corporate and Financial Institutions business, as well as a very solid performance by our Treasury unit. On the SME front, we remain firmly committed to this business having completely revamped our entire front end and back end where we continue to book solid business here, albeit under a completely different set of risk parameters than used last year,” said England.
RAKBank’s chairman Mohamed Omran Alshamsi said despite the on-going challenges during the course of 2016 from the Bank’s legacy SME Business loans portfolio, the lender sees positive mid to long term benefits from its strategy that focuses on a larger balance sheet catering to all customer segments in the UAE.
“The bank is well placed for growth with a very strong capital position and ample liquidity from a well-diversified depositor base. We remain committed to the SME sector, however the journey we commenced last year to re-enter the Wholesale banking market and revitalise our Personal banking business is beginning to bear fruit and is crucial to building a long term sustainable banking franchise,” said Alshamsi.
— issacjohn@khaleejtimes.com