Abu Dhabi Commercial Bank on Tuesday posted a 21 percent rise in second-quarter net profit. The bank made a net profit attributable to shareholders of Dh1.28 billion in the three months to June 30, compared to Dh.06 billion in the corresponding period of the previous year. It also reported a net profit of Dh2.53 billion in the first half of 2015, up 17 per cent year on year compared to Dh2.16 billion in the same period last year.
** Key highlights (30 June 2015): :: Delivering sustainable growth, strong underlying performance in H1'15 H1'15 vs. H1'14 – Net profit up 17% to Dh 2.532 billion – Net profit attributable to equity shareholders up 26% to Dh 2.531 billion – Operating income up 12% at Dh 4.234 billion, with net interest income up 14% to Dh 3.184 billion and noninterest income up 7% to 1.050 billion – Net fees and commission income up 22% to Dh 718 million – Operating profit before impairment allowances up 11% to 2.862 billion – Return on equity of 22.0% compared to 18.7% for the first half of 2014 :: Efficiently managed cost base and further improvements in asset quality – Cost of funds for H1'15 was 87 bps compared to 93 bps in H1'14 – Cost of risk for H1'15 improved to 40 bps from 53 bps in H1'14 – As at 30 June 2015, NPL and provision coverage ratios were 3% and 139% respectively – Cost to income ratio for H1'15 was 32.4%, within our target range :: Targeted growth and disciplined funding approach with strong CASA (current & savings account) deposits contribution – Net loans and advances increased 9% to 146 billion over 30 June 2014 – Deposits from customers increased 11% to Dh 132 billion over 30 June 2014 – As at 30 June 2015, low cost CASA deposits comprised 49% of total deposits Capital position continues to be at industry leading levels – As at 30 June 2015, capital adequacy ratio was 19.80% – As at 30 June 2015, tier I ratio was 16.10% Commenting on the results, Eissa Mohamed Al Suwaidi, Chairman said, "Our strong and stable financial footing has enabled us to stay committed to our clients and customers in our core geography and core businesses since 2009. We are fortunate that our strategy has essentially remained the same and allowed us to avoid any drastic changes. This strategic framework creates a clear direction and combined with our solid foundation, it provides agility in a rapidly changing world. Challenges have increased with the lower oil price; however UAE's economic outlook remains positive supported by its diversified nature.
With a record return on equity of 22%, our results for the first half of 2015 reflect our commitment to our strategic pillars and our business model."
Ala'a Eraiqat, Member of the Board and Chief Executive Officer, said, "Our financial results for the first half of the year reflected strong underlying performance across our businesses, with a net profit of Dh 2.532 billion, an increase of 17% year on year and Q2'15 net profit of Dh 1.283 billion, an increase of 21% year on year. Asset quality improved further, with a non-performing loan ratio of 3% and provision coverage of 139% as at 30 June 2015, and cost of risk was significantly reduced to a record low level of 40 bps in H1'15, while our capital adequacy ratio remained one of the highest in our peer group at 19.80%.
We take a long-term perspective on growth and our quarterly earnings are the result of our strategic pillars agreed over the past years. We continue to strengthen our customer centric culture and set high standards for performance as we invest in targeted growth opportunities and simplifying our businesses. Reducing complexity in our business remains core to our strategy, eliminating inefficiencies and reinvesting savings elsewhere in the business. Ongoing bank wide cost management initiatives help us to maintain a cost to income ratio within our target range."
Eraiqat added, "Our funding approach is similarly disciplined, any future growth is funded through an increase in customer deposits, which supports our commitment to sustainable growth. Year on year, our loan book grew 9% and customer deposits grew 11%. In H1'15, over 80% of our loan growth came from Consumer Banking, SME and mid corporate segments, in line with our strategic direction of a granular build to our balance sheet, whilst remaining risk-aware in our pursuit of growth and profitability. In an extremely competitive environment, we managed to increase our margins, due to a combination of a shift in our asset mix towards higher yielding interest earnings assets and significant repayments that took place during the course of H1'15, resulting in interest in suspense reversals. As one of our key strategic levers to fuel balance sheet growth and improve returns, we have sought to develop a sustainable cost of funds advantage through low cost current account and savings account (CASA) deposits. Our CASA deposits now constitute 49% of our total deposits compared to 45% as at 31 December 2014 and 39% as at 31 December 2013, a testament to our award winning, world class cash management services and strong domestic franchise in the UAE.
In June 2015, we saw further strengthening of the regulatory environment with the new liquidity regulations introduced by the Central Bank. ADCB is well prepared to adapt to the changing global landscape and to comply with these new requirements and all other such initiatives from the Central Bank of the UAE. The new liquidity regulations will result in improved liquidity management for banks and will help the industry to become stronger and safer but will also require more funds to be deployed in high quality liquid assets (HQLA), which may have an impact on margins going forward.
Our aim is to create the most valuable bank in the UAE by delivering sustainable growth, reducing risk, improving long-term financial performance and returns for our shareholders. Our results demonstrate that our strategy is working. We have a clear strategy with an experienced management team focused on customer centricity and service excellence. Despite the challenging operating environment, we maintain a positive outlook situated to benefit from future growth opportunities in the UAE."