Abu Dhabi Commercial Bank’s (ADCB) nine-month (9M) net profit jumped 24% to AED5.752 billion ($1.52 billion) and its third-quarter net rose 22% to record AED1.942 billion.
Record quarterly net profit was driven by solid momentum in loan growth and increased net interest margin. The UAE economy remains resilient with strong long-term fundamentals and ADCB is well-positioned to benefit from robust consumer and business confidence.
The bank’s net interest income for 9M was at AED8.961, an increase of 23%. Non-interest income of AED3.244 billion increased 22% and operating income was AED12.205 billion and increase of 23%.
Cost to income ratio improved 360 basis points YoY to 32.5%, and operating profit before impairment charge of AED8.243 billion increased 30%.
Q3 net interest income
For Q3, net interest income of AED3.179 billion increased 8% QoQ and 24% YoY and non-interest income of AED1.054 billion declined 7% QoQ and rose 11% YoY. Operating income of AED4.233 billion increased 4% QoQ and 21% YoY. Cost to income ratio improved 210 basis points YoY to 33.3%. Operating profit before impairment charge of AED2.822 billion increased 3% QoQ and 24% YoY.
The bank saw strong net loan growth of 10% in 9M’23, and significant growth in CASA deposits, up AED6.8 billion sequentially. Total assets of AED537 billion increased 10% from Sep’22 and were up 8% YTD.
Net loans of AED284 billion were 13% higher from Sep’22 and up 10% YTD. New credit extended totalled AED52 billion in the first nine months of the year. Total customer deposits of AED329 billion were 9% higher from Sep’22 and up 7% YTD. CASA (Current Account and Savings Account) deposits were AED157 billion at September-end, up 4.5% (AED6.8 billion) in the quarter, and comprised 48% of total customer deposits.
Capital adequacy and CET1 ratios were 16.16% and 13.46% respectively as on September 30, 2023 and iquidity coverage ratio (LCR) was 130.4%. The cost of risk was 73 bps for Q3’23 and for 9M’23, remaining within our guidance, while NPL ratio improved to 4.82% (5.36% including POCI) from 5.10% in Jun’23. Provision coverage ratio was 91.4% and, when including collateral, was 148%.
Positive outlook
Ala’a Eraiqat, ADCB Group Chief Executive Officer said: “ADCB is delivering notable growth this year, with all our major businesses performing effectively on our corporate strategy. In our core market, the UAE, the economy has remained resilient in the face of global headwinds. ADCB is leveraging its strong franchise and digital proposition to serve a growing customer base amid robust consumer and business confidence. Looking into 2024, we remain confident in the country's fundamentals and continued investment in its economic diversification strategy.
“In this context, the bank has extended AED52 billion of new credit year to date, helping to drive substantial net loan growth of 10% in the period.”
Building on its recently rebranded proposition, the Corporate and Investment Banking Group has experienced strong credit demand across diverse sectors, particularly GREs, energy, trading and financial institutions. The business is committed to serving the mid-size corporate and SME segment, with over 1,400 new clients onboarded in the third quarter, he said.
New retail credit was 43% higher year on year in the third quarter, with disbursement of new personal loans at its highest ever level, and strong demand also experienced for mortgages and auto loans. The Retail Banking Group set a fresh quarterly record of 167,000 new customers, with over 80% welcomed to the Bank through digital channels. Furthermore, the card business also reported its best ever quarter, with over 67,000 new primary cards issued.
Accelerated expansion in net interest income
Deepak Khullar, ADCB Group Chief Financial Officer, said: The strong third-quarter operating and financial performance were driven by accelerated expansion in net interest income, which was up 8% sequentially and 24% year on year, powered by significant and broad-based loan growth in a rising rate environment. Net interest margin has increased progressively over the last twelve months and was up 14 basis points quarter on quarter.”
Credit conditions for both corporate and retail banking have been positive, and ADCB’s net loan growth year to date of 10% has surpassed our medium-term guidance of mid-single digit growth, he said.
The bank continues to expand its loan book, and enhance the diversification and risk profile of the portfolio. Lending to GREs has increased to 24% from 23% at the end of 2022, while exposure to real estate investment has decreased to 19% from 22%.
“Our efficiency metrics continued to improve even as the bank invested further in the growth of the business. The cost to income ratio for the first nine months of 2023 declined by 360 basis points year on year to 32.5%, in line with medium-term guidance.”
Amid rising benchmark rates, the bank has managed cost of funds effectively. Our strong franchise has supported a AED6.8 billion rise in CASA deposits during the third quarter. We have also launched sustainable CASA deposits for corporate clients as part of the Bank’s broader ESG agenda.
Updated guidance for full year 2023
Given the bank's strong performance, we are updating our guidance on certain key metrics. The bank expects return on average tangible equity in the range of 14% to 15%, driven by net loan growth of between 10% to 12%, and net interest margin of approximately 2.80%. The bank is also targeting a 50% cash dividend payout on this year’s earnings, supported by its robust capital position.--TradeArabia News Service
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