Abu Dhabi Commercial Bank (ADCB) reported on Monday a net profit of Dh1.152 billion for the first quarter of 2019 that preceded its landmark three-way merger with two other banks on May 1 to emerge as a banking titan with Dh423 billion in assets.
The bank said higher cost of funds, partially offset by higher non-interest income and lower impairment charges, led to its first-quarter profit drop of five percent.
In a statement, the lender said a strong operating performance in the first quarter was underpinned by robust growth in gross interest and Islamic financing income and non-interest income. Gross interest and Islamic financing income rose by 17 per cent to Dh3.116 billion while net interest and Islamic financing income of Dh1.707 billion dropped by seven percent, “primarily attributable to a change in the composition of the liability base over the same 2018 quarter and competitive pricing, partially offset by rising benchmark rates and higher volumes,” the bank said.
Ala’a Eraiqat, group chief executive officer and board member of ADCB, said the bank has made good progress in a number of key areas in the first quarter.
“In particular, we have delivered a strong and sustainable return on equity, increased fee income and continued to grow our market share in deposits. In a rising interest rate environment, our low-cost CASA (current and saving accounts) deposits grew by Dh10 billion to Dh80 billion, reporting an increase of 15 percent over the year-end.”
Deepak Khullar, group chief financial officer, said the bank’s fundamentals remain solid. “Bottom line was impacted by higher cost of funds underpinned by a conscious decision to increase long term time deposits and wholesale funding to meet the evolving regulatory liquidity requirements.”
The bank’s non-interest income grew by eight percent to Dh566 million as net fees and commission income rose eight percent to Dh379 million.
Operating expenses went up three percent to Dh793 million, mainly attributable to ongoing investments in digital transformation initiatives and integration related expenses as impairment allowances dropped 13 percent to Dh30 million, said the bank.
Customer deposit growth continued to outpace loan growth by rising four percent to Dh184 billion, while total assets grew four percent to Dh292 billion and net loans to customers increased two percent to Dh169 billion over 31 December 2018
The bank’s registered a capital adequacy ratio (Basel III) of 15.76 percent and common equity tier 1 ratio of 12.07 percent compared to minimum capital requirements of 13.5 percent and 10 percent.
On 1 May 2019, ADCB merged with Union National Bank and Al Hilal Bank to form a larger and stronger banking group called ADCB. Al Hilal Bank continues to operate as a separate Islamic banking entity within the group under its own brand.
The bank’s operations, processes, and infrastructure will be integrated into phases over the next 18 to 24 months. The combination is expected to deliver annual cost synergies of approximately Dh615 million, ADCB said.
Originally published on www.khaleejtimes.com