ADIB’s fourth-quarter net profit jumps 51% on lower impairments amid economic recovery

Islamic Bank of Abu Dhabi, the emirate’s largest Shariah-compliant lender, reported a 51% increase in net profit in the fourth quarter as loan loss provisions fell and revenue increased in a context of continued economic recovery.

Net profit for the three-month period ending in late December reached 728 million dirhams ($198.4 million) from a year earlier, ADIB said in declaration Monday on the Abu Dhabi Stock Exchange, where its shares are traded.

Quarterly revenue rose 3% to Dh1.47 billion from Dh1.43 billion reported for the last quarter of 2020. Bad debt provisions fell 44% to Dh203 million.

“Large-scale commercial momentum was sustained in the last quarter of the year and our pipelines remain healthy for 2022,” said Mohamed Abdel Bary, CFO of ADIB Group.

ADIB’s annual net profit also jumped 45% to MAD 2.33 billion, boosted by revenue growth and continued cost optimization.

12-month revenue to end-December increased 4% to Dh5.56 billion, helped by a 9% year-on-year increase in unfunded revenue to Dh2.22 billion and growth of 1% in income financed at 3 Dh. 34 billion.

“Our overall performance in 2021 reflected strong earnings and demonstrated our ability to successfully adapt to a new operating environment, while continuing to invest in talent and innovation to support future growth,” said Jawaan Al. Khaili, President of ADIB.

“Our strong performance in 2021 has allowed ADIB’s Board of Directors to recommend an increase in its cash dividend by 51.2%, representing 48.5% of net profit for the year.”

The lender continued to focus on cost discipline, which led to an 8% annual decline in operating expenses to 2.26 billion dirhams. Its cost/income ratio improved by 5.1 percentage points to 40.7%.

Impairments for the 2021 financial year decreased by 27% per year to reach 954 million dirhams, reflecting an overall improvement in economic conditions compared to the period affected by the pandemic. ADIB improved its provision coverage for non-performing financing, including collateral, by 9.3 percentage points to 120%.

The UAE’s economy has rebounded strongly from the pandemic-induced downturn in 2020, which plunged the global economy into its deepest recession since the 1930s. The Arab world’s second-largest economy has put in place fiscal and monetary stimulus measures worth 388 billion dirhams that supported the economic rebound.

The economic stimulus includes the central bank’s 50 billion dirham targeted economic support program (Tess) to boost liquidity in the banking and financial sector. Last month, the Central Bank of the United Arab Emirates announced that it would extend certain support measures by six months until mid-2022 to support the country’s continued economic recovery.

The CBUAE estimates the UAE’s economy is expected to grow by 4.2% in 2022, higher than its previous forecast of 3.8%. Emirates NBD has a more optimistic view and expects economic output to grow by 4.6%. Last week, Tokyo-based MUFG said the UAE’s economy is expected to grow 4.9% amid rising oil prices.

“Looking ahead, we believe the UAE economy has proven its resilience in recent years, and continued government investment in diversification initiatives will provide ADIB with opportunities to grow its banking business. ‘business and retail,’ Mr Al Khaili said.

“While the global economic situation is uncertain, we can mitigate volatility by remaining committed to maintaining our best practice approach to risk management.”

Credit quality and capital strength are central to ADIB’s success and it will maintain a “prudent approach” this year, he added.

Customer deposits over the 12-month period increased by 8% to Dh110 billion, gross funding increased by 7% to Dh93 billion and total assets jumped by 7% to Dh137 billion. Dh, he said.

ADIB, which added 116,000 new customers last year, knows the market has “good potential and we can still gain new market share”, said Nasser Al Awadhi, who took over as CEO of the ADIB group in November.

“I will also be focused on delivering on our five-year strategic plan by focusing on new product launches…attracting new business segments where we can grow profitably.”

The bank will also continue to invest in its digital transformation strategy to become a “digital first financial institution”. In August, ADIB launched its all-digital bank to target tech-savvy Generation Z.

Updated: February 7, 2022, 11:32 a.m.