ADCB net profits climbs 36% despite challenging environment

Abu Dhabi Commercial Bank (ADCB) on Sunday reported 36 per cent year-on-year growth in net profit and said the bank showed a resilient performance in low interest rate environment.

In a statement, the bank said its nine-month net profit climbed to Dh3.8 billion during the January-September 2021 compared to Dh2.8 billion in the same period last year. However, third-quarter net profit declined by seven per cent to Dh1.28 billion from Dh1.4 billion in the same quarter last year. Net interest income of Dh2.179 billion for July-September 2021 quarter was six per cent lower and net interest margin (NIM) decreased 26 basis points sequentially to 2.34 per cent. This was mainly attributable to higher interest in suspense reversals and fair value unwinds in Q2 pf 2021.

Revenue mix

The group continues to diversify its revenue mix, with its nine-month non-interest income this year increasing 19 per cent to Dh2.369 billion, representing 26 per cent of operating income, up from 21 per cent in the same period last year.

Net fees and commission income of Dh1.38 billion in January-September 2021 was 24 per cent higher due to a 69 per cent increase in card related fees and a 26 per cent rise in loan processing fees. In July-September 2021 quarter, non-interest income was Dh726 mil-lion, up three per cent and declined 14 per cent sequentially mainly on account of higher loan processing fees in second quarter of 2021 due to large corporate repayments

ADCB has continued to manage costs prudently, with operating expenses decreasing eight per cent and four per cent sequentially to Dh1.013 billion in the third quarter of 2021. The bank is on track to exceed its Dh1 billion merger cost synergy target for 2021, having realised synergies of Dh984 million in nine months of 2021, with Dh322 million recorded in the third quarter.

The acceleration of digital transformation has resulted in an increase in the number of subscribers to the bank’s mobile banking app to over 800,000 customers as at September 30, 2021, up 27 per cent. Over 940,000 customers are now subscribed to either internet or mobile internet banking.

NMC Group restructuring

ADCB said it is expected to receive ‘exit instruments’ in a $2.25 billion ‘Holdco facility’, a debt claim sized to the expected future value of NMC Group following approval of the troubled compa-ny’s debt restructuring on September 1, 2021.

“All net proceeds from a future sale of the business will return to holders of exit instruments, including any value in excess of Dh2.25 billion. There are also further possibilities to benefit from potential recoveries from the company’s ongoing litigation.

“Participants in exit instruments will receive a cash margin of 0.5 per cent per annum, as well as payment in kind of two per cent per annum (paid along with principal), which will accrue from the date of the signing of the facility document,” ac-cording to the bank statement.

ADCB is expected to receive approximately 39 per cent of the transferable exit instruments. The bank participated in a $325 million “Administration Funding Facility” (AFF), which granted ele-vation and conversion rights in the new Holdco Facility.

“The AFF is expected to be repaid using proceeds from the sale of non-core assets of NMC Group. The bank will appoint three of the seven non-executive directors that participants in the exit instruments will select to the new Holdco’s board of directors,” the statement said .

— muzaffarrizvi@khaleejtimes.com