ADCB H1 profit slumps 38% due to NMC, Finablr impairments
Abu Dhabi Commercial Bank's (ADCB) first-half net profit declined 38.6 per cent to Dh1.43 billion, compared to Dh2.33 billion in the same period last year due to massive impairments booked related to NMC Health, Finbalr and associated companies.
Impairment charges jumped to Dh2.551 billion as compared to Dh1.174 billion, as impairment related BR Shetty-owned NMC Health Group, Finablr and associated companies stood at Dh1.231 billion at the end of H1 2020, which includes Dh159 million recorded in the second-quarter.
ADCB has the highest exposure to the troubled firms, estimated at Dh4.27 billion. The lender is also reportedly in the process of reducing its workforce by 400 employees, as Covid-19 takes a toll on the UAE banking sector.
ADCB's operating profit increased two per cent year-on-year to Dh4.066 billion, while operating expenses (including integration costs) decreased 12 per cent to Dh2.351 billion in H1 2020.
Its second-quarter net profit increased to Dh1.22 billion against Dh1.17 billion.
"A robust balance sheet, as well as disciplined financial and risk management, ensured the Bank remained in a position of strength to serve the interests of its stakeholders through this challenging period," said Khaldoon Al Mubarak, chairman of ADCB Group.
Ala'a Eraiqat, group CEO of ADCB, said the bank recorded Dh411 million of cost synergies during the first-half of 2020. "We remain on track to achieve Dh750 million of synergies this year and the full run-rate target of Dh1 billion in 2021," he added.
Based on information on revenue generation, cash flows and asset values received from the joint administrators and advisers, Eraiqat believes that the provisions of Dh1.231 billion taken to-date for the NMC Health Group and Finablr are sufficient.
Under the UAE Central Bank's Targeted Economic Support Scheme, ADCB has extended support to over 53,000 customers worth Dh8.3 billion as of June 30, 2020.
Shareholders' equity stood at Dh53 billion in Q2 2020, up from Dh49 billion at the end of Q1 2020.