Islamic Bank of Abu Dhabi, the emirate’s largest Shariah-compliant lender, reported an 18% increase in first-quarter net profit as revenue rose amid cost control and continued economic recovery in the United Arab Emirates led to lower provisions for loan losses.
Net profit for the three-month period ending in late March rose to 715 million dirhams ($194.8 million) from a year earlier, ADIB said in a statement to the stock exchange on Wednesday. Abu Dhabi, where its shares are traded.
Revenue increased by 6% to Dh1.41 billion compared to the previous year, thanks to a 12% annual increase in unfunded revenue to Dh620 million and a growth of 1% in funded revenue to 789 million Dhs.
Provisions for bad debts decreased by 15% to 113 million dirhams, reflecting an overall improvement in economic conditions. The lender also improved provision coverage for non-performing financing, including collateral, by 9.2 percentage points to over 121%.
“ADIB delivered solid year-over-year growth, underscored by positive increases in our assets, revenues and net earnings, while maintaining stable growth in balance sheet, liquidity and capital ratios “, said Jawaan Al Khaili, President of ADIB.
“Our performance reflects strong momentum in our core businesses, an improved macroeconomic backdrop, and is the result of our strategic review which was conducted to unlock value, drive growth and prepare the bank for the future.”
The UAE’s economy rebounded strongly from the pandemic-induced slowdown last year and has continued its momentum this year despite global geopolitical headwinds and pandemic-related uncertainties. The second largest economy in the Arab world has introduced fiscal and monetary stimulus measures worth 388 billion dirhams which have supported the economic rebound.
The economic stimulus includes the 50 billion dirham Targeted Economic Support (Tess) program launched by the Central Bank of the United Arab Emirates to boost liquidity in the banking and financial sector, parts of which have been extended until mid- 2022.
The country’s economy grew 3.8% last year, beating World Bank forecasts of 2.1%, Sheikh Mohammed bin Rashid, vice president and ruler of Dubai, said earlier this month -this.
Economic output is expected to grow 4.9% in 2022, according to Japan’s largest lender MUFG, while Emirates NBD forecasts 5.7% growth and Abu Dhabi Commercial Bank estimates 5.4% expansion , supported by a sharp rise in the oil sector. .
The country’s non-oil economy is expected to grow 3.9% this year, according to the central bank, while Emirates NBD estimates a 4% rise and the ADCB forecasts a 3.4% expansion.
“Looking ahead, we do not believe global macroeconomic challenges will hold back local recovery. We see the UAE economy continuing to improve,” Mr. Al Khaili said.
“We remain confident that we are well positioned…to deliver strong results well into the future.”
The lender remains focused on cost discipline which led to a 2% annual decline in operating expenses to 577 million dirhams. The bank’s cost/income ratio improved by 3.4 percentage points to 40.9%.
ADIB’s total assets increased by 6% year-on-year to reach Dh139 billion, thanks to a 9% jump in gross funding to Dh95 billion.
Customer deposits in the first three months of the year increased by 8% per year to reach 111 billion dirhams. The lender maintained a strong capital position with a Common Equity Tier 1 capital ratio of 12.7% and a total capital adequacy ratio of 18.1%.
“We had a very successful start to 2022 as we continued to see healthy underlying momentum across most of our businesses,” said group chief executive Nasser Al Awadhi.
“We will continue to identify new areas of growth, invest our resources in them and improve our infrastructure and risk management and controls.”
Updated: April 27, 2022, 1:09 p.m.