Abu Dhabi Commercial Bank PJSC (“ADCB” or the “Bank”) today reported its financial results for the third quarter of 2023 (“Q3’23”).
Record quarterly net profit driven by solid momentum in loan growth and increased net interest margin. The UAE economy remains resilient with strong long-term fundamentals and ADCB is well-positioned to benefit from robust consumer and business confidence.
Key highlights – Q3’23
• Net profit of AED 1.942 bn was steady QoQ and increased 22% YoY
• Net interest income of AED 3.179 bn increased 8% QoQ and 24% YoY
• Non-interest income of AED 1.054 bn declined 7% QoQ and rose 11% YoY
• Operating income of AED 4.233 bn increased 4% QoQ and 21% YoY
• Cost to income ratio improved 210 basis points YoY to 33.3%
• Operating profit before impairment charge of AED 2.822 bn increased 3% QoQ and 24% YoY
Key highlights – 9M’23 vs. 9M’22
• Net profit of AED 5.752 bn increased 24%
• Net interest income of AED 8.961 bn increased 23%
• Non-interest income of AED 3.244 bn increased 22%
• Operating income of AED 12.205 bn increased 23%
• Cost to income ratio improved 360 basis points YoY to 32.5%
• Operating profit before impairment charge of AED 8.243 bn increased 30%
Strong net loan growth of 10% in 9M’23, and significant growth in CASA deposits, up AED 6.8 bn sequentially
• Total assets of AED 537 bn increased 10% from Sep’22 and were up 8% YTD
• Net loans of AED 284 bn were 13% higher from Sep’22 and up 10% YTD. New credit extended totalled AED 52 bn in the first nine months of the year
• Total customer deposits of AED 329 bn were 9% higher from Sep’22 and up 7% YTD. CASA (Current Account and Savings Account) deposits were AED 157 bn at September-end, up 4.5% (AED 6.8 bn) in the quarter, and comprised 48% of total customer deposits
• Capital adequacy and CET1 ratios were 16.16% and 13.46% respectively as at 30 September 2023
• Liquidity coverage ratio (LCR) of 130.4%
• Cost of risk was 73 bps for Q3’23 and for 9M’23, remaining within our guidance, while NPL ratio improved to 4.82% (5.36% including POCI) from 5.10% in Jun’23. Provision coverage ratio was 91.4% and, when including collateral, was 148% as at 30 September 2023
ALA’A ERAIQAT
Group Chief Executive Officer
ADCB is delivering notable growth this year, with all our major businesses performing effectively on our corporate strategy. Nine-month net profit increased 24% to AED 5.752 billion, with a strong return on average tangible equity of 14.3%.
In our core market, the UAE, the economy has remained resilient in the face of global headwinds. ADCB is leveraging its strong franchise and digital proposition to serve a growing customer base amid robust consumer and business confidence. Looking into 2024, we remain confident in the country's fundamentals and continued investment in its economic diversification strategy.
In this context, the Bank has extended AED 52 billion of new credit year to date, helping to drive substantial net loan growth of 10% in the period.
Building on its recently rebranded proposition, the Corporate and Investment Banking Group has experienced strong credit demand across diverse sectors, particularly GREs, energy, trading and financial institutions. The business is committed to serving the mid-size corporate and SME segment, with over 1,400 new clients onboarded in the third quarter.
New retail credit was 43% higher year on year in the third quarter, with disbursement of new personal loans at its highest ever level, and strong demand also experienced for mortgages and auto loans. The Retail Banking Group set a fresh quarterly record of 167,000 new customers(1), with over 80% welcomed to the Bank through digital channels. Furthermore, the card business also reported its best ever quarter, with over 67,000 new primary cards issued.
Meanwhile, ADCB Private has rapidly become a leader in private banking in the UAE, expanding its customer base by a third this year.
As our business expands, we are investing further in the Bank’s capabilities and people.
ADCB continues to make a substantial contribution to the UAE’s progressive Emiratisation agenda and UAE nationals now represent 40% of the Group’s employee base. We welcomed over 200 new Emirati colleagues in the first nine months of 2023, including into senior positions in core business areas, as well as digital partnerships, compliance, finance, sustainability, credit risk and liquidity management. It is rewarding to see high performers achieving career progression, supported by detailed learning and development programmes, with over 800 UAE nationals being promoted this year.
In this ‘Year of Sustainability’ in the UAE, which is hosting the COP28 global climate conference, ADCB is moving forward with a number of initiatives to support the country’s vision for an inclusive, net zero economy.
Through the issuance of a second green bond in September, we continue to channel global capital into clean energy and sustainable projects in the UAE. In parallel, our businesses are making advancements on product innovation and engagement, continuing to align our substantial financing capabilities with the social and environmental priorities of our customers.
While climate change is the major global challenge of our age, we are inspired by the UAE’s ambition for meaningful transformation. We see investment and participation in the emerging green economy as a major opportunity, and ADCB will work closely with our communities, customers and other stakeholders to support the country’s agenda.
DEEPAK KHULLAR
Group Chief Financial Officer
We are pleased to report a strong third-quarter operating and financial performance, with net profit increasing 22% year on year to AED 1.942 billion.
This was driven by accelerated expansion in net interest income, which was up 8% sequentially and 24% year on year, powered by significant and broad-based loan growth in a rising rate environment. Net interest margin has increased progressively over the last twelve months and was up 14 basis points quarter on quarter.
Credit conditions for both corporate and retail banking have been positive, and ADCB’s net loan growth year to date of 10% has surpassed our medium-term guidance of mid-single digit growth.
The Bank continues to expand its loan book, and enhance the diversification and risk profile of the portfolio. Lending to GREs has increased to 24% from 23% at the end of 2022, while exposure to real estate investment has decreased to 19% from 22%.
Our efficiency metrics continued to improve even as the Bank invested further in the growth of the business. The cost to income ratio for the first nine months of 2023 declined by 360 basis points year on year to 32.5%, in line with medium-term guidance.
Amid rising benchmark rates, the Bank has managed cost of funds effectively. Our strong franchise has supported a AED 6.8 billion rise in CASA deposits during the third quarter. We have also launched sustainable CASA deposits for corporate clients as part of the Bank’s broader ESG agenda.
Updated guidance for full year 2023 amid strong performance
Given the Bank's strong performance, we are updating our guidance on certain key metrics. We expect return on average tangible equity in the range of 14% to 15%, driven by net loan growth of between 10% to 12%, and net interest margin of approximately 2.80%. The Bank is also targeting a 50% cash dividend payout on this year’s earnings, supported by its robust capital position.
This year, ADCB has made strong progress across all aspects of sustainability, with a particular focus on advancing our climate strategy.
Green bonds have become an integral part of our funding strategy, and our second issuance received strong demand from regional and global investors in September. The Bank is implementing best practice disclosure in this area, with our inaugural Green Bond Report providing detailed information on the allocation and impact of our Eligible Green Loan portfolio.
To support the UAE’s Net Zero by 2050 Strategic Initiative, ADCB is finalising an enhanced climate framework. Having completed a baseline assessment of financed emissions, we are now prepared to make clear and credible commitments on climate. Our immediate priority is to develop a suite of green products to support our customers in their transition journey.
Across all fronts, the Bank is operating at an accelerated pace and continuing to strengthen its financial position. We are delivering on all guidance metrics, from loan growth, to efficiency and cost of risk. This is creating substantial shareholder value and enhancing long-term organisational resilience.
