FAB reports First Half 2020 Group Net Profit of AED 4.8 Billion

Second quarter net profit at AED 2.4 Billion, flat compared to the first quarter, with operating profits up 11%

First Abu Dhabi Bank (FAB), the UAE’s largest bank and one of the world’s largest and safest financial institutions, reported its financial results for the first half ended 30 June 2020 today.

The bank continued to deliver a resilient performance against an unprecedented global backdrop arising from the COVID-19 pandemic, a low interest rate environment, as well as volatile market conditions. Our resilience and conservative business approach have resulted in a net profit of AED 2.4 Billion in the second quarter of 2020, which was flat compared to the first quarter as higher impairment charges were offset by revenue growth and cost management initiatives. Net profit for the first six months of 2020 was AED 4.8 Billion, down 24% compared to the same period in 2019, driven mainly by an increase in impairment charges and lower revenues, partly mitigated by cost reduction. The Bank’s balance sheet strengthened further during the period with improvements in liquidity and capital ratios, and resilient asset quality metrics. FAB continued to leverage its scale and inherent strength to provide relief to customers in line with the UAE Central Bank Targeted Economic Support Scheme (TESS), and the bank’s own programmes.

A resilient performance despite significant headwinds

• First Half 2020 Group Net Profit at AED 4.8 Billion, compared to AED 6.3 Billion in the first half of 2019
• Second quarter Group Net Profit at AED 2.4 Billion, was flat compared to Q1’20, with operating profits up 11%
• Annualised Earnings Per Share (EPS) at AED 0.84, from AED 1.12 in the prior year comparative period
• Half year operating income at AED 9.4 Billion, compared to AED 10.1 Billion in the first half of 2019
• Operating costs at AED 2.6 Billion, reduced 3% year-on-year
• Cost-to-income ratio (ex-integration costs) was 27.3%, compared to 26.1% in the first half of 2019, while Q2’20 cost-to-income ratio improved to 25.5% from 29.1% the previous quarter
• Impairment charges increased to AED 1.8 Billion, reflecting the challenging macro-economic environment,
  translating to an annualised cost of risk of 87 bps, up from 49 bps in the first half of 2019

Strengthened liquidity and capital position, and resilient asset quality

• Total assets at AED 866 Billion, up 12% year-on-year
• Loans and advances at AED 385 Billion, up 5% year-on-year and 1% from March-end 2020
• Customer deposits at AED 519 Billion, up 12% year-on-year, and 4% from March-end 2020, with Current Account and Savings Account (CASA) balances at a record high of AED 196 Billion
• Liquidity Coverage Ratio improved to 129%, demonstrating a strong liquidity and funding profile
• Non-Performing Loan ratio at 3.9%, provision coverage ratio at 91%
• Common Equity Tier 1 (CET1) ratio strengthened to 13.6%, while Tier 1 capital and total capital ratios also emained comfortably above Basel III regulatory requirements at 15.2% and 16.4%, respectively

Commenting on the results, André Sayegh, FAB Group Chief Executive Officer, said:

“FAB delivered a resilient performance in the first half of 2020 in a period of unprecedented challenges. Our strategic actions have enabled us to further strengthen our balance sheet, with a strong growth in customer deposits demonstrating FAB’s unique position as an aggregator of regional and global liquidity, and our flight-to-safety status in such volatile market conditions. Our capital position remains solid and comfortably above regulatory requirements, even as we proceeded with the repayment of our Additional Tier 1 capital notes in June, testament to our longstanding commitment to our global investor base.

During the second quarter, we focused on providing financial relief to our customers in line with the UAE Central Bank TESS program, as well as through the Bank’s own initiatives, while ensuring prudent lending and diligent risk management, and we are committed to continue to support our clients and the broader UAE economy through these unpredictable times. We also accelerated our digital transformation journey, launching a number of digital-first initiatives aimed at enhancing customer experience and convenience across a broad range of our products and services. The effective launch of the e-payment platform Abu Dhabi Pay was also a key milestone, underlining FAB’s strategic role in enabling digital sustainability in the emirate through innovative payment solutions.

In recognition of our achievements and exceptional track record, FAB received 3 prestigious awards at Euromoney’s Awards for Excellence 2020, including ‘Middle East’s Best Bank for Financing’, ‘Best Investment Bank in the UAE’, and ‘Middle East’s Best Bank for Corporate Responsibility’, acknowledging our regional leadership in addressing Environmental, Social, and Governance (ESG) issues.

There are many in our wider community who deserve recognition for their actions over recent months in the fight against COVID-19, and we are thankful to our leadership for their wise and decisive actions, as the UAE continues to rank amongst the top countries in the world in its response to the pandemic. Looking forward, FAB will embrace change and opportunity as the world enters a new normal, and as we remain firmly focused on delivering long term value for our customers, shareholders and the wider community.”

James Burdett, Group Chief Financial Officer, FAB, said:

“The Group generated a net profit of AED 4.8 Billion in the first half of 2020 with total revenues at AED 9.4 Billion, which is a strong result in a period of unprecedented social and economic challenges and market volatility, compounded by historically low interest rates. Our core businesses delivered a resilient operating performance despite these headwinds, demonstrating the benefit of our diversified business model and our market-leading capabilities. In the context of a challenging and uncertain environment, we continued to build our provision buffers, leading to a substantial increase in impairment charges, while our high-quality portfolio and conservative asset mix are key differentiators. Our ongoing focus on cost discipline also led to significant savings, with various initiatives underway to create future efficiencies. Our liquidity and capital ratios further strengthened during the period, underpinning our robust foundation as we continue to support our core clients, and as we expect a pickup in demand in the second half of the year. While economic activity is gradually resuming, we remain cautious as the shape and timing of the recovery remain uncertain.”

Supporting customers and the community during COVID-19

FAB has taken, and is continuing to take, decisive measures to support employees, customers, and the UAE community at large.

During the last quarter, relief measures were extended to our retail, SME and corporate customers in the form of payment deferrals of over AED 8.0 Billion on interest and principal.

In addition, FAB has also offered extensive support to the community during the COVID-19 outbreak. In a further recent initiative with the Emirates Red Crescent, some 500 meals were distributed to people in need in Al Ain, and the bank also partnered with the organisation on its Eid Al Adha campaign.

The digital-first mindset and policies adopted in the bank’s response to the effects of COVID-19 has also initiated fresh thinking on flexible working policies at FAB and how we can optimise the strengths of our talented teams and continue to provide excellent service to our customers and stakeholders. For FAB, technology has been, and will continue to be, utilised as a key differentiator.

FAB will continue to assess new ways to provide further assistance and practical support to the community as we collectively navigate the challenges of COVID-19, together.