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Group CFO's Review

Annual Report

“FAB achieved a record performance in 2021 with a 19% year-on-year growth in Group net profit to AED 12.5 billion, demonstrating the benefits of our diversified business model in a recovering economy”

Total assets exceeding

AED 1 trillion

AED 12.5 billion

net profit

FAB’s record performance in 2021 was achieved through solid momentum across our core businesses, positive jaws amidst continued investments, prudent risk management and a robust liquidity and funding profile throughout the year. The acquisition of Bank Audi Egypt positively contributed to the Group’s performance, while marking an important milestone in our plans to grow our strategic presence in a priority market.

Against an improving macroeconomic backdrop, FAB delivered a strong set of financial results during 2021, with total assets exceeding AED 1 trillion for the first time in the Group’s history, and with record revenues and net profits. This was driven primarily through revenue growth, with a significant expansion in non-interest income reflecting effective balance sheet deployment to drive higher Group returns, and with our core businesses generating strong growth on the back of the economic recovery.

Delivering record performance in 2021

The Group delivered net profits of AED 12.5 billion in 2021, up 19% over 2020, representing a return on tangible equity (RoTE) of 15.1%.

Total operating income grew 17% year-on-year to AED 21.7 billion, with non-interest income rising 59% to exceed AED 10 billion led by a strong trading performance and growth in fee-generating businesses. This helped to largely offset the 5% decline in net interest income, which primarily reflected the adverse impact from the 2020 rate cuts. Net Interest Margin was 1.50%, down 25bps from 1.75% in 2020.

Operating costs, excluding the impact of the acquisition of Bank Audi Egypt (BAE), rose 9% year-on-year to AED 5.8 billion, reflecting ongoing investments in products, people and technology, whilst maintaining cost discipline with Group cost-to-income ratio at an industry leading level of 26.4%.

Demonstrating prudent provisioning amidst improving macroeconomic conditions, net impairment charges were AED 2.7 billion, broadly flat year-on-year, translating into a cost of risk of 65bps.

Contributing 57% to the Group’s total revenue, Investment Banking produced an exceptional performance capitalising on improving sentiment and buoyant regional capital markets activity, leading to a 69% year-on-year growth in operating income. Corporate and Commercial Banking also saw sustained growth in balance sheet, with CASA balances rising 27% year-on-year, on the back of new strategic cash management mandates, and the rollout of innovative solutions to help deepen client relationships. Consumer Banking delivered strong sales acquisition across key products including mortgages and credit cards, capitalising on the easing of COVID restrictions and increased consumer spending, while Global Private Banking saw a 50% growth in Assets Under Management (AUMs) year-on-year, driven by enhanced product propositions.

International revenue and profits were up 26% and 88%, respectively, buoyed by the acquisition of BAE. The integration of FAB’s Egypt operations is well underway to be completed during 2022.

Maintained balance sheet strength across all key metrics

The Group preserved a robust foundation with a strong funding and liquidity profile, and healthy asset quality metrics, underpinned by the relief measures under the UAE Central Bank TESS programme and reflecting our prudent risk management approach.

Annual Report

“FAB enters 2022 with strong balance sheet fundamentals, a diversified business profile, and a clear strategic roadmap, positioning us well to accelerate our growth and transformation plans”

Total assets rose 9% to reach AED 1 trillion for the first time in the Bank’s history, driven by increased lending and a disciplined growth in our investment book.

Net loans, advances and Islamic financing grew 6% year-on-year reaching AED 410 billion, reflecting higher demand from government, GREs, corporate and retail customers, in addition to the positive impact of the inclusion of Bank Audi Egypt in the second quarter. Customer deposits rose to AED 614 billion, up 14% year-on-year or AED 74 billion, primarily led by a significant growth in CASA balances by AED 65 billion as we continued to attract cost-effective liquidity across our global network. As of end-December 2021, CASA balances represent 47% of total customer deposits, up from 41% the prior year. International loans and customer deposits were up 2% and 27% year-on-year respectively.

During 2021, FAB raised USD 4.7 billion (equivalent) of senior wholesale funding at a competitive pricing across multiple formats, completing several landmark transactions including our inaugural Euro public transaction, as well as our return to the public Sterling market where FAB remains the only MENA FI with public bonds outstanding.

We continued to focus on our Green and Sustainability-linked funding activity, issuing over USD 605 million equivalent in Green Bonds in 2021 across both public transactions and private placements. This brings the total Green Bonds outstanding to over USD 1.4 billion (equivalent) across ten issuances and four different currencies, and further cements FAB’s position as a regional and global leader in the Green Bond market.

FAB is also leading the MENA region in the transition to Alternate Reference Rates (ARR), issuing three SOFR-linked (Secured Overnight Financing Rate) Private Placements in 2021 and the only MENA issuer to have both SONIA (Sterling Overnight Index Average) and SOFR-linked bonds outstanding.

The Group maintained its high-quality loan book in 2021, reaffirming its position at the forefront of the UAE banking sector in terms of asset quality. Non-Performing Loans (NPLs) at end-2021 stood at AED 17 billion compared to AED 15.8 billion at end-2020, representing a NPL ratio of 4.0% at year-end, with provision coverage of 98%.

Strong capital generation and ongoing optimisation of risk-weighted assets helped to offset the impact of regulatory headwinds during 2021. As a result, the Group’s capital position remained strong and comfortably above regulatory requirements, with Common Equity Tier 1 (CET1) ratio at 12.4% and total CAR at 15.4%, post the proposed dividend for 2021.

Both, Return on Tangible Equity (RoTE) and Return on Risk Weighed Assets (RoRWA) improved year-on-year to 15.1% and 2.3% in 2021 as compared to 13.0% and 2.1% for 2020.

Building a future-proof organization

FAB enters 2022 with strong balance sheet fundamentals, a diversified business profile, and a clear strategic roadmap, positioning us well to accelerate our growth and transformation plans.

By deploying capital efficiently, and continuing to invest in talent, technology, and products, we will strengthen our competitive position across key segments and geographies, while enhancing productivity, efficiencies, and organisational agility.

Although we remain cautiously optimistic in the face of market volatility and the uncertainty arising from the pandemic, I am confident in our ability to capitalise on the significant opportunities presented by the positive economic outlook across the region, further complemented by tailwinds from future Fed rate hikes.

I look forward to building on FAB’s robust foundation, as we deliver the next phase of our growth and transformation journey, and as we remain firmly committed to sustain our track record of superior and sustainable shareholder returns.

James Burdett
Group Chief Financial Officer


First Abu Dhabi Bank

First Abu Dhabi Bank P.J.S.C

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