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KHALEEJ TIMES, Wednesday, Jul 29, 2020 | Zul Hijjah 8, 1441

FAB's H1 profit slips 24% on higher impairment charges

Emirates: First Abu Dhabi Bank (FAB), the UAE's largest lender, on Tuesday reported that its first-half 2020 net profit fell 24 per cent to Dh4.8 billion, driven mainly by an increase in impairment charges and lower revenues, partly mitigated by cost reduction.

In a show of resilience, in the second quarter, FAB recorded a net profit of Dh2.4 billion, which was flat compared to the first quarter, thanks to its conservative business approach as higher impairment charges were offset by revenue growth and cost management initiatives, the bank said in a statement.

André Sayegh, FAB group CEO, said strategic actions have enabled the bank to further strengthen its balance sheet, with a strong growth in customer deposits despite significant headwinds.

"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 as a testament to our long-standing commitment to our global investor base."

"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," said Sayegh.

While the half-year operating income stood at Dh9.4 billion, compared to Dh10.1 billion in the same 2019 period, operating cost dropped three per cent to Dh 2.6 billion and impairment charges rose to Dh1.8 billion, reflecting the challenging macro-economic environment.

Total assets surged 12 per cent to Dh866 billion with loans and advances rising five per cent to Dh385 billion year-on-year. Customer deposits grew 12 per cent year-on-year to Dh519 billion with current account and savings account balances remaining at a record high of Dh196 billion, FAB said.

James Burdett, group chief financial officer, said the first half profit and revenues indicate 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," said Burdett.

He said the bank's 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."

Liquidity coverage ratio improved to 129 per cent, demonstrating a strong liquidity and funding profile, while non-performing loan ratio was at 3.9 per cent.

Common Equity Tier 1 (CET1) ratio strengthened to 13.6 per cent, while Tier 1 capital and total capital ratios also remained comfortably above Basel III regulatory requirements at 15.2 per cent and 16.4 per cent, respectively, the bank said.

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