FAB first-quarter profit at record high after Magnati stake sale

Net income for the first three months of the year climbed to $1.4bn

Strong core business at First Abu Dhabi Bank boosted the lender's first-quarter profit. Chris Whiteoak / The National

First Abu Dhabi Bank, the UAE’s largest lender by assets, more than doubled its first-quarter net income to a record high, driven by the sale of its majority stake in its payments business and improved performance of the bank’s core business.

Net profit attributable to shareholders for the three months to the end of March surged to Dh5.1 billion ($1.4bn), the lender said in a statement on Thursday to the Abu Dhabi Securities Exchange, where its shares are traded.

Quarterly income includes a Dh2.8bn net gain from the sale of a majority stake in its payments business Magnati to New York-listed Brookfield Business Partners. The sale announced in February valued Magnati at about $1.15bn.

FAB's first-quarter earnings beat Arqaam Capital's net profit forecast of Dh3.05bn. EFG Hermes had estimated its quarterly net income at Dh3.1bn.

Core underlying operational performance also boosted the bank’s profitability, which was driven by higher net interest income, a pick-up in fees and commissions and bigger contribution from Bank Audi Egypt to group revenue that helped in offsetting lower trading and investment income during the reporting period.

Sale of the Magnati stake crystallises “significant value for our payments business, paving the way for accelerated growth with a long-term strategic partner as we remain at the forefront of the region’s payments and digital agenda”, said Hana Al Rostamani, FAB group chief executive.

“Our core businesses performed well during a period of sustained buoyant economic activity in the UAE, capitalising on a healthy pipeline, and growing business and consumer confidence.”

FAB's total income jumped 66 per cent annually to Dh7.26bn while operating income for the reporting period climbed 2 per cent to Dh4.5bn. It recorded a 9 per cent rise on an underlying basis, excluding Magnati-related and real estate gains during the first quarter.

Impairment charges for loan losses dropped to Dh457 million at the end of March, from Dh470m recorded in the first three months of 2021, reflecting the continued economic recovery in the UAE. The bank's non-performing loans and its provisions coverage ratios came in at 3.8 per cent and 98 per cent, respectively.

The UAE economy bounced back strongly from the pandemic-driven slowdown last year and has continued to grow this year despite global geopolitical headwinds and pandemic-related uncertainties. The Arab world’s second-largest economy introduced fiscal and monetary stimulus measures worth Dh388bn, including the Dh50bn Targeted Economic Support Scheme, parts of which have been extended by the Central Bank of the UAE to mid-2022.

The country's economy grew 3.8 per cent last year, beating the World Bank's forecast of 2.1 per cent, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said earlier this month.

The International Monetary Fund and the UAE Central Bank expect the country's economic output to increase 4.2 per cent in 2022, while Japan's largest lender MUFG estimates it to grow 4.9 per cent. Emirates NBD forecasts growth of 5.7 per cent and Abu Dhabi Commercial Bank projects a 5.4 per cent expansion, supported by a sharp growth in the oil sector.

"Looking ahead and despite ongoing global uncertainty, we see significant momentum in the UAE, which FAB is very well positioned to support and capitalise on," Ms Al Rostamani said.

FAB's assets rose 4 per cent year on year to Dh981bn, but declined from the Dh1 trillion level at the end of December last year. Customer deposits rose 6 per cent to Dh600bn. Loans, advances and Islamic financing increased 15 per cent annually to Dh434bn.

Operating expenses during the reporting period climbed 15 per cent year on year to Dh1.5bn on the back of investments in digital and strategic initiatives and the continued inclusion of Bank Audi Egypt into the FAB group.

The bank is optimistic about mid to high single-digit growth this year, supported by the UAE's economic rebound and higher oil prices, although the Ukraine conflict is a concern, James Burdett, group chief financial officer, said in February.

The lender, which opened a representative office in Iraq in March as part of its geographical expansion, withdrew its non-binding offer to acquire a majority stake in Egypt's largest investment bank, EFG Hermes.

FAB cited “ongoing global market uncertainty and volatile macroeconomic conditions” as reasons for dropping this bid, it said in a statement at the time.

"Internationally, we continued to expand our presence into new, targeted markets. Egypt remains a strategically important market for the [FAB] group, and the integration of Bank Audi Egypt is on track for completion within the next few months," Ms Al Rostamani said.