Abu Dhabi Commercial Bank’s Q3 profit jumps 25% to $432m

Net interest income as well as income from Islamic financing rises during the period

Abu Dhabi Commercial Bank's net interest income during the third quarter rose about 20 per cent to more than Dh2bn. Chris Whiteoak / The National

Abu Dhabi Commercial Bank, the UAE’s third-largest lender by assets, reported a 25 per cent jump in its third-quarter profit as net interest income and income from Islamic financing and investing products rose as the economy continued to rebound from the coronavirus pandemic.

Net profit attributable to equity holders of the parent for the three months to September 30 climbed to Dh1.59 billion ($433 million), the lender said on Monday in a filing to the Abu Dhabi Securities Exchange, where its shares are traded.

Net interest income during the period rose about 20 per cent to more than Dh2bn and income from Islamic financing and investing products also rose more than 17 per cent to Dh612m. Net fees income and commission income as well as trading income also increased during the period.

Impairment charges for the three-month period rose about 7 per cent annually to Dh636.1m, according to the statement.

“The bank has continued on a strong growth trajectory, with disciplined implementation of our strategy helping us to navigate an increasingly challenging global economic environment, marked by inflationary pressures and rising interest rates,” ADCB’s group chief executive Ala’a Eraiqat said.

The International Monetary Fund this month cut its growth forecast for 2023 and warned of a cost of living crisis as the global economy continues to be affected by the war in Ukraine, broadening inflation pressures and a slowdown in China.

The fund maintained its global economic estimate for this year at 3.2 per cent but downgraded next year's forecast to 2.7 per cent — 0.2 percentage points lower than the July forecast.

The UAE economy, however, continued to recover from the pandemic and is expected to grow 5.4 per cent and 4.2 per cent in 2022 and 2023 respectively, according to the latest projections from the UAE Central Bank.

Emirates NBD has forecast that the economy will expand 7 per cent in 2022, due to a higher estimate for the energy industry's output and the “robust growth” of its non-oil sector, setting up the country for its fastest annual expansion since 2011, when output grew by 6.9 per cent.

Higher interest rates and a broad-based recovery of the UAE’s economy from the Covid-19 pandemic-induced slowdown are expected to boost the profitability of the UAE lenders, Egyptian investment bank EFG Hermes recently said.

The expected 300-basis points (bps) rise in US interest rates will drive up the net interest income of lenders, the bank said in a report on the UAE banking sector.

A 25 bps rate increase translates into a net interest margin expansion of about 5 bps and earnings per share growth of 3 per cent for lenders.

“We remain positive on UAE banks going into year end,” EFG Hermes analysts Shabbir Malik and Omnia Kadry said.

ADCB’s nine-month profit rose 22 per cent to Dh4.65bn on the back of higher interest income and income from Islamic financing investing products.

The bank’s net loans and advances to customers were Dh251bn as of the end of September, up 3 per cent over December last year. Customer deposits rose 14 per cent annually to Dh302bn during the period.