Abu Dhabi Commercial Bank second-quarter profit jumps 23% amid growth momentum

Net interest income and proceeds from Islamic financing for the reporting period increased by 14%

Abu Dhabi Commercial Bank is the third-largest bank in the UAE by assets. Khushnum Bhandari / The National

Abu Dhabi Commercial Bank, the third-largest UAE lender by assets, reported an annual 23 per cent jump in its second-quarter profit as net interest and Islamic financing income surged amid continued economic momentum.

Net profit for the three months to the end of June rose to Dh1.93 billion ($525 million), ADCB said in statement to the Abu Dhabi Securities Exchange, where its shares are traded.

Net interest income and proceeds from Islamic financing jumped 14 per cent to Dh2.93 billion, the bank said.

“ADCB is experiencing solid growth momentum and continues to set new growth records,” ADCB’s group chief executive Ala’a Eraiqat said.

Non-interest income for the reporting period climbed 22 per cent year-on-year to Dh1.13 billion. The lender’s operating income surged 16 per cent on an annual basis to Dh4.06 billion.

“The bank’s strong market position and digital innovation are driving growth against a backdrop of the UAE’s robust economic fundamentals,” Mr Eraiqat said.

The UAE's economy has bounced back strongly from the Covid-19 slowdown on the back of higher oil prices and government measures to mitigate the impact of the pandemic.

The Arab world’s second-largest economy grew 7.6 per cent in 2022, the most in 11 years. It is expected to expand 3.9 per cent this year and 4.3 per cent in 2024, according to UAE Central Bank data.

Non-oil gross domestic product and oil output were estimated to have grown 6.6 per cent and 10.1 per cent, respectively, last year.

Non-oil GDP is expected to accelerate by 4.2 per cent this year and 4.6 per cent in 2024. Oil GDP is forecast to grow 3 per cent in 2023 and 3.5 per cent next year, the central bank data showed.

ADCB said the sharp rise in net interest income at the end of June was driven by “higher volumes and rising benchmark rates”.

Net interest margin, a measure of a profitability of a financial institution, was 16 basis points higher year-on-year at 2.73 per cent in the second quarter. ADCB's risk-adjusted NIM increased 20 basis points annually to 2.06 per cent at the end of the reporting period.

Banks in the UAE, like their regional peers, are benefitting from a rise in interest rates. Most central banks in the six-member economic bloc of GCC peg their currencies to the US dollar and follow the US Federal Reserve's interest rate moves.

The Fed has aggressively increased its benchmark policy rates over the past several quarters in its bid to bring inflation down to 2 per cent in the world's largest economy. It is expected to raise interest rates further at least twice this year.

With economic momentum continuing and interest rates still on the rise, the profitability of the four largest banks in the UAE is set to grow further this year, Moody's Investors Service said in March.

ADCB said its net income for the first six months of this year jumped 25 per cent to Dh3.81 billion. Net interest income at the end of the first half jumped 23 per cent to 5.78 billion.

Assets at the end of the first half of the year climbed to Dh521 billion, a 9 per cent year-on-year rise, while ADCB's total customer deposits climbed 8 per cent on an annual basis to Dh316 billion.

Net loans and advances increased 12 per cent to Dh272 billion for the reporting period as new credit extended totalled Dh38 billion in the first half of the year.

The bank said it also recorded strong growth in its customer base, adding a record of 260,000 new retail customers through its UAE operations and onboarding more than 3,500 new corporate clients.

“Amid global economic uncertainty, the UAE economy continues to benefit from consistent investment flows as well as robust consumer and business confidence,” Mr Eraiqat said.

“Our strong growth trajectory is reinforcing the bank’s financial position, enhancing resilience and creating significant shareholder value.”