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29 March 2024

ADCB beats estimates despite 12.3% Q2 profit drop

Published
By Reuters

Abu Dhabi Commercial Bank (ADCB) beat analysts' forecasts despite posting a 12.3 per cent drop in second-quarter net profit on Monday, weighed down by the need to set aside more cash for bad debts.

It is the third Abu Dhabi bank to report weak earnings.

Abu Dhabi's third-largest bank by assets made a net profit attributable to shareholders of Dh1.13 billion ($307.7 million) in the three months to June 30, compared to Dh1.28 billion in the same period a year ago.

Four analysts polled by Reuters had forecast a net profit for the quarter of Dh1.07 billion.

The bank's earnings were dragged down by a steep rise in impairment charges, with Dh350.9 million set aside to cover bad debts in the second quarter compared to Dh83.9 million in the same three months last year.

Net interest income from traditional banking operations also fell 1 per cent on the same three months of last year to Dh1.53 billion.

These factors offset a 24 per cent increase in non-interest income, such as earnings from fees, to Dh616.7 million. The bank noted, in relation to the first half of the year, that fees in its retail banking business had grown strongly on the back of higher loan volumes and credit card spends.

"We remain prudent in our growth strategy and continue to focus on maintaining a diversified funding base while liquidity remains a top priority," Chief Executive Ala'a Eraiqat said in the statement.

The bank's average net interest margin in the first half of the year fell to 3.11 per cent from 3.47 per cent in the corresponding period of 2015, reflecting the lower amount the bank earned on its lending versus how much it paid out to initially secure the funds.

Both the total amount of loans and deposits the bank held on June 30 were up 13 per cent year-on-year to Dh154.9 billion and Dh149.1 billion, although loans had been growing at a faster rate than deposits in the first half of 2016 at 6 per cent and 4 per cent respectively.