ABU DHABI COMMERCIAL BANK PJSC REPORTS FULL YEAR 2017

Abu Dhabi Commercial Bank PJSC (“ADCB” or the “Bank”) today reported its financial results for the year ended 31 December 2017.

Key highlights (31 December 2017)

Delivering sustainable growth and long term value for shareholders

(2017 vs. 2016)

Net profit of AED 4.278 billion was 3% higher
Total net interest income and Islamic financing income of AED 6.701 billion was up 8%
Operating income of AED 8.895 billion was up 5%, and operating expenses of AED 2.948 billion were also up 5%, which resulted in a stable cost to income ratio of 33.1% compared to 32.9% in 2016
Operating profit before impairment allowances of AED 5.948 billion was up 4%
Non-interest income of AED 2.194 billion was down 4%, whilst net fee & commission income of AED 1.507 billion was up 2%
Return on average equity of 15% for 2017

Resilient balance sheet; diversified loan growth and continued focus on growing CASA (Current and savings account) deposits

Total assets grew 3% to AED 265 billion and net loans to customers increased 3% to AED 163 billion
Deposits from customers increased 5% to AED 163 billion, low cost CASA deposits comprised 43.4% of total customer deposits, compared to 41.8% in 2016
Loan to deposit ratio improved to 100.1% from 101.9% in 2016

Remain well capitalised and liquid; solid foundation to comply with the evolving regulatory requirements

Capital adequacy ratio (Basel III) of 19.09% and common equity tier 1 (CET1) ratio of 13.96% compared to minimum capital requirements of 12% and 8.5% (including buffers) respectively prescribed by the UAE Central Bank
Liquidity coverage ratio (LCR) of 135% compared to a minimum ratio of 80% prescribed by the UAE Central Bank
Maintaining a strong liquidity ratio of 24.5%

Significant improvement in NPL and provision coverage ratios, healthy asset quality indicators

NPL ratio improved significantly to 2.1% from 2.7% as at 31 December 2016
Provision coverage ratio improved significantly to 162.9% from 129.9% as at 31 December 2016
Cost of risk was 0.81% compared to 0.83% in 2016
Collective impairment allowances were 1.79% of credit risk weighted assets, above the minimum 1.5% stipulated by the UAE Central Bank

Subject to approval by the UAE Central Bank and shareholders at the Annual General Meeting

As a result of the Bank’s strong performance in 2017, the Board of Directors has recommended a cash dividend of AED 0.42 per share, translating to a pay out of AED 2.183 billion, equivalent to 51% of net profit.

Commenting on the results, Eissa Mohamed Al Suwaidi, Chairman said:

“I am pleased to report that 2017 was a year of solid growth in a testing environment. ADCB achieved this by remaining true to its strengths; focusing on the UAE, putting the customer first, fostering a healthy culture, focusing on operational excellency and providing world-class standards of corporate governance and risk management practices.

We remain focused on the Bank’s proven strategy that has been tested relentlessly since the financial crisis in 2009. Our strategic pillars continue to yield strong results, driving sustainable growth and long-term value for shareholders. During 2017, the Board reviewed and reaffirmed the Bank’s strategy and added a new pillar on digitisation. As the global banking industry continues to evolve, we aim to leverage and build digital technologies to better serve our customers and to support growth and enhance operational efficiency.

Against this background of change, culture and governance are more critical than ever. Also in 2017, the Board commissioned an independent review of ADCB’s governance and compliance frameworks by leading global consulting firms, which judged its governance to be ‘strong and leading in the local market’ and compliance to be ‘robust and a leading player in the region’.

New regulations such as the implementation of Basel III and IFRS 9 continue to strengthen the banking sector, while the removal of subsidies and the introduction of new taxes are fundamentally altering the economy. With its solid foundation, strong capital position and conservative approach to risk management, ADCB is well prepared for these changes. We expect to see a gradual pickup in economic growth in 2018 and beyond and remain well-positioned to benefit from the long term growth prospects of the UAE economy.

The Bank remains committed to contributing to the development of the UAE banking sector and the country, and on behalf of the Board, I thank His Highness Sheikh Khalifa Bin Zayed Al Nahyan, the UAE President and Ruler of Abu Dhabi, His Highness Sheikh Mohamed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, His Highness Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs, and the UAE Central Bank for their continued support for ADCB and the future development of the UAE economy. I also extend my gratitude and appreciation of the Board to our shareholders, our valued customers, and the ADCB executive management team and employees for their continued dedication and commitment.”

Commenting on the Bank’s performance, Ala’a Eraiqat, Member of the Board and Group Chief Executive Officer said:

Built for continuing success

“2017 was a true test of ADCB’s ambition and discipline. The year brought challenges and headwinds, yet the Bank continued to deliver strong and consistent financial performance. Net profit for 2017 was AED 4.278 billion, up 3% year on year, whilst net profit for the last quarter of 2017 was AED 1.072 billion, up 7% year on year. The Bank also continued to perform exceptionally well in other key indicators, including a strong return on average equity of 15%.

Our balance sheet remains resilient with healthy and diversified growth in loans backed by a disciplined and selective lending strategy. Wholesale Banking loans were up 4% and Consumer Banking loans were up 2% over 2016, whilst total customer deposits were up 5% year on year. Our strong deposit gathering franchise coupled with our industry leading cash management platform continue to drive growth in CASA deposits. We are particularly proud of the significant increase in CASA deposits in 2017, which have grown by AED 5.8 billion to AED 70.7 billion at year end.

Having a robust and liquid balance sheet is a high priority and we believe that long term profitability cannot be achieved without it. With a capital adequacy ratio (Basel III) of 19.09%, CET1 ratio of 13.96%, and LCR of 135%, the Bank remains well capitalised and very liquid. Our investment portfolio increased 49% over 2016 to AED 49 billion, mainly driven by an increase in government bonds, whilst the Bank continued to be a net lender in the interbank markets every day in 2017, as it has been for many years.

We have also maintained our solid discipline to increase operational efficiency, while continuing to invest in our franchise, which resulted in a stable cost to income ratio of 33.1%, in line with recent years.

Each of our business segments demonstrated a strong underlying performance. Operating income for Consumer Banking Group was up 3%, Wholesale Banking Group was up 6% and Treasury and Investments Group was up 11% year on year. Islamic banking, whilst still a relatively new part of the business, offers one of the largest Islamic banking windows in the UAE and represents one of our fastest growing segments. In 2017, net Islamic financing assets were up 17% and Islamic deposits were up 23% year on year.”

Customer service remains a key differentiator, powered by digitization

“Following a two year program of planning, testing and training, we transformed and upgraded our core banking systems in 2017, migrating and consolidating many complex systems into a single, fast, agile and secure platform. We now have an unprecedented capability to deliver fast to market solutions and a solid foundation to enhance customer journeys. Our aim is to incorporate cutting edge technology that creates value for our customers by improving their experience. To underscore this commitment, we have made digitisation one of the key pillars in our strategic plan.

We launched a second uBank digital centre in 2017, helping customers to switch from traditional banking to paperless digital banking. Today 96% of our retail financial transactions occur electronically. On the corporate side we have actively migrated our clients from physical to electronic banking and in just two years, the proportion of clients using digital channels has risen from 38% to 80%.

We were also honoured with the Mohammed Bin Rashid Al Maktoum Innovation Award and the Oustanding Award for Business Innovation in 2017. These awards recognise our contributions in business innovation, which has resulted in a superior customer experience.

Over the past year, we continued to ensure that the voice of the customer comes in loud and clear in every part of the organisation. Our net promoter score (NPS)¹ is measured across the entire organisation and 2017 results have shown a positive trend across all dimensions of our service ambition.”

Looking forward

“2017 was year that laid important foundations for growth. Our decision to develop a formal digital strategy, backed by significant investment, will improve our operating model and increase our agility to better serve our customers. We enter 2018 with confidence. ADCB has a strong momentum and continues to gain market share. With our focus on enhancing customer journeys and drive for sustainable growth, we continue to deliver greater value for all our stakeholders.”