AN INCREASE OF 13% QUARTER ON QUARTER, AND 9% YEAR ON YEAR

– Abu Dhabi Commercial Bank PJSC (“ADCB” or the “Bank”) today reported its financial results for the first quarter of 2018 (“Q1’18”).

Financial highlights (31 March 2018)

• Robust underlying performance

(Q1’18 vs. Q1’17)

• Net profit of AED 1.207 billion was up 9%
• Total net interest income and Islamic financing income of AED 1.828 billion was up 12%
•  Net interest margin increased to 3.19% from 2.86% in Q1’17
• Operating income of AED 2.354 billion was up 6%,
• Operating profit before impairment allowances of AED 1.584 billion was up 6%
• Gross impairment charge of AED 431 million was 15% lower
• Non-interest income of AED 526 million was 12% lower, mainly on account of lower trading income from dealing in foreign currencies and an increase in fee and commission expenses coupled with lower loan processing fees
• Cost to income ratio improved to 32.7% in Q1’18 from 33.2% in Q1’17, remaining within our target range

• Outpacing the industry on customer deposit growth, with continued focus on CASA¹ deposits

• Total assets grew 1% to AED 267 billion and net loans to customers remained unchanged at AED 163 billion over 31 December 2017, on account of significant repayments (UAE banking industry average grew 0.6%*)
• Deposits from customers increased 2% to AED 167 billion over 31 December 2017, whilst the UAE banking industry average contracted 0.4%*.
• CASA deposits increased by AED 2 billion to AED 73 billion over 31 December 2017, and comprised 43.6% of total customer deposits compared to 43.4% as at 31 December 2017
• Customer deposit growth outpaced loan growth, resulting in an improved loan to deposit ratio of 97.6% compared to 100.1% as at 31 December 2017

• Strong capital and liquidity position and solid foundation to comply with evolving regulatory requirements
• Capital adequacy ratio (Basel III) of 17.48% and common equity tier 1 (CET1) ratio of 12.37% remained well above the UAE Central Bank minimum capital requirements of 12.75% and 9.25% (including buffers), post dividend payout of AED 2.2 billion and IFRS 9 adjustment of AED 1.36 billion
• Liquidity coverage ratio (LCR) of 141% compared to a minimum ratio of 90% prescribed by the UAE Central Bank
• Maintaining a strong liquidity ratio of 25.6%

• Stable asset quality indicators

• NPL and provision coverage ratios of 2.2% and 179.7% compared to 2.1% and 162.9% as at 31 December 2017
• Cost of risk improved to 0.71% from 0.81% as at 31 December 2017
• Stage 1 and 2 expected credit loss allowances were 2.88% of credit risk weighted assets, above the minimum 1.5% stipulated by the UAE Central Bank

¹ CASA: Current and Savings account

* Latest data available from the UAE Central Bank up to February 2018

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

“The Bank had a very good start to the year, reporting strong top and bottom line growth for the first three months of 2018, with a net profit of AED 1.207 billion, an increase of 13% quarter on quarter and 9% year on year. Our businesses continue to perform well and our return on average equity of 16.8% continues to be at industry leading levels.

In the first quarter of 2018, ADCB has successfully transitioned to the IFRS 9 accounting standard, following the smooth transition to Basel III in the last quarter of 2017, reflecting the Bank’s strong ability to comply with the evolving regulatory environment.

Amidst a more controlled regulatory environment, growing competition and volatility in the markets, the Bank successfully launched and priced a USD 750 million RegS/144A bond offering in March 2018, marking the Bank’s first USD public debt issuance since 2015 and first US 144A compliant market issuance since 2009. The strong demand for the issuance was a testament to the continued growth in investor appetite for ADCB’s bonds.”

Our results reflect our ability to adapt to the changing environment and our performance has once again demonstrated our stability and resilience.”

Deepak Khullar, Group Chief Financial Officer, commented on the results:

“2018 has been a good start for the Bank, with significant progress made in several key areas including, increased margins, continued improvement in our funding profile (with rising CASA balances), maintained a robust liquidity profile and capital position despite the strengthening regulatory environment and improved cost of risk on account of lower impairment charges within a challenging operating environment. Our cost base continues to be efficiently managed, with a cost to income ratio of 32.7%, compared to 34.6% in Q4’17, while we continue to reinvest in our businesses to drive further efficiencies, with a focus on accelerating the Bank’s digital transformation.

Net interest margin improved to 3.19% in Q1’18 from 2.86% in Q1’17, an increase of 33 basis points year on year, mainly on account of rising benchmark rates. Gross fee and commission income of AED 507 million was up 2% year on year, primarily on account of card related and other fee income.

The Bank’s efforts to expand its secured loan book to build resilience in the asset portfolio is now yielding results, with an improved cost of risk of 71 basis points, compared to 78 basis points in March’17.

Despite the healthy drawdown levels seen in both Wholesale and Consumer Banking, net loans to customers remained flat due to significant repayments over the course of the first quarter of 2018. This resulted in an improved loan to deposit ratio of 97.6% as at 31 March 2018.”