United Arab Emirates: The National Bank of RasAl-Khaimah (“RAKBANK”)has announced a consolidated Net Profit of AED306.6 million for H1 2020, a decrease of 44.7%compared to the first half of 2019 due to higher IFRS 9 provisions that a reset aside as precautionary measures to combat the possible economic impact of COVID-19. Total Income of AED 1.9 billion for H1 2020 was down by 4.5% on a year-on-year basis.As at 30 June2020, Total Assets stood at AED 54.3 billion, decreasing by 5.1% year-on-year and by 4.9% year-to-date.
RAKBANK CEO, Peter England,commented: “While the increased IFRS 9 provisions at RAKBANK have weighed down on our net profit, our overall performance for the 1st halfwas solid.In fact, if we exclude the IFRS overlay set aside for potential future bad debts our operating profit including ordinary provisions was very similar to the 1st half of 2019.Spending habits of consumers and businesses overall have been subdued which is reflected in the Bank’s Gross Loans and Advances, which contracted by 2.2% year-on-year. That said, RAKBANK witnessed an increase in CASA deposits by AED 1.0 billion compared to 31 December 2019 which is indication of changing behaviour of clients, as well as the Bank’s operational resilience during this crisis.”
Performance highlights: H1 2020
6-month Net Profit of AED 306.6 million decreased by 44.7% year-on-year
Total Income declined by 4.5% compared to H12019
Operating expenditures reduced by 9.5% year-on-year which resulted in an improvement in cost income ratio to 37.1%
Gross Loans & Advances dippedby 2.2% year-on-year; down 4.7% year-to-date
Total Deposits at AED 35.1 billion, down by 4.8% year-to-date as the Bank required less funding for its lending activities
Annualised Return on Assets stood at 1.1% and Return on Average Equity at 7.9% respectively
Performance review H1
Total Operating Incomedecreased by 4.5% to AED 1,903.9millionas compared to the same period of the previous year.Total Income was down by AED 89.8 million compared to the firsthalf of 2019, mainly due to decrease in non-interest income by AED 72.9 million and the declineof AED 16.9 million in Net Interest Income and Net Income from Islamic products. Likewise, the Net Interest Income and Net Income from Shariah-compliant Islamic financing weakenedby 1.2%year-on-year to AED 1,362.7 millionand the non-interest income reducedby 11.9% to AED 541.3 million, mainly due to the year-on-year decrease of AED 65.2 million in net fees and commission income and AED 22.9 million in forex and derivative income respectively.
Total Assets decreased by AED 2.8billion or 4.9% year-to-date and by AED 2.9 billion year-on-year mainly due to the reductionin customer Loans & Advances and Cash &Balances with Central Bank.
Provisions for credit loss increased by AED 232.9 million year-on-year and this was mainly due to additional precautionary provisionstaken in view of the expected deterioration ofthe current economic and operating environment.The Non-Performing Loans and Advances to Gross Loans and Advances ratio closed at 4.5% compared to 4% as at 31 December 2019.Additionally, the annualised Net Credit Losses to Average Loans and Advances ratio closed at 5.0% compared to 3.8% inH12019 due to the higher provisions under IFRS 9.
Capitalization and liquidity
The Bank’s total Capital Ratio as per Basel III, after the application of the prudential filter, was 18.3% compared to 16.8% at the end of the previous year. The regulatory eligible liquid asset ratio at the end of the period was 9.8%, compared to 12.9% as at 31 December 2019. Similarly, the advances to stable resources ratio stood comfortably at 89.6% compared to 89.1% at the end of 2019.
H2 2020 outlook
“We entered this crisis from a position of strength through the early adoption of several actions aimed at ensuring the safety and security of all our stakeholders, as well as supporting their financial well-being. I’d like to highlight that our credit quality at RAKBANK has been stable throughout the first half of 2020 and the current increase in the impairment provisions is largelya precautionary measure taken to protect the Bank from the potential deterioration in credit quality for the impending quarters.As a proactive step, the Bank reserved additional ECL provision amounting to AED 232 million. RAKBANK is constantly taking the necessary steps to optimise operating costs as much as possible without impacting our operations or business, with the ultimate aim of increasing efficiency and utilizing appropriate technologies.” Peter England concluded.