Gulf News - UAE-based Islamic bank ADIB can drive more capital gains as impairments keep dropping

The leading Islamic bank in the UAE, ADIB stands tall with a capital gain of 33 per cent in the past year alone, despite the global macro-economic environment where the S&P 500 and MSCI World Bank index generated returns of -18.9 per cent and -16.5 per cent, respectively.

In a scenario where banks across the world are factoring impairments, ADIB was able to report a 53 per cent decline in impairments year-on-year, owing to the robust UAE and Gulf markets.

ADIB offers retail, corporate, business, private banking and wealth management solutions to more than one million customers in six strategic markets. The bank’s market cap is at Dh32.9 billion and assets are around Dh147 billion.

Built-in resilience

The key to ADIB’s resilience is its healthy financials. The bank reported total revenues of Dh4.5 billion for the first nine months of 2022, a rise of 10 per cent. This was primarily due to a 16 per cent expansion in customer financing and higher rates, which led to a 22 per cent increase in fees and commission and a 10 per cent growth in funded income to Dh2.80 billion.

The combination of higher revenue and investments in cost-effective digital initiatives bore fruit, with cost-to-income below the 40 per cent mark. Moreover, during the first three quarters of 2022, impairments reduced 53 per cent due to robust local business conditions.

Overall, the group’s net profit grew to Dh2.45 billion in the first nine months of 2022, up 53 per cent. In terms of liquidity, the bank holds an advance to stable ratio of 68.1 per cent and eligible liquid ratio of 15.9 per cent as at end September last. This is relative to 82.4 per cent and 19.9 per cent respectively in September 2021. ADIB’s capital position - such as Capital Adequacy Ratio (17.9 per cent), Common Tier 1 (12.8 per cent) and Tier 1 ratio (16.8 per cent) - remain above the regulatory requirement.

Outlook and strategy

The bank’s future performance hinges on its ability to ride and stay ahead of the digitalisation wave, which has been propelled by the COVID-19 pandemic. ADIB has quoted digital excellence as the heart of its 2025 strategy by leveraging advanced analytics and AI. Additionally, the bank remains committed to providing a first-class CX through digital tools.

An example is the introduction of the ADIB PAY, the region’s first tokenised, contactless payment clasp in partnership with Tappy Technologies and Visa. The contactless clasp can be attached to many wearable items, effectively turning that wearable ring or watch into a smart payment device. The compounded impact of the bank’s efforts and UAE’s real GDP growth (3.9 per cent projected for 2023 as per the Central Bank), are likely to accelerate ADIB prospects.

The bank has on average paid dividends yielding 4 per cent over the past few years.