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Abu Dhabi: The Gulf
The Abu Dhabi Commercial Bank (ADCB) reported net profit of AED 2.782 billion in the first half of 2019, down 15% from the same period last year. The financial results are based on the initial financial statements of the first half of 2019 for the merged entity after completion of the merger between ADCB and Union National Bank and the subsequent acquisition of Al Hilal Bank on 1 May 2019.
The merger created a new banking group, the third largest banking institution in terms of badets in the UAE, with a broader business scope, enhanced capabilities, greater flexibility and a proven track record of success. in the traditional and Islamic banking sectors.
The merger is smooth to ensure sustainable growth by providing a strong and quality governance environment, as well as a foundation within the governance framework to effectively manage risk and keep pace with changes and requirements. regulations.
The Abu Dhabi Commercial Bank Group will focus on optimizing value addition in 2019 and 2020 and exploiting all opportunities for the three integrated institutions. The Group is streamlining processes, harmonizing financial products, banking services, banking channels, policies and regulations, and implementing targeted savings initiatives. The Bank also develops and promotes a good corporate culture in a strong governance framework.
Historic case
Essa Mohammed Al Suwaidi, chairman of ADCB, said: "The merger, which is still in its infancy, between ADBB and Union National Bank and the acquisition of Al Hilal Bank on May 1, 2019 is a landmark transaction. Of great importance to the UAE economy A stronger and more flexible banking group to play a key role in economic development over the coming years, which will also significantly contribute to the support and strengthening the financial sector in the United Arab Emirates.
The new group of commercial banks of Abu Dhabi has the ability to invest in its infrastructure in order to stay at the forefront of the rapidly evolving banking sector and to position itself in order to optimize performance and offer an experience superior customer. And help lay the foundation for a diversified economy. The new banking group has made significant progress in aligning and integrating with the continued implementation of business growth and growth initiatives. "
First consolidated results of the group
"I am pleased to announce the first consolidated financial results of the Abu Dhabi Commercial Bank Group as a result of the merger, reflecting the size and strength of the balance sheet." With total badets of $ 417 billion AED and a growing customer base The new banking group is well positioned to grow and prosper in a competitive banking environment and add value to its shareholders through increased efficiency and new business opportunities.
The strong performance in the first half reflects the fundamentals of the new banking group in the face of market challenges. Abu Dhabi's commercial bank group continues to deliver an attractive return on equity, capital ratios and liquidity positions, a liquidity coverage ratio of 163% and a loan ratio. on deposits of 92% as of June 30, 2019. As one of the local banks affecting the system (D-SIB) and with the first tranche of 12.52%, the group still has a good capitalization. The group also recorded a net profit of AED 2 782 billion, compared to AED 3.295 billion in the same period in 2018. The total interest income also rose sharply in the first half of this year, despite the cost high funds. The Bank made the wise decision not to renew long-term term deposits while continuing to focus on growth in current account deposits and savings accounts, which accounted for 36% of total deposits. customer deposits at the end of June 2019, compared with 33% at the end of last year. As expected, many problems occurred during the implementation of the merger process, and the impact of these factors will be determined and evaluated in a comprehensive manner and presented in the annual results at the end of the year.
Erekat added that the recent confirmation of credit ratings by Standard & Poor's and Fitch Ratings demonstrates the strong franchise of the new integrated banking entity, which pays tribute to the benefits of the merger, which strengthens the position and competitiveness of ADCB.
Our long experience, positive culture and advanced planning as part of our governance approach have allowed us to achieve our ambitions and achieve our integration strategy. At this early stage of the merger, I am pleased to announce that we have come a long way to reach the key milestones of the merger. Legal integration The implementation of initiatives to achieve more than a third of the target rate aimed at reducing integration costs will allow us to implement diligently the process of integration with accuracy and to achieve the desired objectives.
Updates on the process of integration
The Abu Dhabi Commercial Bank Group has made significant progress in achieving the integration process at all levels, including the consolidation of governance, organizational structure, institutional culture, operational systems and Customer service on time. The group seeks to unify all of its businesses in order to provide a complete banking experience that enhances customer convenience and meets their banking needs under the Abu Dhabi Commercial Bank brand by the fourth quarter of 2019. All systems and all operations should be fully integrated by the fourth quarter of 2020.
The Bank has launched cost savings initiatives of 222 million AED annually, while the goal was 615 million AED by 2021. 69 million of EDA, or 11% of targeted savings, have already been realized. The cost of the consolidation of the single operations is AED 87 million to date, which corresponds to the consolidation and completion project of the 800 million AED merger.
As expected, the Group's cost / income ratio increased relative to the cost / income ratio prior to the ADCB merger, mainly due to the higher cost / revenue ratios of the banks Al Hilal and Union National Bank. The Group continues to manage costs in a disciplined manner. Consolidation of operations
In terms of consolidation, one of the most important achievements has been the rapid integration of Al Hilal Bank. Under its current brand, Al Hilal Bank will focus on providing Sharia-compliant banking solutions and services through its digital banking channels. Most of the corporate and institutional bank accounts have been transferred to the Islamic banking portfolio of the ADCB subsidiaries. In recent months, Al Hilal Bank has updated the application of smart phones to provide customers with a unique banking experience, as well as the introduction of smart phones to open new accounts. The Bank continues to invest in the development and training of civil servants, with an emiratization rate exceeding 50%.
The Abu Dhabi Commercial Bank Group has been extensively preparing for the integration of systems, ATMs and cash deposit facilities at ADCB and Union National Bank branches by the fourth quarter of 2019.
The process of integration
* The merger process is progressing quickly and on schedule. The merger is expected to be completed by the end of 2020.
• The governance structure of the new entity has been developed in line with international best practices.
* Savings on the cost of integration, where 69 million of AED have already been saved, accounting for 11% of the 615 million AED savings goal of $ 615 million. Here 2021.
• Credit policies have been standardized within the Abu Dhabi Commercial Bank Group.
All treasury operations were consolidated in the three integrated institutions and liquidity and financing management was centralized.
* ADCB branches will be fully operational in the fourth quarter of 2019, marking the launch of the ADCB Banking group's branches and digital banking channels.
* The restructuring of Al Hilal Bank is almost complete.
* The capital adequacy ratio (Basel III) was 15.88%, while the first tranche was 12.52%, exceeding the minimum requirements of the Central Bank of 13.50% and 10.00% respectively.
* The short-term liquidity ratio (short-term liquidity ratio) was 163.1%, compared to a minimum of 100% set by the Central Bank and 28.5%.
• The Bank maintained its position as a liquidity deposit through interbank transactions: net deposits from state banks reached 23 billion AED.
* The bad debt ratio was 2.41% versus 2.88% (ADCB only) at the end of last year.
* The provision coverage ratio was 106.2% compared to 130.2% (ADCB only) at the end of last year.
* The cost of risk ratio was 0.70% versus 0.72% at the end of last year.
Comparison of first half results with 2018
* Total interest income and Islamic finance increased 11% to AED 9.611 billion, mainly due to the high level of prevailing interest rates on the markets.
* Net interest income and Islamic financing amounted to 5.29 billion AED, a decrease of 6%, mainly due to the harmonization of liquidity management standards of the Combined entity and strong competition in loan yields.
Non-interest income was EFA 1.428 billion, a decrease of 6% due to lower net fee and commission income and lower foreign exchange revenues, offset by higher turnover. derivatives.
Operating expenses amounted to AED 2,671 billion, up 6%, as a result of merger charges and continued investment in the transformation of the digital banking system. Excluding non-recurring transaction costs of AED 87 million, operating expenses were $ 2.584 billion, up 3%. The operating ratio was 38.9% (excluding consolidation costs) compared to 35.6% at the end of the first half of last year.
* General provisions amounted to 1.174 billion dirhams, down 6%.
Net profit was ATS 2.782 billion, down 15%.
* Return on equity was 12.2% year-on-year, compared to 12.9% at the end of the first half of last year.
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