The Banking Executive Magazine - April 2021

ADCB PJSC additional cost initiatives have re- sulted in greater efficiency across our operations. ADCB benefits from a robust balance sheet and in March, the recom- mended cash dividend of AED 1.9 billion, equivalent to 49% of net profit, was approved at the Bank’s Annual General Meeting. The Bank continues to pursue growth opportu- nities in line with its prudent risk management framework. During Q1’21, we announced the acquisi- tion of the retail and SME mortgage portfolios of Abu Dhabi Finance, with a gross book value of AED 1.130 billion. The transaction, which further diversifies our asset and cus- tomer base, is expected to complete in Q2’21. Having successfully integrated UNB and Al Hilal Bank into the ADCB Group and exited non-core assets and geographies, the Bank is driving further growth through a new five- year strategy to increase market share and enhance efficiency. The strategy, which is being delivered through a detailed road map with clear targets for each business unit, will deliver a superior digital offering and deeper customer engagement. In our core-UAE market, where ADCB has a strong franchise, we will continue our successful strategy of attracting current and savings ac- count (CASA) deposits, which in- creased to AED 138 billion at the end of March, accounting for 58% of total deposits compared to 51% at year end. The Consumer Banking Group will grow its customer base, particularly through the mortgage and credit card businesses, while the Wholesale Banking Group will leverage its net- work of corporate relationships to ex- pand fee-generating services. Building on its digital strategy, Al Hilal Bank continues to invest in in- novation to provide a high-quality Sharia’ah-compliant retail banking offering. ADCB continues to invest in its sizeable and profitable operation in Egypt, where we see high growth potential, and we will continue to expand our presence and product of- ferings in the market. Medium term guidance and outlook Through this strategy, we remain committed to creating sustainable shareholder value. In the medium term, ADCB is targeting a dividend payout ratio in the range of 50% of net profit and a CET-1 ratio greater than 12%. The operating environment in the UAE continues to improve gradually. Nevertheless, we recognize that con- ditions remain challenging for some sectors. The Bank therefore remains committed to supporting individuals and corporates impacted by the Covid-19 pandemic through TESS and other deferrals. Our active ap- proach to engaging with customers is enabling them to transition out of the schemes, and has resulted in AED 6.7 billion of repayments to the Bank over the last nine months. We remain confident that the UAE economy is progressing well on the path to recovery from the impact of the Covid-19 pandemic, driven by a robust response guided by the coun- try’s leadership. The UAE Central Bank’s support for the economy through TESS, in combination with the Government’s strong fiscal posi- tion and rapid roll-out of an effective vaccination programme that has reached 103 doses per 100 people1 in the UAE, are underpinning con- sumer and business confidence.” DEEPAK KHULLAR, GROUP CHIEF FINANCIAL OFFICER, COMMENTED: “ADCB delivered a solid financial performance in the first quarter, re- flecting the Bank’s strong resolve over the last 12 months in the face of global economic disruption. We have continued to focus on de- livering a sustained improvement in the efficiency ratio. Operating ex- penses in the first quarter were 20% lower year on year, as we realised further merger synergies, continued our programme of additional cost control measures and benefited from efficiencies stemming from digital transformation. The Bank is firmly on track to exceed its AED 1 billion cost synergy target for 2021, having cap- tured cost synergies of AED 917 mil- lion in 2020. While the UAE economy is broadly on an upward trajectory, a number of sectors, such as real estate contract- ing, aviation, and retail are expected to take longer to recover. The Bank continues to proactively manage sec- toral concentration risk in a prudent manner and has reduced exposure to the construction and real estate sec- tor. The real estate loan portfolio re- mains well diversified with a conservative LTV ratio, and com- pleted properties account for the ma- jority of the book. We continue to be prudent in provid- ing for expected credit losses for businesses that are likely to experi- ence stress in the medium to long term due to the current challenging macro-economic environment. The Group recorded gross impairments of AED 4.3 billion in 2020, including significant one-off charges on NMC Group and on exposure to the real estate and contracting sector. In ad- dition, the Bank took fair value ad- justments of AED 5.7 billion on performing loans2, including histor- ical ECL, at the date of their acquisi- tion through the merger with UNB and Al Hilal Bank. Considering all prevailing factors and progress in NMC’s restructuring process, the Bank views existing provisioning lev- els to be prudent and appropriate. ADCB’s financial position remains strong, with robust capital and liq- uidity positions. We remain confi- dent that the Bank is well positioned to pursue opportunities for growth in 2021 as the UAE economy continues to recover.” the BANKING EXECUTIVE 22 ISSUE 148 APRIL 2021