RAKBANK Reports AED 700 million Net Profit in H1 2014

RAKBANK achieved a net profit of AED 700.4 million for the half year ended 30 June 2014.

Total assets stood at AED 34.5 billion growing 21.8% year-on-year and 14.7% on a year-to-date basis. Gross loans and advances stood at AED 23.9 billion, up 12.9% year-on-year and 6.9% on a year-to-date basis. Gross Islamic financing assets increased by AED 1.1 billion compared to 31 December 2013.

Customer deposits grew by AED 2.4 billion to AED 25.5 billion compared to 31 December 2013. The growth came mainly from a rise of AED 1.1 billion in conventional demand deposits, AED 687 million in call deposits and AED 467 million in savings deposits. This was offset by a decrease in conventional time deposits by AED 412 million. However, there was a healthy growth in Islamic deposits of AED 599 million over December 31, 2013.

At 700.4 million net profit for the half year ended 30 June 2014 dropped by 59.6 million over the same period last year due to more normal levels of provisions for bad debts after abnormally low numbers in the first half of 2013. However, total operating income increased by AED 156.9 million to AED 1.7 billion, an increase of 10.2% compared to the half year ended 30 June 2013. This growth was mainly due to an increase of AED 114.9 million in net interest income and income from Islamic financing, and AED 42.0 million in non-interest income, which climbed by 12.3% over the same period last year. Operating costs increased by 11.5% to AED 740.2 million compared to the same period last year mainly due to increases in employment costs.

For the quarter ended 30 June 2014 the profit was AED 365.8 million which was higher by AED 31.3 million over the quarter ended March 31, 2014, reflecting continued improved operating income over the last quarter.

Net interest income plus net profit from Islamic financing for the half year ended 30 June 2014 grew by 9.6% compared to the half year ended 30 June 2013 to AED 1.3 billion. This was a result of higher interest income on loans and investments, a reduction in the cost of deposits as the Bank focused on accumulating low cost transaction accounts, and an increase in net income from Islamic financing to AED 58.1 million in line with the growing Islamic finance portfolio which commenced operations in 2013.

The total impairment charge for the half year stood at AED 258.4 million compared to AED 118.2 million half year ended 30 June 2013. Non-performing loans were steady at 2.4% of the loan portfolio and the annualized net credit losses to average loans and advances closed at 2.2%.

“We are seeing solid growth in almost all of our lines of business and the focus for the rest of 2014 is to strongly grow the bank’s top line as the full impact of our loan pipeline continues to flow through,” said Peter England, RAKBANK Chief Executive Officer. “We are seeing exceptionally strong growth in our SME and Commercial lending, which is a major engine for growth at RAKBANK. With a strong economic outlook for the UAE, we are confident that we can continue to build on our success in the market as we look ahead to the second half of 2014.  We are in a strong competitive position to increase our market share as we plan to launch innovative products and services over the next two quarters, while maintaining our focus on service quality,” added England.

During the first half of 2014, the Bank successfully issued USD 500 million bond under its USD 1 billion medium term note program, through its subsidiary RAKFunding Cayman Ltd, to take advantage of the current low-cost financing opportunities in the bond market, to proactively tackle the duration mismatch that arises from funding longer tenure loans using short-term deposits, and diversify the investor base. The note, which was issued at a discounted rate of 99.275%, matures in 2019 and carries a fixed interest rate of 3.25% per annum.

The Bank’s capital adequacy ratio as per Basel II requirement at the end of the quarter is 25.51%comprising entirely of Tier 1 capital. This is against a current minimum total capital ratio of 12% prescribed by the Central Bank in the UAE. At the end of the quarter, the regulatory liquid assets ratio was 21.4% and advances to stable resources ratio was 82%. Total shareholder’s equity totalled AED 6.4 billion including six months profit.

The Bank is currently rated by following leading rating agencies. The following ratings have remained unchanged during the half year.