Net profit jumped 120.7% to reach AED 332.1 million for the half year and rose 18.5% quarter-on-quarter on the back of underlying business momentum
National Bank of FujairahPJSC (NBF) is pleased to announce its results today for the six month period ended 30 June 2023.
Highlights:
- NBF recorded year-on-year growth of 120.7% to close the six month period with a net profit of AED 332.1 million compared to AED 150.5 million in the corresponding period of 2022. On the back of a robust Q2 2023 performance, NBF posted a net profit of AED 180.1 million in the second quarter of 2023, a rise of 99.8% over the corresponding quarter of 2022, which reflects the interest rate environment, an improvement in the impairment provisions during the current quarter and a high level of resilience in its core business despite the prevailing geopolitical headwinds and an uncertain global environment.
- Aided by higher net interest income and net income from Islamic financing and investment activities, NBF posted an operating profit of AED 785.3 million for the six month period, a substantial increase of 28.9% compared to AED 609.1 million in the corresponding period of 2022 and up 22.7% for the three month period ended 30 June 2023 over the corresponding period of 2022.
- Operating income reached AED 1.1 billion for the six month period ended 30 June 2023, up 29.6% compared to AED 858.5 million in the corresponding period of 2022, reflecting the benefit from rising interest rates, good momentum experienced in our businesses and enhanced asset and liability management. Operating income growth of 25.4% was recorded for the three month period ended 30 June 2023 over the corresponding period of 2022; and up 0.9% compared to Q1 2023.
- Net interest income and net income from Islamic financing and investment activities grew 58.6% to AED 825.1 million for the six month period ended 30 June 2023 compared to AED 520.1 million in the corresponding period of 2022. It was up 49.5% for the three month period ended 30 June 2023 compared to the corresponding period of 2022; and up 4.2% compared to Q1 2023.
- Net fees, commission and other income stood at AED 211.0 million for the six month period ended 30 June 2023 compared to AED 214.5 million in the corresponding period of 2022.
- Foreign exchange and derivatives income stood at AED 79.5 million for the six month period ended 30 June 2023 compared to AED 102.5 million in the corresponding period of 2022.
- Operating expenses increased by 31.4%, reflecting NBF’s investments in its businesses, systems, infrastructure and people. These investments include a set of digital initiatives to further enhance the focus on exceptional customer service through digital adoption and innovation. Further, the impact of rising inflation continued to affect our operating expenses. NBF’s cost-to-income ratio stood at 29.4% compared to 29.1% in the corresponding period of 2022; remaining in the mid-industry range reflecting on-going cost discipline.
- NBF maintained its policy of prudent and transparent recognition of problem accounts taking into consideration the new credit risk standards being introduced by the Central Bank of the UAE and the risk of a global recession. NBF booked net impairment provisions of AED 453.1 million for the six month period ended 30 June 2023 compared to AED 458.6 million in the corresponding period of 2022. During the period, the bank’s impairment reserve reduced by 2.4% to AED 164.2 million compared to AED 168.2 million as at 31 December 2022. Total provision coverage ratio improved to 116.9% compared to 101.5% as at 31 December 2022. The NPL ratio improved to 5.7% compared to 6.9% as at 31 December 2022, as the bank successfully progressed the resolution of a few exceptional exposures.
- Loans and advances and Islamic financing receivables rose by 5.5% to reach AED 28.4 billion compared to AED 26.9 billion at 2022 year-end, up by 2.4% from 30 June 2022.
- Investments and Islamic instruments increased by 3.8% to reach AED 6.6 billion compared to AED 6.3 billion at 2022 year-end, up by 28.6% from 30 June 2022 evidencing the deployment of a portion of liquidity towards a high-quality investment book offering good risk-to-return as well as access to market liquidity.
- The capital adequacy ratio (CAR) stood at 18.2% (Tier 1 ratio of 17.0% and CET 1 ratio of 13.4%) compared to 18.6% (Tier 1 ratio of 17.4% and CET 1 ratio of 13.6%) at 2022 year-end and is being maintained at this level to support the bank’s ability to
grow and meet any challenges that may arise from the rapidly evolving global economy.
- Customer deposits and Islamic customer deposits reduced by 2.4% at AED 34.9 billion compared to AED 35.7 billion at 2022 year-end, and were up by 9.6% from 30 June 2022. Current and Saving Accounts (CASA) deposits stood at 41.6% of total customer deposits softening the impact of increasing rates for fixed term products on deposit costs.
- Total assets rose by 0.5% to reach AED 47.9 billion compared to AED 47.6 billion at 2022 year-end, up by 9.5% from 30 June 2022.
- Ample liquidity has been maintained with lending to stable resources ratios at 75.6% (2022: 72.1%) and eligible liquid assets ratio (ELAR) at 22.2% (2022: 24.9%), well ahead of the Central Bank of the UAE’s minimum requirements.
- Return on average assets improved to 1.4%, up from 0.7% for the corresponding period in 2022.
- Return on average equity improved to 11.1%, up from 5.3% for the corresponding period in 2022.
- NBF’s rating was upgraded by Standard and Poor’s (S&P) to ‘BBB+’ from ‘BBB’ on the basis of strong track record of local banks being supported by the UAE’s Government Authorities, and the bank’s higher profitability and strong capitalization. It also affirmed the ‘A-2’ short-term rating with a stable outlook that reflects the bank’s creditworthiness. Further, NBF’s rating was re-affirmed at Baa1 / Prime-2 for deposits and A3 for the counterparty risk assessment by Moody’s, with a stable outlook, highlighting the bank’s underlying strength, prudent risk management and resilience.
Dr. Raja Easa Al Gurg, Deputy Chairperson said:
“2023 has started well for NBF, with the bank delivering another very encouraging set of results in the first half of 2023 and being honored with a number of prestigious awards and endorsements. We are particularly delighted that the bank has been awarded the ‘Best Innovation in Trade Finance’ and ‘Most Innovative Trading Platform’ awards at the recent MEA Finance Banking Technology Awards; and the ‘Best Islamic Window – UAE’ at the International Finance Awards 2023, showcasing two of our business areas that have sustained strength.
NBF’s strong Q2 results re-affirm that our business strategies and operational priorities are on track to ensure we return to our long-term trend of sustainable growth. It is good to see the bank’s underlying resilience and proactive approach in what continues to be an uncertain and challenging environment; resulting in an improvement in business performance and asset quality that augurs well for the coming quarters of 2023 and beyond.
Against the backdrop of the risk of global recession, high gold prices supported by fears of an economic crisis and simmering geopolitical tensions, the nation’s economy is projected to grow 3.9 per cent in 2023. This growth will be facilitated through the government’s endeavours and collaboration with the private sector that will continue to unlock ample opportunities across diverse spheres coupled with the now substantial foreign direct investment flow into the UAE and hydrocarbon demand.
Gaining from this good market momentum, NBF will capitalize on the quality opportunities to enhance shareholder value and will pursue its digitally enabled approach to servicing customer needs, supported by strong capital adequacy, ample liquidity and a well-diversified balance sheet; being a reliable and consistent player.
In parallel, we will maintain our focus on environmental, social and governance (ESG) friendly activities and businesses as included in the NBF’s ESG Position Statement issued in Q2 2023, to enhance the bank’s footprint in this space accentuating its commitment to long-term sustainability.