Abu Dhabi Islamic Bank first-quarter profit plunges 55% as credit provisions and impairments soar

Abu Dhabi Islamic Bank on Sunday (May 10) reported first-quarter Group net profit of 269.69 million dirhams ($73.44 million) compared to 600.34 million dirhams for the same period last year, a plunge of 55.08%.

The bank said in a filing with the Abu Dhabi Securities Exchange the drop was driven by an increase in provisioning “due to the challenging operating environment, as well as the result of lower revenues, given unprecedented market conditions.”

“Our profits in the first quarter of 2020 have been impacted by the challenging macro-economic environment caused by the COVID-19 pandemic and lower revenue due to rate cuts. Given the uncertain economic outlook we increased our impairment allowances and our provisioning in anticipation of a potential deterioration in credit quality,” said Group CEO Mazin Manna in a statement.

Credit provisions and impairments for the three months ending Mar 31 increased to 387.1 million dirhams versus 186.4 million dirhams for the same quarter in 2019. This represents an increase of 107.67%.

Group net revenue slid 10% year-on-year to 1.29 billion dirhams.

Net customer financing climbed by a marginal 1.6% to 79.4 billion dirhams versus 78.1 billion dirhams at the end of the first quarter of 2019. The bank said this was led by growth in corporate banking financing.

Assets of the standalone Islamic bank decreased by 2.6% to 122.7 billion dirhams from 125.9 billion dirhams at the end of 2019.

ADIB announced in the first quarter measures in response to the COVID-19 pandemic following the UAE central bank’s and Abu Dhabi government’s economic support schemes for banking customers. The financial relief measures include refinancing, loan repayment deferrals or lower payments where required.

The bank said it saw a 17% increase in average daily downloads for its app and a 20% increase in daily digital transactions amid the COVID-19 movement restrictions in the UAE.

ADIB also said it saw around 30% growth in corporate customers onboarding to its digital platform.

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