Profitability supported by revenue growth in a rising rate environment, and lower provision charges; cost discipline maintained while continuing to invest in the business
9M’22 highlights:
- Group Net Profit at AED 10.9 Billion, up 19% yoy; annualised Earnings per Share at AED 1.29
- Total Income at AED 18.0 Billion, up 13% yoy, driven by 18% growth in net interest income. Total income for the nine-month period includes AED 3.1 Billion net gain on sale of stake in Magnati
- Impairment charges (net) at AED 1.7 Billion, 11% lower yoy; implying an annualised cost of risk at 52 basis points improving from 65bps in the prior period
- Operating costs at AED 4.7 Billion, up 6% yoy excluding Bank Audi Egypt inclusion, reflect ongoing investments to drive growth and transformation
Q3’22 highlights:
- Group Net Profit at AED 2.9 Billion, up 12% qoq excluding gains recorded in Q2’22 from sale of stake in Magnati
- Operating income at AED 5.5 Billion, up 10% qoq driven by, both, higher interest and non-interest income
- Impairment charges (net) at AED 694 Million, 13% lower yoy, up 19% qoq as we continue to strengthen our provision buffers
- Operating costs at AED 1.6 Billion, up 1% qoq and 1% yoy
Balance sheet growth sustained through lending momentum and sizeable deposit inflows; foundation remains robust across all key metrics
- Loans, advances and Islamic financing at AED 465 Billion, up 2% sequentially and 14% year-to-date
- Customer deposits at AED 746 Billion, up 15% sequentially and 21% ytd with CASA balances increased further to AED 300 Billion, up 3% qoq and 4% ytd
- Liquidity Coverage Ratio (LCR) at 171% reflects the strong inflows and a robust liquidity position
- Improved asset quality metrics with NPL ratio and provision coverage at 3.4% and 103%, respectively
- Common Equity Tier 1 (CET1) at 13.1%, improved 48bps in the quarter on continued RWA optimisation initiatives and internal capital generation
“Our results in the first nine months of 2022 demonstrate excellent progress in our strategy to drive growth across our franchise, while underlining the resilience of regional economies against an increasingly challenging global backdrop. We produced a record net profit of AED 10.9 Billion, up 19% from the same period last year, reflecting the strong underlying performance of our core businesses. Our robust balance sheet fundamentals are enabling us to pursue our growth and transformation journey both regionally and in the UAE. In Egypt, we have completed our integration activities which will enable us to unlock new opportunities for our growing base in one of our priority markets.
With structural market shifts and increasingly sophisticated client needs continuing to shape our focus, we are proud to reaffirm our regional leadership position as a trusted advisor to our clients while also delivering a digital-first, best-in-class offering to customers.
FAB continues to be recognized as the Middle East’s safest bank while also improving our ranking as the 14th safest commercial bank in the world. This is an important recognition of our long-term adherence to the strongest standards of safety and stability.
Our commitment to sustainability continues to underline everything we do and as the attention of the world turns to COP 27, we are proud to be a part of the progress by working towards a Net Zero future
Looking ahead, the increasingly challenging global backdrop calls for caution, with recessionary risks looming over several economies. As we navigate these headwinds, we are nevertheless confident in the resilience of this region, and we remain very well placed to deliver market-leading shareholder returns while being an engine for the region’s economic growth and diversification.”
“The Group generated a net profit of AED 2.9 Billion in the third quarter of 2022, up 12% sequentially on an underlying basis, bringing bottom line for the nine-month period to a record AED 10.9 Billion.
Underlying operating performance continues to be strong with Q3’22 revenue up 10% sequentially, supported by positive momentum across core businesses, increased client flow and cross-sell in Global Markets, and the impact of higher interest rates as we continue to significantly benefit from the shift in the rates cycle.
During the period, our strategic initiatives led to continued growth in CASA balances with nearly AED 100 Billion customer deposit inflows underlining our unique role as an aggregator of liquidity. Group liquidity position strengthened with Group LCR at 171%, while Group CET1 improved sequentially to 13.1%, owing to strong capital generation and the positive outcome of our ongoing efforts to optimise risk-weighted assets.
The recent reaffirmation of our AA- credit rating by Fitch is a strong testament to our superior business and credit profile, and our robust fundamentals.
We remain focused on maintaining balance sheet strength to deliver on our strategic priorities to drive growth, transformation, and to deliver superior shareholder returns in 2022 and beyond.”
ECONOMIC OVERVIEW AND OUTLOOK
In Q3’22, global markets continued to be under significant downward pressure, as inflation remained near multi-decade highs and geopolitical tensions escalated further. This led to a sharp rise in bond yields and sell-off in equities towards the latter part of the quarter as financial markets priced in a more hawkish trajectory for policy rates with major central banks reiterating their aggressive stance on bringing inflation under control.
In contrast, the UAE economy is expected to register its highest real GDP growth in over a decade buoyed by higher oil output, relatively moderate inflation, recovery across key economic sectors including real estate and tourism, and ongoing structural reforms to drive economic growth and diversification. The underlying strength of the UAE economy was also highlighted by the highest quarterly average levels of PMI registered in over 3 years, during the quarter. Our forecast for UAE real GDP growth in FY’22e is 6.7% (vs a previous expectation of 5.7%), consolidating to around 5.0% for FY’23e. Moreover, the robust nature of the UAE and Abu Dhabi government’s balance sheet are expected to lead to a return to fiscal surplus status in FY’22e and FY’23e. Although not immune to global headwinds, we believe economic activity in the UAE and broader GCC region will continue to outperform the global backdrop.
