National Bank of Fujairah PJSC (NBF) announce its results for the six month period ended 30 June 2023.
Overview of Results and Operational Performance for the six month period ended 30 June 2023
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. 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, which reflects the interest rate environment during the current quarter and a high level of resilience in its core business despite the prevailing geopolitical headwinds and an uncertain global environment.
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. 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 legacy exposures.
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 and up 22.7% for the three month period ended 30 June 2023 over the corresponding period.
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, 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; 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. It was up 49.5% for the three month period ended 30 June 2023 compared to the corresponding period; 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. 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.
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; remaining well within the mid-industry range reflecting on-going cost discipline.
Summary of financial position as at 30 June 2023
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.
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.
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.
Summary of the cash flows and capital expenditure during the six month ended 30 June 2023
During the period, surplus liquidity has been deployed to fund quality loans and investment book growth, while liquidity balances remain well above the bank’s risk appetite and regulatory requirements. Cash and cash equivalents amounted to AED 1.8 billion compared to AED 2.1 billion in 30 June 2022. The decrease is mainly on account of a planned reduction in deposit balances and the utilization of liquidity in increasing investments and loans and advances.
During the six month period ended 30 June 2023, NBF had incurred AED 65.3 million in capital expenditure relating to the additions of property, equipment and intangibles compared to AED 35.7 million in the corresponding period.
Key Performance Indicators
- 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 Central Bank of the UAE’s minimum requirements.
- Return on average assets improved to 1.4%, up from 0.7% for the corresponding period.
- Return on average equity improved to 11.1%, up from 5.3% for the corresponding period.
