Abu Dhabi Commercial Bank: Earnings Presentation - 2Q 2017

Transcription

1. Abu Dhabi Commercial Bank PJSC Q2 /H1’17 Earnings presentation July 2017
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3. H1 ’17 Financial highlights Strong underlying performance, increased revenues and an efficiently managed cost base ■ Healthy top line growth, bottom line impacted by adverse market conditions Net interest income Operating income +7% +2% 3.099 2.926 AED bn H1'16 H1'17 2.114 H1'16 H1'17 AED bn AED bn H1'16 2.147 2.851 4.255 AED bn -2% +3% 4.338 3.305 Net profit Operating profit H1'17 H1'16 H1'17 Net profit impacted by: ■ Lower trading income on account of unrealised FX translation losses and higher impairment charges on account of significant one-off releases recorded in H1’16 ■ Despite this backdrop, balance sheet growth remained strong ■ Total assets at AED 259 billion +8% YoY, loans to customers +6% YoY, customer deposits +9% YoY, CASA 44% of total customer deposits ■ Maintain a conservative approach to risk management ■ NPL and provision coverage ratios of 2.8 % and 123.8% respectively ROAE 15.5% CI ratio 32.5% Solid returns and disciplined cost management CAR 18.07% LCR 110% Robust capital structure and liquidity profile 3 | Q2/H1’17 Earnings presentation
4. Q2 /H1’17 Financial performance – key indicators Change % Change % Income statement highlights (AED mn) H1’17 H1’16 YoY Q2’17 Q1’17 Q2’16 QoQ YoY Total net interest and Islamic financing income 3,305 3,099 7 1,675 1,631 1,526 3 10 Non - interest income 1,032 1,155 (11) 434 598 617 (27) (30) Operating income 4,338 4,255 2 2,109 2,229 2,143 (5) (2) (1,411) (1,404) 1 (671) (740) (666) (9) 1 Operating profit before impairment allowance 2,926 2,851 3 1,438 1,489 1,477 (3) (3) Impairment allowances (814) (703) 16 (427) (386) (351) 11 22 Net profit for the period 2,114 2,147 (2) 1,008 1,105 1,126 (9) (10) Key indicators (%) H1’17 H1’16 bps Q2’17 Q1’17 Q2’16 bps bps Return on average equity 15.5 17.0 (150) 15.5 16.1 18.9 (60) (340) Net interest margin 2.88 3.11 (23) 2.89 2.86 3.00 3 (11) Cost to income ratio 32.5 33.0 (50) 31.8 33.2 31.1 (140) (70) Balance sheet highlights (AED mn) June’17 June’16 YoY June’17 March’17 Dec’16 QoQ YTD Total assets 259,239 240,752 8 259,239 263,672 258,289 (2) 0 Operating expenses Net loans and advances 164,251 154,853 6 164,251 159,802 158,458 3 4 Deposits from customers 161,779 149,055 9 161,779 162,362 155,442 (0) 4 Ratios (%) June’17 June’16 bps June’17 March’17 Dec’16 bps bps Capital adequacy ratio (CAR) 18.07 18.40 (33) 18.07 17.83 18.92 24 (85) Tier I ratio 14.84 15.07 (23) 14.84 14.55 15.66 29 (82) Loan to deposit ratio (LTD) 101.5 103.9 (240) 101.5 98.4 101.9 310 (40) There could be inconsistencies in totals due to rounding differences 4 | Q2/H1’17 Earnings presentation
5. Healthy volumes and well maintained NIMs , stable cost of funds despite rising benchmark rates Highlights Net interest and Islamic financing income Interest and Islamic financing income in the first half of 2017, increased 15% over H1’16 to AED 4,849 million. Average interest earning assets increased 15% year on year. This was achieved in the absence of higher interest in suspense reversals which were not repeated in H1’17 H1’17 net interest income of AED 3,305 million was up 7% year on year, while Q2’17 net interest income was up 10% at AED 1,675 million Net interest margin for the first half of 2017 was 2.88%; whilst cost of funds stood at 1.46%, which remained stable for the last two quarters despite the rising benchmark rates H1’17 3,305 H1’16 3,099 AED mn Average interest bearing liabilities increased 16% year on year 1,573 1,526 1,528 1,573 1,631 1,675 2,098 2,130 2,195 2,328 2,390 2,459 (525) (604) (667) (754) (759) (784) Q1 Q2 Q3 Q4 Q1 Q2 2017 2016 CASA deposits grew 6% year on year to AED 71 billion Interest income Interest expense YTD June’17 CASA deposits Time deposits YTD June’16 +6% +10% 4.24% 4.19% 4.10% 4.21% 4.20% 4.25% 3.11% 3.00% 2.85% 2.85% 2.86% 2.89% 1.49 1.45 1.48 1.34 1.40 0.92 1.07 1.46 1.20 Q4'16 Q1'17 66.3 65.0 82.8 70.5 90.5 91.3 Evolution of yields (%) 2.88% 1.28 1.34 1.23% AED bn AED bn June'16 Dec'16 June'17 June'16 Dec'16 June'17 4.22% 1.08 1.17 0.64 0.78 Q2'16 Q3'16 Yield on interest earning assets (%) Average 3M EIBOR (%) 1.46% Q2'17 Net interest margin (%) Average 3M LIBOR (%) Cost of funds (%) 5 | Q2/H1’17 Earnings presentation
6. Fees and commission growth momentum maintained , Non-interest income impacted by lower trading income reflecting turbulent markets Operating income (AED mn) Highlights H1’17 non-interest income of AED 1,032 million was 11% lower year on year. This was primarily attributable to lower trading income recorded in Q2, which was partially offset by higher net fee and commission of AED 755 million in H1’17, up 3% year on year 2,112 2,143 2,070 2,171 2,229 2,109 26% 29% 26% 28% 27% 21% 74% 71% 74% 72% 73% 79% Q1 Q2 Q3 Q4 Q1 H1’17 trading income of AED 138 million was 54% lower year on year, mainly impacted by unrealised FX translation losses reflective of turbulent markets. This resulted in a trading loss of AED 29 million in Q2’17 Net interest income (%) H1’17 1,032 58 122 AED mn 358 61 180 541 376 359 102 81 598 29% AED 275 mn 598 79* 140 59 166 380 373 H1’17 H1’16 434 82 381 39% AED 368 mn Q2 Q3 Q4 2017 2016 Net fees and commission income Q2 Q1 Net trading income Other operating income * Other income includes revaluation of investment properties of AED 16 million in Q4’16 41% AED 414 mn 29% AED 292 mn AED AED 1,012 954 million million 13% AED 126 mn (29) Q1 Non interest income (%) Gross fee income breakdown (AED mn) H1’16 1,155 617 Q2 2017 2016 Non-interest income 539 H1’17 4,338 H1’16 4,255 H1’17 operating income of AED 4,338 million was up 2% year on year, whilst Q2’17 operating income was 2% lower year on year, primarily due to lower non-interest income 8% AED 79 mn 11% AED 106 mn 8% AED 84 mn 9% AED 94 mn 13% AED 129 mn Loan processing fees Trade finance commission Card related fees Insurance commission, Asset management and investment services Others¹ ¹ Others include brokerage, fees from accounts related activities and other fees 6 | Q2/H1’17 Earnings presentation
7. Operating expenses continue to be well-managed Cost to income ratio improved to 32 .5% in H1’17 Operating expenses 34.9% 738 34 235 AED mn 468 Q1 31.1% 32.1% 666 663 36 36 255 221 33.6% 33.2% 729 740 38 39 282 260 365 Q2 374 406 408 441 Q2 Q3 Q4 Q1 2016 Staff costs General administration expenses 31.8% Cost to income ratio within our target range 671 40 266 2017 Depreciation & amortisation 33.0% 32.5% H1’16 H1’17 Efficiently managed cost base, while continuing to reinvest in the business Cost to income ratio H1’16 operating expenses of AED 1,411 million, increased 1% year on year, resulting in a cost to income ratio of 32.5% compared to 33% in H1’16 Staff expenses were 57% of total operating expenses in the first half of 2017 compared with 60% in H1’16 7 | Q2/H1’17 Earnings presentation
8. Resilient balance sheet , healthy loan growth +6% YoY Disciplined and selective lending growth in our core geography Highlights Gross loans by economic sector Composition of assets Net loans to customers increased 6% year on year to AED 164,251 million. System wide growth was 4% year on year* Total assets: AED 259,239 million Gross loans: AED 170,276 million Net loans to customers comprised 63% of total assets, compared to 61% as at 31 December 2016 Personal 24% Consumer Banking loans comprised 44% and Wholesale Banking loans comprised 56% of net loans Net loans and advances 63% 94% of loans were within the UAE in line with the Bank’s UAE centric strategy 56% of loans (gross) were in Abu Dhabi, 31% were in Dubai and 7% in other Emirates as at 30 June 2017 Personal loans comprised 24% of gross loans (2016: 25%) YTD Islamic financing assets grew 8% and 24% year on year to AED 19,979 million as at 30 June 2017 Cash and balances with CB 8% Other assets¹ 7% Deposits and balances due from banks 6% Investment securities 16% Net loans and advances 122.8 127.4 131.9 146.3 158.5 164.3 AED bn 2012 2013 2014 2015 2016 Government & PSE 22% Others² 8% Trading 3% Financial institutions 8% Net loans by business segment (AED million) YTD +4% CAGR: +7% Real estate investment & hospitality 35% June'17 Net loans: AED 164,251 million (30 June 2017) Consumer Banking Wholesale Banking 55% 55% 56% 72,903 85,003 87,011 91,348 June’17 June’16 Dec’16 June’17 45% 45% 44% 69,862 71,446 June’16 Dec’16 Consumer banking includes retail and high net worth individuals and their businesses ¹ Other assets include derivative financial instruments, investments in associate, investment properties, property and equipment (net), intangible assets and reverse repo placements ² Others include agriculture, energy, transport, manufacturing and services * Latest data available from the UAE Central Bank up to May 2017 8 | Q2/H1’17 Earnings presentation
9. Solid funding mix , reinforced by increasing customer deposits, +9% YoY Significant increase in total Islamic deposits Composition of liabilities Highlights Customer deposits increased 9% year on year to AED 161,779 million. System wide growth was 7% year on year* Total liabilities: AED 228,735 million Customer deposits comprised 71% of total liabilities, compared to 68% as at 31 December 2016 YTD Islamic deposits increased 23% and 24% year on year to AED 14,735 million as at 30 June 2017 YTD +4% CAGR: +9% 109.2 126.0 143.5 CASA 44% Time deposits¹ 56% Euro commercial paper 3% Due to banks 3% Borrowings 16% Other liabilities 4% ¹ Time deposits include long-term government and Murabaha deposits Derivative financial instruments 3% Contribution to total deposits by business segment (AED million) Customer deposits 115.4 Customer deposits: AED 161,779 million Customer deposits 71% CASA deposits comprised 44% of total customer deposits Consumer Banking deposits comprised 33% and Wholesale Banking deposits comprised 39%, whilst Treasury deposits comprised 28% of total customer deposits Customer deposit breakdown 155.4 161.8 Wholesale Banking Consumer Banking* 32% 32% 47,931 50,006 June’16 Dec’16 33% 52,821 June’17 40% 43% 39% 63,187 66,218 63,572 June’16 Dec’16 June’17 Treasury AED bn 2012 2013 2014 2015 2016 28% 25% 28% 37,936 39,218 45,386 Dec’16 June’17 June'17 June’16 * Consumer banking includes retail and high net worth individuals and their businesses * Latest data available from the UAE Central Bank up to May 2017 9 | Q2/H1’17 Earnings presentation
10. Wholesale funding and maturity profile Diversified sources of funding by markets , tenors, currencies and products Wholesale funding including Euro commercial paper Maturity profile as at 30 June 2017 11,054 10,260 361 942 735 2,502 6,803 6,293 Repo MTN/GMTN Sub debt Syndicated loans Bilateral loans CD ECP 19% 12,007 21% 20% 21% 19% 202 46.7 36.7 7,646 39.2 43.6 29.7 325 2,748 5,721 AED mn 2017 733 3,490 2,925 1,284 122 1,591 1,836 2018 2019 3,490 2020 4,159 2021 and beyond Wholesale funding split as at 30 June 2017 Source of funds GMTN/EMTN AED million 4,159 Euro Commercial paper 7,312 888 Bilateral loans 2,018 Syndicated loans 3,658 Certificate of Deposits 4,460 Total 2013 2014 2015 2016 June'17 Wholesale funding as a % of total liabilities Wholesale funding including Euro Commercial Paper accounted for 19% of total liabilities, providing a stable, long-term and reliable source of funding 21,119 Subordinated debt Borrowings through repurchase agreements AED bn 43,615 Net lender of AED 12 bn* in the interbank markets (As at 30 June 2017) * Includes AED 5.5 billion of certificate of deposits with central banks 10 | Q2/H1’17 Earnings presentation
11. Robust capital ratios and comfortable liquidity levels Highlights Liquidity coverage ratio As at 30 June 2017 , the Bank’s total capital adequacy ratio was 18.07% compared to 12% minimum stipulated by the UAE Central Bank 129% UAE CB minimum requirement As at 30 June 2017, total risk weighted assets were AED 203 billion Dec'16 14 8 203 15 9 15 9 176 180 Dec'16 March'17 June'17 Dec'16 June'17 June'17 Dec'16 June'17 placements, trading securities, and liquid investments (excluding unquoted investments) Tier 2 capital ratio Tier I capital ratio 15.66% 14.55% 14.84% 13.57% 12.54% 169 AED mn * Liquidity ratio: liquid assets/total assets * Liquid assets include cash and balances with Central Banks, deposits and balances due from banks, reverse repo Advances to stable resources ratio stood at 89.7% compared to 94.8% as at 31 December 2016 199 33,059 23.4% 80% Liquidity coverage ratio was 110% compared to 80% minimum stipulated by the UAE Central bank 191 40,905 26.0% 110% As at 30 June 2017, tier I ratio was 14.84% compared to 15.66% as at 30 December 2016. Core Tier I ratio was 12.87% compared to 13.57% as at 30 December 2016 Risk weighted assets Investment securities Liquidity ratio* Capital adequacy ratio (Basel II) 18.92% 3.26% 3.28% 3.23% 17.83% 18.07% 12.87% 12% UAE CB minimum requirement AED bn Credit risk Market risk Operational risk Dec'16 Mar'17 June'17 Dec'16 Mar'17 June'17 Dec'16 Mar'17 June'17 Core tier I ratio 11 | Q2/H1’17 Earnings presentation
12. Investment securities , 99% of total portfolio invested in bonds Highlights Investments By region By issuer Investment securities stood at AED 40,905 million as at 30 June 2017 99% of the total portfolio was invested in bonds issued by government, public sector, banks, financial institutions and corporates Domestic 67% Government securities 56% Average life of the investment securities portfolio is 3.3 years 78% invested in the UAE and other GCC countries 99% Portfolio summary: 78% Invested in bonds 56% of the portfolio is invested in Government securities Rest of the world 2% Non Government bond portfolio – 44% of total portfolio ‒ Rated A- or better: 51% ‒ Rated Investment grade (i.e. BBB+ to BBB-): 37% ‒ Rated below IG (BB+ and below including unrated): 12% Invested in the UAE and GCC Others* 3% Bonds Banks and FI 22% Bonds Public sector 19% USA 1% Europe 4% Asia 15% Other GCC Countries 11% * Include corporate bonds, equity instruments and mutual funds Maturity profile of investment securities portfolio (AED million)* 2,102 5,648 3,602 17,343 5,594 3,207 1,171 132 194 1,220 96 69 30 Total bond portfolio: AED 40,406 million Credit ratings as at 30 June 2017 (Standard & Poor's, or equivalent of Fitch or Moody’s UAE Sovereign¹ 36% AAA to AA18% A+ to A16% Unrated 1% BB+ to B10% BBB+ to BBB19% ¹ UAE Sovereign internal rating mainly in Grade 2 and maps to external rating between AA to A 2017 2018 2019 2020 2021 2022 * Excluding investments in equity and funds 2023 2024 2025 2026 2027 2029 2030 12 | Q2/H1’17 Earnings presentation
13. Stable asset quality metrics Conservative and prudent approach to risk management Cost of risk Highlights Non-performing loans (NPL) and provision coverage ratios were 2.8% and 123.8% respectively, compared to 2.7% and 129.9% as at 31 December 2016 0.79% 0.80% 0.83% 0.78% 0.81% June'16 Sep'16 Dec'16 March'17 June'17 Cost of risk for H1’17 was 0.81% compared to 0.83% in 2016 Impairment charges on loans, net of recoveries amounted to AED 813 million in H1’17, compared to AED 722 million in H1’16. H1’16 benefited from significant impairment allowance releases on loans which were not repeated in the first half 2017 Recoveries during H1’17 totaled AED 162 million compared to AED 70 million in H1’16 Collective impairment allowance balance was AED 1.76% of credit risk weighted assets, above the minimum 1.5% stipulated by the UAE Central Bank Non-performing loans 4,600 4,918 Non-performing loan ratio 2.74% 2.81% Provision coverage ratio 129.9% Impairment allowances (Includes impairment allowances to banks) 3,194 123.8% 3,162 2,970 2,851 AED mn AED mn Dec'16 June'17 Dec'16 June'17 Dec'16 June'17 Dec'16 Individual impairment June'17 Collective impairment 13 | Q2/H1’17 Earnings presentation
14. 2017 Awards “Innovative Approach to Emiratisation to Deliver Exceptional Customer Experience” for Tamooha “Best Business Change or Transformation – Delivery of a Great Customer Experience Through Change” for Operational Excellence Framework ‘SIMPLean’ Gulf Customer Experience Awards “Best Trade Finance Bank in The U.A.E” Gulf Customer Experience Awards “Best Insight and Feedback – Listening to Customers to Create an Impact” for Customer Experience and Research Global Finance Gulf Customer Experience Awards “Best Contact Centre in the Region” for Contact Centre “Best Supply Chain Finance Bank in the Middle East” Gulf Customer Experience Awards Global Finance “Mohammed Bin Rashid Al Maktoum Business Innovation Award” “The Mohammed Bin Rashid Al Maktoum Business Innovation Awards” “Best Trade Bank in the Middle East” Trade and Forfaiting Review (TFR) “Five Star Trade Finance provider in Middle East” Euromoney “3G CSR Award” ” in recognition of excellence in transparency, good governance and social responsibility The Global Good Governance Awards (3G Awards) “Five Star Cash Manager ” Euromoney “Best Employee Engagement in Financial Services” for the Human Resources Team Gulf Customer Experience Awards “Outstanding Award for Business Innovation” “The Mohammed Bin Rashid Al Maktoum Business Innovation Awards” “Best Bank for Transaction Services in the Middle East” Euromoney Awards for Excellence 14 | Q2/H1’17 Earnings presentation
15. Balance sheet AED million June ’17 Dec’16 Change % Cash and balances with central banks 19,535 19,262 1 Deposits and balances due from banks, net# 16,593 24,664 (33) 550 1,525 (64) 41,454 33,478 24 164,251 158,458 4 16,856 20,903 (19) 259,239 258,289 0 6,159 3,843 60 161,779 155,442 4 7,312 8,729 (16) Borrowings 36,302 38,015 (5) Other liabilities** 17,184 21,910 (22) 228,735 227,938 0 Total shareholders’ equity 30,503 30,351 1 Non -controlling interests 0 0 NM 259,239 258,289 0 Reverse-repo placements Investment securities Loans and advances to customers, net Other assets* Total assets Due to banks Deposits from customers Euro commercial paper Total liabilities Total liabilities and shareholders’ equity Note: #Deposits and balances due from banks include AED 4.4 bn as at June 30, 2017 (AED 3.6 bn as at December 31, 2016) of loans to banks that were earlier reported under loans and advances to customers, net. *Other assets include derivative financial instruments, investment in associate, investment properties, property and equipment (net), intangible assets. **Other liabilities include derivative financial instruments. Numbers may not add up due to rounding. 15 | Q2/H1’17 Earnings presentation
16. Income statement AED million H1 ’17 H1’16 Change % Interest income and income from Islamic financing 4,849 4,228 15 (1,543) (1,129) 37 3,305 3,099 7 Net fees and commission income 755 734 3 Net trading income 137 302 (54) Other operating income 140 120 17 Non interest income 1,032 1,155 (11) Operating income 4,338 4,255 2 Staff expenses (806) (843) (4) Other operating expenses (526) (491) 7 (79) (70) 12 (1,411) (1,404) 1 Operating profit before impairment allowances & taxation 2,926 2,851 3 Impairment allowances (814) (703) 16 5 4 NM (4) (5) (17) 2,114 2,147 (2) 2,114 2,145 (1) Interest expense and profit distribution Net interest and Islamic financing income Depreciation Operating expenses Share in profit of associate Overseas income tax expense Net profit Attributed to: Equity holders of the Parent Non-controlling interests Net Profit There could be inconsistencies in totals due to rounding differences 2 2,114 2,147 (2) 16 | Q2/H1’17 Earnings presentation
17. ADCB Investor Relations Sheikh Zayed Street P . O. Box: 939, Abu Dhabi Email: adcb_investor_relations@adcb.com Tel: +971 2 696 2084 Fax: +971 2 610 9845 Internet: www.adcb.com/investors