Wednesday 11, October 2017 by Georgina Enzer

DIB net profit reaches AED 3.301 billion as balance sheet crosses AED 200 billion

Dubai Islamic Bank (DFM: DIB), the first Islamic bank in the world and the largest Islamic bank in the UAE by total assets, has grown group profits by 10 per cent year-on-year to AED 3.301 billion for the period ended September 30, 2017, compared with AED 3,011 million for the same period in 2016.

“The recovery of international oil prices and the stability witnessed in the recent past will be a major source of support in the area of funding and liquidity for the banking sector. With the solidity and resilience displayed by UAE’s financial market, credit growth is expected to more than double to 5 per cent in 2018, spurred by the government’s unabated progress on infrastructure development in line with its economic aspirations. DIB continues to remain at the forefront of the industry with solid earnings growth as net profit increased by 10 per cent YoY, primarily driven by the bank’s persistent efforts in maximising its share of wallet across a diverse array of sectors and segments,” said His Excellency Mohammed Ibrahim Al Shaibani, Director-General of His Highness The Ruler’s Court of Dubai and Chairman of Dubai Islamic Bank.

The Group has seen sustained profitability and growth on the back of robust Net Income Margin (NIMs) and low operating expenses. Net Operating Revenue increased to AED 5,681 million, up 13 per cent compared with AED 5,048 million for the same period in 2016. Efficient and proactive cost management has led to operating expenses remaining nearly flat at AED 1,741 million compared to AED 1,716 million for the same period in 2016.

The Group’s net operating income before impairment charges grew by 18 per cent to AED 3,940 million compared to AED 3,332 million for the same period in 2016, while its cost of credit risk reduced to 63 bps compared to 81 bps for the same period in 2016.

The Group’s cost to income ratio reduced to 30.7 per cent compared with 34.0 per cent at the end of 2016, while asset growth remains robust across all core businesses

“The bank has given another remarkable performance this quarter with total income growing by 17 per cent YoY as DIB continues to outpace the sector growth. The progress we have made in implementing our growth aspirations has led to the bank strengthening its market share with both the financing book and the deposit base growing by mid to high double digits in the first nine months of 2017. With the rapidly changing digital space, we will continue to expand on our technological capabilities to ensure that we remain at the forefront of the FINTECH revolution, and our customers get the best and most convenient product and services at all times,” said Dubai Islamic Bank Managing Director, Abdulla Al Hamli.

DIB’s net financing assets rose to AED 131.3 billion, up by 14 per cent, compared to AED 115.0 billion at the end of 2016, while Sukuk investments increased to AED 25.2 billion, a growth of 8 per cent, compared to AED 23.4 billion at the end of 2016.

The Group’s total assets stood at AED 201.2 billion, an increase of 15 per cent, compared to AED 175.0 billion at the end of 2016.

Asset quality trends remain positive as a direct consequence of robust underwriting and solid risk management practises, according to DIB.

The NPA ratio continued its downward trajectory improving to 3.4 per cent, compared to 3.9 per cent at the end of 2016, and the provision coverage ratio improved to 121 per cent, compared to 117 per cent at the end of 2016.

Overall coverage including collateral at discounted value now stands at 162 per cent, compared to 158 per cent at the end of 2016.

Strong liquidity continues to support asset growth

Customer deposits stood at AED 143.5 billion at the end of the nine month period, compared to AED 122.4 billion at the end of 2016, up by 17 per cent. CASA deposits also increased, reaching a seven per cent growth YoY to AED 50.9 billion from AED 47.4 billion as at end of 2016 leading to a robust 35 per cent constitution of the total deposit base.

Financing to deposit ratio stood at 92 per cent, indicating a push towards efficiency and margin protection.

The Group’s focus on diversification and securing long term funding saw another successful senior Sukuk issuance of $1 billion during Q1 2017.

Robust capitalisation

DIB’s capital adequacy ratio remained strong at 16.9 per cent, as against 12 per cent minimum required. Tier 1 CAR stood at 16.3 per cent under Basel II, against minimum requirement of 8 per cent.

Shareholders’ return remains robust – in line with guidance for the year

  • Earnings per share stood at AED 0.55 as at Q3 2017.
  • Return on equity stood at 18.6 per cent as at Q3 2017.
  • Return on assets steady at 2.34 per cent as at Q3 2017.

 

“Crossing the landmark of AED 200 billion in total assets is another momentous milestone in our incredible growth journey over the last four years. This market beating performance clearly demonstrates the strength of the franchise and the potential the organisation has to continue to defy the trend despite the challenges thrown by the global economic environment. The recent move by the rating agencies with positive impacts on long term as well as standalone ratings is a clear affirmation of the fact that the 14 per cent growth in the financing assets so far this year and the tremendous performance in preceding years has not come at the expense of asset quality or underwriting standards. A testament to the tight and stringent risk management practises in DIB, these announcements by the two international rating agencies should provide a strong sense of comfort to our growing global investor community.  With a sector share of around 8 per cent, DIB today, has the required scale, positioning and the financial strength to continue to deliver above-market performance. Bolstering the international presence will see us engage actively in the existing core markets as we expand our focus geographies to now include South East Asia, East Africa and Far East Asia. The progress so far has been backed by a thorough and solid strategic agenda built on a model of preemptive capacity creation. With ample liquidity and robust capitalisation serving as the backbone to DIB’s growth objectives, the bank is in a strong position to accelerate its plans to expand its franchise locally and internationally and ensure that we continue to deliver even more comprehensive, creative and complete solutions to all our customers in the markets we operate,” said Dubai Islamic Bank Group Chief Executive Officer, Dr. Adnan Chilwan.

Total Income

Profitability remained strong with total income for the period ended September 30, 2017 increasing to AED 7,510 million from AED 6,410 million for the same period in 2016. The 17 per cent rise is driven primarily by sustained growth in all core businesses with income from Islamic financing and investing assets increasing by 19 per cent to AED 5,722 million compared to AED 4,813 million for the same period in 2016.

Net revenue

Net revenue for the period ended September 30, 2017 amounted to AED 5,681 million, an increase of 13 per cent compared with AED 5,048 million in the same period of 2016.  The increase is attributed to strong growth in the financing book as the bank continues to enhance its share of wallet across all key economic sectors.

Operating expenses

Operating expenses were held nearly flat to AED 1,741 million for the period ended September 30, 2017 compared to AED 1,716 million in the same period in 2016, primarily due to efficient cost management. This led to cost to income ratio improving to 30.7 per cent compared to 34.0 per cent at the end of 2016.

Profit for the period

Net profit for the period ended September 30, 2017, rose to AED 3,301 million from AED 3,011 million in the same period in 2016, an increase by 10 per cent emanating from a combination of robust core business growth and effective and efficient cost management.

Financing portfolio

Net financing assets grew to AED 131.3 billion for the period ended September 30, 2017 from AED 114.9 billion as of end of 2016, an increase of 14 per cent driven primarily by the continued growth of core businesses. Corporate banking financing assets grew by 21 per cent to AED 87 billion whilst consumer business grew by 4 per cent to AED 40 billion. Commercial real estate concentration contained at around 18 per cent and in line with targeted guidance numbers.

Asset quality

Non-performing assets have shown a consistent decline with NPA ratio improving to 3.4 per cent for the period ended September 30, 2017, compared with 3.9 per cent at the end of 2016.  Impaired financing ratio stood at 3.2 per cent for the period ended September 30, 2017 from 3.6 per cent at the end of 2016. Consequently, as buildup of provision continuous driven primarily by collective provisioning, cash coverage stood at 121 per cent for the period ended September 30, 2017 compared with 117 per cent at the end of 2016. Overall coverage ratio including collateral at discounted value stood at 162 per cent compared to 158 per cent at the end of 2016.

Sukuk investments

Sukuk investments increased by 8 per cent to AED 25.2 billion for the period ended September 30, 2017 from AED 23.4 billion at the end of 2016. This high yielding portfolio, primarily listed and based out of UAE, consists of sovereigns and other top tier names many of which are rated.

Customer deposits

Early capacity creation, with liquidity mobilisation continues to spur growth. Customer deposits for the period ended September 30, 2017 increased by 17 per cent to AED 143.5 billion from AED 122.4 billion as at end of 2016. CASA component stood at AED 50.9 billion as of September 30, 2017 compared with AED 47.4 billion as at end of 2016 showing consistent rise in low cost deposits. Financing to deposit ratio of 92 per cent as of September 30, 2017 indicates one of the strongest liquidity position.

Capital adequacy

Capital adequacy ratio remained robust at 16.9 per cent as of September 30, 2017, whilst T1 ratio stood at 16.3 per cent; both ratios are well above regulatory requirement in the current Basel II regime.

 

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