Banking & Finance

Abu Dhabi’s ADCB Quarterly Profit Drops 11% on Cost of Funding

(Bloomberg) — Abu Dhabi Commercial Bank, which completed a three-way merger in May, reported an 11% decline in second-quarter profit as the cost of funds rose.

Pro-forma net income of the combined bank fell to 1.45 billion dirhams ($394 million) from 1.62 billion dirhams a year earlier, according to a statement on Sunday.

Net interest and Islamic financing income dropped 7% as funding costs climbed due to higher costs of holding low-yielding liquid assets.

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Abu Dhabi Commercial Bank combined with local rivals Union National Bank PJSC and Al Hilal Bank PJSC to create the Gulf region’s fifth-biggest lender with $114 billion in assets. The merger is expected to deliver cost savings of about $167 million annually.

Profit also impacted by lower non-interest income
Net interest and Islamic financing income 2.6 billion dirhams vs 2.79 billion
Non-interest income 656 million dirhams vs 718 million
Impairment allowances 429 million dirhams vs 602 million
Net loans and advances 251 billion dirhams vs 260 billion at end-December
- Loans fell primarily due to corporate repayments
Customer deposits 273 billion dirhams vs 285 billion at end-December
Full systems and operational integration is expected to be delivered by 4Q 2020
Initiatives launched to achieve 222 million dirhams a year of cost synergies of the 615 million dirhams run rate target to be reached by 2021
One-off integration costs of 87 million dirhams are in line with planned expenditure of 800 million dirhams to complete integration
Integration of Al Hilal Bank close to completion
Abu Dhabi Ex: Abu Dhabi Commercial Bank Management Discussion and Analysis Report for the Period Ended June 30,2019 – 7/28/2019

As a legal entity, Abu Dhabi Commercial Bank reported a profit of 1.18 billion dirhams for the second quarter, which included two months of operations as a combined bank. The three-way merger was effective May 1.