Dubai Islamic Bank 3rd Quarter 2020 Group Financial Results

Press release
Published October 21st, 2020 - 06:30 GMT
Dubai Islamic Bank 3rd Quarter 2020 Group Financial Results
Mohammed Ibrahim Al Shaibani , Dr. Adnan Chilwan
Highlights
Dubai Islamic Bank (DFM: DIB), the largest Islamic bank in the UAE, today announced its results for the period ending September 30, 2020. 

 

Dubai Islamic Bank (DFM: DIB), the largest Islamic bank in the UAE, today announced its results for the period ending September 30, 2020. 

9M 2020 results highlights:

  • Group Net Profit reached to AED 3,124 million during the first nine months of the year.

  • Net financing and Sukuk investments rose to AED 234.5 billion vs AED 184.2 billion in 2019, up by 27% YTD.

  • Customer deposits increased to AED 214.6 billion up by 31% YTD.

  • CASA component increased to 39% from 33% when compared to YE2019.

  • Cost to income ratio stable at 29.4%. 

  • ROA stood at 1.70% and ROE at 14.0%.

  • Financing to deposit ratio stood at 92%, signifying ample liquidity.

  • NPF ratio at 4.8%, remains robust given the current market conditions.

  • Overall coverage, including collateral at discounted value, stands at 114%. 

  • Capital adequacy (CAR) and CET 1 ratios improved to 17.3% and 12.9% respectively, despite growth and conservative provisioning. 

Management’s comments for the period ending 30 September 2020:

His Excellency Mohammed Ibrahim Al Shaibani, Director-General of His Highness The Ruler’s Court of Dubai and Chairman of Dubai Islamic Bank, said: 

  • The global environment remains uncertain with geographies around the world yet to fully recover. At home, the UAE remains committed towards economic development with a strong focus on precautionary safety measures as we witness the gradual recovery of trade and business services. In addition, the proactive fiscal policies of the UAE government have supported the domestic banks to continue to operate profitably whilst simultaneously assisting and servicing customers during these trying times.

  • The on-going consolidation of the banking sector in the GCC region is expected to continue with constrained growth opportunities and lower oil prices. DIB’s strategic acquisition of Noor remains on target for completion by year end. The anticipated synergies have already started to materialize which will pave the way for robust growth and greater returns for our shareholders in the years to come.

Dubai Islamic Bank Managing Director, Abdulla Al Hamli, said:

  • The UAE’s strong international economic relations, stable government and advanced technology infrastructure will further support the recently announced government initiatives such as the retirement and remote working programs. DIB’s robust consumer business coupled with digital offerings remains aligned towards supporting immediate on-boarding of new customers as well as continuing to service and engage with them on the same. 

  • During these unprecedented times, our business continuity and crisis management plans were immediately engaged. This has enabled our highly dedicated and capable employees to continue on with their duties and be able to service our customers with minimal disruptions supported by technology enablers and extreme precautionary and safety measures.

Dubai Islamic Bank Group Chief Executive Officer, Dr. Adnan Chilwan, said:

  • Even with the continued economic uncertainties and market volatilities over the past few months, the bank’s total income for the nine months of 2020 remained stable at nearly AED 10 bln, a significant achievement during these unprecedented times. Our diversified revenue streams continue to sustain the bank’s healthy profitability levels during the period as we see the net operating revenue actually increase to over AED 6.9 bln despite the pandemic.

  • Focusing on low risk segments, the bank remains at the top in the market from earning assets growth perspective with nine months increase of 27% supported by gross new financing of around AED 42 billion. Despite the growth, liquidity remained strong at 92%.

  • Notwithstanding significant growth, and substantial provisioning and impairments due to the conservative approach adopted, the strong profitability has pushed the capitalization ratios upwards with CET1 rising by 90 bps to circa 13% and overall CAR 17.3%, depicting a robust capital position.

  • As a leading player in the capital markets space, more than USD 20 bln of sukuk and syndicated transactions were executed to support the market. Furthermore, vital support was also provided to over 50,000 corporate and retail customers with nearly AED 8 bln in relief measures under the UAE CB’s TESS program.

  • The Noor Bank acquisition remains on target for completion within the year. As synergies start to unfold, this key transaction will facilitate the acceleration of our business and strategic ambitions to sustain our leading position in the industry, now and in the post-covid future.

Financial Review: 

Income Statement highlights:

AED million 

Sep 2019

Sep 2020

YoY Change %

Total Income

10,250

9,892

(3%)

Depositors’/ Sukuk holders share of profit

(3,373)

(2,957)

(12%)

Net Operating revenue

6,877

6,935

1%

Operating expenses

(1,771)

(2,134)

20%

Profit before impairment losses & income tax

5,105

4,801

(6%)

Impairment losses

(1,056)

(2,650)

151%

Gain on Bargain Purchase

-

1,015

100%

Income tax

(34)

(41)

20%

Net profit for the period

4,015

3,124

(22%)

 

Key ratios

Dec 2019

Sep 2020

Change

Net Profit Margin %

3.15%

2.70%

(450 bps)

Cost to income ratio %

26.9%

29.4%

250 bps

Return on average assets %

2.25%

1.70%

(550 bps)

Return on average equity %

17.1%

14.0%

(310 bps)

Income and Net Revenues

The bank’s total income reached nearly AED 9.9 billion for the nine months of 2020 whilst net operating revenue grew to AED 6.9 billion supported by core business growth as well as robust fees & commissions and FX income of AED 1.32 billion, an increase of 19% YoY. 


 

Costs

Operating expenses reached AED 2,134 million in the first nine months of 2020 against AED 1,771 million during the same period last year. The rise in costs primarily stems from consolidation impact of Noor Bank as well as integration expenses in 1Q 2020. Cost to income ratio stood at 29.4% as of Q3 2020, and is expected to steadily improve as synergies materialize.

Net Profits

The net profits of the bank during the nine months of 2020 reached to AED 3,124 million. Despite the challenges in the global economy, the bank continues to demonstrate franchise strength and remain profitable during the on-going global crisis. The near completion of the Noor integration exercise is expected to bring further positive contributions towards the bank’s overall profitability.

Statement of financial position highlights:

AED Million 

 

Dec 2019

Sep 2020

Change

YTD (%)

Net Financing and Sukuk Investments

 

184,157

234,507

27%

Interbank placement & CDs

 

16,275

30,301

86%

Equities & Properties Investments

 

9,788

11,147

14%

Cash & Other assets

 

21,576

23,349

8%

Total assets

 

231,796

299,303

29%

         

Customers' deposits

 

164,418

214,642

31%

Sukuk Financing Instruments 

 

14,852

18,598

25%

Total liabilities

 

197,064

259,271

32%

Shareholder Equity & Reserve

 

25,565

29,043

14%

Tier 1 Sukuk

 

6,428

8,264

29%

Non-Controlling Interest

 

2,739

2,725

(1%)

Total liabilities and equity

 

231,796

299,303

29%

 

Key ratios:

Dec 2019

Sep 2020

Change

Net Financing to customer deposit

92.0%

92.0%

-

CET 1 ratio

12.0%

12.9%

90 bps

CAR

16.5%

17.3%

80 bps

NPF ratio 

3.9%

4.8%

90 bps

Coverage ratio

101.0%

81%

2000 bps

Financing and Sukuk portfolio 

The net financing & Sukuk investments grew to AED 234.5 billion during the nine months of 2020 from AED 184.2 billion at the end of 2019, a robust rise of 27%. Nearly AED 42 billion were deployed in gross new financing growth driven by the realignment of strategy focusing on lower risk sectors, particularly sovereigns, and includes gross new consumer financing amounting to AED 9.5 bn to date. 

 

Asset Quality

Non-performing financing (NPF) ratio and impaired financing ratio stood at 4.8% and 4.6% respectively. Cash coverage and overall coverage ratio, including collateral at discounted value stood at 81% and 114% respectively.  Normalized cost of risk for the period was 99 bps (excluding one-off charges). 



 

Customer Deposits

 

Customer deposits grew to AED 214.6 billion from AED 164.4 billion at year-end 2019 reflecting significant rise of 31% YTD.

 

CASA rose strongly by 52% YTD to AED 82.9 billion, growing from AED 54.6 billion in year-end 2019. This currently represents about 39% of customer deposits. Net financing to deposit ratio stood at 92%, signifying ample liquidity despite material growth in financing book.


Capital Adequacy

Capital adequacy and CET 1 ratios improved to 17.3% (+80 bps YTD) and 12.9% (+90 bps YTD) respectively. Despite strong growth during the year, capital levels remain intact and well above the minimum regulatory requirement. 

Q3 2020 - Key business highlights:

  • To support and mitigate the impact of the pandemic in the domestic economy, the UAE Central Bank announced a comprehensive TESS program providing all banks with Zero Cost Facility (ZCF). As at 30 September 2020, the bank’s customers benefited from nearly AED 8 billion which included relief to the customers from the payment of instalments on outstanding facilities for affected private sector and retail banking customers who approached the bank.

  • Noor bank integration remains on track with key deliverables on policies and operating models completed. The bank continues to progress in terms of its technology platforms integration and end-to-end product and process harmonization, with minimal impact for customers. Targeted completion time will be during Q4 2020.

  • During the annual Islamic Finance News (IFN) awards 2020, DIB’s contributions to the Islamic finance industry was acknowledged with 6 prestigious awards. DIB also landed the “Best Overall Islamic Bank”,  “Social Impact Deal of the Year” in the UAE, the “Sovereign Deal of the Year”, the “UAE Deal of the Year”, and the “Overall Deal of the Year” awards. DIB Kenya picked up the “Best Islamic Bank” award in Kenya for the second time, a testimony to the bank’s achievements in the short tenure thus far in the country. The sheer diversity of accolades received clearly evidences the bank’s commitment, dedication and support to the progression and development of the Islamic finance industry worldwide.

9M 2020 DCM and Syndication Deals

SUKUK

Issuer / Obligor Name

Issuer Type

Profit Rate (%)

Amount Issued 

(USD mn)

Maturity

First Abu Dhabi Bank

Financial Institution

2.500

500

January 2025

Dar Al Arkan

Corporate

6.875

400

February 2027

Islamic Development Bank

Supranational

1.809

2,000

February 2025

Government of Sharjah

Sovereign

2.942

1,000

June 2027

Dubai Islamic Bank

Financial Institution

2.950

1,000

300 (tap)

January 2026

Sharjah Islamic Bank

Financial Institution

2.850

500

June 2025

Republic of Indonesia

Sovereign

2.300

2.800
3.800

750

1,000
750

June 2025

June 2030

June 2050

DP World

Corporate

6.000

1,500

Perpetual NC 5.5yr

Dubai Department of Finance

Sovereign

2.763

1,000

September 2030

Emirates Islamic Bank

Financial Institution

1.827

500

September 2025



 





 






 
 
 

CLUB / SYNDICATED TRANSACTIONS

Obligor Name

Obligor Type / Sector

Total Deal Value

(USD or USD 

eqv. In Mn)

Closing Date

Topaz Energy & Marine Ltd.

Logistics

392

February 2020

Network International

Financial Services

525

March 2020

Port & Free Zone World FZE

Logistics

9,000

April 2020

Government of Egypt

Sovereign

2,000

August 2020


 

Year to Date Industry Awards (2020)

Date

Award Giving Body

Award Received

 

January 2020

The Collaborative Market Data (CMD) Portal Awards

Best Sukuk Dealer

June 2020

Forbes Middle East 2020

DIB ranked 16th amongst Top 100 Companies in the Middle East 2020

June 2020

Islamic Finance News Awards 2019

Best Overall Islamic Bank

June 2020

Islamic Finance News Awards 2019

Social Impact Deal of the Year

June 2020

Islamic Finance News Awards 2019

Sovereign Deal of the Year

June 2020

Islamic Finance News Awards 2019

UAE Deal of the Year

June 2020

Islamic Finance News Awards 2019

Best Islamic Bank in Kenya

June 2020

Islamic Finance News Awards 2019

Overall Deal of the Year

July 2020

EMEA Finance Achievement Awards 2019

Best Financial Institution Sukuk

Background Information

Dubai Islamic Bank

Since its formation in 1975 as the world’s first full-service Islamic bank, Dubai Islamic Bank has established itself as the undisputed leader in its field, setting the standards for others to follow as the trend towards Islamic banking gathers momentum in the Arab world and internationally.

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