FAB reports a Group Net Profit of AED 8.0 Billion for the first half of 2022, up 50% year-on-year

“FAB delivered a strong performance in the first six months of 2022 with a 50% increase in net profit compared to the same period in 2021. Despite heightened global market volatility, our core businesses maintained solid growth momentum reflecting healthy pipeline execution across our diversified franchise, and our ongoing strategic focus on deepening client relationships.”  -Hana Al Rostamani, Group Chief Executive Officer.

Strong underlying performance supported by higher revenue and moderate cost of risk, amid ongoing investments to support growth aspirations

H1’22 highlights:

• Group Net Profit at AED 8.0 Billion, up 50% yoy; annualised Earnings per Share at AED 1.43  
• Total Income at AED 12.5 Billion, up 31% yoy, includes AED 3.1 Billion net gain on sale of majority stake in Magnati
• Impairment charges (net) at AED 1.0 Billion, 9% lower yoy; annualised cost of risk at 47 basis points
• Operating costs at AED 3.1 Billion, up 8% yoy excluding Bank Audi Egypt inclusion, reflects ongoing investments to drive growth and transformation  

Q2’22 highlights:

• Group Net Profit at AED 2.9 Billion, up 13% qoq on an underlying basis when excluding gains on Magnati stake sale 
• Operating income at AED 5.0 Billion, 4% lower yoy, up 12% qoq driven by higher interest and non-interest income
• Impairment charges (net) at AED 582 Million, 14% lower yoy, up 27% qoq
• Operating costs at AED 1.6 Billion

Double-digit loan growth reflects sustained business momentum, while liquidity, asset quality and capital position remain strong

• Loans, advances and Islamic financing at AED 459 Billion, up 6% sequentially and 12% ytd
• Customer deposits at AED 648 Billion, up 8% sequentially and 5% ytd; CASA balances at AED 291 Billion, are up 15% yoy
• Liquidity Coverage Ratio (LCR) at 135% underlines strong liquidity position 
• Healthy asset quality metrics with NPL ratio and provision coverage at 3.6% and 100%, respectively
• Common Equity Tier 1 (CET1) at 12.6%, comfortably above regulatory requirements

We continued to deliver on our growth objectives and create value for all stakeholders while navigating a rapidly evolving environment 

“FAB delivered a strong performance in the first six months of 2022 with a 50% increase in net profit compared to the same period in 2021. Despite heightened global market volatility, our core businesses maintained solid growth momentum reflecting healthy pipeline execution across our diversified franchise, and our ongoing strategic focus on deepening client relationships. 

Almost AED 50 Billion net incremental lending was extended by FAB       year-to-date, which is a record for the Group for any half-year period. This demonstrates buoyant regional activity, FAB’s leading origination capabilities, and the fundamental strength of our balance sheet as we continued to deploy our resources and expertise to support our client franchise with their local and cross-border banking needs.

During the period, we continued to focus on unlocking opportunities for our clients and communities through specialised offerings and innovative solutions, and by strengthening our footprint in target markets. We are also proud of our leading role in building a sustainable future for all, and the tangible progress we are making against our ESG ambitions. Looking ahead, we must recognise a more challenging global economic outlook marked by turbulent market conditions and inflationary pressures. As we enter the second half of the year, we remain committed to our clients and stakeholders, and confident in our ability to deliver sustainable shareholder returns as we pursue our growth and transformation plans.” -Hana AlRostamani, Group Chief Executive Officer.

“FAB produced another solid set of results in the second quarter with a net profit of AED 2.9 Billion, up 13% sequentially on an underlying basis, bringing first half 2022 profit to AED 8.0 Billion. Annualised return on tangible equity for the first half of 2022 improved to 19.5% from 13.6% in H1’21.

In the last quarter, all our core businesses delivered top line growth sequentially, led by a double-digit growth in Investment Banking and Corporate and Commercial Banking, which is a strong result in the context of adverse global market conditions.

This was helped by strong volumes, early benefits from rising interest rates, and healthy client activity in Global Markets consistent with our strategy to enhance cross-sell. Risk was prudently managed across the Group, while the year-on-year growth in operating expenses reflects continued investments in franchise growth and transformation.

We have maintained a strong liquidity position, with Group LCR at 135%, and our balance sheet is optimally positioned to continue to benefit from rising interest rates. Despite balance sheet growth and market and regulatory headwinds, capital buffers remain strong with June-end Group CET1 at 12.6%. Although the supportive regional economic backdrop and the diligent execution of our strategy represent significant tailwinds, we remain cautious in the context of heightened market volatility, persistently elevated global inflation and rapidly evolving monetary policy.” - James Burdet, Group Chief Financial Officer.

ECONOMIC OVERVIEW AND OUTLOOK

Global economic conditions weakened during Q2’22 with inflationary pressures driving aggressive monetary policy tightening, and multiple headwinds fuelling stagflation concerns and market volatility. 

In contrast, the UAE economy continued to demonstrate resilience buoyed by strength in oil prices, moderate inflation, a recovery across key economic sectors including real estate and tourism, and ongoing structural reforms to drive economic growth and diversification. The underlying strength of the UAE economy was also highlighted by PMI data, which remained in expansionary territory for the 19th consecutive month. Despite ongoing global uncertainty, we maintain a positive outlook for UAE economic growth this year and beyond. We now expect real Gross Domestic Product (GDP) growth to reach 5.7% in 2022 and 4.4% in 2023 (from previous forecasts of 4.8% and 4.0%, respectively) with oil price averaging USD 108 /bbl and inflation at around 5%.

Q2/ H1’22 SUMMARY FINANCIALS

_^Notes:

• _{^{Cost-income ratio for H1’22 and the quarters in 2022 excludes Magnati-related gains booked during 2022}}
• _{^{Comparative figures have been reclassified where appropriate to conform to the presentation and accounting policies adopted in the consolidated financial statements}}
• _{^{Ratios for the quarter are annualised, where applicable}}
• _{^{For further details on calculation of the ratios, please see the Quarterly Series on FAB IR website's financial reports page}}
• _{^{To view key figures in USD, please refer to: bankfab.com > investor relations > reports & presentations > key quarterly figures}}
• _{^{These results include financials of Bank Audi Egypt (BAE) effective post legal day 1 on 28 April 2021. As a result of the purchase price allocation (PPA) exercise, the 2021 comparative information has been restated to reflect the adjustments to the assumed carrying amounts. Refer to note #32 in the financials for the period ended 30 June 2022.}}
• _{^{Rounding differences may appear in above table}}