RAKBANK profits 438.6 million dirhams in 9 months

The National Bank of Ras Al-Khaimah (RAKBANK) achieved a consolidated net profit of AED 438.6 million for the nine-month period ending September 30, 2020. The decrease in profits in the third quarter is due to lower revenues resulting from lower demand for loans and higher provisions, according to the International Financial Reporting Standard. No. 9, which is kept as part of the precautionary measures to combat the economic impact of “Covid-19”
During the nine months ended September 30, 2020, the bank’s total revenue of 2.8 billion dirhams decreased by 241.9 million dirhams year-on-year, due to lower net interest income and net income from Islamic financing, and lower non-interest income. In addition, total assets amounted to 52.3 billion dirhams as of September 30, 2020, registering a 7.0% year-on-year decline by 8.4% year-to-date.
“Since the gradual reopening of businesses, we have started to see signs of improvement in the economy of the UAE,” said Peter England, CEO of National Bank of Ras Al-Khaimah. However, customer demand for loans has decreased significantly, with many SMEs and individuals continuing to exercise caution. This, combined with the low interest rate environment, poses challenges to the bank’s income level. To help mitigate this impact, the Bank took a very proactive approach, improving cost. This was evidenced by a decrease in operating expenses by 12.2% on an annual basis, which improved the cost to income ratio by 37.4%.
With the exception of continuing the prudential accounting of loan loss provisions in accordance with IFRS 9, the asset quality in our book remains in good shape, supported of course by the UAE Central Bank’s very proactive approach, which has provided an economic support plan for borrowers who are currently facing challenges » .

Performance summary

Total revenues decreased by 8.1% to reach 2,756.4 million dirhams, compared to the same period last year, mainly due to the decrease in non-interest income by 114 million dirhams, due to the decrease in commercial activity and the decrease of 127.9 million dirhams in net interest income and net Revenue from Islamic products due to lower balance sheets and interest margins. In addition, net interest income and net income from Sharia-compliant financing decreased by 6.1% year-on-year to reach 1,963.8 million dirhams, while non-interest income decreased by 12.6% to 792.7 million dirhams, mainly due to the decrease in Net fee and commission income of AED 103.2 million, and foreign exchange income and financial derivatives of AED 32.4 million, on an annual basis.

the findings

Total assets have decreased by 4.8 billion dirhams, by 8.4% to date, by 3.9 billion dirhams on an annual basis. This is mainly due to the decrease in the total loans and advances and the cash balance with the UAE Central Bank, offset by the increase in bank balances.

Asset quality

Provisions for credit losses increased by 302.3 million dirhams on an annual basis, mainly due to the increase in precautionary provisions that were adopted to combat the expected slowdown in the economic and operational environment resulting from this pandemic. The ratio of non-performing loans and advances to total loans and advances was 5.1%, compared to 4.0% on December 31, 2019 due to lower loans and advances. The ratio of net credit losses to average loans and advances calculated on an annual basis closed at 4.9%, compared with 3.7% for the period extending from the beginning of the year to September 2019, due to the increase in provisions in accordance with IFRS 9 and the decline in the loan book.

Capital and liquidity

The bank’s capital adequacy ratio according to Basel III requirements, and after applying the prudential nomination, was 19.4%, compared to 16.8% at the end of the previous year. The regulatory eligible liquid assets ratio at the end of the period was 9.7%, compared to 12.9% as at December 31, 2019. The advance to stable resources ratio also stabilized at 86.0%, compared to 89.1% at the end of 2019.
Total assets decreased by 4.8 billion dirhams to 52.3 billion dirhams, compared to December 31, 2019, due to the significant decrease resulting from the decline in total loans and advances by 3.7 billion dirhams, the decline in the cash balance of the UAE Central Bank by 1.2 billion dirhams, in addition to the decline in lending in The corporate banking sector in RAKBANK with a rate of 8.8% That is, 810 million dirhams on an annual basis. The loan portfolio in the retail banking services sector decreased by AED 1.8 billion, and the loan portfolio in the business banking services sector decreased by AED 1.1 billion, compared to September 30, 2019.
Customer deposits decreased by AED 2.6 billion to reach AED 34.2 billion, compared to the period ending on December 31, 2019.
The decline was mainly due to lower time deposits, which fell by 4.7 billion dirhams, partially offset by an increase of 2.0 billion dirhams in checking and savings accounts deposits. The UAE Central Bank also reduced the required reserve amount against current and savings accounts by 50%, with the aim of increasing money circulation to stimulate the economy in these difficult times.