National Bank of Fujairah PJSC (NBF) Reports Year End 2020 Results
NBF’s year end results show high level of resilience
despite the significant impact of the COVID-19 pandemic and a few exceptional group exposures bringing results to a net loss of AED 475.3 million
Strong capital position and ample liquidity coupled with effective cost management and prudent provisioning place the bank well for a rapid recovery
NBF announces its results today for the year ended 31 December 2020 in accordance with the approval received from the Central Bank of the United Arab Emirates (CBUAE).
Operating income stood at AED 1.4 billion down 18.9% compared to AED 1.7 billion in 2019 reflecting the exceptionally challenging operating conditions and economic climate. Margin compressions, recessionary trends across global economies and depressed economic activity with the persistence of COVID-19 caused the drop in income. This was mitigated by management’s efforts to protect the core business, adapting its investment strategy and achieving operating efficiencies from its digitalization efforts.
Net interest income and net income from Islamic financing and investment activities and net fees, commission and other income stood at AED 948.9 million and AED 291.7 million respectively compared to AED 1.2 billion and AED 393.7 million in 2019.
Foreign exchange and derivatives income reached AED 125.0 million compared to AED 151.2 million in 2019.
Income from investments and Islamic instruments marked a significant improvement from 2019 to AED 20.0 million in 2020. Unrealised gain on fair value through other comprehensive income (FVOCI) investments stood at AED 92.6 million.
Operating expenses reduced by 12.8% to AED 491.0 million compared to AED 562.9 million in 2019, reflecting the measures adopted in line with the changing market conditions. Cost-to-income ratio stood at 35.4% compared to 33.0% in 2019 reflecting the lower operating income.
Operating profit was AED 894.6 million compared to AED 1.1 billion in 2019.
NBF maintained its policy of prudent and transparent recognition of problem accounts and has taken the opportunity to enhance net impairment losses in response to the potential impact of COVID-19 and a few exceptional group exposures to support a meaningful recovery in 2021. NBF secured net impairment provisions of AED 1.4 billion compared to AED 593.0 million in 2019. This provision charge for the year includes changes to the IFRS 9 model and macro-economic parameters in view of the COVID-19 aggregating to AED 247.7 million. During the year, the bank’s impairment reserve also reduced by AED 79.6 million to AED 283.5 million from AED 363.1 million at 2019 year-end. Total provision coverage ratio (including impairment reserves) stood at 91.8% compared to 107.3% as at 31 December 2019. The NPL ratio stood at 10.1% compared to 5.4% as at 31 December 2019. Excluding the few exceptional group exposures, the NPL ratio would reduce to 7.3%.
NBF recorded a net loss of AED 475.3 million for the year [2019: AED 552.2 million profit] as a result of the substantial increase in impairment provisions and lower operating profit, hence the Board of Directors does not propose a distribution of dividends to shareholders this year.
The capital adequacy ratio (CAR) is being kept at a recent high for the bank to underpin the bank’s ability to ride out any further pandemic related challenges. CAR stood at 19.2% (Tier 1 ratio of 18.1% and CET 1 ratio of 14.0%) compared to 17.8% (Tier 1 ratio of 16.6% and CET 1 ratio of 12.9%) at 2019 year-end.
Loans and advances and Islamic financing receivables stood at AED 24.8 billion compared to AED 27.1 billion at 2019 year-end. High quality liquid assets stood at AED 7.1 billion compared to AED 7.9 billion at 2019 year-end.
Investments and Islamic instruments were up by 54.0% from AED 3.4 billion at 2019 year-end to AED 5.2 billion as liquidity was directed towards the high quality investment book to mitigate the impact of the subdued loan growth in 2020. Fair value reserve increased by AED 61.2 million on the back of improvement in investments designated as fair value through other comprehensive income (FVOCI).
Customer deposits and Islamic customer deposits stood at AED 29.8 billion compared to AED 31.9 billion at 2019 year-end. Current and Saving Accounts (CASA) deposits increased by AED 1.6 billion from 2019 year-end, a 16.9% increase to AED 11.3 billion as at 31 December 2020. CASA deposits improved to 38.0% of total customer deposits compared to 30.3% as at 31 December 2019.
Total assets reached AED 39.9 billion (AED 42.8 billion at 2019 year-end).
Shareholders’ equity stood at AED 5.7 billion compared to AED 6.4 billion at 2019 year-end.
Ample liquidity was maintained with lending to stable resources ratios at 82.1% (2019: 85.9%) and eligible liquid assets ratio (ELAR) at 20.8% (2019: 21.7%), well ahead of all CBUAE minimum requirements.
H.H. Sheikh Saleh Bin Mohamed Bin Hamad Al Sharqi, Chairman said:
“The COVID-19 pandemic had an unprecedented impact on the world economy; contraction of business activities, exceptional government intervention through increased borrowing, oil price decline, geopolitical risks, trade tensions, rising cost of risk, increased joblessness and low investor and customer confidence. Against this backdrop, NBF has demonstrated its resilience and ability to navigate through volatility and uncertainty whilst maintaining its prudent provisioning policy and focus on the future.
Our underlying core business remains robust, our liquidity is in good shape, helped by our short term trade finance business, and our capital adequacy is at a recent high; enabling us to face these exceptional times with confidence and providing us a good platform for our recovery.
Given the changes forced on our customers by the pandemic, we are moving at a pace to adapt our business model to reflect their emerging needs and opportunities with a renewed focus on reducing concentration and growing quality diversified business in the government sector, trade finance, financial institutions, investments and home finance.
The bank’s continued investment in digitalization and innovation will ensure that the bank continues to deliver differentiated customer service and cost efficiency and at the same time create new sources of business development for future growth.
The Board and management are confident about the development and future success of the NBF franchise and that, despite the challenges and difficulties faced over the past year, our continued focus on core business, risk management, commitment to transparency and close focus on financial stability will ensure that NBF moves forward in 2021 and beyond in a strong position and will enjoy a period of exciting growth similar to that seen after the global financial crisis.
I would like to thank all our customers, shareholders and partners for their staunch support and trust in us and our committed staff members for their dedicated efforts and working flexibly during these times to maintain a seamless service. We are grateful for the guidance and support received from the UAE’s leadership and for the government’s timely support measures. Looking ahead, we will continue to play a vital role in supporting the UAE’s economic recovery, and we remain confident in our ability to navigate the evolving environment, and to deliver sustainable shareholder returns.”
Dr Raja Al Gurg, Deputy Chairperson said:
“Whilst our 2020 results, are very disappointing in terms of profitability, they highlight the Group’s financial strength and ability to withstand a truly exceptional shock to the economic system, underpinned by its strong capital base and the unwavering support of our principal shareholders.
In addition, our inexorable focus on our customers’ requirements and building an engaged and enabled workforce, augurs well for the effective delivery of our strategy for 2021 and beyond. NBF believes in value creation for all of its stakeholders and is committed to achieve this through fast-tracking the implementation of our digital plans, aligning our business focus to the current market and enhancing reputation with the highest ethical standards.
We are further re-organizing to strengthen our credit risk management processes and core business focus, more efficiently leveraging our competitive strengths and continue to look to drive efficiencies. We are assured that by upholding diligent risk management standards, financial prudence and sustainability, the Group will continue to make commendable progress over the coming years and benefit from the gradual rebound in business activity and market sentiment.”
About National Bank of Fujairah PJSC:
Incorporated in 1982, National Bank of Fujairah PJSC (NBF) is a full services corporate bank with strong corporate and commercial banking, treasury and trade finance expertise as well as an expanding suite of personal banking options and Shari’a compliant services. Leveraging its deep banking experience and market insight within Fujairah and the UAE, NBF is well-positioned to build lasting relationships with its clients and help them achieve their business goals.
NBF’s key shareholders include the Government of Fujairah, Easa Saleh Al Gurg LLC and Investment Corporation of Dubai. Rated Baa1 / Prime-2 for deposits and A3 for counterparty risk assessment by Moody’s and BBB+ / A-2 by Standard & Poor’s, both with a negative outlook, the bank is listed on the Abu Dhabi Securities Exchange under the symbol “NBF”. It has a branch network of 15 (of which 1 is an electronic banking service unit) across the UAE.
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