National Bank of Fujairah PJSC (NBF) Reports Q1 2021 Results
NBF bounced back to profitability with a first quarter net profit of AED 42.0 million and operating profit growth of 32.5% quarter-on-quarter
The bank achieved its best operating and net performance after the emergence of COVID-19 pandemic benefitting from its robust liquidity and capital position
NBF announces its results today for the three month period ended 31 March 2021.
- Operating income stood at AED 360.2 million, up 11.4% compared to Q4 2020 and down 13.7% compared to AED 417.5 million in the corresponding period of 2020 reflecting the testing operating conditions presented by the COVID-19 pandemic from Q2 2020. Lower interest rates and margins coupled with subdued economic activity affected the drop in income. This was offset by management’s focus on core business, lowering cost of funds, adjusting its investment strategy and achieving operating efficiencies from its automation and digital endeavors.
- Net interest income and net income from Islamic financing and investment activities, up 0.3% and net fees, commission and other income, up 12.9% compared to Q4 2020, standing at AED 227.6 million and AED 78.4 million respectively compared to AED 276.3 million and AED 89.3 million in the corresponding period of 2020.
- Foreign exchange and derivatives income achieved a good growth of 19.2% quarter-on-quarter reaching AED 30.9 million compared to AED 37.0 million in the corresponding period of 2020.
- Income from investments and Islamic instruments marked a substantial improvement to AED 23.4 million during the three month period ended 31 March 2021 compared to the corresponding period of 2020 and Q4 2020. Unrealised gain on fair value through other comprehensive income (FVOCI) investments stood at AED 61.6 million.
- Operating expenses reduced by 9.7% to AED 112.1 million compared to AED 124.2 million in the corresponding period of 2020 and by 17.7% compared to Q4 2020, demonstrating the measures adopted in line with the changing market conditions with the key focus on extraordinary customer service through digital adoption and innovation. Cost-to-income ratio stood at 31.1% compared to 29.8% in the corresponding period of 2020 reflecting the lower operating income.
- NBF achieved an operating profit of AED 248.1 million for the three month period with a growth of 32.5% quarter-on-quarter compared to AED 293.3 million in the corresponding period of 2020.
- NBF maintained its policy of prudent and transparent recognition of problem accounts. NBF secured net impairment provisions of AED 206.1 million for the three month period ended 31 March 2021, down 5.4% compared to AED 217.9 million in the corresponding period of 2020. During the period, the bank’s impairment reserve stood at the 2020 year-end level at AED 283.3 million. Total provision coverage ratio (including impairment reserves) stood at 87.7% compared to 91.8% as at 31 December 2020. The NPL ratio remained at the 2020 year–end level of 10.1%. Excluding the few exceptional group exposures, the NPL ratio would reduce to 6.8% (31 December 2020: 7.3%).
- NBF recorded a net profit of AED 42.0 million for the three month period ended 31 March 2021, up 107.8% compared to Q4 2020 and down 44.3% compared to AED 75.4 million in the corresponding period of 2020, despite the challenging credit conditions and the third wave of the COVID-19 pandemic.
- 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 challenges arising out of the evolving operating landscape. CAR stood at 19.6% (Tier 1 ratio of 18.5% and CET 1 ratio of 14.3%) compared to 19.2% (Tier 1 ratio of 18.1% and CET 1 ratio of 14.0%) at 2020 year-end.
- Loans and advances and Islamic financing receivables rose marginally by 0.7% to reach AED 25.0 billion compared to AED 24.8 billion at 2020 year-end and AED 27.2 billion as at 31 March 2020.
- Investments and Islamic instruments stood at AED 5.0 billion compared to AED 5.2 billion at 2020 year-end and AED 3.0 billion as at 31 March 2020 evincing that liquidity was directed towards the high quality investment book to protect shareholder value.
- Customer deposits and Islamic customer deposits stood at AED 28.3 billion compared to AED 29.8 billion at 2020 year-end and AED 32.0 billion as at 31 March 2020. CASA deposits improved to 39.8% of total customer deposits compared to 38.0% as at 31 December 2020 and 31.8% as at 31 March 2020. Current and Saving Accounts (CASA) deposits stood at the 2020 year-end level of AED 11.3 billion cushioning the impact from the lower interest rates.
- Total assets reached AED 39.1 billion compared to AED 39.9 billion at 2020 year-end and AED 43.3 billion as at 31 March 2020.
- Shareholders’ equity stood at the 2020 year-end level of AED 5.7 billion compared to AED 6.2 billion as at 31 March 2020.
- Ample liquidity was maintained with lending to stable resources ratios at 82.8% (2020: 82.1%) and eligible liquid assets ratio (ELAR) at 18.3% (2020: 20.8%), well ahead of all CBUAE minimum requirements.
- Return on average assets was 0.4% compared to 0.7% for the corresponding period in 2020.
- Return on average equity was 3.0% compared to 4.8% for the corresponding period in 2020.
Dr Raja Al Gurg, Deputy Chairperson said:
“Q1 2021 results underscore NBF’s operational and financial resilience in one of the most challenging economic environments we have ever seen with the COVID-19 pandemic continuing to have a profound impact globally. These results mark a welcome return to profitable operations in line with the bank’s strategy to recognize considerable impact upfront from few exceptional exposures and COVID-19 pandemic in 2020 and achieve accelerated recovery in 2021.
Given the evolving external environment, the Group will continue with its renewed strategies to adapt and pursue quality diversified opportunities coupled with proactive asset and liability management to achieve sustainable growth and add value for its shareholders. Financial stability is underpinned by further strengthening of the capital adequacy ratios and a solid lending to stable resources ratio, which are among the strongest in the UAE banking sector, to support NBF’s future growth trajectory and navigate through uncertainty and complexity.
With signs of improvement through international trade rebounding and the deployment of multiple vaccines, we remain cautiously optimistic and envisage that UAE’s economic growth and the global economic recovery will strengthen as the year progresses and confidence returns to benefit from these recovery expectations. The Board will continue to oversee the execution of the Group’s strategy protecting the interests of shareholders, while ensuring the welfare of staff members, supporting our customers and showing camaraderie with our communities. Enhancements in the digital space and innovation remain fundamental to the bank’s journey of growth, rendering exceptional customer service and business transformation. In the meantime, NBF continues its efforts to support its most impacted customers through the extended relief measures and appreciates the UAE’s leadership and government’s on-going support measures and stimulus packages.”
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 with a negative outlook; and BBB / A-2 by Standard & Poor’s with a stable 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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