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UAE top lender FAB posts 19 percent drop in third-quarter net profit

Published: Updated:

First Abu Dhabi Bank (FAB), the United Arab Emirates’ biggest lender, reported a 19 percent fall in quarterly profit on Monday, dragged down by a double-digit drop in net interest income and higher impairment charges.

Gulf banks face an uphill task over the next 18 months due to the protracted nature of the economic recovery and the gradual withdrawal of regulatory relief measures, rating agency S&P said earlier this month.

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FAB said its third-quarter net profit reached 2.51 billion dirhams ($682 million) versus 3.11 billion a year earlier.

FAB’s net interest income dropped 14 percent to 2.85 billion dirhams, as the bank said it continued to face headwinds from low interest rates and the challenging environment brought about by the pandemic.

Impairment charges in the quarter were 504 million dirhams, up 7 percent from a year earlier but down significantly from the second-quarter’s 1.06 billion.

Shabbir Malik, a banking analyst at EFG Hermes, said asset quality risk for FAB is lower than the other banks given its track record and loan mix -- it has a higher proportion of lending to government and public sector entities.

“Lower rates would mean that their margins will be under pressure,” Malik said.

Rival lender Emirates (NBD) last week posted a 69 percent slump in quarterly profit, as bad debt charges rose due to the COVID-19 crisis, while earnings suffered in comparison with last year, when they were swelled by an asset sale.

FAB said it continued to accelerate its digital initiatives, citing its partnership with Abu Dhabi state-owned holding company ADQ to set up a digital bank.