Group CEO's Message

Group CEO's Message

I am pleased to report that ADCB delivered another year of strong performance. Given the headwinds and turbulence in the global economy, it certainly was a successful year for the Bank.

2016 was challenging, and being close to our customers and their businesses, we are well aware of the effects of the lingering low oil price environment for various businesses. Still, the economy of the UAE continued to diversify and to grow year on year. ADCB grew, too. In fact, we did more than grow.

We continued to invest in enhancing the customer experience and in smart digitisation. We continued to invest in our infrastructure as we re-engineer and upgrade our core banking system. We continued to invest in our people.

Yes, profitability declined, net profit of AED 4.157 billion for 2016 was 16% lower year on year. This was primarily on account of the tightening liquidity environment that has driven up our cost of funds and higher impairment allowances reflective of our prudent and disciplined approach to risk management. But in other leading indicators and measures that matter, we continued to perform exceptionally well.

The factors driving ADCB's continued success are clear to see.

Leading through Continuity of Strategy and Management

We have a clear and focused strategy, born out of the global economic crisis of 2008, and we continue to execute against it. This strategy has harnessed our collective ambition and discipline and put that to work on behalf of our customers and shareholders. Our focus on executing our strategy consistently and with great discipline has not wavered.

The Management Executive Committee that conceived and dedicated itself to our five-pillar strategy has been with the Bank for an average of nine years. We go forward with a remarkably stable management team. And whilst our tenure together is long, the team remains a flexible and agile group that brings great energy and passion to our challenges every day. We believe this continuity has contributed to the Bank's proven ability to produce strong and even record-breaking results year after year - enabling us to deliver consistently strong total returns to our shareholders.

Leading through Strong Underlying Performance

The Bank delivered strong financial results in 2016, reporting an operating income of AED 8.495 billion, up 3% and operating profit before impairment allowances of AED 5.700 billion, up 5% over 2015. We continue to focus on granular growth opportunities in the UAE to build our balance sheet. Total assets reached AED 258 billion as at 31 December 2016. Year on year, loans to customers increased 8% in our core businesses and core geography, with Islamic financing assets up 30% over 2015. Our customer deposits also increased 8% year on year, and low-cost CASA (current and savings account) deposits comprised 42% of total customer deposits.

Our cost to income ratio improved to 32.9% in 2016, an improvement of 130 basis points year on year. By total assets, operating profit, cost to income ratio and a host of other measures, it was a very good year for ADCB.

Leading through Putting Service First

We have built this Bank around human needs.

In this market, ADCB is known for customer service and a differentiated customer experience, and we believe this reputation is a direct result of our strategy. We are widely acknowledged as having an industry-leading mobile app as well as superior Internet banking and e-platforms for business. We recently unveiled our pacesetting digital centre at Yas Mall in Abu Dhabi and two other Digital Centres are on the way.

Our cash management platform and Wholesale Banking franchise continue to win awards. Recently, Euromoney awarded us global "Five Star" status for cash management, based on an extensive survey of client feedback. This is an accolade fewer than ten banks worldwide earned in 2016 - a remarkable achievement for a UAE bank and a testament to our platform, digital capabilities, transactional businesses and to our employees, who deliver such exceptional service. Our investments and innovations have focused on differentiating the Bank on this absolutely mission-critical point of customer service, for both our retail and our business customers who trust us with their banking requirements. Within the Bank, our people bring an equally strong focus on customer service to internal customers.

A little over two years ago, we instituted Net Promoter Score (NPS), which measures our customers' propensity to recommend ADCB to friends and family. This has given us a quantifiable means of assessing and improving our effectiveness in serving customers. The progress and impact have been remarkable. Our 2016 NPS indicates that we have retained #1 ranking against our peer group in almost all segments. This confirms that we are putting the customer at the center of everything we do at ADCB. We are relentless in the pursuit of service excellence, and our efforts are being rewarded by our loyal customers. Exceptional customer service is also reinforced with real-time, fast feedback loops and led by a Customer Experience Working Group, which I chair.

Leading through Empowering Our People

We firmly believe that if you focus on the human element, everything falls into place.

In the culture we have built within ADCB, our people bring a unique blend of ambition and discipline to every task. The Bank continues to earn extremely high levels of employee engagement and retention, whereby employee engagement reached 76% and the staff turnover came down by 54% in 2016. We see this as a function of how we train and treat our employees.

"This is our time. We are more confident than ever that we chose the right path and have the right people to meet the challenges ahead."

We routinely open up new avenues of opportunity. For example, our Tamooha initiative has given 147 Emirati women a place in the working world where their talent and education can shine. Tamooha's success is a unique and innovative part of our overall commitment to the national goals of Emiratisation, which includes helping more Emirati nationals earn their way into positions of expertise and authority. Our vibrant workforce represents over 70 nationalities - a diverse blend of talented people from all over the world who come here to make the most of their careers and personal ambitions.

Despite job losses around us, we have not let go of our people. Historically when crises have hit, we have found a way to keep our people, and to redeploy and retrain them when necessary - to keep their knowledge and experience as a living asset of the Bank. My management team understands that over 4,000 families are counting on us to lead them through whatever the economy may bring.

Leading through Social Engagement

On the social front, our people are working to raise the level of financial literacy throughout the UAE, especially with young adults, through our partnership with the Emirates Foundation with whom we have worked for over a decade. This is a first-of-its-kind financial literacy programme in the region, a public-private partnership combining an international best practices framework with in-branch counseling. ADCB experts and Emirates Foundation specialists will cooperate to develop free, branch-based counseling focused on providing help and advice to young adults who have just started their careers. ADCB is a pioneer in responsible lending practices, and we are very pleased to be able to play a role in encouraging the widespread adoption of sound financial management practices across the UAE.

Leading through Focus

Like the soaring falcon, who can track the slightest movement hundreds of metres below, we do not lose sight of what matters. We focus keenly on our five strategic pillars: on our home market; on a granular balance sheet growth with a stable and conservative liability base; on a customer experience that is second to none; on diligent risk management; and on the people who sustain our success as well as those who are counting on us to succeed. Ambition plus discipline describes us as a business and as people - and that is not about to change.

ADCB today enjoys strong fundamentals, an agile approach to the marketplace and proven innovation that continually raises the bar on making it easier and more enjoyable to bank with us. These challenging times make the strengths of the Bank all the more apparent.

Leading through Resilience

In essence, we were built for times like these.

Our resilience stems in part from our stringent standards as to risk management. We perform rigorous and continuous "last bank standing" stress testing to ensure our viability as a business and as a leader in the UAE banking sector. Whilst the economy presents difficulties, we are not locked down in crisis mode. We continue to serve our customers, meet their needs and grow our business.

ADCB is viewed positively by global monitors of our industry. In June, Standard & Poor's upgraded ADCB's stand-alone credit profile (SACP) to 'bbb+,' driven by the Bank's strengthening business position, track record at improving returns, and balanced earnings across different business segments. We were ranked amongst the top five safest banks in the Middle East and Africa in Global Finance magazine's rankings of the world's safest banks. The Euromoney Cash Management Survey awarded ADCB "Best Cash Manager" in the UAE. Asian Banking and Finance recognised our retail and SME businesses with four awards, including "SME Bank of the Year."

We take pride in the respect ADCB has earned as a competitor in this market. Banking leaders outside of our region also have taken notice. A number of CEOs of major global banks have come to us to share their ideas and to see ours in action — looking to share strategies, experience and insight on how to face the future with enduring confidence.

Leading through Confidence

What these times have shown us, is that our strategy is working. This is our time. We are more confident than ever that we chose the right path and have the right people to meet the challenges ahead. As we pursue responsible, sustainable growth, we strive to continue to earn the right to bring our customers and shareholders with us on this journey - leading through these difficult times into the favourable future.

We deeply appreciate the support of our employees and the Board, and look forward to reporting on our progress in the coming year.

Ala'a Eraiqat
Group Chief Executive Officer
Member of the Board of Directors