ADCB

CHAIRMAN’S
MESSAGE

On behalf of ADCB’s Board of Directors, I am pleased to report that the Bank achieved record results in 2013 with a net profit of AED 3,620 mn, up 29% from 2012.

These results reflect strong underlying performance across all ADCB operations and reinforce ADCB’s position as one of the leading banks in the UAE, where our financial strength provides a clear competitive advantage. In 2013, ADCB differentiated itself and benefited as economic conditions began to improve and as uncertainties stemming from the global economic recovery and regional politics began to subside.

ADCB is a leading institution with a vision and strategy for the future. Our 2013 results demonstrate the Bank’s ability to achieve the goals we set for ourselves. With a strategy and business model that form a strong foundation to build on, ADCB is an ambitious and secure bank, and our employees are very well equipped to help their customers achieve their financial goals. In this pursuit, ADCB plays a fundamental role in helping Abu Dhabi, the UAE, and their businesses and communities to prosper.

ADCB’s strong performance also reflects the Bank’s commitment to the Abu Dhabi Economic Vision 2030. ADCB moves in concert with the Vision’s policy agenda and principles, as well as with its stated goal that the emirate should become a shining example on the international business stage.

As a result of the Bank’s continued healthy financial position and capital base, and the strong performance of the Bank’s core businesses in 2013, the Board has recommended a 30% cash dividend, subject to approval by the shareholders at the Annual General Meeting and the UAE Central Bank.

The Board met in October 2013 to review the Bank’s strategy. Following that review, the Board and management reaffirmed the Bank’s existing strategy, subject to certain adjustments necessary to enable the Bank to maintain its share of a market that is increasingly competitive. The Board and management continue to believe that the Bank’s strategy and business model provide a solid foundation from which to implement the Bank’s objectives and will enable the Bank to generate strong and sustainable returns on a continuing basis. In particular, the Board and management believe in the importance of excelling in service quality in the Bank’s core business areas, as well as maintaining strong discipline in the Bank’s operations, particularly in our approach to risk management. The Bank will continue to position itself as disciplined, efficient, safe and secure, and it is well-placed to deliver sustainable returns to investors.

In 2013, the Board also worked to maintain and extend the strong governance culture across the Bank. In particular:

  • The Board continued to focus on its own engagement and effectiveness, through various efforts including regular evaluations, professional development, and improving boardroom processes and practices.
  • Continued efforts were made to improve risk and remuneration governance.
  • The Board’s Corporate Governance Committee worked on embedding the governance culture across the Bank, particularly in the areas of risk management, remuneration, Islamic banking, transparency and product governance.
  • The Board remained highly engaged, having met (either in full Board or Committee meetings) 56 times in 2013. The Board visited several branches and operations functions, and held off-site strategy sessions.

More details of these efforts are described in the Corporate Governance section of this report.

The Bank published a sustainability report in 2013. The Board appreciates the need for local and regional banks to be strong and secure to continue contributing to the development of local and regional communities and economies.

During 2013, the Bank continued to focus on attracting, training and retaining high-calibre UAE national talent across all levels of the Bank. At the end of 2013, 40% of the Bank’s staff were UAE nationals.

The Bank remains committed to contributing to the development of the UAE banking sector, and on behalf of the Board, I extend our most sincere appreciation and gratitude to His Highness Sheikh Khalifa bin Zayed Al Nahyan, the UAE President and Ruler of Abu Dhabi; to His Highness Sheikh Mohammed bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces; to His Highness Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs; and to the UAE Central Bank for their continued support for ADCB and the development of the UAE economy. I also extend the gratitude and appreciation of the Board to our shareholders, valued customers, and the ADCB executive management team and employees for their continued dedication and commitment.

Eissa Mohamed Al Suwaidi
Chairman

CEO’S
MESSAGE

It gives me great pleasure to report another year of delivering strong results at ADCB. Even as economic challenges persisted, we continued building the foundation for sustained growth and profitability, and we produced excellent returns for our shareholders.

Our success reflects the efforts of our Board members, executive management team and employees, who bring our values to life every day. They were guided, as always, by our strong vision of creating the most valuable bank in the UAE.

A Solid Foundation

2013 was another eventful year with many challenges. Much was achieved: as planned, credit quality was improved and risks reduced; cost management was disciplined; and we made further progress maintaining our strong capital structure. In a competitive market environment, we laid the strategic foundations for future growth and profitability. Implementing these measures rigorously will be a key goal for the Bank in the coming years.

ADCB has a strong and conservative balance sheet that gives us the platform to accelerate business growth and concentrate on the products and services that matter most to our customers. Throughout the year, we optimised the overall quality of our loan book to maximise returns and minimise risks.

Our capital is at industry-leading levels. We ended 2013 with a Tier 1 capital ratio of 16.62%.

We have more than adequate capital today to support our strategic growth plans, and we are well positioned to return excess capital to our shareholders via dividends and share buybacks. In 2013, we bought back 7.02% of the issued share capital, which resulted in an EPS uplift of 7% on a pro-forma basis.

Growing Revenue

We continued to deliver strong operating performance in 2013, with operating income up 11% to AED 7,320 mn. ADCB’s revenue growth is a direct result of our customer-centric focus. We put customers first and help them succeed financially. When we do this, we enhance relationships, build loyalty and earn trust. When we do it right, our customers bring us more business and we earn more revenue to support our operations and grow our earnings.

Managing Our Cost Base

During 2013, the Bank’s cost-to-income ratio was 32.22% and we continued to invest in our businesses. We manage our expenses well — not by cutting costs that are critical to business, but by making sure that everything we do is as efficient and simple as possible. We spend money on what really matters to our customers and invest in the things that help us grow revenue, including our people, systems, processes and infrastructure.

Managing Risk

ADCB has a strong risk-management culture, and in 2013 we observed improvements in credit quality across major consumer and commercial portfolios. As at 31 December 2013, our collective loan impairment allowance balance was AED 2,640 mn and 1.96% of credit-risk-weighted assets, in excess of the UAE Central Bank directive for banks to increase the level of collective impairment allowance to 1.50% of credit-risk-weighted assets by 2014. In line with our current provisioning policies, we will continue to reassess loss history and probability of default and loss given default in various portfolios at each reporting period, and we remain prudent in building adequate provisions based on our understanding of the portfolio and current economic conditions.

Outlook and priorities of 2014

The UAE market continues to remain intensely competitive, yet the prospects of economic growth in 2014 are promising. We have consistently demonstrated our competitive advantage and remain confident that our strong and conservative balance sheet will provide a platform for future growth.

We continue to focus on our strategic objectives, and we will take advantage of future economic improvements to capitalise on value-adding opportunities for our shareholders and to contribute to the UAE economy as a whole.

Ala’a Eraiqat
Chief Executive Officer
Member of the Board of Directors