ADCB’s success is driven by a focused and well-executed strategy. Built to generate sustainable growth in the face of changing market dynamics, our strategy has not changed. The Bank and our stakeholders benefit from this continuity, as demonstrated in our consistently strong performance in this market.
The challenging economic environment may have dampened our results in 2016, but it has also demonstrated the strength and resilience ADCB derives from its five strategic pillars. Because of them, we continue to make progress on our journey toward achieving our ambitious goal of creating the most valuable bank in the UAE.
At ADCB, staying true to our home market remains the cornerstone of our strategy.
Our sharp focus on serving the UAE differentiates ADCB and is a clear strength in the marketplace. The UAE remains a dynamic, growing market of significant business potential long term, and we are entirely committed to its future. We understand this market, and this is where our expertise resides. Dedicating ourselves to this singular market also ensures clarity and speed of decision-making within the Bank.
We have built a strong domestic franchise and extensive, high-quality brand recognition, with 48 branches across the UAE. ADCB serves a growing customer base of more than 761,500 retail customers and over 57,700 corporate clients.
As at 31 December 2016, 94% of our loan book (gross) and 64% of our investment portfolio were in the UAE. We have a highly selective presence outside the UAE, primarily to expand the financial solutions available to our UAE customers. In addition to two branches in India and one in Jersey, our representative offices in London and Singapore allow us to capitalise on global economic trade and investment flows. We also have a strategic partnership in place with Bank of America Merrill Lynch to provide a global network for our clients.
94% of gross loans are within the UAE
A key pillar in our strategy is to develop and sustain a resilient liability structure based on granular growth in CASA and time deposits. CASA deposits have a strategic advantage over fixed deposits, as they provide stable, low-yield/low-cost customer deposits that help to hold down our overall cost of funds. Our award-winning and world-class cash management services, which help clients make their businesses more efficient and automated, also deliver CASA balances for ADCB.
Over the years, our CASA balances increased from AED 25 billion in 2010 to AED 65 billion in 2016. Our liability structure remained resilient in the face of rising interest rates with CASA deposits comprising 42% of total customer deposits. While maintaining a strong CASA base, over 2015 and 2016 we also focused on gathering time deposits in order to provide additional liquidity and longer term deposits to the Bank. As at 31 December 2016, time deposits totalled AED 90 billion.
42% Current Account and Savings Account (CASA) Deposits as a Percentage of Total Customer Deposits in 2016
We retained the #1 position among our peers across Wholesale, Mid Corporate, Treasury, SME, Institutional Client Group, Private accounts and ADCB securities segments*
*Source: 2016 survey conducted by independent third-party research agencies for ADCB customers
At ADCB, we invest in and focus on creating a differentiated customer experience for every customer of the Bank. Continuing investment in technology and simplifying our businesses enhances our customer-centric culture, and has led to ADCB becoming the acknowledged leader in this market in Internet and mobile banking.
The launch of uBank, our Digital Centre at Yas Mall, in Abu Dhabi has taken digital banking to a whole new level. We continue to invest in digitising and optimising processes to provide a better banking experience, whilst delivering best-in-class service through multiple channels.
Customer satisfaction is measured and guided by our use of Net Promoter Score (NPS), a well-recognised measure of customer advocacy that tracks the propensity of customers to recommend a business to their family, friends and associates. NPS functions as a single currency throughout the Bank. Every member of our staff has at least 30% of his or her annual performance objectives tied to delivering a superior customer experience. We are extremely proud that ADCB’s NPS scores continue to rise.
Robust risk management protocols are vital to preserving and protecting ADCB’s long-term financial strength and growth potential. These protocols are built upon a rigorous control framework, disciplined risk practices and a strong risk management culture that guides each and every employee.
The effectiveness and efficiency of our disciplined risk profile are reflected in three key elements:
This discipline prepared us well for the changing operating environment, which caused ADCB’s cost of risk to rise from 0.29% to 0.83% year over year. The cost of risk has risen across the banking sector due to macro factors such as the lingering effects of low oil prices on economic activity and resultant tightened liquidity.
We continue to improve our risk management function, corporate governance and transparency through regular reviews. We also actively monitor and assess macroeconomic conditions and realign policies and practices to ensure our portfolio remains robust. Our risk appetite is approved by our Board and our strict enforcement of discipline uses measures such as risk adjusted return on capital (RAROC). We keep our risk appetite always in alignment with our overall strategy to maintain the quality of our portfolio and our long-term growth prospects.
0.83% cost of risk in 2016
At ADCB, we recognise that the Bank’s long-term profitability and success are in the hands of our staff — and that harnessing our people’s ambition and discipline is critical to the successful realisation of our strategic aspirations. We benefit from having a highly talented, motivated and inclusive workforce, who take personally our purpose to build partnerships with customers that last a lifetime.
This is in part because we have chosen our people well, but it is also a function of having empowered them through professional development, function-specific training academies and career advancement opportunities. These aspects of our “human capital” development work together to promote individual growth and institutional excellence. We also focus on attracting talent to key new roles within the organisation through a competitive compensation structure, investment in our people and a commitment to building meaningful career paths for staff.
The success of our efforts can be seen in our best-in-class retention rate amongst our peers, and our ability to sustain an outstanding employee engagement of 76%. We view retention and continuity of staff and management as distinct strengths of ADCB. Our executive team averages 8.8 years of experience with the Bank.
In 2016, we transformed our banking structure greatly to simplify job titles and descriptions, and to clarify the paths to promotion. The number of job descriptions was reduced from 1,500 to 600.
145,194 employee training hours in 2016
Since 2009 ADCB has been guided by our clearly defined strategic framework, which continues to provide our bank and its shareholders with a solid financial foundation.
Driven by our ambition and discipline, we consistently refine and evolve our strategic pillars to ensure their relevance and effectiveness through the cycles of today's global financial markets.
This approach ensures that ADCB can meet and exceed our ambitious goals; while at the same time positioning the bank to deliver consistently strong performance, despite the rapidly changing business environment.
Our Board of Directors is actively engaged in ensuring our success.
Looking forward from 2016, ADCB is still dedicated to achieving our ambition of being the most valuable bank in the UAE. We will do this by delivering a second-to-none customer experience across our retail operations; selectively growing our wholesale franchise; and maintaining shareholder value in a disciplined manner underpinned by strong corporate governance and a prudent approach to risk management.
Through a range of performance measures, we rigorously measure our progress against our strategy and aim to create the most valuable bank in the UAE.
Total Shareholder Return (TSR)
Calculated as the growth in share price plus dividends paid to shareholders during the year. TSR is recognised as one of the best measures of achieving a good investment return.
5-Year Total Shareholder Return
Return on Average Equity (ROAE)
Calculated as the profit attributable to equity shareholders as a percentage of average shareholders’ equity.
To increase ROAE, we focus on growing our business where risk-adjusted returns are maximised and capital is efficiently deployed.
Return on Average Equity
Basic Earnings per Share (EPS)
Calculated as profit attributable to equity shareholders of the Bank as divided by the weighted average of the equity shares in issue during the year.
Basic Earnings per Share
Cost to Income Ratio
Calculated by dividing operating expenses by operating income. We made important changes to our core processes, strengthened and enhanced our procurement function. We also introduced specialist management techniques to do more with less, and thus became more efficient whilst still investing in our businesses.
Cost to Income Ratio
Net Promoter Score (NPS)
NPS is based on customers’ likelihood to recommend ADCB to a friend or colleague.
NPS is calculated as the percentage of customers who are promoters, rating the Bank a 9 or 10 on a 0-to-10 point scale, minus the percentage who are detractors, rating it a 6 or lower.
We retained the #1 position among our peers across Wholesale, Mid Corporate, Treasury, SME, Institutional Client Group, Private accounts and ADCB securities segments