CFO’s Report
Strengthened capital, liquidity, and funding
We are pleased with the steady growth in our operating income and substantial improvement in our cost to income ratio. The Bank continued to strengthen its capital position, improving liquidity levels and funding profile while remaining prudent in its risk management approach. Our strategic pillars and business model provide a solid foundation to implement our objectives and have enabled us to generate steady returns in 2012.
Deepak Khullar
Group Chief Financial Officer
2012 Highlights

  • Net profit of AED 2,810 mn compared with AED 3,045 mn in 2011. 2011 included AED 1,314 mn non-recurring gain on the sale of ADCB’s stake in RHB Capital Berhad in June 2011. Excluding the non-recurring gain, on a comparable basis, ADCB’s net profit for 2012 was up 62% over 2011.
  • Loan book was stable and we continued to deliver strong operating performance, with operating income up 9% in 2012. Net interest income was up 11%, driven primarily by an increase in the investment portfolio and cost of funds decline of 33 bps from 2.15% in 2011 to 1.82% in 2012.
  • Continued to focus on maintaining a strong and conservatively positioned balance sheet driven by our strategy, which resulted in an improvement of our loans to deposit ratio from 114.27% in 2011 to 112.80% as at 31 December 2012.
  • In addition to encouraging top line growth, a significant achievement of 2012 was the substantial improvement in our cost to income ratio. Operating expenses were held flat as a result of our improved operating efficiency and dedicated approach to proactive cost management. This was achieved through aggressive sourcing initiatives and demand management, which resulted in a 170 bps improvement in our cost to income ratio year on year from 33.1% to 31.4% in 2012.
  • As at year end, our collective loan impairment allowance balance was AED 2,257 mn and 1.76% of credit risk weighted assets, in excess of the UAE Central Bank Directive for banks to increase the level of collective provisions to 1.50% of credit risk weighted assets by 2014.
  • Non-performing loan ratio was 5.4% compared to 4.6% a year earlier, and provision coverage improved from 80.0% to 82.2%. Overdue but not impaired loans showed a significant decline of 61% to AED 4 bn (AED 10 bn as at 31 December 2011), and total impairment charges were 29% lower year on year in 2012.
  • The Bank has strong liquidity and was a net lender of AED 15 bn in the interbank markets as at 31 December 2012. We remain well capitalised at 23.05%, and Tier I ratio improved significantly to 17.47% from 15.90% as at 31 December 2011. As at 31 December 2012, our liquidity ratio was 24.0% compared to 22.1% in 2011. Investment securities portfolio increased to AED 19 bn from AED 15 bn as at 31 December 2011, with 99% of the portfolio invested in bonds and government securities providing a liquidity pool for the Bank.

Deepak Khullar
Group Chief Financial Officer