Group CFO’s Message

2014 stands as a year of strong financial results that built on strong years before it, as we continued to execute a strategy put in place five years ago. We see ADCB’s performance as a function of discipline, reflecting our focus on fundamental banking principles and the emphasis we place on sustainable growth.

The Bank reported a record net profit and operating income, and delivered strong basic earnings per share of AED 0.74 compared to AED 0.59 in 2013, an increase of 25.4% year on year. Return on equity grew from 15.5% in 2013 to 18.1% in 2014. Our return on average assets for 2014 was 2.00% compared to 1.72% in 2013.

In an extremely competitive environment, net loans grew 7% in 2014 and customer deposits increased 9% year on year. Our net interest margin levels were relatively stable, with a slight decline of 18 basis points year on year. Our cost base is efficiently managed, and asset quality shows continued improvement, with the provision coverage ratio increased to 137.1% for the year and past due and impaired loans decreased by 19% over 2013, whilst cost of risk was reported at record low levels. Our cost to income ratio came in at 34%, within our target range.

In an environment of margin compression and intense competition, we have performed quite well. We credit the strength and consistency of our strategy, the stability and dedication of our management team, and the disciplined execution by our people.

Meeting Challenges

The margin compression we have seen has intensified the need for stringent discipline in executing our strategies. We are also pursuing, and winning, other sources of business, intensifying our focus on non-interest income and granular growth. This increased emphasis on non-interest income is reflected in our net fees and commission income, which grew 25% year on year to AED 1,243 mn in 2014.

Challenges remain. Competition is fierce, and the cost of compliance has gone up. The regulatory environment has intensified and will likely only grow more stringent.

Our differentiation comes down to disciplined execution and customer-centricity. In this overbanked market, the only way to win consistently with customers is to outperform on service. We continue to invest in world-class service infrastructure. We make it easier to bank, and easier for our customers to handle the challenges of life and business that benefit from having a good banker behind you.

Stable, Strong and Growing

The Bank’s capital ratios are at industry-leading levels, and we maintain a strong liquidity ratio of 25.2%. We offer investors a straightforward business model, with a clear geographic focus in the UAE; a clear strategy, focused on sustainable growth; and a clear differentiator in the disciplined way we operate, govern and grow our business.

Our footprint is well-defined: primarily Abu Dhabi and Dubai, whilst also serving the entire UAE. Yet our offerings are as diversified and technology-enabled as any international bank.

Our strategic focus remains on sustainable profitability as we grow. And we are growing. As can be seen in the accompanying charts and throughout this report, our results include many individual indicators that show strong progress.

Resiliency

We believe a bank ought to be resilient as well as high-performing for its shareholders. We manage our balance sheet conservatively. Our loans and advances are diversified across all economic sectors to minimise risk. We control costs efficiently and always look for ways to build capital for our businesses, improve shareholder returns, and offer the best products and services to our customers.

We run a stable and resilient business — a strong, liquid and focused Bank — with a clear vision and the ambition and discipline to make it a reality.

We are not the only ones to think so. Standard & Poor’s revised its outlook on ADCB from “Stable” to “Positive” in July 2014. ADCB is also the acknowledged leader in corporate governance and risk management in the banking sector.

Our Ratings

A/A-1/
Positive
S&P
A+/F1/
Stable
Fitch
AAA/P1/
Stable
RAM

Moving Ahead

As we have said before, our strategy is working. Going forward, we see more of the same. Our strategy will not change. Our discipline will not waver. Our focus on the customer will remain absolute. The recognition that truly matters to our bottom line comes from our customers.

Year by year, ADCB finds better ways of delivering the right products and services to our customers and attractive returns to our shareholders, and our business continues to grow. We are confident in our chosen path
as we move ahead.

Deepak Khullar

Group Chief Financial Officer