Group CEO’s Message
I am pleased to report that ADCB delivered another year of strong performance in 2015. As in past years, our success was the result of ambition and discipline. Our ambition is to serve our customers’ needs and to become the most valuable bank in the UAE. Our discipline mandates that we pursue responsible, sustainable growth and profitability.
Among many noteworthy achievements of the past year, your Bank reported record net profit and revenues, produced healthy loan and deposit growth, maintained a solid capital foundation and worked to further enhance our excellent customer service.
Our ability to produce such accomplishments, in an environment buffeted by lower oil prices and other economic headwinds, reflects our differentiation from other banks. This “ADCB Difference” is supported by a well-defined and well-executed strategy that we have pursued consistently for over five years.
The Difference Is Consistency
Delivering consistent, profitable growth in a range of economic scenarios is clear evidence of the ADCB difference. Our performance in 2015 was characterised by record-setting growth across many key measures. Total assets reached a record AED 228 bn, increasing 12% from the prior year. Net profit also set a record, rising 17% to AED 4.927 bn, whilst net profit attributable to equity shareholders grew by 22% to AED 4.924 bn. Return on average equity was an industry-leading 20.3% in 2015.
Our 2015 performance continued the steady pace of growth we have enjoyed since launching our current strategic course. Over the past five years, total assets have risen by 24% and operating income by 36%, and provision coverage ratio strengthen from 80% in 2011 to 128.5% in 2015. Importantly, total shareholder return over the five-year period was 290%.
The Difference Is Focus
ADCB’s unwavering commitment to our core UAE market, and to core lines of business that will best serve our market, has long been one of our strategic pillars. The UAE offers economic opportunity on a vast scale, as reflected in our base of over 650,000 retail and over 52,000 corporate customers. Our UAE-centric focus is marked by a dedication to serving the UAE’s people and businesses and supporting the long-term health of the economy.
Reflecting our core market focus, 90% of our loan book (gross) and 45% of our investment portfolio were UAE-based at the end of 2015. The dynamic nature of our market helped drive a 9% increase in net loans and a 14% increase in deposits year on year in 2015.
Our mix of core businesses has been carefully tailored to the needs and opportunities of the UAE market. One important way in which we support the UAE’s growth, and our own, is by serving small and medium-size enterprises (SMEs) in the UAE. Such businesses are powerful growth engines and give us the opportunity to offer a wide range of financial solutions whilst also broadening our business mix beyond large corporate clients. ADCB’s offering to SMEs is delivered by a dedicated team of relationship managers, aided by best-in-class risk management practices and technology, providing us with a true competitive advantage in this segment.
We are also committed to meeting the needs of a broad range of individuals and households. For example, we have expanded our simplylife programme for UAE mass-market customers by opening our first simplylife Sales and Service Centre inside the BurJuman Dubai Metro station. We also launched an extensive ADCB Private Wealth Management product suite in December, and this initiative will be developed further in the coming year.
ADCB’s Islamic Banking has continued to provide customers with the freedom to bank in accordance with their values and traditions. It is also an important contributor to our growth, with Islamic financing assets rising 32% and total Islamic deposits up 9% in 2015.
The Difference Is Service
We strive to provide customers with a superior banking experience. Not only is this effort vital to earning their trust and loyalty, it is also a competitive differentiator and the pathway to sustainable growth and value. To maintain our high standards of service, we use the Net Promoter Score (NPS)¹, which measures our customers’ propensity to recommend ADCB to friends and family. I am pleased to report that the Bank’s NPS continued to rise throughout 2015. Exceptional customer service is also reinforced with real-time, fast feedback loops and led by a Customer Experience Working Group, which I chair.
To enhance service and convenience, ADCB continually invests in advanced technology. 55% of our retail customer base has registered for online banking, and 29% has registered for our market-leading mobile banking app. In 2015, we became one of the first UAE banks to launch an Apple Watch app. Another innovation was our Purely Business Web portal, a source of information, advice and other resources tailored specifically to SMEs.
The ADCB Difference is reflected not only in the performance of our business, but also in the power of our brand. We are proud that ADCB was recognised as one of the "Top 10 Brands" in the UAE according to the MBLM Brand Intimacy 2015 Report, an independent study by an international branding authority. In this study, which ranked those brands that have done the best job of forming emotional bonds with customers, ADCB was the only local brand in the Top 10, alongside a collection of global names. Also, ADCB was the UAE’s #1 “most Googled” local brand in 2015. This strong brand engagement is a tribute to our customer-centric culture and the passion of our team members, who bring our culture to life every day.
The Difference Is Stability
A strong balance sheet is a vital defence against economic turbulence — and another differentiator for ADCB. We have built a robust capital structure, with a capital adequacy ratio of 19.76% at 2015 year-end. We run a stable and resilient business and remain disciplined in the way we operate, govern and grow our business, and we always look for a better way to build capital for our businesses, improve shareholder returns and offer the best products and services to customers.
We strive to create a sustainable liability base supported by stable, cost-effective customer deposits. Consequently, we have focused on enhancing our franchise and building relatively sticky low-cost current account and savings account (CASA) deposits, which comprised 44% of total customer deposits as at 31 December 2015. The growth in CASA deposits over the past five years has helped to drive down overall cost of funds, providing a strategic advantage for the Bank.
We continually evaluate our risk strategy, appetite and analysis in response to current and anticipated economic conditions, conducting vigorous stress tests, extensive risk reporting and analysis, and digitisation of certain monitoring systems and processes. This is reflected in our improved asset quality, with our cost of risk reported at record low levels.
The Difference Is People
ADCB’s ability to deliver excellent customer service, business performance and long-term shareholder value springs from the talent, energy and motivation of our people. Over 5,000 team members, representing 70 nationalities, share a culture that is entrepreneurial, puts customers first, and values accountability and integrity. We are committed to attracting and retaining the best talent through effective career development and leadership programmes as well as competitive compensation and incentives.
Our investment in human potential is reflected in the Tamooha programme, launched in 2014, which provides career development and a flexible workplace to bring Emirati women into the workforce in a way that is consistent with their beliefs. After extensive training at the Tamooha Centre, participants can work from home, from the Centre or from a combination of both, taking on increasingly challenging and diverse tasks. We are proud of the role of Tamooha in providing over 1,400 hours of training and in enabling 140 Emirati women to find meaningful employment, and we look forward to expanding the range of job functions available.
We are confident that the Bank is well-positioned to sustain and strengthen the elements of the ADCB Difference. We will continue to aim higher and to do more to serve our customers, grow our business profitably and build value for our stakeholders.
Delivering the ADCB Difference
Whilst the global economic environment for 2016 is uncertain, the core of the UAE economy remains sound. It is characterised by a robust non-oil sector, strong liquidity and foreign exchange reserves, and ongoing economic diversification.
ADCB possesses an array of strengths that will enable the Bank to weather challenging cycles, as we have in the past. We have a sharp focus on the dynamic and resilient UAE market, a solid customer franchise based on exceptional service, and a strong financial foundation. Most important, we have a proven strategy and a team that is committed to achieving sustainable success.
It is an honour and privilege to be part of ADCB. Our strong performance and exciting potential are the result of the dedication of our Board and employees, the loyalty of our customers and the confidence of our shareholders. We deeply appreciate your support and will strive to earn that support every day.
Going forward, we are confident that the Bank is well-positioned to sustain and strengthen the elements of the ADCB Difference. We will continue to aim higher and to do more to serve our customers, grow our business profitably and build value for our stakeholders. We look forward to reporting on our progress in the coming year.
Group Chief Executive Officer
Member of the Board of Directors