Dubai Islamic Bank Group 1st Half 2018 Financial Results

Dubai Islamic Bank (DFM: DIB), the first Islamic bank in the world and the largest Islamic bank in the UAE by total assets, today announced its first half results for the period ending June 30, 2018.

H1 2018 Results Highlights:

Earnings growth driven by strong increase in income from core businesses

• Group Net Profit increased to AED 2,441 million, up 14% compared with AED 2,143 million for the same period in 2017.
• Total income rose to AED 5,577 million, up 15% compared with AED 4,865 million for the same period in 2017.
• Net Operating Revenue jumped to AED 4,036 million, up 10% compared with AED 3,677 million for the same period in 2017.
• Impairment losses stood at AED 392 million.
• Efficient cost management continues with cost to income ratio at 29.4%.  
• Net funded income margin improved to 3.15%, now at the higher end of the guidance for the year.

Sustained balance sheet growth

• Net financing assets rose to AED 141.8 billion, up by 6%, compared to AED 133.3 billion at the end of 2017.
• Sukuk investments increased to AED 28.4 billion, a growth of 18%, compared to AED 24.0 billion at the end of 2017.
• Total Assets stood at AED 215.6 billion, up by 4%, compared to AED 207.3 billion at the end of 2017.

Asset quality metrics in line with guidance

• NPF ratio shows steady improvement now at 3.3%.
• Provision coverage ratio now up to 120%.
• Overall coverage, including collateral at discounted value, stands at 158%, indicating significant cushion in the balance sheet.

Stable liquidity continues to be a critical driver for growth

• Customer deposits stood at AED 151.4 billion as of H1 2018, a rise of 3% from year end 2017.
• Significant CASA proportion, constituting 39% of total deposit base, improved from 37% from year end 2017.
• Financing to deposit ratio stood at 94%, as efficiency buildup continues.

Stronger capital ratios under Basel III following successful rights issuance

• Capital adequacy ratio is at 18.3%, as against 12.4% minimum required.
• CET 1 is at 13.0%, providing significant room for growth under the new Basel III regime.

Focused on long term value to shareholders

• Earnings per share further improved to AED 0.38 in H1 2018 compared to AED 0.33 in the same period.
• Return on assets remained stable at 2.33% in H1 2018.
• Return on equity maintained around 18.8% in H1 2018.

Management’s comments on the financial performance for the period ending June 30, 2018

His Excellency Mohammed Ibrahim Al Shaibani, Director-General of His Highness The Ruler’s Court of Dubai and Chairman of Dubai Islamic Bank, said:

• New initiatives recently announced by the UAE to fuel economic growth across various key sectors look very positive for businesses as well as the financial markets in the coming years
• The roll out of the new capital regulations is another solid step by regulator aimed at boosting the financial strength of the sector as a whole and to safeguard the interest of all stakeholders whilst creating new growth opportunities.
• The tremendous response of the shareholders to the recent capital raising via issuance of rights is a heartening sight for the Board and management. Given the issue was subscribed nearly three times clearly denotes the strong support and confidence the investors have in the franchise.

Dubai Islamic Bank Managing Director, Abdulla Al Hamli, said:

• Our stringent risk management practices and cautious approach towards lending have led to the creation of a franchise far more immune to economic volatility than ever before.
• The bank’s investments in strengthening our digital capabilities continues with our recently enhanced web and mobile platforms aimed at providing our customers with advanced functionalities and delivering a more enriching and user-friendly experience.
• The reaffirmation of DIB’s credit rating recently clearly indicates the robust financial position of the bank across all key financial metrics and ratios.

Dubai Islamic Bank Group Chief Executive Officer, Dr. Adnan Chilwan, said:

• 2018 so far is panning out as planned with expansion across all businesses leading to core income growth as the key performance indicators remain aligned with the guidance.
• Overall income levels continue their northbound trajectory aided by an increase in CASA as well as expansion in net funded margin, the latter having moved towards the higher end of the guidance given earlier.
• Efficiency buildup remains a focus area, a fact clearly evidenced in the trends depicted in key metrics of RoE, RoA and Cost- Income ratios
• With international operations getting fully aligned with the DIB Group agenda, we expect the non-UAE contribution to increase over the years as we continue to spread our proven growth strategy across other markets.
• The recent capital increase has once again created capacity for further growth, allowing us to continue to unlock the potential that the franchise offers both in terms of financial strength and market leadership position.
• The stage is set for another successful year for DIB, and with the foundation laid, we will soon reveal a new direction and an expansionary agenda for the bank which will largely revolve around digitalization directed squarely at changing the way customers interact across the organization with two simple aims – Greater efficiency, Higher returns.

Financial Review

Income Statement highlights:

Total Income

Profitability growth remains on the rise with total income increasing to AED 5,577 million compared to AED 4,865 million for the same period in 2017. The 15% increase was driven primarily by sustained growth in core businesses. Income from Islamic financing and investing transactions increased by 19% to AED 4,415 million from AED 3,713 million for the same period in 2017.

Net revenue

Net revenue for the period ending June 30, 2018 amounted to AED 4,036 million, an increase of 10% compared with AED 3,677 million in the same period of 2017. Commissions and fees increased by 14% in the first half of 2018 reaching to AED 781 million.

Operating expenses

Operating expenses maintained at AED 1,187 million for the period ending June 30, 2018 compared to AED 1,162 million in the same period in 2017. As a result, cost to income ratio significantly improved to 29.4% compared to 30.4% in 2017. 

	Cost to Income Ratio (%)

Profit for the period

Net profit for the period ending June 30, 2018, rose to AED 2,441 million from AED 2,143 million in the same period in 2017, an increase of 14%. Sustained improvements in profitability continues via the bank’s consistent efforts to push for growth and manage costs across the group. 

	Robust & Growing Profitability (AED million)

Statement of financial position highlights:

Financing portfolio

Net financing assets grew to AED 141.8billion for H1 2018 from AED 133.3billion at the end of 2017, an increase of 6% as the bank continues its strong growth on the franchise. Corporate banking financing assets grew at nearly 10% to AED 98 billion whilst consumer business remained steady at AED 40 billion, supported by new financing of over AED 1.2 billion. Commercial real estate concentration remained at around 19%.

	Deployment by Segment (AED bn)

Asset Quality

Non-performing financing ratio and impaired financing ratio improved to 3.3% and 3.2%, respectively, highlighting the quality of new underwriting. Cash coverage for the period ending June 30, 2018 stood at 120% compared with 118% at the end of 2017. Overall coverage ratio including collateral at discounted value reached 158% compared to 157% at the end of 2017.

	Non-Performing Financing (“NPF”)

Customer Deposits

Customer deposits for the period ending June 30, 2018 increased by 3% to AED 151 billion from AED 147 billion as at end of 2017. CASA component increased to AED 59.2 billion as of June 30, 2018, as the drive to enhance the low cost deposit base continues. Financing to deposit ratio stood at 94% as of June 30, 2018. 

	Customer Deposits

Capital Adequacy

Capital adequacy ratios remained robust, with overall CAR at 18.3% as of June 30, 2018 and CET 1 ratio at 13.0%. The successful rights issuance boosted the bank’s core capital metrics with the transaction generating massive interest across a highly diversified local and international investor base.

	Capital Ratios*

* Above graph reflects amended prior year values under the new Basel III regime

Ratings:

• June 2018 – Fitch Ratings has affirmed Dubai Islamic Bank (DIB) Long-Term Issuer Default Rating (IDR) at ‘A’ with a Stable Outlook and Viability Rating (VR) at ‘bb+’ reflecting strong domestic franchise, healthy profitability and sound liquidity

• June 2018 – Moody’spublishes noteon successful DIB rights issuance indicating that the capital increase is credit positive for the bank and will support the bank’s liquidity, solvency as well as maintain strong and stable capital buffers over the medium term.

Q2 2018 - Key business highlights:

• DIB concluded its Rights Issuance during the quarter successfully raising 1.6 billion additional shares to enhance the bank’s capital and continue to support on its growth plans. The transaction generated massive interest with subscriptions crossing AED 14 billion clearly denoting the huge interest from local and international investors in one of the fastest and most profitable banks in the region.
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• An enhanced website platform was launched providing consumers with a more enriched and superior experience in accessing the banks products and services. In addition to enjoying a simplified layout, the site also offers advanced functionalities supported by the latest technology to deliver a more intuitive and user-friendly experience.

• The bank continues its strategy of spreading awareness and leading Islamic finance beyond UAE with participation in key summits and business forums in Tatarstan, Kazakhstan and Indonesia during the quarter.

Year to Date key deals

2018 Industry Awards