Abu Dhabi’s ADCB’s Q1 profit falls 5%, sees cost synergies from three-way merger

ADCB finalised the bank’s integration with Union National Bank and Al Hilal Bank last week



Abu Dhabi Commercial Bank, which formalised a merger with two other banks last week, reported a 5 per cent fall in first-quarter profit, hurt by lower interest income, missing analysts’ forecasts.

Net interest and Islamic financing income of Dhs1.71bn ($465.58m) fell 7 per cent from the first quarter of 2018, as the bank said its move to raise long-term funds hit its profitability.

“Bottom line was impacted by higher cost of funds underpinned by a conscious decision to increase long-term time deposits and wholesale funding to meet the evolving regulatory liquidity requirements,” said Deepak Khullar, chief financial officer.

ADCB also said the bank’s integration with Union National Bank and Al Hilal Bank will be in phases over the next 18 to 24 months.

The merger makes the combined entity the third-biggest lender in the United Arab Emirates after First Abu Dhabi Bank and Emirates NBD.

Read: Abu Dhabi banks ADCB, UNB and Al Hilal merge to create third largest UAE lender

ADCB made a net profit of Dhs1.15bn ($314m) in the three months ending March 31, 2019 it said in a statement. That compared with Dhs1.21bn profit made in first quarter 2018.

SICO Bahrain had forecast ADCB would make a first-quarter profit of Dhs1.29bn, while EFG Hermes estimated Dhs1.3bn.

The bank, however, reported a higher non-interest income of Dhs566m, up 8 per cent over the first quarter 2018.

Loans increased 2 per cent to Dhs169bn and deposits grew 4 per cent in the quarter over December 31, 2018.

ADCB said the merger between the three banks is expected to deliver annual cost synergies of approximately Dhs615m.