ADCB denies report of talks to sell $3.7bn of bad loans

Abu Dhabi Commercial Bank (ADCB) said it is not in talks with funds to sell $3.68bn (Dhs13.5bn) of non-performing loans (NPLs) after a media report said the UAE lender was weighing a possible offer to clean up its books.

“ADCB denies in the strongest terms that it is in ongoing deliberations with the company named in the report related to the sale of non-performing loans. The bank has no intention of pursuing a transaction or any business partnership with the named party,” the bank said in a bourse filing.

“The bank disclosed in its full-year results statements that it had completed the sale of legacy, fully written-off loans in two tranches in late 2022,” the Abu Dhabi lender added.

Sources told Bloomberg that an entity called Lexolent was looking to assemble a group of buyers to purchase ADCB’s non-performing loan book. The report said Lexolent might set up a debt collection joint venture with ADCB. That body will also oversee the bank’s other bad debts it offloaded and possibly those of other financial institutions across the Middle East.

However, the talks between ADCB and Lexolent are reportedly ongoing and may not result in a transaction. International investors focused on distressed debt have said they are eyeing opportunities in the GCC, where banks may need to make provisions for more NPLs as companies navigate global economic headwinds and post-pandemic recovery, said a Reuters report.

ADCB’s clean-up process

Meanwhile, US investment fund Davidson Kempner bought a $1.1bn loan portfolio from ADCB in January, as part of a broader strategy by Abu Dhabi’s second-largest bank to declutter its balance sheet straddled with high-profile corporate defaults.

The following month Grant Thornton and its Asset Recovery Fund purchased $357m in distressed NPLs from ADCB, marking the first time the UAE lender offloaded distressed debt of that magnitude. Grant Thornton said in February that the sale signals “how local banks in the UAE are cleaning up their books to support the growing market while remaining compliant with international regulatory and banking standards.”

ADCB said while the bank “continuously considers a range of opportunities to maximise shareholder value and recoveries in the normal course of business,” it does not expect any further transactions of this nature this year.

The bank, one of NMC Healthcare Group’s biggest lenders, said that it received 37.5 per cent of the transferable exit instrument in a $2.25bn facility issued by the healthcare group’s operations in the UAE and Oman following its completion of a debt restructuring process and exit from administration last year.

ADCB reported a full-year net profit of Dhs6.4bn, a 23 per cent increase compared to a year earlier despite an increase in impairment charges to Dhs2.78bn. The bank’s net interest income reached Dhs10.2bn, up 15 per cent from 2021 while non-interest income surged by 22 per cent to Dhs4.2bn compared to the previous year.

The bank recommended a 2022 dividend of Dhs0.55 per share, compared to Dhs0.37 a year ago, which is equivalent to 60 per cent of its net profit. This translates into a payout of about Dhs3.82bn, which is nearly 49 per cent higher compared to 2021.

The bank completed its integration process in 2020 following a three-way merger with Union National Bank and Al Hilal Bank to create one of the biggest banks in the Middle Region with Dhs498bn in assets as of December 2022.