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UAE’s RAKBANK reports 44.7% dip in net profit for H1 2020

UAE’s RAKBANK reports 44.7% dip in net profit for H1 2020

The bank’s total income for H1 2020 declined by 4.5 per cent compared to H1 2019

UAE lender RAKBANK has reported a consolidated net profit of Dhs306.6m for H1 2020, a decrease of 44.7 per cent compared to the first half of 2019.

The decline in net profits were registered due to higher IFRS 9 provisions set aside as precautionary measures to combat the possible fallout of the Covid-19 pandemic.

The bank also recorded a total income of Dhs1.9bn for H1 2020, down by 4.5 per cent from Dhs1.99bn in H1 2019, mainly due to the decrease in non-interest income by Dhs72.9m and the decline of Dhs16.9m in net interest income and net income from Islamic products.

As at June 30, 2020, total assets stood at Dhs54.3bn, decreasing by 5.1 per cent year-on-year and by 4.9 per cent year-to-date.

On the other hand, RAKBANK’s wholesale banking lending grew by 14 per cent, up by Dhs1.2bn year-on-year, the personal banking’s loan portfolio decreased by Dhs1.3bn and the business banking’s loan portfolio also declined by Dhs632.7m compared to June 30, 2019.

Likewise, customer deposits also decreased to Dhs35.1bn. 

Provisions for credit loss increased by Dhs232.9m year-on-year, primarily due to additional precautionary provisions taken in view of the expected deterioration of the current environment.

RAKBANK CEO, Peter England, commented: “While the increased IFRS 9 provisions at RAKBANK have weighed down on our net profit, our overall performance for the first half was solid. In fact, if we exclude the IFRS overlay set aside for potential future bad debts, our operating profit including ordinary provisions was very similar to the first half of 2019. Spending habits of consumers and businesses overall have been subdued which is reflected in the Bank’s Gross Loans and Advances, which contracted by 2.2 per cent year-on-year. That said, RAKBANK witnessed an increase in CASA deposits by Dhs1bn compared to December 31, 2019, which is indication of changing behaviour of clients, as well as the bank’s operational resilience during this crisis.”

“I’d like to highlight that our credit quality at RAKBANK has been stable throughout the first half of 2020 and the current increase in the impairment provisions is largely a precautionary measure taken to protect the Bank from the potential deterioration in credit quality for the impending quarters. As a proactive step, the Bank reserved additional ECL provision amounting to Dhs232m,” noted England.

In March, RAKBANK announced several measures to mete financial relief to all its customers by providing flexible solutions to help them overcome challenges such as pay disruption, among others.

Also read: RAKBANK reveals measures to support those affected by Covid-19 outbreak

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