Wednesday, 26 October 2016

Abu Dhabi Commercial Bank 3Q2016 Results: A Tale of Two Newspapers

Where Would We Be Without Ambition?

On 23 October Abu Dhabi Commercial Bank issued its interim unaudited financial statements. 
  1. Net profit for the first nine months of the year was AED 3.2 billion versus AED 3.7 billion for the comparable period last year (a decline of 14%). 
  2. Net profit for 3Q16 was AED 1.0 billion versus AED 1.2 billion for 3Q16 (a decline of roughly 17%). 
  3. The major factor impacting net income was impairment provisions which increased from AED 391 million in the first nine months of 2015  to AED 1.083 for the first nine months of 2016 (an increase of 77% percent) and from AED 66 million in 3Q15 to AED 380 million for 3Q16 (an increase of 475%).
How did UAE’s two flagship English language newspapers cover this story?
The National’s 23 October headline was ADCB Net Profit Falls 17% in Third Quarter

Abu Dhabi Commercial Bank said its third-quarter profit slid by 17 per cent as provisions for bad loans jumped almost six-fold.
Net profit declined to Dh1 billion in the three months to the end of September versus Dh1.2bn in the same period last year, the bank said. Impairment allowances shot up to Dh380 million from Dh66m in the third quarter last year

Two days later Dubai’s Gulf News took a slightly more optimistic view:  ADCB Reports Dh999m in Q3 Profits Figure brings profit for first nine months to Dh3.14 billion.

Abu Dhabi: Abu Dhabi Commercial Bank (ADCB) continued to register growth in net loans and customer deposits in the first nine months of this year despite increased challenges in the banking industry.

“The bank delivered strong financial results for the nine month period of 2016, reporting a net profit Dh3.153 billion and an industry leading return on equity of 16 per cent.   
While the challenging operating environment and the turbulent markets have impacted the industry, our underlying performance and fundamentals remain strong and we continue to grow our businesses. Our balance sheet remains resilient and registered a healthy growth in net loans and customer deposits year to date, 10 per cent and 7 per cent respectively,” said Alaa Eraiqat, ADCB’s group chief executive officer.

In a statement, the CEO reiterated his confidence in the long-term growth of the UAE’s economy, stressing the bank’s strong fundamentals and outlook of delivering value to shareholders.

In the first nine months of this year, the bank’s assets grew 12 per cent to Dh255 billion, while net loans and advances to customers increased 10 per cent to Dh162 billion compared to December 31, 2015.”

Technical notes: 
  1. AA’s calculations are based on net change not simply a division of this year’s results divided by last year’s. 
  2. Gulf News appears to be using net income attributable to controlling equity holders in the bank not total net income.
What a difference a point of view makes. 

One comes away with two very different conclusions from reading these two articles.
  1. Everything sounds just fine from the account in Gulf News. 
  2. The National the “hometown” newspaper of ADCB with perhaps more at stake to  paint a rosy picture does not.  In AA’s view it presents a more accurate picture by providing comparatives to prior periods and discussing negatives as well as positives.
Another post to follow soon with comments on things to watch in ADCB's financials. 

Here's a link to the earlier promised post.

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