The National Bank of Ras Al-Khaimah (RAKBANK) today announced a consolidated net profit of AED 554.2 million for the nine months ended 30 September 2016. The Group’s operating profit increased by 6.1% to AED 1.9 billion as a result of reduction in operating cost by 11.7% offset by a marginal drop in total operating income.

Total operating income is AED 2.9 billion and is down by 0.8% due to a reduction in the net interest income and net income from Islamic financing by 6.1% that is partially offset by the increase in non-interest income by 17.4%. Non-interest income grew by AED 115.5 million, and this is mainly due to a growth of AED 113.9 million in investment income and AED 8.6 million in income from the insurance segment.

Operating expenses declined by AED 134.2 million during the first nine months of the year compared to the previous year due to various cost saving initiatives taken by the Group. The Group improved its Cost-to-Income ratio to 34.8% compared with 39.1% during the nine months of 2015, as it maintained its focus on cost optimization. The consolidated operating profit before provision for impairment increased by AED 110.2 million to AED 1.9 billion, while the total provisions for impairment for the nine months increased to AED 1.3 billion. As a result, the Bank recorded a net profit of AED 554.2 million for the nine months ended September 30, 2016.

“2016 has been a very challenging year for RAKBANK as we have seen a significant increase of provisions in our legacy SME Business loans portfolio,” said Peter England, RAKBANK Chief Executive Officer. “From 2008 until early 2015 the bank’s core focus had been on SME lending and therefore is it understandable that, as the largest SME bank in the UAE, we would be adversely affected by the very challenging market for SME’s due to a number of factors including a global economic slowdown,” explained England.

“On the positive side, the banks diversification strategy commenced in early 2015 has been showing exceptional results with solid growth coming in our Corporate and Financial Institutions business, as well as a very solid performance by our Treasury unit. On the SME front, we remain firmly committed to this business having completely revamped our entire front end and back end where we continue to book solid business here, albeit under a completely different set of risk parameters than used last year. We have commenced completely revamping our Personal banking business and have seen significant progress in our revitalised Card business and completely changed the market for home lending with RAKBANK’s widely acclaimed ‘Home in One’ product which was successfully launched in August of this year,” added England.

Total assets grew by AED 275.3 million to AED 40.8 billion as compared to 31 December 2015, mainly as a result of growth in gross loans and advances which were up by AED 463.7 million to AED 29.0 billion. Customer deposits grew by AED 544.9 million during the nine months of 2016 to AED 28.4 billion as compared to AED 27.8 billion as at 31 December 2015.

The Bank’s capital adequacy ratio as per Basel II requirement that comprises entirely of Tier 1 capital is 23.9%, compared with 24.4% at the end of the previous year. This is against a current minimum total capital ratio of 12.0% prescribed by the Central Bank in the UAE. At the end of this quarter, the regulatory eligible liquid assets ratio is 18.7% and advances to stable resources ratio stood comfortably at 84.3%. Total shareholder’s equity is AED 7.5 billion including the current year profit.

Commenting on the results, RAKBANK’s Chairman H.E. Mohamed Omran Alshamsi noted “We expect to see on-going challenges during the course of 2016 from the Bank’s legacy SME Business loans portfolio, however we see positive mid to long term benefits from the Bank’s strategy that focuses on a larger balance sheet catering to all customer segments in the UAE. The bank is well placed for growth with a very strong capital position and ample liquidity from a well-diversified depositor base. We remain committed to the SME sector, however the journey we commenced last year to re-enter the Wholesale banking market and revitalise our Personal banking business is beginning to bear fruit and is crucial to building a long term sustainable banking franchise.”