The National Bank of Ras Al-Khaimah (RAKBANK) announced the financial results for the year ended on 31 December 2016. RAKBANK’s consolidated net profit is at AED 663.0 million, a decrease of AED 742.3 million over the previous year. Total Assets stood at AED 42.5 billion, an increase of 4.7% compared to 31 December 2015. On a more positive note the Group’s* operating Profit before impairment losses grew by AED 10.0 million over 2015 mainly as a result of the bank’s cost optimisation strategy which commenced in early 2016.

“2016 has been a very challenging year for RAKBANK as we have seen a significant increase of provisions especially in our legacy SME loan 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 it is understandable that RAKBANK has been significantly affected by the challenges in the SME sector brought about by a range of global and regional factors. We are however seeing some signs of improvement with provisions having peaked in the third quarter of 2016 and showing signs of improvement in the fourth quarter”, explained England.

Total Operating Income declined by AED 99.9 million to AED 3.8 billion mainly due to a decrease of AED 223.2 million in Net Interest Income predominantly due to the decline in the high margin SME Business loan book. Non-interest income grew by AED 123.3 million to AED 1.0 billion. This was mainly due to an increase of AED 132.5 million in income from investments, AED 17.7 million in insurance underwriting profit and AED 12.3 million in foreign exchange and derivative income. This was offset by a decrease of AED 27.2 million in commission income and AED 11.9 million in other income compared to 2015.

Operating costs were down by AED 109.9 million, a decrease of 7.4% from 2015. This was mainly due to a decrease of AED 68.3 million in staff costs, AED 21.7 million in outsourced staff costs and AED 11.1 million in depreciation costs. The Group’s cost to revenue ratio reduced to 35.6% compared to 37.5% for the previous year.

The provision for impairment in loans and advances increased by AED 752.3 million compared to previous year and this was due to larger payment defaults in the unsecured loan products, Business Banking and Commercial Banking segments. Total impairment provisions for the year was AED 1.8 billion compared to AED 1.1 billion in 2015.

“Overall, 2016 was a challenging year, however we made significant strides in advancing our three year Strategic plan. The Bank’s diversification strategy that commenced in early 2015 has been showing exceptional results with solid growth coming in our Corporate and Financial Institutions segments, as well as a very solid performance by our Treasury unit. We have recognised the need to move away from the Bank’s traditional legacy approach, achieving greater diversity in our balance sheet and income base to minimise the risk of focusing on specific sectors. The Bank successfully merged its internet and mobile banking platforms to deliver a seamless digital experience, called RAKBANK Beyond, and we will continue to introduce innovative products and services as well as strengthen our branch and ATM network across the country. We have completely revamped our Personal banking segments and have made significant progress in our revitalised Card business and further enhanced the market for home lending with RAKBANK’s widely acclaimed ‘Home in One’ product that was successfully launched in August of this year,” said England.

Total Assets rose by 4.7% to AED 42.5 billion compared to the end of 2015. This was due to an increase in Gross Loans and Advances of AED 1.2 billion, lending to banks which grew by AED 722.4 million and an increase in investments of AED 695.6 million. Customer deposits grew by 5.7% to AED 29.4 billion compared to 2015. This growth came mainly from an increase of AED 1.1 billion in demand deposits and AED 455.4 million in time deposits.

The Bank’s capital adequacy ratio as per Basel II before taking into consideration profit for the year 2016 stood at 21.8% by the year-end. This compares with 22.3% at the end of 2015, against a requirement of 12% set by the UAE Central Bank. This level of capital provides the Bank with ample room for growth in 2017. The regulatory eligible liquid asset ratio at the end of the year was 16.9%, compared to 19.1% the previous year. The advances to stable resources ratio stood comfortably at 85.5% compared to 83.3% at the end of 2015.

Commenting on the results, RAKBANK’s Chairman H.E. Mohamed Omran Alshamsi noted: “While 2016 presented many obstacles, we made significant progress in the implementation of our three-year strategy, particularly with regards to diversifying our business. We are placing greater emphasis on optimizing synergies within the Group to increase efficiency while supporting the diversification of our revenue streams. The Bank’s progress in 2016 positions us well for sustained profitable growth. By doing so, we aim to better serve our customers by offering them a seamless experience across the Bank’s diverse products and services through industry-leading service excellence, innovation, and simplicity. We will also continue to strengthen our capacity to meet any future challenges. This has placed us in a strong position to grow in both the medium and long term. The Bank’s new business mix – which includes lower margin and lower risk products – is likely to contribute to a steadier more sustainable growth.”

-ENDS –

*RAKBANK is a public joint stock company with shares traded on the Abu Dhabi Securities Exchange (ADX) and comprises five subsidiaries, collectively known as “the Group”.

About RAKBANK         

RAKBANK, also known as The National Bank of Ras Al Khaimah (P.S.C), is one of the UAE’s most dynamic financial institutions. Founded in 1976, it underwent a major transformation in 2001 as it rebranded into RAKBANK and shifted its focus from purely corporate to retail and small business banking. In addition to offering a wide range of Personal Banking services, the Bank increased its lending in the traditional SME, Commercial, and Corporate segment in recent years. The Bank also offers Islamic Banking solutions, via RAKislamic, throughout its 38 branches and its Telephone and Digital Banking channels. RAKBANK is a public joint stock company headquartered in the emirate of Ras Al Khaimah and listed on the Abu Dhabi Securities Exchange (ADX). For more information, please visit www.rakbank.ae or contact the Call Centre on +9714 213 0000. Alternatively, you can connect with RAKBANK via twitter.com/rakbanklive and facebook.com/rakbank.