The Abu Dhabi Islamic Bank (ADIB) Group posted a net profit of AED 1,201.2 million for 2012 after taking provisions and impairments of 802.3 million in a year where the focus was on laying the foundations of the Bank’s next phase growth strategy, with an important part of this work being the successful USD 1 billion Hybrid Tier 1 Capital issue. Despite the continued challenging market conditions and an increasing level of regulatory uncertainty, the performance of the main banking business remained strong: the Bank welcomed its 500,000th customer in Q4 2012, and its net profit grew by 5.0% to AED 1,495.8 million from AED 1,425.0 million in 2011.

The business highlights for 2012 were:

• A primary focus on capital preservation and as such: the Bank curtailed growth in risk weighted assets thereby restricting customer financing growth to 4.8% year-on-year; and raised USD 1 billion in new tier 1 capital in November 2012.

• Given that ADIB’s core customer base is UAE Nationals, who have been the focus of extensive regulatory restrictions, the Bank decided during 2012 to expand its operations to include expatriates. The Retail Banking business, underpinned by ADIB’s number 1 rating in customer service for the second consecutive year, therefore saw the customer base increase by 11.9% year-on-year to 506,689 customers.

• ADIB opened its 75th Retail branch in the UAE and installed its 549th ATM during the year, giving the Bank the third largest Retail network in the UAE. It remains on track to have 80 branches in early 2013.

• ADIB operations in the United Kingdom, Iraq and the Kingdom of Saudi Arabia continued to gain momentum as did the plans to establish new branches in Sudan, which was launched in December 2012, and Qatar.

• The deposit concentration was further reduced as current and savings account balances reached AED 32.1 billion at the end of 2012, a 25.7% year-on-year increase and significantly above the total market growth in deposits.

• The continuation of the conservative policy of non-performing asset recognition and remedial management, including the taking of an additional AED 609.0 million in credit provisions to ensure a healthy pre-collateral non-performing asset coverage ratio of 69.6% of the impaired portfolio, net of write-offs.

• The Group continued the process of bringing the legacy investment and development portfolio held by its real estate subsidiary, Burooj Properties, to account and made further impairments of AED 190.0 million in this regard.

A best practice approach to risk management continues to underpin the Bank’s strategy

ADIB’s management continued its rigorous approach to managing the non-performing portfolio. As a result, the Bank took an additional AED 161.1 million in credit provisions in Q4 2012, thereby increasing net credit provisions to AED 3,098 million, after AED 516.8 million in write-offs in 2012 vs. AED 11.5 million in 2011, with specific credit provisions at AED 2,282 million and collective provisions at AED 816 million. Total net credit provisions now amount to 5.7% of gross customer financing assets and represent a pre-collateral non-performing coverage ratio of 69.6% of the impaired portfolio, net of the write-offs. The Bank’s collective provisions now represent 1.68% of total customer risk weighted assets, well ahead of the Central Bank’s requirement of 1.5% by the end of 2014.

In addition to the credit portfolio, a further AED 190.0 million in impairments was taken against the real estate subsidiary’s legacy development and investment portfolio, bringing total impairments related to this business to AED 546.3 million over the past three years as it tracked the downturn in the real estate market.

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