Abu Dhabi-based Finance House, a leader in commercial and retail financing, financial services and investments, has reported a consolidated net profit of Dh61.7 million ($16.7 million) for 2015, slipping from Dh73.3 million ($19.9 million) achieved in 2014.
Total Assets as of December 31, 2015 grew by 4 per cent to Dh5.04 billion ($1.3 billion) compared to Dh4.85 billion ($1.3 billion) as at December 31, 2014.
Commenting on the results, Mohammed Abdulla Alqubaisi, chairman of Finance House said: “Despite challenging local, regional and global market conditions, we are proud to maintain our profitable stance for the eleventh successive year since inception. Our resilient business model has delivered profitable growth not only during periods of economic growth and expansion, but also during periods of economic turbulence and uncertainty. For a genuine private sector enterprise operating in the fiercely competitive UAE financial services sector, this is a creditable achievement indeed.”
On the back of the growth in the asset book, Net Interest Income, Income from Islamic Financing & Investing Assets and Net Income from Perpetual Instruments grew by a robust 36.3 per cent to reach Dh198.4 million ($54 million) in 2015 compared to Dh145.6 million ($39.6 million) in 2014. However, Net Fee and Commission income dropped by 24.6 per cent to Dh44.6 million ($12.1 million) in 2015, compared to Dh59.1 million ($16 million) in 2014 primarily due to the significant drop in brokerage commission revenue in the local stock broking subsidiary. Aggregate investment and other operating income from the well diversified proprietary investment portfolio consisting of listed equity, private equity, fixed income and real estate assets grew by 3.7 per cent to Dh97.3 million ($26.4 million) in 2015 compared to Dh93.9 million ($26.6 million) in 2014. This is despite the steep fall in domestic listed equity prices during the year.
“During 2015, the insurance business achieved a major turnaround by registering a Net Insurance Income of Dh700,000 ($190,539) compared to a Net Insurance Loss of Dh14.2 million ($3.8 million) in 2014. The insurance company initiated a series of corrective measures to alter the product-mix, weed-out unprofitable businesses and/or re-price them in line with known risk characteristics. Concurrently, the company has also strengthened its claims management procedures to ensure that loss ratios fall in line-with or lower than its estimates for such product lines. The positive impact of all these initiatives is clearly visible in the underwriting results achieved in 2015,” commented Alqubaisi.
As a combined result of the above, Total Operating Income for 2015 at the consolidated level was up by a healthy 17.2 per cent at Dh324.1 million ($88.2 million) compared to Dh276.4 million ($75.2 million) in 2014.
Net Loans and Advances including Islamic Financing and Investing Assets grew by nearly 11 per cent to reach Dh2.30 billion ($626 million) as at December 31, 2015, compared to Dh2.08 billion ($566.1 million) at the end of 2014. Notwithstanding this steady pace of loan book growth during the year, the Credit Portfolio to Stable Resources ratio at the consolidated level as of December 31, 2015 stood at a remarkably healthy 63.5 per cent compared to 60.3 per cent in 2014, reflecting both the Group’s cautious approach to asset/liability growth and the significant head room available for sustained loan book growth in 2016 and beyond.
FH’s loan loss provisioning policy continues to be conservative and as of December 31, 2015, the group maintained loan loss coverage of 83 per cent by way of specific provisions to cover net exposure against individually impaired loans and loan balances that are past due for 91 days or more but are not impaired. In addition, it also maintains collective provision of 1.50 per cent of the Gross Loan Book, in line with UAE Central Bank directives.
Total operating expenses at the consolidated level were higher by 8 per cent in 2015 compared to 2014 mainly on account of hiring new employees and higher establishment costs, in line with increased business volumes across major business segments. Despite the absolute increase in Total operating expenses, the Cost/Income ratio registered a 5 per cent drop year on year, signifying improved overall operating efficiency.
FH Group continues to manage its liquidity in a prudent and conservative manner. Since the onset of the financial crisis in October 2008, it has remained a net lender to the UAE inter-bank market and continues to maintain this position till date. Net cash and cash equivalents as at 31 December 2015 increased to Dh1.21 billion ($329.3 million) compared to Dh902.38 million ($245.6 million) as at the end of 2014, representing a robust 24 per cent of Total Assets.
At the consolidated level, Shareholders’ equity as at December 31, 2015 soared to Dh954.19 million ($259.7 million) compared to Dh682.38 million ($185.7 million) at the end of 2014. During 2015, Finance House successfully raised Dh300 million ($81.6 million) by way of Shari’a compliant Tier 1 Capital Certificates, after obtaining necessary regulatory and shareholder approvals. Capital adequacy ratio at the consolidated level as of December 31, 2015 stood at a robust 23.3 per cent compared to 20.6 per cent at the end of 2014, providing a solid footing for sustained future growth in assets.
In January 2016, the investment grade Corporate Credit Ratings of Finance House were reaffirmed by Capital Intelligence, for the 3rd year in succession, at “A3” Short Term and “BBB-” Long Term, both with a stable outlook. Commenting on FH’s credit rating, Mr. Alqubaisi said “The reaffirmation of our investment grade credit ratings for three years in a row is a fitting testament to the soundness of our growth strategies, the resilience of our business model and the robustness of our corporate governance structure.”
“We look forward to 2016 with cautious optimism for sustained profitable growth, in line with our growth aspirations. Our strategy is sound and we have the necessary mechanisms and structures in place to exploit profitable opportunities, to adapt quickly to changing market conditions, to continue managing risks well and to maximize returns for our shareholders”, concluded Alqubaisi. – TradeArabia News Service