Ahli United Bank (AUB) reported a record net profit of $203.9 million for Q4-2022, which represents a 30.2 per cent increase over the Q4-2021 reported net profit of $156.6m.
The Q4-2022 net profit is the highest quarterly profit achieved by the bank since its establishment in 2000.
It was primarily driven by higher operating income and lower provision charges given AUB’s conservative, forward-looking provisioning measures undertaken in the preceding quarter.
The basic and diluted earnings per share increased to 1.6 cents in Q4-2022 versus 1.2 cents in Q4-2021.
Comprehensive income for Q4-2022 was $113.5m (Q4-2021: $147.5m, -23pc). The core operating performance during the quarter was strong with net interest income increasing to $242.5m in Q4-2022 (Q4-2021: $227.6m, +6.6pc) and total operating income surging to $341.4m in Q4-2022 (Q4-2021: $282.7m, +20.7pc).
It should be noted that AUB’s financial results from Q4/2022 are consolidated into Kuwait Finance House (KFH) as per the applicable international financial reporting standards, as the effective date for acquisition was October 2, 2022.
AUB reported a net profit of $546.1m for the full year 2022 which represents a 10.1pc decrease over the 2021 reported profit of $607.2m.
This is entirely attributable to the higher exceptional precautionary non-recurring provision charge of $160.2m incurred during Q3-2022.
Basic and diluted earnings per share in 2022 is 4.5 cents, as compared to 5.1 cents in 2021.
Total comprehensive income for 2022 was $261.2m (2021: $641.3m, -59.3pc). Net interest income for 2022 was $909.1m (2021: $871.8m, +4.3pc) primarily achieved through an increase in interest earning assets.
Total operating income for 2022 was $1,236.9m (2021: $1,108.9m, +11.5pc).
The group’s equity as of December 31, 2022 marginally decreased by 2.1pc on a comparative basis to $4.4bn due to dividend distribution and forex revaluation changes (December 31, 2021: $4.5 billion).
The AUB Group’s total assets as at December 31, 2022 were $41.6bn (December 31, 2021: $41.9bn, -0.8pc). Return on average equity for 2022 was 12.3pc (2021:14.7pc) and return on average assets stood at 1.4pc for 2022 (2021: 1.6pc).
It should be noted that without the precautionary non-recurring ECL 1 & 2 provision charge of $160.2m recorded in Q3-2022, return on average equity adjusts to 15.4pc and return on average assets to 1.7pc, above the comparative period in 2021, in line with AUB normal historic operating levels.
The group improved its already solid asset quality in 2022 with a gross non-performing loan (Stage 3) ratio of 1.9pc (December 31, 2021: 2.4pc), which represents one of the lowest NPL ratio ever achieved by AUB.
The provision coverage ratio for Stage 3 loans was extremely conservative at 84.5pc (December 31, 2021: 83.1pc) and is calculated on a cash provision basis excluding the value of the substantial additional non-cash (real estate and securities) legally assigned collaterals available against non-performing loans of $491.2m in value (December 31, 2021: $364.5m in value).
Stage 1 and Stage 2 ECL provisions for the non-impaired loans surged to 1pc and 13.5pc at December 31, 2022 as compared to 0.9pc and 11.4pc at December 31 2021, which stand well above the regional banking sector averages, funded by the precautionary provisions recorded by the bank in Q3-2022.
The cost to income ratio for 2022 was at 29.7pc (2021: 29.5pc) reflecting AUB’s continuing structured efforts to enhance operational efficiencies through the progressive roll-out of automation and digitisation initiatives as part of the AUB Group’s transformation plan and the gradual harvesting of its data initiatives.
The board of directors has recommended a distribution comprising of a cash dividend of 2.5 cents per share, subject to AUB annual general assembly approval.
AUB deputy chairman Mohammad Al Ghanim commented: “Despite a challenging background of the prolonged Russia-Ukraine conflict, increasing inflationary pressures, slowdown in the global economy and overall market volatility, AUB achieved strong results in 2022 with its total operating income increasing by 11.5pc proving once again the solidity and resilience of its multimarket business model as well as its prudent risk management approach. Excluding the non-recurring additional precautionary provision charge of $160.2m taken in Q3-2022 from non-distributable pre-acquisition profits for KFH shareholders, the AUB Group achieved record financial results in 2022 with consolidated NPAT reaching $706.3m, a 16.3pc increase over the previous year NPAT and the second highest NPAT achieved in its history.”
Mr Al Ghanim added: “During 2022, AUB successfully acquired Citibank’s consumer banking business in Bahrain. The acquisition which included the retail banking, credit card, and unsecured lending businesses of Citibank Bahrain has provided critical mass to AUB in highly profitable retail and premium segments and has enabled AUB to significantly enhance its market share in the Bahrain credit card business. During the year, AUB has also successfully concluded a landmark $1.1bn sustainable murabaha financing facility, making it the first ever issuance of its type raised by a financial institution worldwide. The sustainable murabaha financing facility attracted very high demand from regional and international banking investors demonstrating and reinforcing AUB’s credentials as a leading and innovative market player.”
He concluded by stating that: “The KFH acquisition which was concluded in November 2022 is a key milestone in AUB’s corporate evolution and a strong testament to AUB’s excellent financial performance over the past 23 years and of the stellar value accretion achieved for its shareholders. The transaction valued AUB at $10.7bn which translated to an IRR of around 17pc per annum for AUB shareholders over the 23 year period since the bank’s establishment.
“It also represents attractive exit P/E and P/BV multiples of 16.6x and 2.5x respectively. This transaction has laid the foundation for the creation of a leading Sharia compliant bank in the regional and global banking space and should provide a very solid platform for achieving the aspirations of its combined shareholders.”
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