RAKBank's Q4 net profit jumps 27% on higher customer deposits

National Bank of Ras Al Khaimah reported a 27.3 per cent increase in last year's fourth-quarter net profit, driven by a growth in customer deposits and a drop in impairments amid continued economic recovery in the UAE.

Net profit for the three months to the end of December climbed to Dh284.6 million ($77.5 million), RAKBank said in a statement on Monday to the Abu Dhabi Securities Exchange, where its shares are traded.

Total income of the bank in the last quarter jumped nearly 26 per cent to Dh994.8 million.

RAKBank's full-year net profit rose 53.4 per cent to Dh1.16 billion while its total income surged nearly 7 per cent to more than Dh3.4 billion. The bank said it achieved the highest net profit growth rate in more than a decade.

A “well-diversified balance sheet and resilient UAE economic environment” led to a 25.3 per cent yearly reduction in impairments last year, while customer deposits stood at Dh44.9 billion, an increase of 15.3 per cent year-on-year.

“The growth was diversified across all of our segments … it is also worth noting that … Casa [current and savings account] ratio was 70.4 per cent as at 31 December, 2022 — an important achievement given the rising interest rate environment,” said Raheel Ahmed, RAKBank’s chief executive.

“We have seen balance sheet momentum across wholesale banking and business banking segments” that grew by more than Dh1.5 billion and Dh996 million, respectively, Mr Ahmed said. Retail banking grew by Dh102.8 million.

“We have achieved a V-shaped recovery by curbing the declines in the pandemic years. We reignited growth in both sides of the balance sheet, while prudently managing costs and strengthening our capital position to achieve an ROE [return on equity] of 13.5 per cent,” he added.

The UAE economy made a strong recovery from the coronavirus-induced slowdown and the pace of economic momentum has continued to improve on the back of government initiatives, higher oil prices, a strong performance in its property sector and a rebound in travel and tourism.

The UAE economy is estimated to have grown by 7.6 per cent last year, the highest in 11 years, after expanding by 3.9 per cent in 2021, according to the UAE Central Bank.

Overall, the country’s economy is projected to grow 3.9 per cent in 2023, the central bank said.

RAKBank's operating expenditure stood at Dh1.5 billion for last year, reflecting an annual increase of 6.4 per cent.

Operating expenses for last year were higher due mainly to an increase of Dh75.6 million in staff costs, Dh29.6 million in card expenses and Dh6.4 million in IT expenses.

“We foresee 2023 to be a year of opportunity in the midst of uncertainty caused by geopolitical and economic headwinds. Therefore, we will diversify our business mix and further strengthen our credit profile and lay the foundation of a long term, sustainable growth,” said Mohamed Alshamsi, chairman of RAKBank.

“Through the execution of our latest multi-year strategic plan, we will build on the bank’s existing strengths, while continuing to transform the bank to navigate through a challenging external environment, and ultimately exceed the expectations of our customers.”

RAKBank’s cash and cash equivalent reached Dh4.3 billion as of December 31. The net cash generated from operating activities was Dh5.3 billion, Dh2.6 billion was used in investing activities and Dh1.7 billion used in financing activities, the bank said.