Abu Dhabi / Emirates Business
Finance House (FH) has reported a consolidated net profit at the group level of AED 61.7 million for the financial year ended December 31, 2015 compared to a consolidated net profit of AED 73.3 million achieved in the previous year. Total Assets as of December 31, 2015 grew by 4% to AED 5.04 billion compared to AED 4.85 billion as at December 31, 2014.
Commenting on 2015 results, Mohammed Abdulla Alqubaisi, Chairman of Finance House said: “Despite challenging local, regional & 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% to reach AED 198.4 million in 2015 compared to AED 145.6 million in the previous year. However, Net Fee and Commission income dropped by 24.6% to AED 44.6 million in 2015, compared to AED 59.1 million in 2014 primarily due to the significant drop in brokerage commission revenue in the local stock broking subsidiary. Aggregate investment & 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% to AED 97.3 million in 2015 compared to AED 93.9 million in the previous year. 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 AED 0.7 million compared to a Net Insurance Loss of AED 14.2 million in the previous year. 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% at AED 324.1 million compared to AED 276.4 million in the previous year.
Net Loans & Advances including Islamic Financing & Investing Assets grew by nearly 11% to reach AED 2.30 billion as at 31 December 2015, compared to AED 2.08 billion at the end of the previous year. Notwithstanding this steady pace of loan book growth during the year, the Credit Portfolio to Stable Resources ratio at the consolidated level as of 31 December 2015 stood at a remarkably healthy 63.5% compared to 60.3% in the previous year, 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 31 December 2015, the Group maintained loan loss coverage of 83% 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% of the Gross Loan Book, in line with UAE Central Bank directives.
Total operating expenses at the consolidated level were higher by 8% 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% 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 AED 1.21 billion compared to AED 902. 38 million as at the end of the previous year, representing a robust 24% of Total Assets.
At the consolidated level, Shareholders’ equity as at 31 December 2015 soared to AED 954.19 million compared to AED 682.38 million at the end of the previous year. During 2015, Finance House PJSC successfully raised AED 300 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 31 December 2015 stood at a robust 23.3% compared to 20.6% at the end of the previous year, 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.