Abu Dhabi Islamic Bank Financial & Business Analysis 1999 "A promising start for a young operation - a sound strategy, growing asset base and reasonable profitability"

Exchange Rate at 31 Dec 1999 1 US$ = 3.67 AED (Utd. Arab Emir. Dirham) Financial Trends

Ownership and Legal Status

Abu Dhabi Islamic Bank is a public joint stock company, incorporated in the United Arab Emirates under Federal Law 8 of 1984 and Amiri Decree No. 9 for 1997. The Bank was registered in the commercial register on 3 November 1997 and commenced commercial operations on 11 November 1998. The Bank's main activities include carrying out banking, investment, trading and other banking service activities in accordance with Islamic principles. The Bank operates solely in the United Arab Emirates and employed 241 employees at year-end 1999 (1998: 177). Authorised, issued and fully paid share capital at year-end 1999 was AED 1 billion (US$272 million).

The Year in Brief

(The comparative period ended 31 December 1998 included 14 months)
Total assets increased by 83% to AED2.66 billion (1998: AED1.48 billion). Total deposits increased by 444% to AED1.50 billion (1998: AED0.33 billion), while Shareholders' funds increased by 1.58% or AED17.45 million to AED1.121 billion (1998: AED1.103 billion). Total operating income (prior to distribution to depositors) increased by 53.55% or AED36.134 million to AED103.61 million (1998: AED67.48 million). After distribution to depositors, income comprised AED72.06 million, up AED4.97 million or 7.41% (1998: AED 67.09 million). Operating expenses increased by AED20.02 million or 59.4% to AED53.71 million (1998: AED33.69 million). Ratio of operating expense to operating income (less distribution to depositors) was 74.53% (1998: 50.21%). Staff cost per employee was AED128,402 (1998: AED125,604).

Business Highlights

The external domestic environment was buoyant, with considerable growth in the local economy (GDP up 10%). Trade surplus was 34%, inflation was steady at 2% and average per capita income rose 9%. The average price of oil reached US$17.48 per barrel, up 41% from 1998, but still below levels reached in 1996 (US$19.70) and 1997 (US$18.60). The enactment of laws to establish a formal stock market and commodity exchange in the U.A.E. will shape the future of domestic financial and commodity markets and have positive implications for the economy generally.

The Bank, in cooperation with other Islamic financial institutions, invested in the Awqaf properties in Muslim countries. It also participated in major projects such as Qatar Telecommunications (Q-TEL), whose capital reached QR5 billion. Assets were deployed 11% in the local market, 55% in the Middle East and 34% in Europe and other markets.

The Bank is developing a number of investment products and services, including the 'ADIB Al Hilal Fund', comprising three portfolios (global equities, medium-term financing and short-term financing) and the 'ADIB Ijara Fund 1' that invests in equipment leases. These two funds are in the process of being launched.

The Bank's strategic plan envisages expansion of its activities to all cities in the U.A.E. To this end, three new branches were opened - Al Ain in July; Dubai in November and a second branch in Abu Dhabi in March. New branches are planned for Sharjah, Fujairah, Baniyas, Gheyathi and others.

The introduction of policies and procedures relating to control and risk management continued to be given a high priority, with particular emphasis on setting risk-based controls for credit and investment activities. An Internal Audit Committee was formed to enhance the audit function within ADIB.