Dubai Islamic Bank Trading Outlook

Dubai Islamic Bank Trading Outlook

Dubai Islamic Bank Trading Outlook

DB ISLAMIC BK closed up 0.030 at 5.410. Volume was 44% below average (neutral) and Bollinger Bands were 9% narrower than normal.

Open High Low Close Volume___
5.380 5.420 5.360 5.410 3,491,938

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 5.43 5.19 5.39
Volatility: 15 29 37
Volume: 5,943,123 7,652,950 5,864,100

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

DB ISLAMIC BK is currently 0.4% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of DISB.DU at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on DISB.DU and have had this outlook for the last 28 periods.

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Dubai Islamic Bank, DIB, the first Islamic bank in the world and the largest Islamic bank in the UAE by total assets, today announced its 1st half results for the period ended June 30th, 2016.

Figures released today show that Group Net Profit increased to AED 2,004 million, up 11% compared with AED 1,801 million for the same period in 2015, Total Income increased to AED 4,236 million, up 17% compared with AED 3,625 million for the same period in 2015, Net Operating Revenue increased to AED 3,356 million, up 6% compared with AED 3,166 million for the same period in 201, Impairment losses declined to AED 191 million compared with AED 276 million for the same period in 2015, and Cost to Income Ratio remained stable at 34.3% compared with 34.1% for the same period in 2015, in line with guidance for the year.

The results indicate a strong balance sheet driven by growth in core business activities with net financing assets at AED 108.9 billion up by 12%, compared to AED 97.2 billion at the end of 2015, Sukuk investments at AED 22.8 billion, an increase of 14%, compared to AED 20.1 billion at the end of 2015, and Total Assets at AED 172 billion, an increase of 15%, compared to AED 149.9 billion at the end of 2015.

The figures also reveal improving asset quality, with NPLs on a consistent decline with NPL ratio improving to 4.5%, compared to 5.0% at the end of 2015, provision coverage ratio improved to 100%, compared to 95% at the end of 2015, and overall coverage, including collateral at discounted value, now stands at 150%, compared to 147% at the end of 2015.

There has been a steady growth in customer deposits which are at AED 125 billion compared to AED 110 billion at the end of 2015, up by more than 13%. The CASA book has been enhanced to 41.3% of total deposit base compared to 40.6% at the end of 2015, despite the challenging liquidity environment.

The bank is maintaining strong capitalisation ratios, with capital adequacy ratio at 18.0% as of June 2016, as against 12% minimum required. Tier 1 CAR stood at 17.8% against minimum requirement of 8%. Financing to deposit ratio is at 87% highlighting significant liquidity.

Earnings per share stood at AED 0.40 in 1H 2016, return on assets is at 2.48% in 1H 2016, and return on equity stood at 18.1% in 1H 2016, in line with guidance given for the year.

Mohammed Ibrahim Al Shaibani, Director-General of His Highness The Ruler’s Court of Dubai and Chairman of Dubai Islamic Bank, said, “These continue to be challenging times with substantial economic impacts stemming from global events. The Brexit decision further added an air of uncertainty to the global economic scenario. DIB continues to impress with its performance as one the most attractive and profitable franchises in the country. The board and the management remain focused on effectively executing the growth strategy that not only achieves results in the short term but also builds capabilities and platform to sustain the same in the years to come.”

Dubai Islamic Bank Managing Director, Abdulla Al Hamli, said, “The bank has once again delivered robust results during the first half of 2016 aligned with the UAE economy’s resilience to the commodity prices volatility. The bank’s recent capital increase via a rights issue was heavily oversubscribed, denoting the strong shareholder interest in the franchise.

Dubai Islamic Bank Group Chief Executive Officer, Dr. Adnan Chilwan, said, “DIB’s performance over the last two years, despite the current economic conditions, has been remarkable to say the least. Our growth guidance was well above the market and we have managed to beat those consistently. In a challenging and highly competitive liquidity landscape, we have shown the ability to generate not just a double digit deposit growth, but also growth in the low cost funding for the bank. Whilst NIMs continue to be under pressure across the industry, DIB remains at healthy levels and at the higher end of the market, another remarkable feat and a testament to the bank’s ability to generate low cost funding whilst maintaining competitive pricing on its financing book. The recent rights issuance has led to enhanced capitalisation with overall CAR standing at 18%, and has created room for further advancement and penetration in existing clientele and industry sectors as we push forth our growth strategy for 2016. Given the solid performance so far and the robust balance sheet positioning, I believe that that we have the ingredients in place to navigate the economic challenges posed by the market and continue our performance leadership in line with the expectation of all our stakeholders.”

Total income for the period ended June 30th, 2016, increased to AED 4,236 million from AED 3,625 million for the same period in 2015, an increase of 17% driven primarily by growth in core businesses. Income from Islamic financing and investing transactions increased by 20% to AED 3,126 million from AED 2,614 million for the same period in 2015. Fees and commissions have increased by 25% to AED 790 million compared to AED 630 million for the same period in 2015.

Net revenue for the period ended June 30th, 2016, amounted to AED 3,356 million, an increase of 6% compared with AED 3,166 million in the same period of 2015. The increase is attributed to build up of core financing assets as well as growth in commissions and fees.

Operating expenses slightly increased by 7.0% to AED 1,152 million for the period ended June 30th, 2016, from AED 1,080 million in the same period in 2015. The marginal increase is primarily due to growth in operational expenses in line with increased business volume. Cost to income ratio remained stable at 34.3% compared to 34.1% for the same period in 2015, in line with guidance for the year.

Impairment losses declined to AED 191 million compared with AED 276 million for the same period in 2015, an improvement of 31%, a clear sign of improving asset quality. With a 50 bps drop in NPL within the first half, the bank remains on target for the guidance given for the ratio for 2016.

Net profit for the period ended June 30th, 2016, increased to AED 2,004 million from AED 1,801 million in the same period in 2015, an increase by 11%, stemming from higher revenues and declining impairment losses.

Net financing assets grew to AED 108.9 billion for the period ended June 30th, 2016 from AED 97.2 billion as of end of 2015, an increase of 12%. This increase was supported by Corporate Banking financing growth which rose to AED 76 bn (including commercial real estate) and Consumer Banking which grew to AED 38 bn.

Non-performing assets have shown a consistent decline, with NPL ratio improving to 4.5% for the period ended June 30th, 2016, compared with 5.0% at the end of 2015. Impaired financing ratio also improved to 3.8% for the period ended June 30th, 2016, from 4.1% at the end of 2015. The improving NPLs and impaired ratio is primarily driven by recoveries in legacy portfolio as well as continuous growth in the quality asset book. With continued provisions, cash coverage improved to 100% compared with 95% at end of 2015. Overall coverage ratio stood at 150% at the end of June 2016 compared to 148% at the end of December, 2015.

Sukuk investments increased by 14% for the period ended June 30th, 2016, to AED 22.8 billion from AED 20.1 billion at end of 2015. The primarily dollar denominated portfolio consists of sovereigns and other top tier names many of which are rated, with average yield across the portfolio of over 4%.

Customer deposits for the period ended June 30th, 2016 increased by 13% to AED 125 billion from AED 110 billion as of end of 2015. CASA book increased by 15% to AED 51.3 billion compared with AED 44.5 billion in 2015. Investment deposits grew by 12% for the period ended June 30, 2016 to AED 73.3 billion from AED 65.5 billion as at end 2015. Financing to deposit ratio of 87% as of June 2016 compared to 88% at the end of 2015, depicts continuing healthy liquidity.

Capital adequacy ratio stands at 18.0% as of June 30th, 2016, and T1 ratio at 17.8%, both ratios are well above regulatory requirement. The recent AED 3.2 bn rights issue gave a significant boost to T1 and overall CAR and was massively oversubscribed by nearly 3 times indicating continuing investor interest and faith in the bank and its management.

Dubai Islamic Bank, established in 1975, is the first Islamic bank to have incorporated the principles of Islam in all its practices and is the largest Islamic bank in the UAE. DIB is a public joint stock company, and its shares are listed on the Dubai Financial Market. The bank enjoys a reputation as a leader and innovator in maintaining the quality, flexibility and accessibility of its products and services. The bank currently operates 90 branches in the UAE.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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