Abu Dhabi Commercial Bank (ADCB) posted its first quarter performance with a clear shift toward a more scalable and diversified earnings model, as a 36% rise in non-interest income and sustained lending growth helped offset margin compression and support overall profitability. Revenue growth remained broad-based, with profit before tax increasing by 30% year-on-year to AED 3.78 billion (about $1.03 billion) and operating income rising 18% to AED 5.93 billion ($1.6 billion). Eraiqat said the bank's performance reflects continued execution of its five-year strategy and progress in its transformation into a technology-driven organisation.

The impact of lower benchmark rates became increasingly evident in margin performance, with net interest margin (NIM) declining to 2.32%, down 16 basis points year-on-year and 7 basis points sequentially. Net interest income (NII) rose 10% year-on-year to AED 3.74 billion ($1.02 billion) but fell by around 2% sequentially, highlighting growing pressure on core interest income.

This margin compression was mitigated by stronger fee and trading income. Net fees and commission income increased by 14%, supported by higher loan-related fees, trade finance commissions, and asset management and investment service fees. Trading income surged by 72% year-on-year, driven by increased foreign exchange activity and gains on financial instruments. Deepak Khullar, group chief financial officer of ADCB, said "a diversified revenue mix and enhanced efficiency continues to support a high-quality and resilient earnings base," with non-interest income becoming an increasingly important contributor to overall revenues.

Momentum across retail, private, and corporate banking segments provided a combined engine for fee income growth and balance sheet expansion during the quarter. In retail banking, the addition of over 57,000 new customers and the origination of more than 52,000 new cards increased transaction volumes and drove higher fee generation. Private banking also contributed, with a 7% increase in client numbers alongside growth in assets under management (AUM) and investment solutions, translating into higher recurring income from wealth and advisory services.
In corporate banking, lending activity remained strong across government-related entities, financial institutions, trade, and manufacturing. This was complemented by participation in a $3.5 billion bond issuance for the Republic of Türkiye, strengthening the bank's capital markets presence and supporting cross-border client engagement.

Lending momentum and CASA inflows strengthen the balance sheet

Total assets expanded by 19% from a year earlier and 5% sequentially to AED 809 billion ($220 billion), supported by growth in net loans. Net loans grew by AED 20 billion ($5.4 billion), or 5% from the previous quarter, bringing the total loan book to around AED 426 billion ($116 billion).

The expansion reflects a diversified lending profile, with nearly 50% of quarterly growth attributed to lending to government-related entities, particularly in infrastructure-related projects. The bank extended around AED 52 billion ($14.2 billion) in new credit during the quarter, indicating strong demand across key sectors in the UAE.

On the funding side, customer deposits increased by AED 23 billion ($6.3 billion), or 5% sequentially, reaching AED 523 billion ($142.4 billion), driven by CASA inflows of around AED 14 billion ($3.8 billion) during the period. Khullar said "strong CASA deposit inflows continued to support a favourable funding mix." CASA deposits reached around AED 245 billion ($66.7 billion), representing 46.9% of total deposits, up from 44.7% a year earlier. The strong CASA inflows support a favourable funding mix, helping to offset pressure on net interest margin.

Profitability strengthened by efficiency and capital resilience

Profitability remained strong, with return on average equity (ROAE) reaching 16.3%, up from 13.7% a year earlier and above the bank's target of more than 15% under its current strategy. The cost-to-income ratio (CIR) improved to 25.6% from 29.2% a year earlier, reflecting positive operating leverage. Khullar attributed the result to "strong top-line growth combined with greater efficiencies."

The bank's capital position remained robust, with a common equity tier 1 (CET1) ratio of 13.82% and a total capital adequacy ratio (CAR) of 16.95%, both comfortably above regulatory requirements. Total shareholders' equity stood at AED 86 billion ($23.4 billion), with a liquidity coverage ratio (LCR) of 124.2%, a liquidity ratio of 35.9% and a loan-to-deposit ratio (LDR) of 81.4% at March-end.

Resilient asset quality with strong coverage and disciplined risk

Asset quality improved during the first quarter, with the non-performing loan (NPL) ratio falling to 1.76%, from 1.83% at the end of 2025 and 2.24% a year earlier, indicating strengthening portfolio quality. Provision coverage increased to 151.8% from around 149% at the end of 2025; the cost of risk stood at 41 basis points, within the bank's guidance. Total coverage reached 256%.

While underlying asset quality continued to improve, net impairment charges rose to AED 638 million ($174 million), up from AED 183 million ($49.8 million) in the fourth quarter of 2025, reflecting precautionary provisioning through overlays in response to heightened geopolitical risks rather than deterioration in the underlying portfolio.

Acceleration of technology-driven transformation strategy

Investments in technology and artificial intelligence (AI) are translating into measurable efficiency gains, as reflected in the CIR improvement to 25.6% in the first quarter.

By embedding AI across core operations, including back-office processes, corporate functions, and customer-facing activities, the bank aims to reduce manual intervention and lower operating costs. Khullar said the bank "continues to invest in technology and talent to support growth priorities, particularly in advancing its digital and AI transformation programme."

Growth momentum supported by international subsidiaries and Islamic banking

Subsidiary operations contributed to quarterly performance through cross-border loan growth, earnings from Egypt, and digital-led customer expansion in Islamic banking. International business accounted for 28% of total loans in the first quarter, driven by cross-border activity linked to UAE-based clients.

In Egypt, the bank's subsidiary reported net profit of EGP 1.1 billion ($21 million) and a return on equity of 24%. Loans and customer deposits increased by 28% and 27% year-on-year to EGP 77.6 billion ($1.48 billion) and EGP 158 billion ($3.01 billion), respectively.

Al Hilal Bank, ADCB's Sharia-compliant franchise, further supported performance through its digital expansion. The addition of over 15,000 new customers during the quarter through a fully digital onboarding process, alongside around 90% of credit card applications processed digitally, increased customer acquisition while improving operational efficiency.

2026 guidance maintained as pipeline stays strong

The bank maintained its full-year 2026 guidance, supported by continued momentum across lending, deposits and fee-generating activities. Khullar said the bank "continues to see a very strong pipeline of growth" and expects performance to remain broadly aligned with its strategic objectives.

ADCB also confirmed its key financial targets: a return on equity above 15% and a cost of risk below 60 basis points, with approximately 20% annual profit growth targeted and a doubling of net profit to AED 20 billion ($5.4 billion) by the end of the five-year strategy period. Diversified income streams and balance sheet expansion are expected to sustain earnings growth against a backdrop of continued margin pressure.