First Abu Dhabi Bank Q2 2025 slides: Record profit growth, upgraded loan guidance

First Abu Dhabi Bank (FAB) reported record profitability for H1 2025, with net profit surging 26% year-over-year to AED 10.63 billion and Q2 net profit up 29%. This strong performance was underpinned by a 20.5% Return on Tangible Equity, an improved 21.8% cost-to-income ratio, and robust non-interest income growth. FAB upgraded its full-year loan growth guidance to low double-digits, while significantly improving asset quality with a 2.8% NPL ratio and 100% provision coverage. These results, supported by strategic international expansion and digital transformation, position FAB for sustained growth in a favorable macroeconomic climate.

Analysis

First Abu Dhabi Bank (FAB) delivered a record-setting performance in the first half of 2025, reporting a 26% year-over-year surge in net profit to AED 10.63 billion. The results were driven by strong revenue growth and enhanced operational efficiency, evidenced by a Return on Tangible Equity (RoTE) that improved to 20.5%, significantly exceeding its medium-term target of over 16%. The bank’s cost-to-income ratio saw a notable improvement to 21.8% from 24.4% in the prior year period. A key highlight is the diversification of revenue streams, with non-interest income growing 41% year-over-year, mitigating potential margin pressures from the two anticipated interest rate cuts in H2 2025. Asset quality has strengthened considerably, with the non-performing loan (NPL) ratio declining to 2.8% from 3.7% a year ago, while provision coverage reached 100%. This robust performance, combined with 14% YoY growth in total assets to AED 1.34 trillion, underpins management’s decision to upgrade its full-year 2025 loan growth guidance from high single-digit to low double-digit growth, signaling strong confidence in the bank's trajectory within a favorable UAE macroeconomic environment.

Key Decisions for Investors

• Given the record profitability, upgraded loan growth guidance, and RoTE of 20.5% comfortably exceeding targets, investors should view these results as a strong justification for a bullish position on the bank.
• Investors should monitor the impact of the projected two H2'25 interest rate cuts on net interest margins, although the bank's 41% growth in non-interest income provides a significant hedge against this risk.
• The bank's successful international expansion, with its international franchise now contributing 17% of revenue, and its significant progress in sustainable finance (64% of its 2030 target met) should be considered key long-term value drivers that may warrant a premium valuation.
• Note the significant improvement in asset quality, with the NPL ratio falling to 2.8% and provision coverage at 100%, which substantially de-risks the balance sheet and supports the positive outlook.