Mashreq 2Q 2017 FINANCIAL RESULTS PRESENTATION 16 July 2017 - - PowerPoint PPT Presentation

Mashreq

2Q 2017 FINANCIAL RESULTS PRESENTATION 16 July 2017

2

Disclaimer

The material in this presentation is general background information about MashreqBank’s activities current at the date of the presentation. It does not constitute or form part of and should not be construed as, an offer to sale or issue

• r the solicitation of an offer to buy or acquire securities of MashreqBank in any

jurisdiction or an inducement to enter into investment activity. Although MashreqBank UAE has obtained the information provided from sources that should be considered reliable, it cannot guarantee its accuracy or

• completeness. The information provided is purely of an indicative nature and is

subject to change without notice at any time. The person retrieving information is responsible for its selection and all aspects of its use. The information may only be used by the person retrieving it. The person retrieving the information may not transfer, duplicate, process or distribute it. The person retrieving the information is obliged to follow all instructions from MashreqBank concerning its use. No part of the content of this presentation may be copied.

3

Performance Highlights Financial Results

2Q 2017 Results

Appendix

4

Performance highlights

> Stable growth in Net Profit (3.0% Y-o-Y) > Risk charge for 1H 2017 has decreased to AED 652 million ( 22.3% decrease Y

• o-Y). Coverage ratio is

at 150.1%, NPL to advances at 3.3% and General provisions at 1.6% of Credit Risk Weighted Assets > Prudent cost management continued and efficiency stands at 39.3% > Steady growth in loans and advances (2.4% YTD) > Consistently high fee and other income proportion (41.2%) > Most diversified revenue base. Contribution from international operations is 22.2% > Industry leading share of CASA in deposits (63.6%)

5

Operating income 1H 2017

Consolidated Income statement

1H 2016 Variance

Comments

Operating expense Operating profit Impairment charges Net profit 2,994 1,175 1,819 652 1,104 3,168 1,204 1,964 838 1,071 (5.5%) (2.4%) (7.4%) (22.3%) 3.0% > Operating income down by 5.5% primarily due to a 14.7% decline in fee and commission income driven by a decline in loan processing fees > Operating expenses decreased by 2.4% driven by efficiency initiatives > Impairment charges decreased by 22.3% mainly as a result of a lower risk charge from the retail segment > Net profit increased by 3.0% primarily

• n account of a decrease in impairment

charges

Financial highlights – Consolidated Income statement [AED million]

6

31 Dec 2016 122,814 60,994 77,041 19,486 118,874 Total Assets

Consolidated Balance sheet

Variance

Comments

Loans & Advances Customers’ deposits Total Equity Risk weighted assets 30 Jun 2017 125,794 62,430 77,855 19,822 118,080 2.4% 2.4% 1.1% 1.7% (0.7%) > Total assets increased by 2.4% owing to increase in loans and advances and stood at AED 126 billion > Customer loans and advances at AED 62 billion, increased by 2.4% primarily due to growth in conventional loans > Customer deposits increased by 1.1% to reach AED 78 billion – the growth in conventional deposits of 1.7% was brought down by a 5.1% decline in Islamic deposits; CASA proportion remains high and constitutes 63.6% of total deposits > Total Equity increased by 1.7% mainly due to increase in retained earnings and stands at 19.8 billion > Risk weighted assets decreased by 0.7% to reach AED 118.1 billion driven by a 23% decline in Market Risk

Financial highlights – Consolidated Balance sheet [AED million]

7

Tier I Capital Ratio Total Capital Ratio Efficiency Ratio Liquid Assets to Total Assets Advances to Deposits

Financial track record

NPL Coverage Ratio NPL to Gross Advances ROA Net Interest Margin ROE

Capital adequacy Liquidity Asset quality Performance

15.8% 16.8% 38.0% 26.6% 84.2%

30 Jun 2016

134.1% 3.5% 1.9% 3.66% 12.0% 43.2% 16.3% 17.2% 39.3% 29.7% 80.2%

30 Jun 2017

150.1% 3.3% 1.8% 3.37% 11.7% 41.2% Fee and other income to total income 16.0% 16.9% 39.0% 30.4% 79.2%

31 Dec 2016

151.1% 3.1% 1.6% 3.52% 10.6% 42.2%

8

Performance Highlights Financial Results

2Q 2017 Results

Appendix

9

Operating income, expense and net profit [AED million]

Net profit Key Points Operating income and expenses Operating income split by segments

37% 39% 39% Cost efficiency

> 1H 2017 Operating Income decreased by 5.5% Y-o-Y and stands at AED 3.0 billion. The decline was as a result of a 14.7% fall in fee income and a 2.1% fall in Net Interest Income and Income from Islamic Financing > On a Q-o-Q basis 2Q 2017 operating income increased by 5.1% > Efficiency ratio for the quarter remained stable at 39% > Operating profit for the quarter decreased by 10.8% Y-o-Y but increased by 4.3% Q-o-Q > Net profit for the quarter increased by 3.4% Y-o-Y however increased by 2.1% Q-o-Q > Retail banking accounted for the largest portion of 1H 2017 Operating Income with 25% contribution, followed by International Banking at 22%

606 569 601 1,460 2Q 2016 1,641 2Q 2017 1,535 1Q 2017 Operating expenses Operating income

21% 21% 28% 25% 10% 10% 23% 22%

7% 7%

7%

1H 2016 3.17 (100%) 7% 7% 5% 1H 2017 2.99 (100%) Corporate Retail Treasury & Capital markets International Islamic Insurance Others 929 891 1,041 557 546 539 2Q 2017 1Q 2017 2Q 2016 Net Profit Operating Profit 2,994 1,175 1H 2017 1,204 3,168 1H 2016 38% 39% 1H 2016 1,104 1,819 1H 2017 1,964 1,071

10

Operating income mix [AED million]

Non-interest income1) Key Points Net interest income1) Net interest margin2) [%]

> 2Q 2017 Net Interest Income increased by 6.7% Q-o-Q due to better asset yields; on a Y-o-Y basis 1H 2017 Net Interest Income decreased by 2.1% > NIM’s have increased 19 basis points Q-o-Q on the back of higher asset yields > Non-interest income increased by 3.0% Q-o-Q driven by an increase in Fee & Commission income > Non interest income as % of total income remained high at 41% for 2Q 2017

909 852 916 1Q 2016 2Q 2016 +6.7% 2Q 2017 56% 58% 59% % of

• perating

income 447 376 387 196 200 39 35 248 607 1Q 2017 625 2Q 2017 2Q 2016 725 30 Other Income Fee & Comm.

• Inv. Income

44% 42% 41% % of

• perating

income

1) NII component booked under Inv estment income as per IFRS, has been reclassif ied under NII in the abov e representation 2) Based on annualized quarterly NII

3.66% 3.53% 2Q 2017 1H 2017 1H 2016 3.37% 2Q 2016 1Q 2017 3.34% 3.76%

• 0.7%

57% 59% 43% 41% 1H 2017 1,800 1H 2016 1,762

• 2.1%

1,368 48 426 894 763 1,233 1H 2017 74 1H 2016 397

11

Asset mix [AED billion]

Gross Loans portfolio split as of June 2017 Key Points Total Assets and Loans & Advances Asset split by segments

> Total assets increased by 2.4% to reach AED 125.8 billion, as compared to AED 122.8 billion in December 2016 > Net Loans & advances increased by 2.4% in the first half of the year to reach AED 62.4 billion led by Services > Personal segment contributes 27.6% of the Gross Loans > Diversified loans portfolio with no individual sector accounting for >20% of the total corporate loan portfolio > Assets mix fairly balanced between domestic and international locations with International business accounting for 25% of the assets as of June 2017 125.8 120.7 122.8 119.6 114.7 62.4 61.5 61.0 62.3 61.8

Jun-16 Sep-16 Jun-17 Dec-16 Mar-17 14.6% 27.6% 11.6% 5.2% 7.2% 2.8% 15.7% 0.1% 15.3% Personal Govt/GRE Other Trade Financial institutions Construction Manufacturing Services Transport & Comm. 54% 52% 50% 51% 50% Loans to total assets Loans & Advances Total Assets

25% 26% 11% 11% 14% 15% 26% 25% 12% 13%

7%

7%

4% Dec-16 122.8 (100%) Jun-17 4% 125.8 (100%) International Islamic Insurance Others Treasury & Capital markets Corporate Retail

12

Liability mix [AED billion]

Key Points Liability mix Customer deposits split comparison (June 2017)

> Customer deposits accounted for 73% of total liabilities, > CASA formed a majority portion of customer deposits at 64% as compared to overall market at 56%; Time deposits contributed 36%

• f total deposits vs 44% for the market

> Corporate Banking accounts for the largest portion of liabilities at 30% 73.3 77.9 76.4 77.0 75.3

Jun-17 Mar-17 Dec-16 Sep-16 Jun-16

75% 73% 10% 11% 9%

8% Jun-17 106.0 (100%)

6%

2% Dec-16 103.3 (100%) 1% 5% Customer deposits Due to Banks Insurance Funds

• Med. Term FRN

Other Liabilities

1) Represents data of Mashreq Group including ov erseas deposits 2) Represents data of UAE banking sector as of May 2017 sourced f rom Central Bank Statistical Bulletin

Customer deposits Liabilities split by segments

Mashreq Group1 UAE banking sector2

Savings A/c 5% Current A/c 59% Time deposits 36% 12% 44% 44%

29% 30% 23% 24% 7% 9% 22% 20%

7%

8% 8% 8%

Jun-17 106.0 (100%) 2% Dec-16 103.3 (100%) 2% Corporate Retail Treasury & Capital markets International Islamic Insurance Others

13

Asset quality and liquidity [AED billion]

NPL Coverage Ratio [%] NPL’s and % of Gross Loans

2.6 2.5 2.3 2.7 2.6 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1 2 3 4 5 6 7 8 9 Mar-17 3.3% Dec-16 3.1% Sep-16 3.6% Jun-16 3.5% 3.3% Jun-17 NPLs NPL % of Gross Loans %

Key Points Liquid assets trend

> Mashreq has set aside AED 341 million net for Impaired assets in 2Q 2017. General provisions stand at 1.6% of Credit Risk Weighted Assets > NPLs have increased by 3.1% in the second quarter compared to December 2016 to reach AED 2.6 billion; consequently the NPL’s as % of Gross loans has increased to 3.3% > Coverage ratio in June 2017 remains high at 150.1% > Liquid assets to total assets as of June 2017 was at 29.7%, as compared to 26.6% in June 2016 and 30.4% in December 2016

30.5 32.1 37.3 33.9 37.3 10 20 30 40 50 5 10 15 20 25 30 35 Mar-17 28.1% Dec-16 30.4% Sep-16 26.8% Jun-16 26.6% Jun-17 29.7% Liquid assets % of total assets % Dec-16 145.5% 151.1% Mar-17 Sep-16 136.0% Jun-16 134.1% 150.1% Jun-17

14

Tier I and Capital Adequacy Ratios [%] Key Points Tier I and Tier II Capital [AED billion] Risk-weighted assets [AED billion]

> Tier 1 capital remained high at AED 19.3 billion > Tier 1 capital ratio of the bank was at 16.3% as of June 2017; 39 bps increase as compared to December 2016 > The banks’ overall capital adequacy ratio at 17.2% is higher than the regulatory requirements as per Central Bank of UAE (Basel II)

18.3 18.7 19.0 18.8 19.3 Mar-17 19.8 1.1 Dec-16 20.0 1.1 Sep-16 19.8 1.1 Jun-16 19.4 1.1 1.1 20.4 Jun-17 Tier 1 capital Tier 2 capital

Capital adequacy [AED billion; %]

118.1 115.9 118.9 119.1 115.7 Mar-17 Dec-16 Sep-16 Jun-16 Jun-17 16.3 16.2 16.0 15.7 15.8 17.2 17.1 16.9 16.7 16.8 Jun-16 Jun-17 Dec-16 Sep-16 Mar-17 CAR Tier 1 Ratio

15

Business segment information [AED million]

Corporate Banking Key Points

31,866 33,135 Dec-16 29,624 30,911 Jun-17 +8% +7% 623 667 1H 2016

• 7%

1H 2017 Operating income Liabilities Assets

> Retail banking is the largest contributor towards operating income at 25% > Y-o-Y operating income decreased by 14.3% driven by slowdown in Business Banking > Retail banking assets decreased by 2.0% and stand at AED 13.3 billion > Won multiple awards including “Best Regional Retail Bank” by Banker ME Industry Award 2016 > Voted Middle East Retail Bank of the Year at Retail Banking Conference & Awards, London 2017 > Received EFMA 2017 Award – Distribution and Marketing > Corporate banking is the biggest segment in Mashreq in terms of assets (26% of total assets) & liabilities (30% of total liabilities) > Assets at AED 33.1 billion increased by 7.2% year to date and make up 26% of total assets as on June 2017 > Operating income decreased by 6.5% in 1H 2017 as compared to last year, accounting for 20.8% of total operating income in 1H 2017 > Won “The Innovators 2017 Transactions Services” award by Global Finance for the banks transformative products > Best Real Estate Financing award by the Banker Middle East 2017

Retail Banking Key Points

24,153 13,579 13,310 Dec-16 +4%

• 2%

Jun-17 25,175 761 888

• 14%

1H 2017 1H 2016 Operating income Assets Liabilities

16

Business segment information [AED million]

Treasury & Capital Markets Key Points

9,845 7,468 +32% +10% Jun-17 18,652 Dec-16 17,004 293 316

• 7%

1H 2017 1H 2016 Operating income Liabilities Assets

> International business contributed 22% of operating income and 20% of liabilities > International Banking assets decreased by 4.9% as compared to December 2016 > Y-o-Y operating income reduced by 8.2% Y-o-Y primarily as a result of a decrease in balance sheet (devaluation impact) > Treasury & Capital markets accounts for 15% of assets and 9% of liabilities as of June 2017; Assets increased by 10% YTD > TCM Operating income contributed 10% to the total operating income in 1H 2017 > Operating income decreased by 7.2% as compared to 1H 2016 primarily as a result of FX revaluation loss. > Global Finance award for the best Treasury and Cash Management in the UAE

International Banking Key Points

• 10%
• 5%

Jun-17 20,845 30,904 Dec-16 23,155 32,505 665 724 1H 2016 1H 2017

• 8%

Operating income Liabilities Assets

17

Performance Highlights Financial Results

2Q 2017 Results

Appendix

18

1) NII component booked under net inv estment income as per IFRS, reclassif ied under NII

2Q 2017 financials – Consolidated Income statement [AED million]

Income statement 2017 2016 Variance (% change) AED million 2Q 1Q 2Q 2Q 2017 vs 2Q 2016 2Q 2017 vs 1Q 2017 (Y-o-Y) (Q-o-Q) Net interest income1) 909 852 916

• 0.7%

6.7% Fees and commission 387 376 447

• 13.6%

2.8% Investment income / (loss)1) 39 35 30 27.7% 10.3% Other income 200 196 248

• 19.2%

1.9% Total operating income 1,535 1,460 1,641

• 6.5%

5.1% Operating expenses (606) (569) (601) 0.9% 6.5% Operating profit 929 891 1,041

• 10.8%

4.3% Impairment allowance (341) (311) (472)

• 27.9%

9.6% Overseas tax expense (22) (24) (15) 40.8%

• 10.2%

Minority interest (9) (10) (14)

• 36.0%
• 7.4%

Net income 557 546 539 3.4% 2.1%

19

s

Balance sheet 30 Jun 2017 31 Dec 2016 Variance (% change) Assets Cash and balances with Central Banks 17,694 18,630

• 5.0%

Deposits and balances due from Central Banks 19,589 18,668 4.9% Loans and advances 54,195 53,428 1.4% Islamic financing and investment products 8,234 7,565 8.8% Other financial assets 13,856 13,268 4.4% Goodwill 15 15 0.7% Interest receivable and other assets 10,566 9,552 10.6% Investment properties 521 521 0.0% Property and equipment 1,123 1,166

• 3.7%

Total Assets 125,794 122,814 2.4% Liabilities Deposits and balances due to banks 6,865 9,538

• 28.0%

Customers’ deposits 71,123 69,947 1.7% Islamic customers’ deposits 6,731 7,093

• 5.1%

Insurance and life assurance funds 1,703 1,511 12.7% Other liabilities 11,182 10,267 8.9% Medium-term loans 8,367 4,972 68.3% Total Equity 19,822 19,486 1.7% Total Liabilities and Equity 125,794 122,814 2.4%

2Q 2017 financials – Consolidated Balance sheet [AED million]