Investor Presentation September 2016
UNB – Key Highlights Majority ownership (50%) and strong support from the Government of Abu Dhabi Stable and conservative management Demonstrated consistent performance of a time tested strategy, even in a challenging environment Reaffirmed strong ratings
Diversified loan book and prudent provisioning High capitalization – Strong CAR and Tier I ratio of 18.6% and 17.4% respectively
Strong fundamentals, consistent strategy and management track record supporting sustainable growth 1
Overview of UNB Strong Ratings – Constantly Maintained
Overview Established in 1982 and headquartered in Abu Dhabi. Joint Abu Dhabi and Dubai Government ownership. Listed on the Abu Dhabi Securities Exchange (ADX).
A1
Provides a full array of wholesale and retail banking services through a network of 72 branches in UAE. A+
5th largest local commercial bank (excluding Islamic Financial Institutions) in UAE in terms of loans and advances. International footprint in China ,Egypt, Kuwait and Qatar.
A+ A+
Over 3,000 employees as at 30 September 2016.
Market capitalization of AED 11.0 Billion (USD 3.0 Billion) as at 30 September 2016. Group Operating Structure UNION NATIONAL BANK- GROUP
2002
Union Brokerage Company
2
2006
2006
2008
2009
2012
Al Wifaq Finance Company
UNB- Egypt
Rep Office China
Qatar Branch
Kuwait Branch
Highlights - Income Statement 9M Sep 2016
9M Sep 2015
Y-o-Y %
Q3 2016
Q3 2015
Q-o-Q %
1,926
2,245
(14%)
667
770
(13%)
Non interest income
656
625
5%
235
186
26%
Operating Income
2,582
2,870
(10%)
902
956
(6%)
AED in Million
Net interest income and income from Islamic financing
Operating expenses
(801)
(778)
( 3%)
(279)
(260)
( 7%)
Operating profit
1,781
2,092
(15%)
624
696
(10%)
Impairment charge on financial assets, net
(390)
(385)
(1%)
(192)
(200)
4%
Income tax expenses
(59)
(38)
(55%)
(22)
(13)
(69%)
1,332
1,669
(20%)
410
483
(15%)
Net Profit
4
Operating income for the nine month period ended 30 September 2016 was lower by 10%, mainly due to drop in net interest income by 14%, while non interest income increased by 5%. Net interest income dropped by 14%, due to the drop in net interest margins by 47 bps to 2.64% on account of higher costs of deposits and lower customer yields, due to increased NPLs in SME segment. Non interest income up by 5%, due to increase in gains from dealing in foreign currencies, derivatives and net investment income. Operating expenses increased by 3% year on year in 2016 with cost income ratio at 31.0%, one of the most efficient in the industry. Impairment charge on financial assets for the nine month of 2016 marginally increased by 1% as compared to the same period last year.
Highlights - Financial Position
AED in Billion
30-Sep-2016 30-Sep-2015
Y-o-Y %
% Change 31-Dec-2015 over prior year end
Loans and advances
73.6
68.6
7%
68.4
8%
Investments
19.4
15.7
24%
14.7
32%
Total assets
105.4
101.8
4%
101.9
3%
Customers’ deposits
74.8
73.2
2%
74.8
-
Total liabilities
86.7
84.1
3%
84.0
3%
Equity attributable to equity holders of the Bank
18.5
17.6
5%
17.7
5%
Group assets increased by 4% year-on-year and by 3% over prior year end. Loans and advances were up by 7% year on year and by 8% as compared to the prior year end, due to selective growth both in Consumer and Corporate Banking business. The investment portfolio increased by 24% year on year to AED 19.4B as at 30 September 2016 to comply with liquidity norms and to optimize the overall balance sheet returns.
Customer deposits increased by 2% as at 30 September 2016, compared to the corresponding period in the previous year and remained unchanged as compared to prior year end. The Group’s liquidity position remains comfortable with the liquid assets, including investments constituting 26.0% of the total assets as at 30 September 2016. Capital adequacy ratio remains strong at 18.6% as at 30 September 2016.
5
Key Performance indicators Return On Average Equity * (Annualized) 14.6%
2.3% 12.1%
9M 2015
Return On Average Assets (Annualized)
* Excluding Tier I Capital Notes
FY 2015
1.9%
11.0%
9M 2016
9M 2015
1.7%
FY 2015
Cost to Income Ratio
9M 2016
Capital Adequacy Ratio 31.0%
27.1%
19.4%
27.8% 18.9%
18.3%
18.6%
17.7%
9M 2015
FY 2015
9M 2016
9M 2015
17.4%
FY 2015
Capital Adequacy Ratio
6
9M 2016
Tier 1 Ratio
Balance Sheet – Customer Loans Gross Loans and advances (AED Billion) +7%
Net loans and advances comprised 69.8% of total assets as at 30
+8%
71.3
76.4
71.1
September 2016. Gross Loans and advances increased by 7% year on year driven by the growth in services, consumer and financial Institutions. Well diversified Loan book by product and industry. Selective lending with focus on long-term relationships.
Sep-15
Dec-15
Sep-16
Diversified Loan Book Energy 6%
Others 6%
Manufacturing 4% Consumer 22%
Construction 6% Sovereign 8%
Real estate & Mortgages Loans 16%
Trade 9% Services As at 30 September 2016 9%
7
Fin Inst. 14%
Funding Structure Product-wise Deposit break-down (AED Billion) 73.2
74.8
74.8
13.2
14.1
14.2
60.0
60.7
60.6
Sep-15
Dec-15
Sep-16
Time
Customers’ deposits increased by 2% compared to the corresponding period in the previous year and remained unchanged as compared to prior year end. The bank successfully concluded issuance for US$ 600M of 5-year senior unsecured bonds under its Euro medium term note program.
CASA
Funding Mix (AED Billion) as at 30 September 2016 Others 3%
Diversified funding mix, with Customers’ deposits constituting 86% of total liabilities.
Customers' Deposits 86%
Sector-wise Deposit Break-down as at 30 September 2016 Public Sector, 11% Retail, 13%
Due to banks 5%
Medium term borrowings 6%
8
Corporate, 37%
Sovereign, 39%
Comfortable Liquidity Position Investments – Geographical Break up
Liquidity Position 94%
91%
98%
28%
28%
26%
Sep 2015
Dec 2015
Sep 2016
Loans to Deposit Ratio
Liquid Assets to Total Assets *
*Liquid assets includes cash , Due from Banks and Investments
Investments - Ratings As at 30 September 2016
*Consolidated including subsidiaries
9
Investments – By Type TOTAL : AED 19.4 Bn *
Credit Quality Loan Loss Coverage and NPL Ratio (%) 107.7%
11 0.0%
10 50 .%
5.0%
101.7%
101.2% 4.0%
Asset quality remains stable and continues to be tightly managed with NPLs to gross loans at 3.7% as at 30 September 2016.
10 00 .%
95 .0 %
3.8%
3.7%
3.5%
3.0%
Prudent provisioning being maintained with the loan loss coverage of 101.2% as at 30 September 2016.
90 .0 %
2.0% 85 .0 %
80 .0 %
1.0%
75 .0 %
70 .0 %
0.0%
Sep 2015
Dec-15
Loan Loss Coverage Ratio
Sep 2016 NPLs / Gross Loans
Cost of Risk
Impaired Loans and Impairment allowances AED Billion
0.75% 2.9
2.8 2.7
2.7
0.70%
2.7
2.5
NPLs Sep 2015
10
Impairment Allowance Dec 2015
Sep 2016
9M 2015
9M 2016
Business Lines AED million, as at 30 September 2016, unless otherwise stated
Consumer and Private Banking
Islamic Banking
Operating Income
711
998
199
327
347
2,582
Operating Expense
(157)
(424)
(56)
(56)
(107)
(801)
Operating Profit
554
574
143
271
240
1,781
Impairment charge (Net)
37
(352)
(33)
(6)
(36)
(390)
-
-
-
-
(60)
(60)
Net Profit
591
222
110
264
145
Assets
33.4
22.6
7.7
31.1
10.6
Income tax expense
(AED billion)
* Figures may not add up due to rounding off differences
11
Treasury and International investment and unallocated banking
Corporate Banking
Total
1,332
105.4
Business Lines – Corporate Banking Operating Income (AED Million) 841
Decrease in Operating income mainly due to lower NII driven by margin compression.
711
Increase in non funded income up Y-o-Y by 14%, largely due to higher trade, syndicated fee and loan processing fee income.
20% 27% 80%
73%
9M 2015 Net Interest Income
Customer Assets increased by 6% as compared to prior year end to AED 33.4 billion as at 30 Sep 2016 driven by increase in service sector.
9M 2016 Non Interest Income
Operating Income
Customer Assets (AED Billion)
33.9
Sep 2015
12
31.4
Dec 2015
Customer Assets for Corporate Banking constituted 32% of the Group’s total assets as at 30 Sep 2016.
Sector wise breakup
33.4
Sep 2016
Business Lines – Consumer and Private Banking Operating Income (AED million) Consumer and Private Banking Operating income of AED 998 million for the period ended 30 Sep 2016 decreased by 15% Y-o-Y, due to impact of NPLs in SME and margin compression in retail loans partly offset by increase in retail loans on account of higher sales volume.
1,176
998 21% 21% 79%
79%
9M 2015 Net Interest Income
Customer Assets increased by 5% as compared to prior year end to AED 22.6 billion as at 30 Sep 2016, driven by higher growth in personal loans (salary backed) and private banking loans.
9M 2016 Non Interest Income
Operating Income
Consumer and Private Banking Gross Loans as at 30 June 2016Product wise %
Customer Assets (AED Billion)
AED 22.6 Billion
22.6 21.5 19.2
Sep 2015
13
Dec 2015
Sep 2016
Business Lines – Treasury and Investment Banking Operating Income (AED million) 367
Investment portfolio increased by 8% on Y-o-Y basis to enhance the balance sheet yield and comply with the new liquidity ratios.
327
Net interest income dropped on account of increase in cost of term deposits and higher medium term borrowing, due to raising of additional US$ 750M syndicated loan in Q4 2015.
27%
46% 73%
Non interest income increased by 50% in 9M 2016, due to increase in gains from dealing in foreign currencies, derivatives and net investment income.
54%
9M 2015
9M 2016
Net Interest Income
Non Interest Income
Operating Income
Asset Breakup as at 30 Sep 2016 (AED Billion)
Assets- by type (AED Billion)
13.3
14.4
12.4
11.4 11.5 8.4
8.3
6.1
Investments
Liquid Assets Sep 2015
14
Dec 2015
Loans Sep 2016
9.0
Business Lines – Islamic Banking Operating Income (AED million) 198
199
27%
Operating income remained flat in Sep-16, mainly due to lower NII driven by margin compression, offset by increase in loans and advances.
33%
Islamic lending increased mainly due to growth in retail financing.
73%
67%
9M 2015
9M 2016
Income from Islamic Financing
Non Financing Income
Operating Income
Islamic Financing (AED Billion) 5.8 4.9
4.2
4.1
4.9
1.4 0.7
Sep 2015
Dec 2015
Sep 2016
0.8
Retail Sep-15
15
Dec-15
Corporate Sep-16
4.4
Awards and Certifications Union National Bank won six awards at the 2016 International Business Awards (Stevies) namely Executive of the Year Financial Services for UNB (Gold Stevie Winner), Health, Safety & Environment Program of the Year in the Middle East and Africa (Gold Stevie Winner), Customer Service Team of the Year for Customer Care Unit (Silver Stevie Winner), Company of the Year, Financial Services (Bronze Stevie Winner), Product Development/Management Department or Team of the Year for Retail Products (Bronze Stevie Winner) and Corporate Social Responsibility Program of the Year in the Middle East and Africa (Bronze Stevie Winner) Union National Bank won the acclaimed Superbrand award 2016. This is the 6th consecutive year that UNB has achieved this distinction. Union National Bank has been recognized with the ISO 22301 and is now certified for the Business Continuity Management Systems by LRQA. UNB won the “Best Enterprise” award from the Europe Business Assembly (EBA). Additionally, UNB CEO won the “Manager of the Year” award from EBA. UNB received four product awards Best Customer Deposit Scheme, Best Consumer Insurance Product, Best Savings Account and Best Current Account Product at the 2016 Banker Middle East Product Awards. UNB was recognized at the “Forbes Middles East” event for being amongst the Top Companies in the Arab World 2016. World Confederation of Businesses has awarded Union National Bank, with the BIZZ “The beyond Success” Trophy, and UNB CEO Mr. Mohammad Nasr Abdeen with the World Leader Businessperson certificate for being a successful leader at The BIZZ Europe 2016 Award ceremony.
18