Posted on October 31, 2016

Mashreq, one of the leading financial institutions in the UAE, today has reported its financial results for the first nine months ending 30th September 2016.

Key highlights [9M 2016 vs 9M 2015]:

  • Stable growth in Operating Income
    • Operating Income up 4.6% year-on-year to AED 4.7 billion driven by strong growth in both interest and non-interest income
    • Operating Profit increased by 9.2% year-on-year to AED 2.9 billion
    • Net profit for the first nine months stood at AED 1.5 billion – a decrease of 9.4% compared to the normalized Net profit for 9M 2015 (adjusted for the impact of recoveries)
  • Consistently high proportion of net fee and commission income
    • Mashreq’s best-in-class Net Fee, Commission and Other Income to operating income ratio remained high at 42.6%
    • Insurance, FX & Other Income up by 7.1% year-on-year
  • Solid balance sheet
    • Total Assets increased by 3.9% to AED 119.6 billion while Loans and Advances increased by 3.5% to AED 62.3 billion as compared to December 2015
    • Customer Deposits increased by 2.2% to reach AED 75.3 billion as compared to December 2015
    • Loan-to-Deposit ratio remained robust at 82.8% at the end of September 2016
  • Healthy liquidity and capital position
    • Liquid Assets to Total Assets stood at 26.8% with Cash and Due from Banks at AED 32.1 billion
    • Capital adequacy ratio and Tier 1 capital ratio continue to be significantly higher than the regulatory limit and stood at 16.7% and 15.7% respectively
  • Sustained asset quality
    • Non-Performing Loans to Gross Loans ratio remained stable at 3.6% at the end of September 2016
    • Total Provisions for Loans and advances reached AED 3.6 billion, constituting 136.0% coverage for Non-Performing Loans

Mashreq's CEO, H.E. AbdulAziz Al Ghurair, said:  “I am pleased with the progress the bank has made in the context of the external market conditions in 2016. I had previously emphasized the need for us to adopt rigorous business practices to respond to the challenging market environment. This meant that we had to make conscious yet realistic choices on where to focus, in order to achieve sustainable long-term growth for the bank.”

“We took clear decisions at the outset to continue to grow by improving share of wallet of our existing customers and selectively on boarding new-to-bank quality customers. The impacts of these decisions are reflected in the bank’s top line revenue growth of 5%. Our continued efforts in cost reduction for the last 3 quarters have led to a good 2% improvement in costs. The combined effect of revenue growth and cost reduction has delivered a solid 9% growth in operating profit for the first 9 months of 2016.  We remain committed to continuously raising the bar and doing what is right for the long-term growth of the Bank. We therefore optimized our short term trade-off choices, in order to be in a leaner stronger position and fit for growth.”

Al Ghurair concluded, “I am confident we are going to finish 2016 on a relatively strong note and will be well poised and ready to take advantage of the multiple growth opportunities in 2017.”

Operating Income

  • Total operating income for 9 month of 2016 was AED 4.7 billion, a year-on-year increase of 4.6% compared to 9 months of 2015 operating income of AED 4.5 billion.
  • Net Interest Income, net income from Islamic products and interest earned on marketable securities1) at AED 2.7 billion was up by 4.9% compared to 9 months of 2015, driven by 6.7% year-on-year increase in finance volume. On a quarterly basis, it has decreased by 4.4% from AED 0.9 billion in 2Q 2016. There has been a decrease of 9bps in net interest margin from 3.13% in     9M 2015 to 3.04% in 9 months of 2016.
  • Total non-interest income increased by 4.2% year-on-year to reach AED 2.0 billion on the back of an increase in Insurance, FX & Other Income. Net fee and commission income represented 65.0% of total non-interest income in 9 months of 2016 as compared to 68.0% in 9 months of 2015.
  • Operating expenses decreased by 2.0% year-on-year and by 3.0% quarter-on-quarter to reach AED 1.8 billion; Efficiency Ratio at 38.3% in 9 months of 2016 improved with respect to the previous year (40.9% as of 9 months of 2015).
  • Net Profit has decreased by 19.5% year-on-year, however Net Profit decreased only by 9.4% on a normalized basis (one-off recoveries of AED 7 million in 9M 2016 vs AED 213 million in 9M 2015).

Assets and Asset quality

  • Mashreq’s Total Assets increased by 3.9% to reach AED 119.6 billion in 9M 2016, compared to AED 115.2 billion at the end of 2015. Loans and Advances increased by 3.5% YTD to end at AED 62.3 billion. On a year-on-year basis, Loans and Advances grew by 6.7% driven by 23.0% growth in Islamic finance. Liquidity continues to remain healthy with a high liquid asset to total assets ratio of 26.8%. Loan-to-Total Assets Ratio at 52.1% decreased slightly as compared to 53.9% at the end of June 2016 (52.2% in December 2015).
  • Customer Deposits increased by 2.2% YTD to AED 75.3 billion driven by an increase in conventional deposits. Loan-to-Deposit ratio stood at 82.8% vs 81.7% in December 2015.
  • Non-Performing Loans stood at AED 2.7 billion in September 2016 leading to a Non-Performing Loans to Gross Loans ratio of 3.6% at the end of September 2016 (2.8% in December 2015). Net Allowances for impairment for 9M 2016 were AED 1,308 million compared to AED 682 million in 9 months of 2015. Total Provisions for Loans and advances reached AED 3.6 billion, constituting 136.0% coverage for Non-Performing Loans as of September 2016.

Capital and Liquidity

  • Mashreq’s Capital adequacy ratio stood at 16.7% (regulatory minimum of 12%) as of 30 September 2016, compared to 16.9% as of 31 December 2015. Tier 1 capital ratio at 15.7% continues to be significantly higher than the 8% regulatory minimum stipulated by the UAE Central Bank (15.9% as at 31 December 2015)

Operational Update:

Mashreq Qatar Retail continued its attractive offers in Q3 of 2016. Customers who have a fixed deposit or MashreqMillionaire certificates or Easy Saver account or having a salary with the Bank were offered first year annual fee waiver on their credit against their deposit or salary transfer. Benefits to card customers did not end here. Mashreq credit card customers were offered and benefited from an exclusive holiday package as low as QAR 1,399 to Georgia. Mashreq Qatar’s award winning mobile banking platform offers customers to open Easy Saver, Fixed Deposit and Unfixed Deposit accounts instantly through SNAPP.

The Corporate Banking unit also continued to work with the largest Corporates in Qatar, offering them leading edge financial solutions through innovation and customer centricity that enriches their banking experience. During the quarter, Mashreq Corporate also structured a deal to take over significant exposures of State Bank of India (registered under QFC) in Qatar. 

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