Mashreq

YE 2019 FINANCIAL RESULTS PRESENTATION

3rd February 2020

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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

or 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.

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be copied.

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Performance Highlights

Financial Results

YE 2019 Results

Appendix

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Performance highlights

> Net Profit of AED 2.1 billion for the year 2019, stable with respect to last year

> Risk charge for YE 2019 has decreased by 1.5% Y-o-Y. Coverage ratio is at 116.8%, NPL to advances

is at 3.6%

> Efficiency stands at 43.8%; Operating costs remain flat w.r.t last year (Increased by 0.2% Y-o-Y)

> Strong growth in loans and advances (10.0% YTD)

> Consistently high fee and other income proportion (38.2%)

> Most diversified revenue base – contribution from international operations is 20%

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YE 2019

Operating income

YE 2018 Variance

Consolidated Income statement Comments

Operating expense

Operating profit

Impairment allowance

Net profit

> Operating income increased by 0.9%

primarily due to a steep increase in

investment income

> Operating expenses remained stable

vis-à-vis last year

> Impairment allowance decreased by

1.5% driven by lower risk charge in the

retail segment

> Net profit increased by 0.2% and stands

at AED 2.1 billion

Financial highlights – Consolidated Income statement [AED million]

5,994 5,938 0.9%

2,623 2,618 0.2%

3,371 3,320 1.5%

1,212 1,230 (1.5%)

2,065 2,060 0.2%

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159,431 142,561 11.8%

76,167 69,270 10.0%

90,969 83,219 9.3%

21,533 20,144 6.9%

137,164 126,545 8.4%

Total Assets

Variance

Consolidated Balance sheet Comments

Loans & Advances

Customers’ deposits

Total Equity

Risk weighted assets

> Customer loans and advances at AED

76 billion, increased by 10.0% primarily

due to a 9.5% growth in conventional

loans; Loan growth is mainly from

Corporate Banking

> Customer deposits increased by 9.3%

to AED 91 billion, Advances to Deposit

ratio at 83.7% is well within established

guidelines. CASA constitutes 42% of

total deposits

> Total Equity increased by 6.9% and is

at AED 21.5 billion

> Risk weighted assets increased by

8.4% to reach AED 137.2 billion driven

by a 9.0% increase in Credit Risk

Weighted Assets

Dec 2018Dec 2019

Financial highlights – Consolidated Balance sheet [AED million]

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Tier I Capital Ratio

Total Capital Ratio

Efficiency Ratio

Liquid Assets to Total Assets1)

Advances to Deposits

Financial track record

NPL Coverage Ratio

NPL to Gross Advances

ROA

Net Interest Margin

ROE

Capital adequacy

Liquidity

Asset quality

31 Dec 2019 31 Dec 2018

Performance

Fee and other income to total income

30 Sep 2019

Note: 1) Total Assets excludes contra items

15.1% 15.6% 15.3%

16.3% 16.8% 16.5%

32.6% 32.6% 32.6%

83.7% 85.8% 83.2%

237% 167% 159%

116.8% 130.9% 137.2%

3.6% 3.4% 3.1%

1.5% 1.8% 1.6%

9.9% 11.3% 10.2%

3.01% 3.06% 3.24%

43.8% 44.0% 44.1%

38.2% 39.3% 38.7%

Liquidity Coverage Ratio (LCR)

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Performance Highlights

Financial Results

YE 2019 Results

Appendix

9

Operating income, expense and net profit [AED million]

Net profit

Key Points

Operating income and expenses

Operating income split by segments

50% 47% 43%Cost

efficiency

> YE 2019 Operating Income has increased by 0.9% Y-o-Y and stands at AED 6.0 billion. Investment income has increased significantly by AED 123 million Y-o-Y, however, there has been an AED 83 million (9.8%) decrease in FX, Insurance & Other income.

> On a Q-o-Q basis, 4Q 2019 operating income increased by 1.1% driven by a 6.9% increase in NII

> Efficiency ratio for 4Q 2019 stood at 43%

> Operating profit for FY19 increased by 1.5% Y-o-Y to AED 3.4 billion. YE 2019 Net profit increased by 0.2% Y-o-Y

> Corporate banking accounted for the largest portion of YE 2019 Operating Income with 29% contribution, followed by Retail Banking at 27%

1,3441,452 1,468

671 677 629

4Q 20194Q 2018 3Q 2019

Operating expensesOperating income

27% 29%

29% 27%

12% 9%

20% 20%

9%6%

5,969.8

6%

YE 2018

5,994.0

YE 2019

6%

Others

Treasury &

Capital markets

Domestic Retail

Insurance

International

Domestic Corporate

673775

838

312

536

308

4Q 20194Q 2018 3Q 2019

Operating Profit Net Profit

5,938 5,994

2,618 2,623

YE 2018 YE 2019

44% 44%

3,320 3,371

2,060 2,065

YE 2019YE 2018

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Operating income mix [AED million]

Non-interest income

Key Points

Net interest income

Net interest margin1) [%]

> 4Q 2019 Net Interest Income increased by 6.9% Q-o-Q and 12.7% Y-o-Y mainly due to an increase in volumes

> Quarterly NIM’s have fallen by 23 bps Y-o-Y and 17 bps Q-o-Q

> Non-interest income decreased by 8.3% Q-o-Q driven by a fall in other income

> Non interest income as % of total income remained high at 35% for 4Q 2019

851 898 960

4Q 2018 3Q 2019 4Q 2019

+6.9%

63% 62% 65%% of

operating

income

141 170 14239

351328 327

1

554

4Q 20194Q 2018 3Q 2019

493

56

508

Fee & Comm. Inv. Income Other Income

37% 38% 35%% of

operating

income

1) Based on annualized NIM

3.07%

4Q 20193Q 20194Q 2018

2.90% 2.90%

+12.7%

3,643 3,707

YE 2018 YE 2019

+1.8%

61% 62%

855 772

1,413

27

YE 2019

150

YE 2018

1,365

2,2872,295

38%39%

YE 2018 YE 2019

3.24%3.01%

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Asset mix [AED billion]

Gross Loans portfolio split as of Dec 2019 (AED 80.4 billion)

Key Points

Total Assets and Net Loans & Advances

Asset split by segments

> Total assets increased by 11.8% YTD to AED 159.4 billion, as compared to AED 142.6 billion in December 2018

> Net Loans & advances increased by 10.0% YTD to reach AED 76.2 billion led by Manufacturing segment

> Personal segment contributes 11.7% of the Gross Loans while residential mortgage represents 8.3%

> Diversified loans portfolio with no individual sector accounting for more than 18% of the total loan portfolio

> Asset mix fairly balanced between domestic and international locations with International business accounting for 26% of the assets as of December 2019

142.6 141.7 136.4146.9

159.4

69.3 69.9 70.7 72.2 76.2

Dec-18 Jun-19Mar-19 Dec-19Sep-19

12.5%

13.6%

17.6%

12.7%

11.7%

8.3%

16.8%

4.4%

2.4%

Manufacturing

Services

Residential Mortgage

Transport & Comm.

Construction

Trade

Financial institutions

Personal

Govt/GRE

49% 49% 52% 49%Net Loans to

Total Assets

Total Assets

Net Loans & Advances

31% 31%

11% 10%

14% 14%

26% 26%

14% 15%

142.6

Dec-18

5% 4%

Dec-19

159.4

Others

Domestic Retail

International

Insurance

Treasury &

Capital markets

Domestic Corporate

48%

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Liability mix [AED billion]

Key Points

Liability mix

Customer deposits split comparison (December 2019)

> Customer deposits accounted for 66% of total liabilities

> CASA accounts for 42% of customer deposit as compared to overall

Market at 51%; Time deposits contributed 58% of total deposits vs

49% for the Market

> Corporate Banking accounts for the largest portion of liabilities at

34% as on December 2019

83.2 80.6 77.6 84.1 91.0

Dec-18 Sep-19Mar-19 Dec-19Jun-19

68% 66%

9% 9%

7% 9%

13% 13%

Dec-18

137.2122.5

3% 3%

Dec-19

Other Liabilities

Customer deposits

Med. Term FRN

Due to Banks

Insurance Funds

1) Represents data of UAE banking sector as of December 2019 sourced from Central Bank Statistical Bulletin

Customer deposits

Liabilities split by segments

Mashreq UAE banking sector 1)

58% Time deposits

Current A/c

3% Savings A/c

39%

49%

40%

11%

34% 34%

20% 18%

14% 16%

18% 17%

10% 11%

4%

Dec-18

4%

Dec-19

121.8 137.2

Others

Insurance

International

Treasury &

Capital markets

Domestic Retail

Domestic Corporate

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Asset quality and liquidity [AED billion]

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

2.8

3.2 3.3 3.33.5

0

1

2

3

4

5

6

7

8

9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Sep-19

3.4%3.1%3.5%3.6%

Dec-18 Mar-19 Jun-19 Dec-19

3.6%

NPL % of Gross Loans (RHS)

NPLs (LHS) %

Key PointsLiquid assets trend

> Mashreq has set aside AED 1.2 billion net for Impaired assets in

YE 2019. General provisions stand at 1.8% of Credit Risk

Weighted Assets

> NPLs have increased by 6.1% in the quarter to reach AED 3.5

billion. NPL’s as % of Gross loans is at 3.6%

> Coverage ratio in December 2019 stands at 116.8%

> Liquid assets to total assets as of December 2019 was at 32.6%;

stable compared to September 2019

> LCR ratio stands at 237% which has increased significantly

compared to September 2019 and is above the regulatory

requirements

43.2 44.037.1

43.6 47.5

0

50

100

150

200

250

0

10

20

30

40

50

60

Dec-18

120%

33% 33%

Dec-19

159%

Mar-19

29%

133%

Jun-19

33%

167%

Sep-19

33%

237%

% of total assets (RHS)

Liquidity Coverage Ratio % (RHS)

Liquid assets (LHS) %

123.3%

Jun-19Mar-19

137.2%

116.8%

Dec-18 Sep-19

128.0% 130.9%

Dec-19

1) Total Assets excludes contra items

1)

AED Bn

AED Bn

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Tier I and Capital Adequacy Ratios [%]

Key Points

Tier I and Tier II Capital [AED billion]

Risk-weighted assets [AED billion]

> As per Central bank regulation for Basel III, the CAR requirement

is 13% (inclusive of capital conservation buffer) and 8.5% of RWA

for Tier 1 capital.

> Tier 1 capital ratio of the bank was at 15.2% as of December 2019

> The bank’s overall capital adequacy ratio at 16.3% is higher than

the regulatory requirements as per Central Bank of UAE (Basel III)

> RWA/Total assets has declined from 92% in September 2019 to

86% in December 2019

19.4 20.0 20.2 21.2 20.8

1.5

Dec-18

1.4

Mar-19 Jun-19

1.51.5 1.5

Sep-19

20.8 21.5 21.722.7

Dec-19

22.3

Tier 2 capital Tier 1 capital

Capital adequacy [AED billion; %]

126.6 130.6 134.4 135.5 137.2

Jun-19 Sep-19 Dec-19Dec-18 Mar-19

15.3 15.3 15.015.6 15.2

16.5 16.5 16.216.8 16.3

Dec-18 Dec-19Mar-19 Sep-19Jun-19

Tier 1 Ratio CAR

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Business segment information [AED million]

Corporate Banking (Domestic) Key Points

44,06248,862

41,68846,810

Dec-18 Dec-19

+11%

+12%

1,6101,730

YE 2019YE 2018

+7%

Operating income

Liabilities

Assets

> Retail banking is one of the largest contributors of operating

income at 27% in YE 2019

> Y-o-Y operating income decreased by 5% driven by a recalibration

of the portfolio mix

> Retail banking assets have increased by 3% and stand at AED

15.7 billion

> World Finance Digital Banking Awards 2019: Best Mobile

Banking App - 2019 - UAE

> UAE innovation award

> Global Finance: Best Bank in the UAE for 2019

> Corporate banking is the biggest segment in Mashreq in terms of

assets (31% of assets) and liabilities (34% of total liabilities) in YE

2019

> Assets increased by 11% and stand at AED 48.9 billion

> Operating income increased by 7% Y-o-Y, accounting for 29% of

total operating income in YE 2019

> EMEA Finance: Best structured finance house in the Middle East

Retail Banking (Domestic) Key Points

15,333 15,723

24,346 24,831

Dec-18 Dec-19

+3%

+2%

1,690 1,610

YE 2018 YE 2019

-5%

Operating incomeAssets

Liabilities

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Business segment information [AED million]

Treasury & Capital Markets Key Points

19,98822,645

16,782

22,595

Dec-18 Dec-19

+13%

+35%

693

567

YE 2018 YE 2019

-18%

Operating incomeAssets

Liabilities

> International business contributed 20% of operating income and

17% of liabilities in YE 2019

> International Banking assets increased by 13% as compared to

December 2018 and make up 26% of total assets. Increase in

assets driven by growth in the India business

> Y-o-Y operating income increased by 2% to AED 1.2 Bn

> IFN Awards: Best Cross Border Deal of the Year – 2019

> EMEA Finance: Most innovative structured finance deal in

EMEA - Shorouq

> Treasury & Capital Markets accounts for 14% of assets and 16%

of liabilities as of December 2019

> Assets increased by 13% in the year and stood at AED 22.6 billion

due to an increase in liquid assets

> TCM Operating income contributed 9% to the total operating

income in FY 2019. Investment income increased significantly by

AED 123 Mn in 2019

> Operating income, which includes funding center income,

decreased by 18%. Funding cost increased due to public issue

(bonds) of USD 625 Mn to diversify the funding base.

International Banking Key Points

36,90641,868

22,081 22,972

Dec-18 Dec-19

+13%

+4%

1,199 1,228

YE 2019YE 2018

+2%

Operating incomeAssets

Liabilities

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Performance Highlights

Financial Results

YE 2019 Results

Appendix

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4Q 2019 financials – Consolidated Income statement [AED million]

Income statement 2019 2019 2018 Variance (% change)

4Q 3Q 4Q

4Q 2019 vs 3Q 2019 4Q 2019 vs 4Q 2018

(Q-o-Q) (Y-o-Y)

Net interest income 960 898 851 6.9 12.7

Net Fees and commission 327 328 351 (0.2) (6.7)

Net Investment income 39 56 1 (30.4) N.M.

Other income 142 170 141 (16.7) 0.9

Total operating income 1,468 1,452 1,344 1.1 9.2

Operating expenses (629) (677) (671) (7.1) (6.2)

Operating profit 838 775 673 8.2 24.6

Impairment allowance (507) (223) (393) 127.5 29.2

Tax expense (7) (2) 3 234.6 (339.8)

Non-Controlling Interest (16) (14) 29 14.9 (156.3)

Net Profit 308 536 312 (42.5) (1.4)

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YE 2019 financials – Consolidated Income statement [AED million]

Income statement 2019 2018 Variance (%)

YE YEYE 2019 vs YE 2018

(Y-o-Y)

Net interest income 3,707 3,643 1.8

Net Fees and commission 1,365 1,413 (3.4)

Net Investment income 150 27 464.6

Other income 772 855 (9.8)

Total operating income 5,994 5,938 0.9

Operating expenses (2,623) (2,618) 0.2

Operating profit 3,371 3,320 1.5

Impairment allowance (1,212) (1,230) (1.5)

Tax expense (23) (25) (7.5)

Non-Controlling Interest (71) (5) 1,313.9

Net Profit 2,065 2,060 0.2

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Balance sheet 31 Dec 2019 31 Dec 2018 YTD

Assets

Cash and balances with central banks 20,940 20,148 4%

Deposits and balances due from banks 26,566 23,009 15%

Other financial assets measured at fair value 4,522 1,738 160%

Other financial assets measured at amortised cost 10,875 11,681 (7%)

Investment in Associates 29 - -

Loans and advances measured at amortised cost 61,710 56,353 10%

Islamic financing and investment products measured at

amortised cost14,457 12,916 12%

Acceptances 12,903 9,782 32%

Other Assets 2,738 2,489 10%

Reinsurance contract assets 2,586 2,473 5%

Investment properties 474 490 (3%)

Property and equipment 1,631 1,482 10%

Total assets 159,431 142,561 12%

Liabilities

Deposits and balances due to banks 11,184 9,060 23%

Repurchase agreements with banks 1,089 2,117 (49%)

Customers’ deposits 76,440 72,522 5%

Islamic customers’ deposits 14,529 10,697 36%

Acceptances 12,903 9,782 32%

Other Liabilities 4,951 5,356 (8%)

Medium-term loans 11,839 8,185 45%

Insurance and life assurance funds 4,254 4,077 4%

Total liabilities 137,188 121,795 13%

Total Equity 22,243 20,766 7%

Total Liabilities and Equity 159,431 142,561 12%

December 2019 financials – Consolidated Balance sheet [AED million]

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