NBAD Reports 4Q / FY 2016 Results Continued Solid ...

[Pages:11]31 January 2017

NBAD Reports 4Q / FY 2016 Results

Continued Solid Performance in Challenging Environment

FY'16 Net Profits of AED 5.296 Billion, up 1% y-o-y Q4'16 profits of AED 1.329 Billion, up 28% y-o-y

FY'16 Revenues of AED 10.808 Billion Continued underlying strength in Retail & Global Wholesale flow products

Disciplined Expense Management continues Positive JAWS of 4% in FY'16 and 10% y-o-y in 4Q'16

Customer Loans of AED 201 Billion: down 3% y-o-y, down 2% q-o-q Customer Accounts & Other Deposits of AED 253 Billion: up 8% y-o-y, up 4% q-o-q

Liquidity & Capital ratios improved further in 4Q'16 Loans to Deposit ratio of 79%; Tier-1 capital ratio of 16.9% Board of Directors propose cash dividend of 45% (45 fils per share)

REVENUES (AED mn)

QoQ +1%; YoY +6%

YoY +2%

NET PROFITS (AED mn)

QoQ +1%; YoY +28%

YoY +1%

2,557 2,684 2,715

10,556 10,808

1,320 1,329 1,036

5,232 5,296

4Q'15 3Q'16 4Q'16 FY'15 FY'16

4Q'15 3Q'16 4Q'16 FY'15 FY'16

National Bank of Abu Dhabi (NBAD) reported net profits of AED 5.296 billion for FY'16, up 1.2% year-overyear (y-o-y) as strong underlying performance was partially offset by several macro headwinds, including volatility in financial and currency markets driven by political and economic uncertainties.

Operating profits (profits before impairment and taxes) rose by 5% y-o-y as non-interest income grew in line with the Bank's strategy. Additionally, expenses continued to

be tightly managed throughout the year.

The Bank maintained its prudent approach to risk management as challenging market conditions persisted in the UAE. Net impairment charges increased 26% y-o-y to AED 1.191 billion, which was in line with guidance provided by management at the beginning of the year.

Liquidity remained strong with Loans-to-Deposits ratio of 79%, and

capital ratios remained robust with a Tier-1 ratio of 16.9%.

Fourth quarter profits were AED 1.329 billion, up 1% sequentially (qo-q( and 28% )y-o-y ); Y-o-Y results were driven by higher revenues, lower expenses and lower impairment charges.

Return on Shareholders' Funds (RoSF) was 13.1% in FY'16 and 12.9% for 4Q'16.

Customersupport@ | 8002211 | | | 4 . | ...

National Bank of Abu Dhabi PJSC P O Box 4 Abu Dhabi United Arab Emirates Toll Free 800 2211 Email customersupport@

NBAD FINANCIAL HIGHLIGHTS ? 4Q / FY 2016

Income Statement - Summary

(in AED million)

Net interest income

(incl net income from Islamic financing)

Non-interest income Total Revenues UAE Gulf & International

Operating expenses Operating Profits Impairment charges, net Taxes NET PROFIT

Revenues by Business

Quarterly 4Q 2016 3Q 2016 4Q 2015

1,830 1,807 1,844

QoQ % 1.2

YoY % -0.8

885 2,715 2,241

474

(996) 1,719 (311)

(79) 1,329

877 2,684 2,144

540

(1,000) 1,684 (287)

(77) 1,320

713 2,557 1,997

560

(1,039) 1,518 (436)

(46) 1,036

Quarterly

0.9 1.1 4.5 -12.2

-0.4 2.0 8.2 3.0 0.6

24.1 6.2

12.2 -15.3

-4.2 13.2 -28.7 71.6 28.3

Year-to-date

FY 2016 FY 2015 7,305 7,307

YoY % 0.0

3,503 3,249

7.8

10,808 10,556

2.4

8,723 8,364

4.3

2,086 2,192

-4.8

(4,013) (4,083) -1.7

6,795 6,473

5.0

(1,191) (943) 26.3

(309) (298)

3.5

5,296 5,232

1.2

Year-to-date

(in AED million)

4Q 2016 3Q 2016 4Q 2015 QoQ % YoY %

FY 2016 FY 2015 YoY %

Global Wholesale (GWB)

# 1,403 1,355 1,257

3.5 11.5

5,505

Global Retail & Commercial (GRC)

# 1,109 1,066 1,111

4.1

-0.1

4,393

Global Wealth (GW)

# 236

224

232

5.1

1.7

918

Head Office (HO)

# (33)

39

(43) -184.3 -23.5

(8)

Total Revenues

2,715 2,684 2,557

1.1

6.2

10,808

Note: During the period, the Group has changed the basis of allocation around centrally held profit & losses and other inter-segmental allocations resulting in a restatement of comparative segmental information

5,186 4,103 1,005

262 10,556

6.2 7.1 -8.7 -103.1 2.4

Key Ratios

4Q 2016 3Q 2016 4Q 2015 QoQ (bps) YoY (bps)

FY 2016 FY 2015 YoY (bps)

Return on Equity Return on Shareholders' Funds 1 Cost-Income ratio Net Interest Margin2 Return on Risk Weighted Assets

11.6% 12.9% 36.7% 1.85% 1.92%

12.0% 13.4% 37.3% 1.89% 1.88%

9.7% 10.8% 40.6% 1.94% 1.51%

-38

190

-53

209

-57 -395

-4

-9

4

41

11.8% 12.9% -108

13.1% 14.3% -113

37.1% 38.7% -155

1.92% 2.01%

-9

1.94% 1.99%

-5

Tier-I ratio (YTD)

16.9% 15.8% 15.7%

110

121

16.9% 15.7% 121

Capital Adequacy ratio (YTD)

18.1% 17.0% 16.7%

113

135

1- excl Tier-I capital no tes and interest thereo f 2 - annualised; based o n daily average o f perfo rming assets

18.1% 16.7% 135

Balance Sheet - Summary

(in AED billion)

Dec-16

Se p -16

Dec-15 QoQ % Ytd %

Assets

420.7

414.9

406.6

1.4

3.5

Customer Loans

200.5

205.3

205.9

-2.3 -2.6

Customer A/c's & other deposits

253.4

242.9

233.8

4.3

8.4

CASA (deposits)

75.3

74.0

71.3

1.8

5.7

Equi ty

46.5

45.0

43.2

3.4

7.6

Contingencies (Trade & Market)

1,476

1,542

1,291

-4.3 14.3

- Trade co ntingencies are defined as LCs & LGs; M arket co ntingencies reflect no minal value o f FX co ntracts & derivatives - Equity includes Tier-I capital no tes

Page - 2 - of 11

H.E. Nasser Alsowaidi

Chairman of NBAD

Abhijit Choudhury

Acting Group Chief Executive

"2016 was a solid year for NBAD. The bank generated top and bottom line growth in difficult market conditions and, in doing so, laid the foundations for the transformational merger with FGB.

In addition to enhancing our revenue generating capabilities and carefully managing expenses, we maintained our strong balance sheet and capital position, which allowed the bank to consistently deliver value for our shareholders throughout the year.

As ever, our foremost priority in 2016 was meeting the needs of our customers at home and in our international markets. Merging with FGB in the early part of 2017 will bring an even wider range of products, services and opportunities for our customers, and we are grateful to them for their support and patience as we work toward creating the UAE's champion bank."

"From both a full-year and fourth quarter perspective, it has been a good period for NBAD. The bank has performed in line with market expectations and our previous guidance, and we have made significant progress towards our merger with FGB.

Over the course of the year, we built real momentum in our Global Wholesale and Global Retail and Commercial businesses, particularly within fee-generating business lines. Combined with our expense discipline, robust capital, strong liquidity and prudent risk mangement, this momentum has enabled NBAD to deliver strong and steady financial performance.

Our priority for the year ahead is to bring together NBAD with FGB. Central to that is ensuring our existing customers and those of FGB experience a smooth and transparent integration. Ultimately, this merger will create a stronger bank for the UAE, and our customers will benefit from the best of both banks."

Page - 3 - of 11

Solid operating performance delivered by Wholesale and Retail businesses

8% 0%

51%

(FY'16)

Revenues

41%

AED 10.8bn

8% -1% 61%

(FY'16)

Operating Profits AED 6.8bn

32%

Global Wholesale Global Wealth

Global Retail & Commercial Head Office

19% 81%

(FY'16)

Revenues AED 10.8bn

UAE Gulf & Int'l

GLOBAL WHOLESALE BANKING

Global Wholesale Banking (GWB) FY'16 revenues grew 6% y-o-y to AED 5.51 billion, driven by strong performance in flow, trade & value-added products. Costs remained tightly controlled across all products, and impairment charges decreased during the period. GWB's liquidity position remained strong despite challenging economic conditions, benfitting from the Bank's diversified funding sources.

Global Banking (GB) FY'16 revenues improved 3% y-o-y driven by strong results across Transaction Banking, Specialised Lending and Debt Origination & Distribution, and reflecting the strategic diversification of the business. Expenses were down 7% y-o-y (vs FY'15) as GB continued to focus on cost optimization. Impairment charges were also down significantly following strong recoveries and write backs. The business continued to focus on its Cash Management proposition driving significantly liquidity improvement.

Global Markets (GM) FY'16 revenues were up 13% y-o-y on strong GM sales and trading revenues. Global Markets Sales delivered strong results and maintained momentum throughout the year as the team focused on providing quality solutions for key clients including

financial institutions, non-banking financial institutions and corporates. During the fourth quarter, the business managed to maintain and increase liquidity, by introducing new names to its list of global depositors. During 4Q'16, the product team managed its risk effectively, through the volatile period resulting mainly from the surprise U.S elections results and the Egyptian Pound (EGP) floatation.

Highlights from 4Q'16 include: Won "The Best Foreign Exchange Provider in the

UAE" for 2016 awarded by Global Finance

Won "Best Cash Management Bank" for 2016 awarded by The Asian Banker

Won the Middle East's "Best Overall Bank for Cash Management" awarded by Global Finance

Won 13 awards across both Loan & Debt platforms, including: - Best Loan House in the UAE for 2016 awarded by EMEA Finance - Best Sukuk house of the year 2015-16 awarded by GIFA

Page - 4 - of 11

GLOBAL RETAIL & COMMERCIAL

Global Retail and Commercial (GRC) continued its trend of strong growth in revenues, generating 7% y-o-y growth in FY'16, driven mainly by Retail and Islamic product sales. Operating expenses declined 5% y-o-y in FY'16, driven by a disciplined cost management focus across all lines of business. Net profits were down 17% y-o-y in FY'16, driven by higher impairment charges due to challenges in the commercial (SME) and retail segments.

Retail lending in the UAE grew 7% y-o-y in FY'16, faster than the market and in line with strategy. Growth reflected strong sales performance and customer acquisition, particularly in mortgages, which grew 34% y-o-y in 2016. Other significant contributors to growth during the year were Bancassurance and investment revenues (up 24% y-o-y) and card-related revenues (up 13% y-o-y).

FY'16 Commercial lending in the UAE decreased 8% y-o-y in line with tighter risk appetite, while deposits increased 6% y-o-y. FY'16 revenues were flat compared to FY'15, while overall FX income was up 9% y-o-y.

FY'16 Islamic Banking lending grew 11% y-o-y as revenues grew 27% versus FY`15.

Highlights from 4Q'16 include: Enhanced digital platforms including online and

mobile banking experienced higher registrations and significant increase in usage and transactions

NBAD was the Presenting Partner of SME Beyond Borders & Stars of Business Awards ? UAE held in October 2016 in Dubai

NBAD SME Academy conducted the workshops `VAT, the Commercial Companies Law and Your Business' in Dubai and Abu Dhabi, delivered by two worldclass training entities (Dentons and Deloitte), and attended by over 270 SME executives across Abu Dhabi & Dubai

GLOBAL WEALTH

Global Wealth FY'16 revenues were AED 918 million, down 9% y-o-y and net profits were AED 434 million, down by 17% y-o-y. Overall business results were impacted by challenging market conditions and FX depreciation, while the Securities and Asset Management businesses were also impacted by local trading volumes and market volatility impacted in 2016. However, there was underlying growth in the Global Private Banking business which remained focused on its strategy to be the best private bank for the Arab world and continues to build momentum with strong client acquisition and successful diversification of its client base.

Highlights from 4Q'16 include: NBAD MENA Dividend Leader and NBAD MENA Bond

Fund continue to be the largest mutual funds in our tracked peer groups

NBAD Securities achieved 8.2% of market share for 2016

UAE Private Bank, Global Asset Management & NBAD Securities businesses continue winning key industry awards

Page - 5 - of 11

Revenue growth reflects strong underlying trends and increases in FX & investment income, despite adverse currency movements and challenging market conditions

(in AED million)

Net interest income

(including income from Islamic financing)

Fees & Commissions, net FX and Investment income, net Other operating income Total Non-Interest Income

Total Revenues

4Q 2016 3Q 2016 4Q 2015 QoQ % YoY %

1,830 1,807 1,844

1.2 (0.8)

588

436

537 34.8

9.5

283

433

168 (34.7) 68.6

14

8

8

85.3

70.3

885

877

713

0.9 24.1

2,715 2,684 2,557

1.1

6.2

FY 2016 FY 2015 YoY %

7,305 7,307 (0.0)

2,178 1,289

36 3,503 10,808

2,106 1,072

71 3,249 10,556

3.4 20.3 (48.9) 7.8 2.4

Net interest income (including income from Islamic financing) (NII) was AED 1.830 billion in 4Q'16, up 1% q-o-q, but down 1% y-o-y. In both periods, movement in interest expense drove the change in NII.

Net fees and commissions (F&C) for the quarter were AED 588 million, up 35% sequentially and 9% y-o-y. Both q-o-q and y-o-y increases were primarily driven by higher fees earned on lending and sales of insurance products.

FX and investment income was AED 283 million in 4Q'16, down 35% sequentially, but up 69% y-o-y, reflecting the volatile market conditions that have prevailed through the year. Revenue from FX and investments grew 20% y-o-y for the full year.

Other operating income was AED 14 million in 4Q'16, while the decrease in FY'16 to AED 36 million from AED 71 million in FY'15 was due primarily to one-time gains recorded in 2Q'15.

Movement in Revenues (AED mn)

-2

10,556

+217 +72

-35

10,808

FY 2015

Net Int Inc & Income Fees & Commissions, FX & Investment

from Islamic financing

net

income, net

Other operating income

FY 2016

In FY'16, Net interest margin* declined 9bps y-o-y to 1.92% as positive underlying trends were largely offset by the impact of excess liquidity and lower interest in suspense recoveries. Overall, trends in our customer asset and investment portfolio remained positive due to a combination of positive repricing in the UAE loan market and growth in retail assets. These factors were offset by the dilution caused by excess short dated liquidity, which was placed conservatively at Central Banks' (deposit facilities) and other financial institutions.

Gross Lending Yield

3.52

3.45

3.40

Gross Customer Deposits Cost

3.37

3.61 3.57 3.56

(in %) NIM

3.59

2.04

2.03

2.03

2.01

2.02

1.98

1.95

1.92

0.39

0.39

0.41

0.42

0.54

0.53

0.54

0.54

1Q'15 1H'15 9M'15 FY'15 1Q'16 1H'16 9M'16 FY'16

* annualised and year-to-date; based on daily average outstanding balances for performing assets

Page - 6 - of 11

Disciplined cost management continues driving positive JAWS of 10% in 4Q'16

(in AED million)

Operating Expenses

4Q 2016 3Q 2016 4Q 2015 QoQ % YoY % 996 1,000 1,039 (0.4) (4.2)

FY 2016 FY 2015 YoY % 4,013 4,083 (1.7)

Operating expenses for the quarter were AED 996 million, down 0.4% q-o-q and 4% y-o-y, reflecting continued expense discipline.

The cost to income ratio of 36.7% for 4Q'16 represents a decline from 40.6% in 4Q'15 and 37.3% in 3Q'16.

Movement in Expenses (AED mn)

-45

-23

4,083

-2 4,013

FY 2015

Staff Costs

Other expenses*

* Other expenses include general and administration expenses, donations and charity

Depreciation

FY 2016

Increase in impairment charges driven by challenging operating environment and prudent provisioning

(in AED million)

Impairment charges, net

4Q 2016 3Q 2016 4Q 2015 QoQ % YoY %

311

287

436

8.2 (28.7)

FY 2016 FY 2015 YoY %

1,191

943 26.3

a s a % of Avg Gros s Loa ns * a s a % of Opera ti ng profi ts

* annualised ; Gro ss lo ans net o f suspended interest

0.59% 18.1%

0.55% 17.0%

0.81% 28.7%

bps

bps

5

-22

103 -1062

bps

0.57% 0.46%

11

17.5% 14.6%

295

Net impairment charges in 4Q'16 of AED 311 million, were up 8% q-o-q, but down 29% y-o-y. The Bank's impairments are reflective of the ongoing challenging operating environment, particularly in the retail and commercial segments. Results are in line with guidance and continue to reflect NBAD's prudent provisioning approach.

Cost of risk (CoR) (annualised) of 57bps for FY'16 has been relatively stable through the year and largely in line with guidance. This is higher than 46bps recorded in FY'15 as the Bank manages through a more challenging credit environment. CoR was 59bps in 4Q'16; slightly higher than 55bps in 3Q'16 and mainly due to a lower denominator effect as loans declined in 4Q'16.

Collective provisions continue to be maintained above the Central Bank of UAE's minimum requirement of 1.5%.

Non-performing loans, net of interest in suspense, declined by AED 181 million to AED 5.592 billion in 4Q'16 as the Bank continued to focus on resolution of its problem loans as well as recoveries. NPL ratio at the end of FY'16 was 2.70% of the gross loan book.

Total provisions were AED 6.409 billion and represented 115% of non-performing loans.

Cost of Risk* (%)

Provisions & NPLs (AED Mn)

NPLs Specific Prov Collective Prov

0.56

0.56

0.55

0.57

0.44

0.46

2,088

105% of NPLs 4,037

6,125

2015

5,847 2.76% of Gross Loans

FY'14

FY'15

1Q'16

1H'16 9M'16

FY'16

* annualised and YTD; as a % of average gross loans (net of interest in suspense)

2016

2,287

115% of NPLs 4,122 5,592

6,409 2.70% of Gross Loans

Page - 7 - of 11

NBAD's balance sheet is characterised by strong liquidity, funding and robust capital position

Dec'15

Dec'16

(in AED Bn)

+3%

407 421

-3%

206 201

+8%

234 253

+8%

43 47

+14%

1,542 1,339

CASA

71 75

Assets

Loans

Custo20m15er2A0/16Cs & Other Deposits

Equity

Contingencies

Contingencies (Trade & Market) - Trade contingencies defined as LCs and LGs; Market contingencies defined as the notional amount of derivatives

Assets were AED 421 billion at the end of FY'16, up 1% sequentially and 3% y-o-y.

Net Loans and advances were AED 201 billion, down 2% sequentially and 3% y-o-y. The increase in lending to wholesale and retail clients was offset by the Bank's move away from FI Trade (financial institutions) and towards higher yielding loans and other assets as part of its ongoing balance sheet optimisation.

Customer accounts and other deposits were AED 253 billion, up 4% sequentially and 8% y-o-y primarily due to an increase in government deposits in 4Q'16. CASA was up 2% sequentially and 6% y-o-y to AED 75 billion, representing 30% of total customer accounts and deposits.

Equity, consisting of shareholders' funds of AED 39.8 billion and perpetual Tier-I capital notes of AED 6.75 billion, was up 3% q-o-q and 8% y-o-y, reflecting the earnings growth in 2016.

Basel-II ratios, in accordance with UAE Central Bank's framework, improved further and remain well above the minimum 12% and 8% (Tier-I), with a capital adequacy ratio of 18.1% and a Tier-I ratio of 16.9% as of 31 December 2016.

Liquidity & Funding: The Bank's liquidity position and Loans-to-Deposits ratio (79%) remain strong. The Bank is continuing its focus on diversification and extending the liability profile, and executed selective private debt transactions throughout 2016, including a successful debut 30 year Formosa bond of USD 696 million (USD bond listed in Taiwan). Due to continual demand, NBAD followed up this transaction in January 2017 with an additional 30 year transaction of USD 885 million. Both these issuances are a testament to NBAD's prominent position and innovative approach amongst MENA issuers to raise funding from new investors in new geographies. Additionally, NBAD executed a USD 2 billion Syndicated Loan in December 2016, which again was very successful and drew strong interest of around USD 3 billion from leading financial institutions around the world.

DIVIDENDS

The Board of Directors has recommended a cash dividend of 45% (45 fils per share) to shareholders for the financial year ended 31 December 2016. The dividends proposal is subject to approval by the shareholders at the Annual General Meeting.

Page - 8 - of 11

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