Mashreq - Investor Presentation

Mashreqbank Investor Presentation

March 2015

> UAE economy

> Mashreqbank heritage

> Structure and Leadership

> Strategy

> Financial track record

> Trading history, rating and dividends

> Corporate governance

> Accolades

2


UAE economy

3

UAE Real GDP growth [%] GCC countries comparison 2014 FC

Moderate outlook driven by:

> Growth in non-oil economy,

> Oil reserves,

> UAE’s position as an unparalleled economic hub in the region,

> Dubai established as a trade and logistics hub,

> Tourism on the rise and stabilizing real estate

UAE is the 2nd largest economy in the GCC, with low dependency on oil at 33%

1

4

4

2

9

31

Population [mn] Nominal GDP [USD bn]

Bahrain 34

Oman 81

Kuwait 179

Qatar 212

UAE 416

Saudi Arabia 778

9%

Others

25%

Manufacturing 9%

Construction

Trade

12% Real Estate

12%

Oil

33%

UAE Real GDP composition 2013 [%]

Source: IMF October 2014; UAE National Bureau of Statistics

UAE market outlook

3.55.24.43.9

1.7

-4.8

3.2 4.3

2014 FC

2013 2012 2011 2010 2009 2008 2015 FC

Real GDP growth Inflation

12.3

1.6

0.9 0.9 0.7 2.2 2.5

1.1

Non-oil growth in Dubai and Abu Dhabi is driving overall GDP growth

4

UAE economy

Dubai Real GDP growth [%]

4.64.43.33.5

-2.7

3.2 3.1

2013 2012 2011 2010 2009 2008 1H 2014

5.25.6

9.3

6.5

-4.9

6.4 5.8

2013 2012 2011 2010 2009 2008 1Q 2014

Abu Dhabi Real GDP growth [%] …driven by resilient non oil growth

4.04.34.4

6.5

Trans. & Comm.

Utilities Hotels Mnfg

…driven by key sectors

-0.3

11.7

6.87.5

12.7

7.47.76.9

3.2 3.8

6.7

6.1

-13.9

4.9

2009 2008 2011 2010 2012 2013 1Q 2014

Non oil Real GDP growth Oil Real GDP growth

Dubai 1H 2014 Real GDP YoY growth by sectors

Source: Dubai Statistics Centre, Statistics Centre of Abu Dhabi, Abu Dhabi government of Economic Development

5

Country

Bahrain3)

Kuwait

Oman3)

Qatar

Saudi Arabia

UAE

8

-1

10

13

11

10

Total assets 20141)

[USD billion] Assets/GDP2)

[%]

UAE is the largest banking sector in the Arab world by assets

1) Excludes foreign assets 2) Nominal GDP 3) Assets data as of November 2014 Source: Central Banks; IMF

50

65

188

276

569

632

CAGR, 11-14 [%]

152

82

130

105

80

146

UAE banking sector

Dec-2014

# of banks:

> National: 23

> Foreign: 26

# of branches:

> National: 869

> Foreign: 86

Gross credit: USD 380 billion

> Domestic: USD 353 billion

> Foreign: USD 27 billion

Deposits: USD 387 billion

> Resident: USD 345 billion

> Non-resident: USD 42 billion

UAE economy

http://www.cia.gov/cia/publications/factbook/flags/ba-flag.html

http://www.cia.gov/cia/publications/factbook/flags/ku-flag.html

http://www.cia.gov/cia/publications/factbook/flags/mu-flag.html

http://www.cia.gov/cia/publications/factbook/flags/qa-flag.html

http://www.cia.gov/cia/publications/factbook/flags/sa-flag.html

http://www.cia.gov/cia/publications/factbook/flags/ae-flag.html

Several sectors such as non-oil trade flows witnessed strong growth over the last five years.

UAE non-oil trade flows [AED billion]

Non-oil growth is gaining momentum as demonstrated by an increase in business activity

HSBC PMI index

6 Source: HSBC, Federal Customs Authority, Hotel and Airport authorities of UAE, DP World; 1) As of Oct 2014

UAE economy – Microeconomic outlook

Additionally the hospitality sector, especially in Dubai, is one of the major growth drivers …

Hotel guests [million] Air passengers [million]

… along with the logistic sector, which has been growing continuously over the last three years.

UAE container volumes [TEU million]

UAE air freight [million tonnes]

485603

737909

175

495

163

Imports

Exports

Re-exports

2013

1,458

374

2012

1,234

334

2011

928

114

211

2010

754

83 186

1H’14

204

794

95

CAGR ’10-’13

23.3%

28.1%

26.1%

Increasing rate of growth

50 – no change on previous month

5857

5859

5658

565658

56

53

56

40

45

50

55

60

65

Increasing rate of contraction

5.8

11.010.0

9.18.3

2.82.42.11.8

2013 2012 2011 2010 1H’14

2.81)

7066

585147

2017151211

2013 2012 2011 2010 2014

Abu Dhabi Dubai

2.3 2.2 2.3 2.4 2.4

2013

3.1

0.7

2012

2.9

0.6

2011

2.7

0.5

2010

2.7

0.4

2014

3.2

0.8

Abu Dhabi Dubai

13.913.613.313.011.6

2013 2012 2011 2010 1H’14

5958

61

5858585857585857 58

Oct-

14

Nov-1

4

Dec-1

4

Jan-1

5

Sep-1

4

Feb-1

4

Mar-

14

Apr-

14

May-1

4

Jun-1

4

Jul-

14

Aug-1

4

7 Source: JLL, UAE Central Bank, HSBC

UAE economy – Microeconomic outlook

Rents are stabilizing in Dubai and Abu Dhabi…

… supported by continuous increase in employment levels

HSBC Employment index [#]

Rate of increase in Dubai property prices is slowing reflecting stabilization

Mashreq Property Price Index [%] Dubai Q4 ‘14 Abu Dhabi Q4 ‘14

Residential Office Retail Hotel

Increasing rate of growth

50 – no change on previous month

53

58 58 5859

58

565756565656

40

45

50

55

60

Personal loans to residents [AED]

318

280261252247

2014 2013 2012 2011 2010

+14% +7%

Consumer borrowing has been rising…

Rent falling

Rent bottoming out

Rent growth slowing

Rent growth

acceler-ating

Rent falling

Rent bottoming out

Rent growth slowing

Rent growth

acceler-ating

-5

0

5

10

15

20

25

30

Jan-15 Nov-14 Sep-14 Jul-14 May-14 Mar-14 Jan-14 Nov-13

Cum MPPI inc (%) Avg MPPI inc (%)

535353

56

52535354

55

535353

Oct-

14

Nov-1

4

Dec-1

4

Jan-1

5

Sep-1

4

Feb-1

4

Mar-

14

Apr-

14

May-1

4

Jun-1

4

Jul-

14

Aug-1

4

Increasing rate of contraction

> UAE economy



> Strategy




> Accolades

8


Mashreqbank heritage

Diversified business case

> Universal bank offering a comprehensive suite of products and services to individuals and corporates across all lines of business

> Most diversified revenue streams with fee and other income contributing ~50% of total income

Strong management team

> Combination of long serving senior executives with international management expertise delivering a robust growth model

> Led by Abdul Aziz Abdulla Al-Ghurair, Chief Executive Officer for 24 years

Private sector ownership

> Oldest regional bank based out of UAE

> Combines the entrepreneurial spirit of Dubai with enduring trade banking relationships across the region

> Publicly traded since inception; Listed on the DFM on creation of local stock exchange

Strong and supportive

ownership structure

> Al-Ghurair Group, the main shareholders of the bank, are a leading conglomerate in the UAE with numerous business interests

> Featured in the Forbes billionaire list for the past 10 years

> Mashreqbank is the flagship business for the family for nearly 50 years

Heritage > Established in 1967 by the Al-Ghurair Group

> 48 years in UAE banking and financial services market

Strong regional presence

> Well positioned to finance regional trade flows

> Regional bank with 43 branch network in the UAE and 20 branches / offices in MENA, Asia, Europe and United States

9

Mashreqbank is one of UAE's leading financial institutions

Ownership – Al-Ghurair flagship brand

> Al-Ghurair families holds the majority stake in Mashreqbank (approximately 87%) and are the founders of the Bank

> Al-Ghurair family has a strong commitment to the continued growth and financial solidity of Mashreqbank

> Al-Ghurair family is one of the oldest and wealthiest families in the UAE

● Featured in Forbes billionaire list for the past 10 years,

● Business interests include shopping malls, real estate, cement manufacturing, food industries, Masafi (mineral) water, contracting, trading, retailing, shipping, printing & packaging, aluminium extrusion, building materials, oil refinery, manufacturing, steel and canning

> Mashreqbank’s shares are listed and traded on the Dubai Financial Market

Key shareholders

10


Stable and supportive ownership structure

13%

5%

12%

31%

39%

> One of the most prominent businessmen and industrialists in the UAE

> Former Chairman of the UAE Banks Association

Mr. Abdulla Bin Ahmad Al-Ghurair Chairman & President

> Chairman of UAE Banks Federation > Vice Chairman of the higher board of DIFC > Chairman of Masafi, Oman Insurance > Board Member of Emirates Foundation > Former Speaker of the Federal National Council

H.E. Abdul Aziz Abdulla Al-Ghurair Chief Executive Officer & Director

Other shareholders

Other Al-Ghurair owned

Masar Investments (Abdul Aziz Al-Ghurair)

Abdulla Ahmed Al-Ghurair Inv. Co.

Saif Al-Ghurair Inv. Co.

Mashreqbank’s Leadership

Strong distribution network in the UAE with 22 branches in Dubai

11


Umm Al Quwain

> 1 branch

Abu Dhabi

> 10 branches

Ajman

> 1 branch

Ras Al Khaimah

> 1 branch

Fujairah

> 1 branch

Sharjah

> 7 branches

Dubai

> 22 branches

Alternate Channels

> 43 branches (out of which Mashreq Gold has presence in 29 branches and SME Banking has presence in 21 branches) and 4 Retail Customer Service Centers in UAE serving ~500K customers

> ATMs and CCDMs increased coverage to 233 units in UAE

> 21,000 POS machines spread over 12,200 merchants in the UAE. 2nd Largest Merchant acquirer in the UAE with over 35% market share

> Internet Banking through Mashreq Online (Retail incl. Brokerage), Mashreq Business online (Corporate), Mashreq-FI online (Correspondent Banking); 203,300 registered retail customers online banking

> Mobile banking services: Snapp registration has grown up 34% YoY, and financial transactions has grown by 37%. Snapp has been equipped with unique features such as : Mobile 2 Mobile transfers, Cardless cash withdrawals, My money manager and Forex alerts

> Fully integrated electronic platform for transaction banking (GTS)

> State of the art Polaris System (mashreqMATRIX) to provide online services to corporate customers

> 24 x 7 Direct Banking Call Centre

Regional and international banking presence with 18% of revenues from outside of UAE

12

International branches

Financial Institution branches

New York

London

Representative Offices

Hong Kong India

Bangladesh

Nepal Pakistan

Egypt

Kuwait

Bahrain

Qatar


> UAE economy



> Strategy




> Accolades

13


14

Structure and Leadership

Board of Directors

Chief Executive Officer

Corporate Banking Group (CBG)

[24% of revenue]

Retail Banking Group (RBG)

[28% of revenue]

Treasury & Capital Markets (TCM)

[10% of revenue]

International Banking Group (IBG)

[18% of revenue]

Corporate Affairs (CA)

Audit , Fraud & Compliance Group

(AFCG)

Risk Management (RM)

Operations & Technology (O&T)

Mashreqbank organization chart

15


> Large Corporate

> Emerging Corporate

> Contracting Finance

> Abu Dhabi Division

> Strategic Relationships

Mashreqbank is a universal bank that covers significant lines of business with a full product and channel suite

Corporate Banking Group (CBG)

Offers wholesale banking

> Credit Products Group

> Medium Enterprises

> Global Transaction Services

> Corporate Finance

> Islamic Banking products

> Personal Banking

> SME

> Mashreq Gold

> Private Banking

> Payments

> Islamic banking products

Retail Banking Group (RBG)

Offers personal banking

> Distribution

> Alternate Channels

> Direct Sales

> Direct Banking Centre

> Marketing & Customer Experience

> FX and Investments

> Rates & Structured Solutions

> Mashreq Capital


Treasury & Capital Markets (TCM)

Offers treasury and investment products

> Equity Derivatives & Institutional Sales

> Mashreq Securities

> Islamic Banking – Product House

> Wholesale and investment banking

> Treasury and investment products

> Personal banking

> Financial Institutions globally


International Banking Group (IBG)

Offers banking services outside UAE

16

Mashreqbank - Key subsidiaries

Mashreqbank Psc

Oman Insurance Company (63.65%)

> Largest insurance company in the UAE

> Provides full range of Insurance Products & Services

> Equity: AED 2,000 mn

> 2014 profit: AED 229 mn

Mashreq Al Islami Finance (99.8%)

> Islamic Finance Company

> Provides full range of Islamic Products & Services

> Equity: AED 604 mn


Mashreq Capital (100%)

> Registered in DIFC for Brokerage, Asset Management and Fund Management services

> 3rd largest asset management in UAE with USD 800 mn in asset under management

> Funds rated highest in the market

> Equity: AED 49 mn


Mashreq Securities (99.98%)

> Securities brokerage Company registered at Dubai Financial Market

> 3rd largest brokerage in UAE

> Equity: AED 161 mn

> 2014 Profit AED 65 mn

Corporate Banking (CBG) business

17

CBG Revenues [AED million]

CBG Assets [AED million]

Business highlights

> Corporate Banking Group comprises of corporate and commercial banking customers in the UAE

> Major products offered include trade finance, contracting finance, project finance, corporate advisory and cash management

> 2014 saw strong performance in the areas of Corporate Finance, Real Estate and Investment Services

> Successfully closed >13 multibank deals establishing the best DCM platform amongst local / regional banks

● “Best Loan House in UAE” award from EMEA Finance for the second year in a row

● #1 ranking for Thomson Reuters Middle East 2014 Book Runner Loan League Table

> Global Transaction Services (GTS) received many important accolades in 2014

● EMEA Finance – Best Cash management Services in the Middle East

● The Banker Middle East - Best Corporate Account Product

● Celent Model Bank Awards – Cash Management and Trade

29,61726,026

21,922

+14% +19%

2014 2013 2012


1,4291,288

1,127

+11% 14%

2014 2013 2012

Retail Banking (RBG) business

18

RBG Revenues [AED million]

RBG Assets [AED million]

Business highlights

> Retail Banking Group includes products and services offered to individuals and small businesses in the UAE

> Products offered include current / savings / fixed deposits, investment products, personal loans, auto loans, mortgages, small business loans, credit cards with unique loyalty programs, bank assurance, private banking and wealth management

> Advances growth was led by Credit Cards, Mortgages, Secured assets and Business Loans

> Fee income grew by 78% YoY led by significant growth in Investments, Insurance and FX revenues

> Mashreq Internet Banking base recorded growth of 36% with historical growth in remittance of 92%

> Launched Mashreq Property Mart and SMEXchange to serve relevant customers

> 7th largest Merchant acquirer in Middle East & Africa with 21,000 POS machines spread over 12,200 merchants in the UAE

> Key innovations in 2014 include Tap n Go - UAE’s first NFC-sticker solution, Payport - EMV compliant mPOS solution, World’s first overseas online and mobile top-up service

> Key awards include Best Regional Retail Bank by Banker ME Industry Awards and Best Retail Bank 2014 by Global Banking & Finance Review Awards

14,06111,899

8,390

+18% +42%

2014 2013 2012


1,2861,096

1,626

+26%

17%

2014 2013 2012

Treasury and Capital Markets (TCM) business

19

TCM Revenues [AED million]

TCM Assets [AED million]

Business highlights

> Treasury and Capital markets business consists of customer flow business and proprietary business

> Customer flow business includes transactions for FX, derivatives, hedging, investment products, equities and regional asset management undertaken on behalf of customers

> Proprietary business includes trading and investing activity undertaken on behalf of the Group

> 2014 witnessed robust growth in revenues supported by a strong product suite and a 24 hour dealing room

> Brokerage business grew robustly driven by the growth in equity capital markets

> Retail franchise grew in key products such as brokerage and structured products

> Best in Class Asset Management:

● AED 5.0 bn in assets under management

● ~114% growth in income in 2014

● Makaseb Arab Tiger Fund won the ‘Best Equity Fund’ in both 1-yr and 3-yr performance categories for 2014

● Makaseb Income Fund won the ‘Best Fixed Income Fund Award’ in both 1-yr and 3-yr performance categories for 2014

13,69813,32015,080

+3% -12%

2014 2013 2012


453334

599

+32%

36%

2014 2013 2012

1,059

827

639

+28%

29%

2014 2013 2012

International Banking (IBG) business

20

IBG Revenues [AED million]

IBG Assets [AED million]

Business highlights

> International banking business consists of retail and corporate business in Qatar, Egypt, Bahrain and Kuwait and Financial Institutions business in other locations including trade services, reimbursements – arranging debt capital market transactions, undertaking and financing, export bill collections and risk participations

> In 2014, Hong Kong saw the upgrade of the banking license to the status of a Tier 1 full-fledged bank and launch of the new CORE banking system

> Transaction Electronic Robust Mandate System (TERMS) was implemented in Qatar, while becoming IBN compliant

> Key awards 2014

● “Best Commercial Bank in Qatar” - World Finance Magazine

● “Best Corporate Bank in Qatar” - Global Banking & Finance Review

● “Best Bank Middle East” - IAIR Milan Awards

28,548

15,75914,759

+81%

+7%

2014 2013 2012


Islamic Banking (ISB) business

21

ISB Revenues [AED million]

ISB Assets [AED million]

Business highlights

> Mashreq Al Islamic is the Islamic Banking arm of Mashreq (Mashreq Al Islami Finance Company PJSC and Islamic Banking Division, Mashreqbank PSC) and offers a wide range of Shari’ah compliant products and services

> Amongst the top ten Islamic institutions in the UAE based on market share as per MEED

> Products offered include Ijara home finance, Mudarabah deposit and savings, Musharaka finance, Murabaha commodity finance, Ijara equipment finance, sukuk underwriting, Musharaka LC, Murabaha LC, TR Murabaha, Kafala, Wakala deposit, Reserve Murabaha deposit and sukuk advisory

> Offerings for the retail customer include credit card, home & auto finance and SME financing

> Key awards:

● “Best Islamic Window” in 2014, 2013, 2011 & 2010 by Islamic Business & Finance

● “Most Innovative Islamic Banking Solution Provider” by Global Banking & Finance Review

6,5746,6845,892

-2% +13%

2014 2013 2012


259

180

311

+20% 44%

2014 2013 2012

Insurance business (Oman Insurance Company)

22

Gross written premium [AED million]

Net profit [AED million]

Business highlights

> Mashreqbank owns 63.65% of Oman Insurance Company

> Oman Insurance Company (OIC) is the largest insurance company in the UAE and the fourth largest in the Middle East & North Africa

> Products offered include life, medical, motor, marine cargo and hull, aviation, property, fire and general accidents, engineering, energy, liabilities and personal lines insurance

> Largest distribution network in the UAE; OIC has 11 branches, with operations across all Emirates in the UAE, the Sultanate of Oman, Qatar and Turkey. In addition, OIC owns a medical third-party administration company in Iraq and has over 30 bank partners in the region

> The company is rated ‘A-’ Positive Outlook by Standard & Poor’s and ‘A Excellent’ Stable Outlook by AM Best, supported by leading multinational reinsurers such as Swiss Re, XL Re and ACE Tempest Re


3,2492,920

2,443

+11% 20%

2014 2013 2012

229247223

-7% 11%

2014 2013 2012

Profile of Senior Management

23


Abdul-Aziz Abdullah Al-Ghurair

Chief Executive Officer

• A Graduate of California Polytechnic State University, Mr. Abdul-Aziz Al-Ghurair joined Mashreqbank , then Bank of Oman, in 1977

• He worked in different Divisions and through rigorous training in various assignments, Mr. Al-Ghurair climbed to his current position as of March 1991

Ali Raza Khan

Head of Corporate Affairs

• Mr. Ali Raza Khan is a Member of the Institute of Chartered Accountants of India (1978)

• Joined Mashreqbank in 1980; As Head of Corporate Affairs, he is responsible for Finance, HR and Administrative functions in the bank

John Iossifidis Head of Corporate Banking Group

• Mr. John Iossifidis is an MBA and B.Ec (Acctg.) from Monash University

• Joined Mashreqbank in 2009 after a successful career at Standard Chartered Bank and ANZ

Farhad Dhun Irani

Head of Retail Banking Group

• Mr. Farhad Dhun Irani has an MBA from University of Bombay

• Joined Mashreqbank in 2011 from PayPal in Asia • Prior to this, he was Global Head, Credit Card and Personal

Loans at Standard Chartered Bank

Nabeel Waheed Shaikh

Head of Treasury & Capital Markets and Acting Head of

International Banking

• Mr. Nabeel Waheed Shaikh has a BSc from Syracuse University, New York

• Joined Mashreqbank in 1996, from Bank of America, Pakistan where he spent over 15 years and held various positions including Head of Corporate Banking

• Mr. Paracha has a BSc from the University of Leeds. He completed a General Management Program from HBS

• Joined Mashreqbank in 1995 from Deutsche Bank AG in Pakistan

• Overall banking experience of approximately 20 years, covering corporate banking, internal audit and compliance

Nasser A. Paracha Head of Audit, Fraud & Compliance Group

Jose K Joseph

Head of Risk Management

• Mr. Jose Joseph is a Commerce Graduate and an MBA in Finance from XLRI, India

• He joined Mashreqbank in October 2013 • Prior to joining Mashreqbank he spent over 28 years with

Citibank

Sandeep Chouhan

Head of Operations Division and Mindscape

• Mr. Chouhan has a Masters in Technology, Management & Systems from IIT, Delhi, India

• Joined Mashreqbank in March 2015 from CBQ, Qatar • Prior to this, he was CIO with Barclays and Morgan Stanley

> UAE economy



> Strategy




> Accolades

24


Strategic Objectives

25

Strategy

Vision

“To provide

our

customers

the most

rewarding

banking

relation-

ships”

Mission

Being the primary bank

to our customers

Being the employer of choice

Being relationship

based

Delivering superior service

Drive nationalization 6

Become primary bank 1

Strengthen Mashreqbank brand 2

Innovation as differentiator 3

Grow New-to-Bank 4

Ensure revenue and portfolio quality 5

Strategic Objectives

Strategy

Drive operational efficiencies

> Leverage existing infrastructure to drive growth and returns

> Significantly improve efficiencies across the bank to bring cost/income ratio in line with market

Strengthen risk management and

asset quality

> Reduce charge-to-loans ratio in line with pre-crisis levels, through continued focus on portfolio and asset quality

> Selective portfolio / asset sales as part of an ongoing portfolio balancing strategy

Grow international contribution

> Support franchise client needs internationally and international client needs in our franchise by providing solutions to corporate clients across network

> Provide cross border accessibility to clients, such as offshore booking location for private and gold customers and non-resident proposition across the network

> Maintain momentum in our core South Asia FI market and build scale in Qatar, Egypt and Africa

Accelerate domestic growth

> Win new customers and increase customer penetration through a differentiated customer centric, service oriented approach and focus on continued product innovation

> Leverage balance sheet strength and liquidity position to grow market share

> Capitalize on leadership position in fee-generating businesses

Optimize balance sheet

> Optimize liability mix to lower cost of funds and enhance margins

> Increase leverage and deploy liquid assets into higher yielding opportunities

26

Business Objectives

Business segments outlook

Diversified earnings base with strong growth potential

27

Loans portfolio split as of December 2014

0.2% 2.5%

4.9% 5.1%

6.8%

9.9%

10.4%

12.9%

22.2%

25.2%

Other

Financial institutions

Transport & Comm.

Construction

Manufacturing

Islamic finance

Services

Govt / Public sector

Trade

Personal

Strategy

> UAE Retail: Significant pick up in mortgage business and continued growth in the UAE SME market, the second largest market in the GCC; strong growth in cards, consumer loans and wealth management

> UAE Corporate: Strong growth from trade, manufacturing, tourism and logistics, driving overall UAE GDP in the coming years leading to increased demand for credit & trade services

> International Banking: Robust regional trade flows and lending opportunities in higher growth countries such as Qatar and Egypt

> Insurance: As the largest insurance company in the UAE, Mashreqbank’s Oman Insurance Company (OIC) subsidiary is expected to capitalize and benefit greatly from this growth

Revenue split as of December 2014 Asset split as of December 2014

5.3%

8.4%

10.3%

18.1% 24.5%

27.8% 5.6%

Islamic

Insurance

Treasury & Capital markets

International Banking

Corporate

Retail

Others

7.2%

10.2%

13.4%

14.3%

54.8%

Other assets

Financial Investments

Interbank deposits & balances

Cash and balances with Central Bank

Loans & Advances

Innovation

Strategic advantage through innovation

28

Mashreqbank was the first bank in the UAE to:

> Introduce consumer loans

> Install ATM cash dispensers

> Issue debit/credit cards

> Introduce Point-of-Sale terminals

> Offer Visa Connectivity across the world

> Centralize foreign trade services

> Offer a direct banking centre

> Introduce a comprehensive corporate cash management solution offering (GTS)

> Introduce “Tap & Go”, mobile NFC sticker payment method

> Introduce “E cube retail branch” concept in distribution

> Launch UAE’s first fully EMV Chip & PIN compliant mobile POS solution

Strategy

> UAE economy



> Strategy




> Accolades

29


30

Financial track record

Net loans and advances [AED billion]

Net profit [AED million]

> Growth-led strategy with a focus on portfolio quality, balance sheet structure optimization, improved cost efficiencies and higher infrastructure utilization

> Significant expansion on the back of buoyant macroeconomic conditions

Growth & Expansion

> Prudent management focused on strengthening the bank, de-risking and conserving capital

● Balance sheet de-risking and de-leveraging ● Strengthening capital and liquidity position ● Enhancing risk management functions

Crisis & Risk Management Accelerated Growth & Profitability

Solid performance over the past decade

2,4011,806

1,3128208031,000

1,6431,9011,5711,739

751601505

2009 2008 2007 2006 2005 2004 2003 2002

+14%

2014 2013 2012 2011 2010

5850

41384148

55

352922181513

+14%

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

+33%

+15%

31


Loans & Advances [AED billion] Customer deposits [AED billion]

Total Revenue [AED billion]

58.0

50.4

41.437.7

15% 16%

2014 2013 2012 2011

68.558.6

47.545.4

17% 14%

2014 2013 2012 2011

Net profit [AED billion]

Rapid improvement in performance over the last three years

1,886 2,1032,393

2,720

21%

5,845

12%

4,837

2013

3,125 2,445

2014 2012

1,982

4,084

2011

3,872

1,986

Fee and other income Net interest income1)

6.8% 10.3% 13.1% 15.7% ROE

1,8061,312

820

2,401

48%

2013

33%

2012 2013 2011

1) NII component booked under net investment income as per IFRS, reclassified under NII

Strong capital adequacy, high liquidity, improved portfolio quality and enhanced returns

32

Tier I Capital Ratio

Total Capital Ratio

Efficiency Ratio

Liquid Assets to Total Assets

Advances to Deposits


NPL Coverage Ratio

NPL to Gross Advances

ROA

Net Interest Margin

ROE

Capital adequacy

Liquidity

Asset quality

Performance

16.4%

18.1%

42.2%

26.5%

86.1%

31 Dec 2013

96.1%

5.1%

2.2%

2.9%

13.1%

49.5%

17.2%

19.3%1)

45.4%

27.4%

87.3%

31 Dec 2012

56.6%

9.4%

1.7%

2.6%

10.3%

51.5% Fee and other income to total income

15.3%

16.6%

37.8%

27.7%

84.8%

31 Dec 2014

120.4%

3.7%

2.5%

3.2%

15.7%

46.5%

1) Ministry of Finance debt repaid in 2012

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Operating leverage

Liquidity

2014

28%

2013

27%

2012

27%

2011

31%

2014

85%

2013

86%

2012

87%

2011

83%

Loan to Deposits

Funding as of 31 December 2014

77.0%

Customer deposits

Other Loans

8.5%

Med. Term FRN

4.5%

Others

0.7%

9.2% Due to Banks

Well-funded balance sheet …

Liquid Assets to Total Assets

34


Risk weighted assets

Capital adequacy [%]

Tier 1 and Tier 2 capital

2013

18.1% 16.4%

2012

19.3% 17.2%

2014

15.3% 16.6%

Total Capital ratio

Tier I Capital ratio

88,97577,821

2013 2012 2014

106,628

13,388 14,578 16,277

2013

16,146 1,568

17,726

2014

1,450

2012

15,043 1,655

Tier 2 capital Tier 1 capital

…along with stable adequacy

35


Total loans [AED bn]

Total revenue1) [AED bn]

Total assets [AED bn]

Total deposits [AED bn]

90

18.1%

106

+9.8%

DXB AUH

1,566 569 998

1,427 530 897

Peer group1) Mashreqbank

58

50

+15.1% +8.7%

DXB AUH

989 377 612

910 347 563


68

59

+16.9% +9.4%

DXB AUH

1,070 407 663

978 373 605


+20.8%

5.8

4.8

+13.7%

DXB AUH

61.3 26.0 35.3

53.9 21.6 32.3


1) Peer group includes 9 banks: ENBD, NBAD, ADCB, FGB, CBD, UNB, ADIB, DIB and RAK

Dec ‘13

7.3% 11.2% 8.6% 8.7%

9.3% 9.5% 20.3% 9.3%

Dec ‘14

Dec ‘13

Dec ‘14

Dec ‘13

Dec ‘14

Dec ‘13

Dec ‘14

Source: Banks’ financial statements

Market outperformance in 2014 – Growing faster than all peers

36

Financial track record - FY ’14 [AED billion]

Bank

NBAD

UNB

Total assets

RAK

ADIB

DIB

Mashreq

363

124

212

204

47

112

93

106

35

376

Total loans (net) Total deposits

Growth vs Dec’13

CBD

18%

7%

8%

11%

7%

16%

9%

6%

5%

16%

64

73

246

74

140

32

141

194

24

58 15%

7%

18%

7%

11%

6%

32%

3%

6%

11%

67

85

258

32

243

141

126

92

25

68 17%

4%

12%

9%

2%

15%

17%

8%

4%

7%

Growth vs Dec’13

Growth vs Dec’13

Market position in UAE

Du

bai

based

ban

ks

Ab

u D

hab

i b

ased

ban

ks

ENBD

First Gulf

ADCB

http://images.google.com/imgres?imgurl=http://www.topnews.in/files/Union National Bank2.gif&imgrefurl=http://www.topnews.in/tree/Abu+Dhabi/Abu+Dhabi&usg=__JeYF5fVPWB384zayT9-xEWKtLys=&h=100&w=100&sz=5&hl=en&start=40&um=1&itbs=1&tbnid=6cn_dFdCx8GHPM:&tbnh=82&tbnw=82&prev=/images?q=union+national+bank+uae+logo&start=20&um=1&hl=en&sa=N&ndsp=20&tbs=isch:1

Market position in UAE – 2nd in Dubai, Top 5 in the UAE

37

Bank Revenue – FY’14 [AED bn]

YoY growth

10.4

14.7

3.6

3.5

4.6

2.2

5.8

5.6

9.2

7.5

21%

9%

17%

3%

10%

11%

32%

20%

10%

13%

Bank Net profit – FY’14 [AED mn]

1,455

1,201

1,750

2,003

4,050

5,579

5,656

5,139

2,661

2,401 33%

YoY growth

21%

15%

20%

18%

18%

65%

58%

19%

2%

NBAD

UNB

RAK

ADIB

DIB

Mashreq

CBD

Financial track record - FY ’14 [AED billion] D

ub

ai

based

ban

ks

Ab

u D

hab

i b

ased

ban

ks

NBAD

UNB

RAK

ADIB

DIB

Mashreq

CBD

ENBD

First Gulf

ADCB

First Gulf

ADCB

ENBD



> UAE economy



> Strategy




> Accolades

38


39

Trading history

Feb-14 Feb-15

1) Based on price as of February 26,2015; EPS and Book value as of December 2014 Source: DFM

Mashreqbank’s trading price – LTM [February 2014 – February 2015]

Trading performance over the last 1 year

Key multiples – Mashreqbank1)

FY 2014 P/E 10.2x

Current P/B 1.5x

June 2014: UAE included in MSCI Emerging

Markets Index

0

50

100

150128

3,931

0

2,000

4,000

6,000

Mashreq

DFM General Index

12 month performance

Mashreqbank 18%

DFM GI (8%)

0

5

10

15

20

25

30

35

4038%

20% 20%

40% 40%

2,401

1,806

1,312

820803672676643

338338

0

500

1,000

1,500

2,000

2,500

2014 2013 2012 2011 2010

Progressive dividend policy based on solid performance

40

Net profit and Cash Payout [AED million] and Cash dividend [%]

Cash dividend (%)

Dividends

Cash payout Net profit

4.75 14.20 4.85 7.76 10.68 EPS [AED]

33%

38%

41

>No of shares in issue: 169 million

>Market cap at February 26, 2015: AED 21.6 billion

>Free float: 13%

>Foreign ownership limit: 49%

Rating Agency Long term Short term

Baa2 P-2

BBB+ A-2

A F1

A- A1

Credit rating

> UAE economy



> Strategy




> Accolades

42


43

Corporate Governance

Mashreqbank is regulated by the UAE Central Bank and follows international banking standards

Supervisory Authority

> Mashreqbank’s home supervisory authority is the UAE Central Bank which is responsible for licensing, monitoring and supervising banks, finance companies and exchange companies in the UAE

> Internationally, Mashreqbank comes under the purview of respective country regulators such as the Federal Reserve and NY-SBD in the USA and Prudential Regulation Authority & Financial Conduct Authority in the UK

Basel II and III

> Banks are expected to follow the Standardized Approach for both credit and operational risks. Migration to Foundation Internal Ratings Based Approach (“IRB”) for Credit Risk is expected

> Basel III is under implementation in line with the Basel III schedule (by 2019)

Accounting Standard

> The Central Bank made it mandatory in 2000 for all Banks to publish their Annual Financial Statement as per International Financial Reporting Standards (IFRS)

Bank monitoring - liquidity

> Cash ratio requirements (1% on Time Deposits and 14% on Demand Savings and Call deposits)

> Maintenance of 1:1 ratio is mandatory, i.e. utilization of funds should not exceed stable sources

> As per Basel III, liquidity coverage ratio (Jan 2015) and net stable funding ratio (Jan 2018) is under implementation; in the meantime Central Bank has introduced ‘liquid assets ratio’, to be implemented from June 2014 onwards

Credit Limit

> Lending limits fixed by the Central Bank in relation to capital:

● Lending to large private borrowers: 25% (10% for funded)

● Commercial entities of Federal Govts and UAE Local Govts: 25% (15% for funded), 100% aggregate

● UAE Local Govts and non-Commercial entities: 25% Individual, 100% aggregate

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Board Supervision

> The Bank’s Board consists of 7 Directors

> The Chairman and 5 Directors are Non-Executive Directors and only the CEO is an Executive Director

> 2 independent directors

> The Board of Directors meet at least once every quarter

> Management issues are raised at Board level where the bank’s senior management presents details to the Board

Board Committees

> Audit Committee

> Remuneration Committee

Management Supervision

> The Leadership Forum (reporting to the CEO) is the Executive Management Committee of the Bank

which discusses and debates bank-wide issues, develops strategic plans for the Board’s approval and

takes decisions on pan-bank issues

> UAE economy



> Strategy




> Accolades

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> Gallup Great Workplace Award

> Banker ME Industry Awards - Best Regional Retail Bank

> Islamic Business & Finance Awards - Best Islamic Window

> CSR Label – Dubai Chambers – 2014

> EMEA Finance ME Banking Awards

• Best Local Bank in the UAE

• Best Regional Investment Bank in the ME

• Best Loan House in the UAE

> Banker Middle East Product Awards

• Best Call Centre

• Best Corporate Account

• Best Customer Service – Retail

• Best Fixed Income Fund

• Best Web/Mobile site

> Global Banking & Finance Review Awards

• Most Innovative Islamic Banking Solution Provider

• Best Corporate Bank Qatar 2014

• Best Customer Service Bank Qatar 2014

• Best Retail Bank UAE 2014

• Most Innovative Banking Product (Mashreq Max) UAE 2014

Accolades in 2014

> IAIR Banking Awards - Best Bank in UAE

• International Finance Magazine

• Best Internet Bank in UAE

• Best Online Bill Payment in UAE

> World Finance Banking Awards

• Best Investment Bank - UAE

• Best Commercial Bank – Qatar

> The ME Excellence Awards 2014

• Financial Market Trading Automation and System Excellence Award

> MasterCard Innovation Forum 2014

• Best Use of Innovative Technology’ in the ME & Africa

> EMEA Finance – ME Banking Awards

• Best Cash Management in the ME

> Celent Awards

• Best Cash Management and Trade award

> Gulf Business Industry Awards

• Innovator of the Year – H.E. Abdulaziz Al Ghurair

> First Bank in UAE to achieve IIA Conformance

> Asian Business Leadership Forum - Business Excellence Award

http://www.dunnlorenmerrifield.com/wp-content/uploads/2014/11/WF-Banking-Awards-2014.jpg

Mashreq - Investor Presentation

Investor Relations

Transcript of Mashreq - Investor Presentation