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Edited Transcript of EMIRATESNBD.DU earnings conference call or presentation 27-Jan-20 10:00am GMT

Q4 2019 Emirates NBD Bank PJSC Earnings Call

Dubai Feb 3, 2020 (Thomson StreetEvents) -- Edited Transcript of Emirates NBD Bank PJSC earnings conference call or presentation Monday, January 27, 2020 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Patrick Sullivan

Emirates NBD Bank PJSC - Incoming Group CFO

* Patrick Eugene Clerkin

Emirates NBD Bank PJSC - Head of IR

* Shayne Keith Nelson

Emirates NBD Bank PJSC - Group CEO

* Suryanarayan Subramanian

Emirates NBD Bank PJSC - Outgoing Group CFO

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Conference Call Participants

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* Aybek Islamov

HSBC, Research Division - Analyst

* Chiradeep Ghosh

Securities & Investment Company BSC, Research Division - Research Manager & Senior Analyst

* Jagadishwar Pasunoori

Franklin Templeton - Analyst

* Naresh N. Bilandani

JPMorgan Chase & Co, Research Division - Research Analyst

* Shabbir Malik

EFG Hermes Holding S.A.E., Research Division - VP of Research, Director of Banking & Banking Analyst

* Vijay Raghavan

ARENCO - Director

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Emirates NBD 2019 Full Year Results Call and Webcast for Analysts and Investors. Please refer to the link sent for the presentation.

If we are all ready to begin, I will now pass the call over to our host, Mr. Shayne Nelson, Group CEO of Emirates NBD.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [2]

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Thank you, Mollie, and thank you all for participating in today's call. Joining me on this call are Surya, our outgoing Group CFO, who will cover the 2019 results; and Patrick Sullivan, the incoming Group CFO, who will also comment on the results and talk about the 2020 guidance. Also on the call is Paddy, our Head of Investor Relations, not to be confused with Patrick, our new Group CFO.

If we move to Page 3 of the presentation, that contains a summary of the key results. We reported a strong set of results, with net profit up 44% to AED 14.5 billion for 2019. We are also pleased with DenizBank's performance, which contributed total income of AED 3.6 billion and net profit of AED 609 million for the 5 months since acquisition. Excluding the gain from the Network International transaction, bank's net profit grew marginally as a 29% increase in income more than offset higher expenses, taxation and impairment allowances. We will elaborate in more detail on the profit drivers in the subsequent slides.

The bank's balance sheet remains solid and healthy liquidity and stable credit quality. Following the successful rights issue in November, the common equity Tier 1 ratio settled at 15.3%.

2019 was a momentous year for Emirates NBD. As well as growing the asset base to over AED 683 billion, we welcomed DenizBank into the Emirates NBD family. This expands the bank's presence to 13 countries, servicing over 14 million customers. The AED 1.75 billion rights issue, which was 2.8x oversubscribed, strengthened capital ratios to provide a strong foundation to embrace controlled growth in the following years. The rights issue helped boost the capital base to over AED 80 billion and will propel Emirates NBD into The Banker's list of Top 100 Global Banks by capital.

The bank raised its foreign ownership limit to 20% and signaled its intention to further increase limit to 40% due course. Foreign ownership has grown from 5% to 8.5%, helped by 62% foreign demand for the rights issue. The operating performance, coupled with strategic initiatives, helped generate significant shareholder value.

We were granted permission to open a further 20 branches in the Kingdom of Saudi Arabia. This ongoing expansion in KSA and Egypt will help cement our position as a leading bank in the MENAT region.

We won numerous awards. We were named Bank of the Year UAE 2019 for the fourth time by The Banker in recognition of the robust financial performance and pioneering approach to innovation in digital banking. Disability-friendly access was extended to cover about half of the bank's UAE network.

2020 promises to be an exciting year with opportunities and challenges. As the official banking partner of Expo 2020, we're excited about the economic opportunities that this event will generate for the UAE. This will further strengthen Emirates NBD's prominent position as a key banking partner.

We have recently completed the third chapter of our AED 1 billion digital transformation and will conclude the final phase ahead of the UAE's 50th anniversary.

We now operate a diversified business model across the MENAT region. This allows us to direct capital to the most attractive growth opportunities in the region.

The bank's research team estimates the GDP growth in the UAE reached 2% in 2019. However, deeper oil production cuts announced by OPEC in December are likely to weigh on the UAE, and the research team expects GDP growth in UAE to slow down to 1.6% in 2020. Nevertheless, Dubai's economy is expected to gain momentum this year, with Expo 2020 providing a boost to activity in the Emirate. Research expects Dubai's GDP to grow 3% this year, up from an estimated 2% in 2019.

In summary, I am pleased with the bank's operating performance and the many strategic initiatives, which were positively received by all of our shareholders. We'll continue to drive efficiencies and capital optimization across the group. As Expo 2020 draws closer, I'm confident we'll be able to take advantage of growth opportunities across our MENAT network while delivering excellent customer service and superior value to our shareholders.

I'll now hand you over to Surya to go through more details of the presentation. Surya?

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [3]

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Thank you, Shayne. This is my last full year presentation before Patrick takes over, and I have immense pleasure in revealing a record set that will be among, if not, I believe, the best in the region.

Let me lead as usual through Slides 4 and 5 of the presentation. As Shayne mentioned, the group's net profit of AED 14.5 billion in 2019 represents a 44% increase on the previous year. This includes a AED 3.2 billion realized gain and a AED 1.2 billion unrealized gain from the Network International transaction. It also includes AED 609 million of net profit from DenizBank for the 5 months since acquisition date. Excluding the gain from Network International, net profit increased by 1% in 2019. Core operating profit grew 4% year-on-year, supported by 26% higher net interest income from loan growth and 38% higher noninterest income.

Excluding DenizBank, core operating profit declined 5% mainly due to higher impairment allowances. The 28% increase in costs is due to a rise in staff costs, amortization of intangibles and higher depreciation due to IFRS 16 implementation. Excluding DenizBank, costs increased by 6%. The cost-to-income ratio at 32.1% is within guidance, and the bank remains firmly focused on cost controls. Provisions of AED 4.8 billion were 176% higher than in 2019 or 88%, excluding DenizBank. We had given early guidance of an increase in the cost of risk, reflecting the slowdown in regional and international markets. Net cost of risk rose to 117 basis points as a result of higher net impairment charges with lower write-backs and recoveries compared to 2018.

Loans and deposits grew by 7% each, respectively, during 2019, excluding DenizBank. The liquidity coverage ratio of 160% and the advances to deposits ratio of 92.6% continue to demonstrate the group's healthy liquidity position.

During 2019, the impaired loan ratio settled at 5.6% as a result of acquisition of DenizBank loans at fair value. The bank's capital ratio improved following the successful completion of the rights issue and remains comfortably above the minimum regulatory requirements.

Taking you now to Slide 6 on net interest income. We see that margins increased 7 basis points year-on-year to 2.89%, helped by higher margins from DenizBank. Excluding DenizBank, margins declined 12 basis points on higher average deposit costs for the year. As DenizBank benefited from a lower interest rate environment, it provided NIM diversification for the overall group, and the positive impact of DenizBank helped offset the effect of interest rate cuts flowing through to the UAE loan book. In quarter 4, we saw a 28 basis points improvement in margins as the 31-basis point impact from DenizBank's higher margins more than offset a 3-basis point margin contraction. These dynamics allow us to finish the year -- full year at 2.89%.

Slide 7, on funding and liquidity. We see that the liquidity coverage ratio remains healthy at 160%, while the advances to deposits ratio strengthened to 92.6% at the conservative end of the 90% to 100% target range and demonstrates the bank's continuing healthy liquidity. Liquid assets are now AED 109.3 billion or 18% of total liabilities.

During 2019, we raised AED 13.3 billion of term funding in 9 different currencies with maturities out to 20 years. Debt and sukuk represents 9% of total liabilities, down from 10% at the beginning of the year due to a smaller relative contribution from DenizBank.

Since our acquisition, DenizBank has seen improved pricing and access to wholesale funding. In the fourth quarter of last year, DenizBank successfully returned to the syndicated loan market. This transaction saw good demand from a broad range of investors, enabling DenizBank to issue a AED 2.8 billion syndicated loan while offering significant scale-back. This loan also included a 2-year tranche.

On Slide 8, we share with you the loan and deposit trends, and we see that gross loans grew 7% since the start of the year, with growth across all operating segments. Corporate lending grew 8%, with demand coming from agriculture, manufacturing, services and the construction sectors. Consumer lending grew 4% due to growth in personal loans and credit cards, while Islamic financing grew 5% due to growth in personal and trade sectors.

CASA across the entire group now represents 43% of total deposits. The domestic CASA engine for Emirates NBD remains stable and represents 49% of domestic deposits.

We have a loan composition, Slide 9. We thought it useful to show how the addition of DenizBank has helped diversify the loan book. A year ago, the loan book was heavily concentrated, with the UAE making up 93% of total loans. At the end of 2019, the UAE comprises 3/4 of loans, with international and GCC making up the balance 25% of the loan book. This improvement in diversification also extends to the sector level, where 35% of loans are sovereign, down from 43% in 2018. Retail lending has also grown from 12% to 17%, while corporate has grown from 30% to 35% of the loan book.

With that, I now hand you over to Paddy to take us through the next few slides.

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Patrick Eugene Clerkin, Emirates NBD Bank PJSC - Head of IR [4]

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Thank you, Surya. Slide 10 shows the core fee income improved 32% year-on-year. This increase is driven by higher foreign exchange and credit card-related income. Investment securities and other income also showed a year-on-year improvement due to a higher gain on trading securities as a result of changing interest rates. Property losses were smaller due to lower provisioning on the existing inventory.

On Slide 11, we see that, excluding DenizBank, quarterly costs were higher due to a rise in staff and operating costs relating to international expansion, higher depreciation due to the implementation of IRFS 16 (sic) [IFRS 16], increased costs relating to the digital transformation and amortization of intangibles.

The cost-to-income ratio in Q4 at 36.4% increased partly due to redundancy costs. This ratio does tend to be higher in the final quarter as the bank invests in marketing initiatives and other revenue-generating investments ahead of the new year. Excluding these one-off and seasonal costs, the cost-to-income ratio for the final quarter was closer to guidance. The year-to-date cost-to-income ratio of 32.1% is within guidance, and the bank remains firmly focused on controlling costs.

On Slide 12, as I mentioned earlier, we see that the NPL ratio settled at 5.6% as a result of the acquisition of DenizBank loans at fair value. Provisions for 2019 of AED 4.8 billion increased 176% year-on-year or 88%, excluding DenizBank, due to higher charges and lower write-backs and recoveries. In 2019, the bank had AED 1.5 billion of write-backs and recoveries compared with AED 1.6 billion in 2018.

The net cost of risk increased 117 basis points on higher provisions, including the impact of DenizBank and reflecting the slowdown in regional and international markets. The coverage ratio declined to 112.3% as the impaired loan balance increased with the acquisition of DenizBank. Including collateral, the coverage ratio was 210%.

Stage 1 and 2 ECL allowances amount to AED 8.3 billion or 2.2% of credit risk-weighted assets.

Note 50 of the financial statements show that during 2019, Stage 2 loans have increased from AED 9.4 billion to AED 20.3 billion. A large element of this relates to Stage 2 loans at DenizBank, and we will continue to monitor this closely. It is, however, worth noting that Stage 2 loan coverage is high at 15.8%.

Slide 13 shows that capital ratio strengthened in the final quarter of 2019 as the rights issue and retained earnings more than offset the impact of growth in risk-weighted assets. Credit risk-weighted assets increased by 53% during the year as the bank absorbed AED 126 billion increase in risk-weighted assets relating to DenizBank. Excluding the effect of the acquisition, RWAs grew by 8%. There was also an increase in Tier 2 capital on increased eligibility of reserves due to a larger credit risk-weighted asset base.

On Slide 14, we see that in 2019, RBWM income improved 8% year-on-year. Net interest income grew by 11%, supported by growth in liabilities, with fee income increased 5% due to an increase in cards, loans and foreign exchange transactions. Loan and deposit balances both grew 4%, supported by enhanced customer promotions and new product launches. Liv. now has a base of 350,000 customers as new products were extended to the Liv. offering. The bank launched E20., a digital business bank for entrepreneurs and SMEs. Emirates Islamic delivered an 8% year-on-year increase in income to AED 2.7 billion on higher financing and investment activity. Total assets reached AED 64.8 billion at the end of 2019.

Financing receivables grew 4%, and customer accounts increased by 9% during the year, and CASA represents 63% of EI customer accounts. EI's headline financing-to-deposit ratio stood at 83%, and it is comfortably within management's target range.

On Slide 15, we see that Wholesale Banking income increased 2% year-on-year due to growth in fee income. Fee income of AED 1.3 billion increased 7% in 2019 due to higher lending fee revenue and increased investment banking activity.

In terms of the balance sheet, loans grew 8% during the year, with strong momentum in lending activity and growth in the bank's core and short-term lending business. Deposit growth of 13% reflects the bank's aim to maintain liquidity at an optimum level.

Global Markets & Treasury revenue declined 25% year-on-year as net interest income decreased due to lower interest rates. The rates in foreign exchange desks contributed significantly to a year-on-year increase in fee income by taking advantage of volatility in their respective markets. The Global Funding Desk raised AED 13.3 billion of term funding in 9 currencies through private placements with maturities out to 20 years. The desk also successfully raised a $1 billion perpetual Tier 1 security earlier in 2019.

With that, I'll pass you to Patrick for some comments of what we can expect in 2020.

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Patrick Sullivan, Emirates NBD Bank PJSC - Incoming Group CFO [5]

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Thank you, Paddy. Hello, everyone. I'm delighted to join the bank. And just looking back at its track record over recent years and the achievements over the last year, it was certainly an easy decision to join. And I'm looking forward to working in the Middle East and helping the bank to grow and also looking forward to meeting many of you in person in the coming year.

Just turning to the guidance for the year ahead, as set out on Page 3 of the deck. Firstly to NIMs. With the NIMs closing 2019 at 2.89%, just over the guidance range that we gave, we will maintain the expected range of 2.75% to 2.85%, reflecting, first, the softening of NIMs in the UAE, as noted by Surya, with the effect of rate cuts in 2019 coming through into 2020, along with the impact of a potential further federal rate cut later in 2020. This will partly be offset by relatively higher NIMs in Turkey.

For costs, we'll continue to maintain strong control, as our track record shows in recent years. So guidance at 33% remains unchanged. Paddy noted the nonperforming loan coverage ratio dropped to 112% with the addition of DenizBank. And for 2020, we expect this to be stable.

With -- we expect the NPL ratio to increase slightly, reflecting challenges from lower GDP growth across the region, and we'll continue to closely monitor the credit health of DenizBank's loan portfolio. We'll continue to maintain strong liquidity, keep the AD ratio between 90% and 100%. We expect mid-single digit loan growth across our regional network, and retained earnings will continue to support healthy capital ratios in the coming year.

So I'll now just hand back over to Shayne for his closing remarks.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [6]

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Thanks, Patrick. I'm very pleased with the bank's operating performance and the many strategic initiatives that we -- that were positively received by our shareholders, and we'll continue to drive efficiencies and capital optimization across the group. And as Expo 2020 draws closer, I'm confident that we are able to take advantage of the growth opportunities across our regional network.

And with that, Mollie, can we take some questions, please? Surya, you had a couple already while she's lining them up.

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Questions and Answers

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [1]

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That came on the web, and we can take it up. I'll read the first question that came off the web from [Elena] at [P&I]. She asked, what are the opportunities and challenges in the local banking sector for 2020? And specifically, what are the drivers of Emirates NBD's growth and pressure points?

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [2]

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Okay. I'll take that one. I think we start with challenges in the industry. I think in the UAE, I suppose, she's mainly focused on. I think the challenge is not just for us, for the whole industry is, I don't think we're going to see very significant loan growth in 2020. Loan growth has been pretty muted in '19, so I think that's certainly a challenge. I think NIMs for banks like us, which we had talked about, that have especially high CASA balances, as we get U.S. rates being cut, it certainly has an impact on profitability for banks like ourselves with big CASA shares. And we are quite interest rate-sensitive when it comes to rates falling. Conversely, if they go up, it's actually very positive for us.

I think one of the main challenges for the industry is around consolidation. We're just about through our digital transformation project. We're already now around 60% on private cloud, and we're close to 100% private cloud by the end of the year. So our full digital transformation is just about complete. And the reason I mention that is that I think that the smaller banks are going to struggle to compete with the larger banks that are investing very heavily in digital, and I think it remains a challenge for them as to where do they focus.

One of the opportunities we are getting and drivers of our growth is we're getting growth in market share across our retail products. And that's not because the market is growing, it's just us gaining market share from a pretty stagnant market. If those smaller banks also then try to compete in the large-ticket corporate side, capital is an issue for them. And if they get losses, that's an issue for them.

And the SME space, obviously, it was important and can be attractive, also has its problems, as we've seen in previous years, where the industry lost between AED 7 billion and AED 10 billion in SME problem loan. So I think one of the challenges for the industry is going to be around the consolidation and where do they play as an industry. And you're seeing now that the 4 major banks, FAB, Abu Dhabi Commercial Bank, ourselves and DIB, now controlling more than 70% market share, and yet, you've got a market that has around 50 banks in it. So I think where these smaller banks go, I think, for the market, is going to be difficult.

Having said that, I think, for us, where our drivers of growth. I think one of the things that we've done as we saw the UAE slowing down, the diversification that we've made into Turkey, diversification into Egypt and our growing share in Saudi certainly provides us with opportunities, albeit sometimes at a cost. And the example I'll give you, in Saudi, yes, we've got approval to do another 20 branches, but there's a cost of doing that and a lag between cost and income. So it will take us a while to build those opportunities up.

So I think our diversification, geographical reach that we have now, our growing market share in profitable products puts us in a good position against the competition.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [3]

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Thank you, Shayne. I'll take another question that came off the web. And this is probably a question that many of you have asked on the web and will probably ask on the call. Two questions, in fact.

The first relates to dividend, and there was a question whether a dividend will be announced. And if so, at what level will it be maintained, or to seek clarity, is the Board recommending 0, or has the Board yet to make a recommendation.

The simple answer to the dividend question is the Board has yet to make a recommendation for dividend for the year, so wait for any further announcements on this particular subject.

The other topic that has a common topic to many is the reason for increase in quarter 4 provisions, drivers of the provision, some breakdown between what's happening in DenizBank and the group. And I think I will take this first, and my colleague, Patrick, will also add to it.

First of all, I will refer everybody to Note 50, Page 104 of the financial statements where you will find more detailed public disclosures. And it's fair to say -- first of all, to clarify, when we took DenizBank in quarter 3, we took their loans at fair value. Since then, some of those loans have obviously become 90 days past due and moved into the impaired loans category. So if you look at the slides on credit quality, we had impaired loans of AED 4.2 billion in quarter 4 against an allowance of about AED 1.2 billion, AED 1.3 billion. Of these, AED 3 billion of these loans are disclosed in our financial statements as credit impaired on purchase, POCI, as we call it, which means on the date of acquisition, these were already taken in at fair value. So that already includes an element of valuation adjustment.

The remaining movement, which is about AED 1.2 billion, has, therefore, an allowance of about AED 1.2 billion and is 100% covered. We do have other subsequent movements in the balance sheet, which involves Stage 2 movements. And primarily, in the main UAE book year-over-year, there is clearly a change and a shift in expectations of economic indicators of what's happening in the real estate market, and each of these impact the models that drive the expected credit loss calculation for our book. And that also leads to a year-over-year increase.

But if you break it up and look at the operating segment disclosure, also you would see, when you look at year-over-year, there's almost AED 900 million of impairment coming from DenizBank in quarter 4, which didn't exist in quarter 4 of last year. And the rest of it is the Stage 2 movement, primarily in the domestic book, some affecting corporate book, some affecting the retail book.

There's also some confusion relating to income year-over-year, and I think we need to look -- if you go to Slide 5, you will see that the total income for the bank year-over-year is up 53%. Even though the costs are higher, and we will talk about that for -- in relation to a separate question, the pre-impairment operating profit is higher by 46%. It is this explanation of the impairment charges that bring down the operating profit almost flat. The bottom line, however, is lower because of new things that have come into the P&L for the current year.

Clearly, in DenizBank, we are subject to a higher level of taxation than the UAE GCC franchise where we were primarily operating. There's also a delta for the gain on bargain purchase. We had recorded a gain in quarter 3. We recorded a small loss in quarter 4 because we did a cleanout of the remaining shares and took the company private; for DenizBank, that is. And clearly, since the sale of Network International, the major income we were deriving from share of profits of associates in quarter 4 of last year doesn't flow through anymore. So there is some delta for all those miscellaneous lines as well, which should normalize as we go forward.

Patrick, you commented on some guidance for next year. Do you want to touch upon the guidance for credit quality and impairment charges in the context of these questions?

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Patrick Sullivan, Emirates NBD Bank PJSC - Incoming Group CFO [4]

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Certainly. Thanks, Surya. There are a couple of points to note here. What we do see that NPLs will be up slightly from the 5.6% as DenizBank NPLs start feeding through into the post consolidation results and a slightly weaker UAE environment. And we're also likely to see lower levels of recoveries than prior years. So a combination of these factors. We do then expect the cost of risk to be in 2020 over 100 basis points, more likely to be at a level that we have been seeing overall in 2019, but perhaps with a different mix.

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Operator [5]

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(Operator Instructions) We will take our first question from Chira Ghosh of SICO.

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Chiradeep Ghosh, Securities & Investment Company BSC, Research Division - Research Manager & Senior Analyst [6]

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I have 2 quick questions. My first one is related to the operating expense, the cost. So I see that the operating expense was a bit higher this year. So I just wanted to get a sense why do you still believe that the cost-to-income ratio would remain at this level because this year included some redundancies and some digital transformation. So do you believe these things will again continue next year? Or is it related to the new branch network that you're planning to expand into Saudi? That's my first question.

And second question is, I don't know whether I understood you right on that, so the operate -- the impairment charges went up by 78% in UAE, so that's excluding DenizBank. So if you can throw some more light on why exactly has gone up in the UAE.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [7]

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Okay. Thank you, Chira. Just on the impairment, since we had just talked about it, it's really the movement in the expected credit losses for Stage 2 loans as there are changes in the economic indicators year-over-year. There are, of course, lower recoveries compared to previous years as well as collateral values also become subdued. So that's the dynamic for the impairment charges.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [8]

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But just remember, the ECL models are largely driven by economic indicators, right? So it's -- what is your expected GDP going to be for [the company], where do you see -- where are interest rates going to be, what are property prices going to be. So in the expected loss calculation, it's very much a model on formulas. So if you're forecasting a weaker economic environment, then you will get a natural increase in the ECL.

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Chiradeep Ghosh, Securities & Investment Company BSC, Research Division - Research Manager & Senior Analyst [9]

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Yes, yes. And should it make sense because I was surprised because the NPL number did not go up? I mean within UAE, NPL number did not go up. That's -- okay.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [10]

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Yes. That's what drives the number into the financials is -- and also, if you think about what we do is, if we restructure any loan that goes from Stage 1 to Stage 2, say we re-profile it, maybe it was a loan that was, say, for 8 years as a property loan and we went to 12 because it got lower yields. We'd immediately move that to a Stage 2, yes? So even though we have actually re-profiled it and the cash flows can repay the loan, we, for 12 months, put it into Stage 2 and then migrate it back to Stage 1, providing it has met all its obligations after the first 12 months. So you get a double whammy. So you get a double whammy of the increased ECL calculation and the movement as you go from Stage 1 to 2.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [11]

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I mean it is fair to say that IFRS 9 has introduced some volatility in results because of expected credit losses. And we're just into the second year of the cycle. It will take a few years for everybody to understand how these little bits and pieces interact with ECL. On...

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [12]

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So we can just blame the accounting.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [13]

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We can blame the accounting.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [14]

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Yes.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [15]

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On your question on OpEx, Chira, I'll make 2 comments. One, while in certain quarters, we have bust our management target of 33%, you'll notice that it has typically been in the fourth quarter when we do ramp up marketing spend under normal years, we ramp up readying the organization for growing income in the first quarter of the new year. And in this particular year, we talked a little bit more about -- right, about the redundancies, the amortization of intangibles on the acquisition, the impact of IFRS 16 on leases and so on. But you'll recall that over all these past years, we have never missed our full year management guidance. So when we do give you guidance that we'll be coming back to 33%, we know where we are taking the organization and what choices we have to make to get there. Clearly, DenizBank's own cost/income ratio is higher than the Emirates NBD cost/income ratio. So there will be some averaging out there. But at the moment, year-over-year there, that they are a public entity until the last quarter of last year. And year-over-year, they have been improving their cost/income ratio, too.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [16]

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And there was a linked question from [Mohammed] about where -- some redundancies related to DenizBank. The answer to that is largely no. The redundancies were the UAE, but we're repositioning our cost base for a more difficult 2020. So it was largely out of the UAE that we -- our costs [increase]. And one of the reasons why you see the increase in costs in the fourth quarter is those redundancies, which around 500 people that we took out in the last couple of months of the year.

The other comment I'll just make on cost would be that we do envisage we'll start to wind down some of our big IT spend. Hopefully, I should say, inshallah, into the fourth quarter as well. So we should start to see some drop in our IT spend as we complete our digital transformation.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [17]

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So Patrick, we have a question for you on what's management's view of cost of risk for the NBD Group for 2020.

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Patrick Sullivan, Emirates NBD Bank PJSC - Incoming Group CFO [18]

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So -- well, similar to the earlier comment, actually. So we have seen that Deniz is carrying a higher cost of risk, particularly in the 5 months since the acquisition. And there will be a different change in the mix, and we have already commented on some of the slowdown in the UAE as well, so -- and with slightly lower recoveries. We will see with the combination of those factors that the cost of risk will be more likely around the level that we have seen for overall in 2019. So it will be a slightly different mix between DenizBank and the rest of the bank.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [19]

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Thank you. And Shayne, we have one for you. What's management's M&A outlook for the next year?

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [20]

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I think we've got enough to do at the moment, Surya, with getting Deniz bedded down, building out Saudi. But having said that, sometimes, all the buses arrive at the same time after you've been waiting for a bus for a long time. We waited a long time for Deniz. But we have -- there is nothing in the UAE or anywhere else at the moment that we're in negotiations for. We would like to bed down what we've got.

I mean, if it's a more strategic question, what I would say is we believe we have enough markets. If you think about where we're pushing our growth outside of the UAE, they're in markets like Egypt, Turkey, Saudi, with big populations compared to the UAE, strong demographics and improving economics. And certainly, Egypt, for us, in 2019 was a good year. Turkey has performed better than our initial financial model. And Saudi, we certainly see huge opportunity there as we grow our network there and launch Liv. and our digital offerings into that market.

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Operator [21]

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Our next phone question comes from Jag Pasunoori of Franklin Templeton.

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Jagadishwar Pasunoori, Franklin Templeton - Analyst [22]

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Congratulations, Surya, and good luck. My question, going back on the provisions for 2019, I was looking at Note 40 of your annual report where I saw the corporate provision spend of [135] and retail, 46%, and Islamic, 25%. So basically, what you are saying was like the Stage 2 ECL calculations. Just for my understanding, these -- what are done just because there was a delay in payments from these loans?

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [23]

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Yes. So whenever there's a delay in payment, if it is more than 30 days anyway, you start getting into Stage 2. And eventually, beyond 90 days, you are in Stage 3 for sure. So these are definitely Stage 2 for a lot of other reasons, mainly economic indicators.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [24]

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So it's an automatic migration, yes? [If it is 30] days, it goes right into Stage 2.

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Jagadishwar Pasunoori, Franklin Templeton - Analyst [25]

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Okay. So -- okay. So you said like...

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [26]

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But we also do have problem loans in there that have been restructured, that have been re-profiled. It might have been 8-year loans gone to 12-year loans, et cetera. That will stay there for 12 months.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [27]

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Yes. But if it has gone past 90 days, it would be in Stage 3.

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Jagadishwar Pasunoori, Franklin Templeton - Analyst [28]

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Okay. So can you tell me in the corporate segment, what are the specific sectors had impacted these higher Stage 2 provisions? And when you said like collateral values have declined, how much have you declined in these models? As far as I understand, the real estate prices have declined by 25% to 30% in the last 3, 4 years. But how much did you take care of that in these calculations?

And another question is, as far as I understand, this IFRS 9 implementation will reduce the volatility of the provisions. Is my understanding incorrect? I know -- I mean you got to this like only a year back. You need more time to get into the stable part of this. Can you please explain that?

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [29]

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I'll take the second question because I don't want to let an accountant answer it. Because in that way...

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [30]

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Yes. I'll agree with you on this one.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [31]

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There's no doubt in my mind that IFRS 9 has created volatility. You have one loan that could be good reasons, moves into 30 days and bounces back. The volatility of that movement from Stage 1 to Stage 2 can be quite considerable, yes? Yes, maybe they couldn't make loan payment because they didn't get paid by someone else, for example. Suddenly you've got volatility that comes in your Stage 2 very, very quickly. So it's not smoothing out losses at all. If anything, to me, it's just creating more volatility in the P&L.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [32]

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Yes. My comment on collateral values was specific collateral, which, of course, if, say, last year, you had a collateral that was worth 100 in the property sector. This year, it's probably worth less than 85, for example, given what's happened in the property market. So that clearly flows through into your exposure at default as well. The broader movement is really the range of economic indicators.

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Jagadishwar Pasunoori, Franklin Templeton - Analyst [33]

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Okay. But have you corrected the collateral values as well when you are looking at ECL's expected or these recoveries? How much maturity is it, like 20%, 30% are in line with the market?

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [34]

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These are specific collaterals also when you look at a loan-by-loan basis. Also, you had asked about which of the economic sectors that are flowing into the NPLs, I'm afraid we do not disclose that. However, there is some broad range of economic activity disclosed both in the financials and about a month later when we announce our Annual General Meeting with the Basel II Pillar 3 disclosures. There will be some more information on breakdown of the loan book by economic activity. You can get some more information there, but it wouldn't link back to the NPL formation by economic activity.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [35]

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And our corporate property loan is supported by independent valuations. So as the valuations come down, obviously, that's reflected in the models and the loss given default.

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Jagadishwar Pasunoori, Franklin Templeton - Analyst [36]

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Okay. Great. One last question from my end. Where are you in terms of increasing this FYL to 40%? Are you still on this path? And is there a time line that you guys are thinking?

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [37]

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You'll have to wait for our AGM for that.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [38]

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Unfortunately, we can't disclose the AGM agenda before it's disclosed to the shareholders will be my answer on that. We've -- I think we've been pretty clear as to what we want to do.

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Operator [39]

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We will take our next question from Shabbir Malik of EFG Hermes Research.

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Shabbir Malik, EFG Hermes Holding S.A.E., Research Division - VP of Research, Director of Banking & Banking Analyst [40]

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Good luck, Surya, and welcome, Patrick. Just 2 quick questions from me. There was a lot of news flows, which suggest that ENBD is getting more active in terms of foreclosures. Al Jaber Group and Infinite Investment, there was some news flow around that. I was wondering, is there a reason why there's an increase in activity? Has there been any change in strategy? Or this is just BAU?

My second question is, Shayne, you talked about room for consolidation in the market. What do you think is the end game for the smaller banks? How do you think they're likely to go about this changing landscape? Will they merge with each other or they will be target for acquisitions from the larger banks? What do you think is the end game for the smaller banks?

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [41]

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I think on the individual cases that have been in the press that have named us. I can't talk about them for obvious reasons, yes, and you realize that. But what I would say is that when we have [lombard] lending to a client, if they hit triggers and they don't meet their top-up, we just have an automated process.

On being more aggressive on recoveries, my view is we've always tried to do the best thing by the bank and the client. It's a combination of two. We're not in the business of selling out clients easily. We try to work through the problems with them wherever we can. Because in some regards, us taking possession of any property doesn't maximize the value as if the guy sold it on a non-distressed basis. We will take action where we don't see a workout that is in the best interest of the bank in the medium to long term with the client. That's how we work. We are here to do the best for all of our stakeholders, including our clients, and we will act where we see it's in the best interest of all those stakeholders.

But have we become more aggressive? The answer is no. We're acting as we normally would within our workout parameters.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [42]

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I'll take one question that came from the web from...

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [43]

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Sorry, I didn't finish. Second part of his question was on consolidation. On that, I think consolidation here from now on is somewhat more problematic just because of the ownership structures. I think the easier ones have been dealt with, where you've had common ownerships. Abu Dhabi is obviously consolidated into 2 -- or 3, I suppose, we've added. And Dubai, the last big one that they own a significant stake up in Noor has gone into DIB. So now I think the shareholdings become more problematic as to who will sell to who.

And given the Emirates' ownership of many of these -- separate Emirates' ownership of many of these banks, I think it's going to be a bit more difficult for mergers to occur. Do I think they should occur? Absolutely. You guys are analysts and investors. You know that size in -- especially in retail banking is really important. You need that size, you need that market share, you need that investment capability. So yes, they should. The quicker they do it, the better. It's better to have a willing marriage than a shotgun wedding. So I think there should be more consolidation in the market. But I think it's going to become more difficult now to facilitate that combination.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [44]

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Thank you, Shayne. There's a question on the web, which I'll read out. And between Patrick and Paddy, they will respond. This is further on the NPLs for Turkey. They say, on asset quality, unlike other Turkish banks, NPL increased materially at DenizBank in fourth quarter. And I was wondering if you expect more NPL pressure there as you reclassify risk assets post acquisition. Also, can you provide us with the NPL ratio of the purchase? Originated credit impaired financial assets from DenizBank were added.

There is a related question to this from Deepak Babu of the BNH Group. Could you please provide some clarity on how provisioning for POCI assets is carried out? Would it continue to be reported under NPL without requiring provisions against it?

Patrick?

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Patrick Sullivan, Emirates NBD Bank PJSC - Incoming Group CFO [45]

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Okay. A couple of components there. I think just for the -- comparing us to the market and NPLs, I think that might be part of the earlier question, where the AED 4.2 billion NPL stepping up from AED 0.2 billion includes AED 3 billion that was part of the acquisition's fair value NPLs.

And as Surya said earlier, the AED 1.2 billion that's left over from that, was -- had almost 100% provision against that. So that's the management team being very proactive in the provisioning. Nonetheless, we will, of course, keep an eye on the NPL formation in Turkey.

And the part about what would the ratio, the cover ratio, look like if you adjusted for Turkey, perhaps I can just look at that as a slightly different way. If you stripped out the AED 3 billion, so it's down and it went from 127% to 112%, and that is the effect of that AED 3 billion being recorded at fair value. So if you strip that out, and you can actually do that if you're looking in the notes to the accounts, and that would work out back at 127%. So broadly, a flat level of the coverage ratio if you exclude that AED 3 billion.

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Patrick Eugene Clerkin, Emirates NBD Bank PJSC - Head of IR [46]

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Okay. There's a couple of Part B and C of Ali -- Bank of America's questions relating to the DenizBank Tier 2 loans and also HQLA risk-weighted assets for the Central Bank. So I'll take those. Regarding Ali's referring to the $1.2 billion of Tier 2 debt that DenizBank had, we have taken over full ownership of that, and we are in the process of looking to restructure that to make DenizBank's capital stack more efficient. So approximately $400 million of that will be converted into common equity Tier 1, and we are looking because the -- all the Tier 2 is in amortization fees, we are looking to restructure the remaining $800 million to make that more capital-efficient.

Regarding Ali's third parties question, yes, the capital standards for government debt have been updated. There is a transition period, 7-year transition period from the 30th of June. And after that, only government debt issued in local currency will continue to be 0% risk-weighted. Risk weighting will be applied depending on the appropriate credit rating for the relevant [government].

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [47]

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Just -- I think the question also was there around the asset quality of Deniz versus other Turkish banks, the NPLs. I'll just take that just in broad context. I'd say you've all followed us long enough to know how conservative we are on risk and provisioning and the coverage ratios that we like, and that we like to hit our problems early. And Deniz will be no exception to that. We like to get in front of the problems and provision aggressively. And that's why, historically, we've had the gross coverage of over 125%, 127% last year and 250%-odd and over with security. So I think from our perspective, we want to be conservative, and we will make sure that we'll be quite aggressive with the Deniz book as we have always been with our book.

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Operator [48]

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Our next telephone question comes from Vijay Raghavan of ARENCO.

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Vijay Raghavan, ARENCO - Director [49]

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Patrick, welcome. And Surya, all the best, and hopefully, we'll remain in touch. On the advantage of being called last, the last is -- most of the questions have been asked and answered, especially the impairments have been completely dissected. Just 2 questions on the DenizBank. Yes, I could see a 6-month first half from the 5 months from the date you actually took over. So the full year profit, can I say, is about [AED 1.2 billion], if it is a rough estimate. That's a significant drop from 2018 full year, which has been disclosed, primarily, I guess, coming out of the impairment. Do you see it as a one-off? Would you have any guidance for DenizBank per se for the year ahead?

And my second question will be around the dividends. You said the Board is yet to take a call. Any dates where the Board or the AGM is going to be...

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [50]

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So Vijay, as you know, whenever there's a Board meeting, we will make a DFM announcement prior to that. So when the DFM announcement is made, you will know when the Board meeting is being held and subsequently, the update in the DFM on the minutes of that Board meeting as well. So right now, I'd say, patience on that one.

On your earlier question on Deniz, you have to be a bit careful when you compare the 12-month results to the 5 months results because Deniz's 12-month results was prior to our ownership that's prepared under BRSA guidelines, which is their local regulator, whereas our results for 5 months are under IFRS, but includes the purchase price adjustments on the acquisition as well. So I wouldn't straight normalize it. But it's fair to say that, not just for Deniz, but for the whole market, impairment provisions in 2019 are higher than the impairment provisions of 2018 because the crisis hit Turkey only midyear 2018.

And in fact, I would say, after the peak of the crisis, things have been, in fact, been improving. Interest rates that were at a peak of 24% have now become negative real interest rates. Some of the exchange rate volatility that we saw where, at one point, it was almost touching 7 to the dollar. Now it's more stable at about 5.9 to the dollar in recent times. All of that is giving some comfort to the fact that the future is a lot brighter, although not yet totally out of the woods compared to, you could say, the latter half of 2018 and the early part of 2019.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [51]

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There was a question also, I think, related to that, it was -- I think it was the -- around the -- one of these massive lists of questions about the BRSA list of accounts wanting provisioning and how do we go with the due diligence on that.

Because this acquisition took so long, we did 2 credit due diligences on the portfolio. On top of that, as part of the sales and purchase agreement, as that process was going on, we looked at every large loan or high-risk loan in their book as normal flow. So of that very large list of the BRSA gave banks, we had 2 accounts that we hadn't picked up, only 2, and they were small. That's why we didn't pick them up. They were below the sample size of quite small accounts. So we know the book well. We've had a very good look at it now; not only from where we've owned it 100%, but with the due diligence, the 2 due diligence, plus the flows that seemed like it took forever. What was it? 18 months of flows that we looked at of their book. So we know the book pretty well, and we know where the provisions need to be taken.

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Operator [52]

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Our next question comes from Naresh Bilandani of JPMorgan.

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Naresh N. Bilandani, JPMorgan Chase & Co, Research Division - Research Analyst [53]

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It's Naresh from JPMorgan. Just 2 quick questions, please. One is, could you share some insight into -- you shared the guidance for the group. Just wanted to get some insight on the outlook for Deniz into 2020. I mean we are seeing a pickup in growth and the NIM outlook that is coming from a bank and guarantee is sounding much more optimistic for 2020. So any outlook you can provide on 4 key items, which is the volumes, NIMs, cost of risk and cost/income ratio in Deniz. Where do you see these 4 key metrics evolving into the medium term? That would be very helpful.

And the second question is just again on Deniz. Now that it's delisted, would you still be reporting the -- will the bank still be reporting the quarterly financial statements so that we can maintain a separate model for DenizBank? Or should we just rely on the segmental information that you provide going forward?

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [54]

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Naresh, let me take your second question first. Although they are delisted and therefore don't have any responsibility under the capital markets Board disclosure requirements, Deniz does have public debt outstanding, and there are some limited disclosure requirements under those public debt listing conditions. So you will see that. And also, the BRSA has some requirements, although not quarterly, around disclosure of financials. So you and everybody else will have access to a reasonable level of Deniz financials because of these 2 reasons. However, one of the reasons we went into Deniz, and you recall, Shayne has said, even in the early days, that we are getting into a market that's countercyclical to the UAE. We are oil producers, they are oil importers. We've seen in the interest rate cycle, also they benefit from lower rates. Because of our high CASA, we hurt marginally from lower rates and vice versa. So if we start giving you guidance at that segmental level and you run your models on an A+ B basis without looking at the synergies that come with this countercyclical movement, you will have some challenges. At the moment, whatever guidance Patrick gave you earlier was at a consolidated group level.

Just one more caution on my earlier comment on Deniz disclosures, they will be on the BRSA basis, not on IFRS basis. So you would have to make some adjustments between BRSA and IFRS financial status.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [55]

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Just to confuse you more.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [56]

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Yes. So sorry, that wasn't much of a help.

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Operator [57]

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We will take our next question from Aybek Islamov of HSBC.

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Aybek Islamov, HSBC, Research Division - Analyst [58]

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Yes. It's Aybek from HSBC. I think I just wanted to ask you about one point. Given now that you're present in Turkey, how are you planning to manage your capital? I -- let's put it a dividend policy, given the volatility in Turkish lira. So yes, if you can sort of give us some light about your dividend policy post acquisition of DenizBank, that would be very helpful.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [59]

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Our dividend buyback have always been a shareholder call at the AGM. So as management, we've never talked about a policy. I fully take on board your point that there will be some volatility in the Turkish lira leading on to potential pluses and minuses on the group's equity through the translation, but you will notice that our capital ratios and our core equity is quite at an enhanced and high level. So there are buffers to support any dividend payout, certainly, the historic dividend payout.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [60]

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But I think there's no escaping, given that the Turkish market has significant amounts of foreign currency loans and that their core capital is in Turkish lira, that any large fluctuations in the Turkish lira does translate into the consolidated capital numbers. So we are very mindful of that when we're modeling, we made the acquisition, and also the capital that we hold.

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Operator [61]

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Our next question comes from (inaudible) of Daman Investments.

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Unidentified Analyst [62]

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My question was linked to DenizBank credit quality and the outlook, which has been answered already.

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Operator [63]

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Our next audio question comes from [Abdullah Alturaj] of NCB Capital.

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Unidentified Analyst [64]

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A couple of questions from my side. First of all, are you expecting any regulatory changes in the coming 2 years?

Secondly, if you can give us or shed a light on the real estate outlook in the UAE from your perspective, and if you can provide guidance on the targeted LDR levels or the R&D targeted normalized cost of risk.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [65]

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I think it depends which market we're talking as opposed as to regulatory changes. The one thing I do know, so many -- there's so many in every market that we operate in, and they continue to evolve. For our main market, I suppose UAE, the one that is currently in draft form is around the real estate ratio. And that's an important one for us, both from a capital perspective and from a business perspective. So -- that might link into your question about what our outlook is for property. I'll give you my personal view. We don't have a bank view. We don't do property coverage as part of our research. I'll give you my personal view, I think, with -- and I think this has been covered in the press quite a bit. So there is considerable supply in 2020 coming on. There's supply coming in 2021. And it's fair to say the government is doing a good job of now containing that supply coming in, but the reality is that supply needs to be finished. You can't have a half-complete residential tower. So supply needs to be complete. I think we're going to get some stabilization in prices once that supply pipe comes through. I think it's probably going to be 2022 when we get that stabilization. I think we're going to continue to get rental and property price pressures until we get that stabilization. And I think the government is doing a good job of doing things like long-term VISAs, attracting more people to invest here. And also, obviously, managing that supply by restricting government-linked companies' development. So we've got some good positives. Obviously, we're hopeful that Expo 2020 will bring some more property investors into the country. But I think the overhang of supply, I think, is going to dampen prices until we get through that pipeline.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [66]

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And Patrick, there was a final limb of the question for you, which I think you'd covered earlier, but important to reassure again. What is the outlook for NPLs and cost of risk?

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Patrick Sullivan, Emirates NBD Bank PJSC - Incoming Group CFO [67]

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Yes. And within the presentation, you could see the ex DenizBank, the NPLs have been quite stable over the last 5 quarters. And we are guiding that there will be a slight increase in that, given the slowdown in the economy and coupled with the risk that some of the Stage 2 loans become NPLs as well. So I think, as I said before, we'll also make sure we're vigilant about the formation of the DenizBank's nonperforming loans and the proactive provisioning that management's taken against that.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [68]

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Thank you. There are a number of questions on the web, which we haven't individually answered, but they touched upon the themes of provisions in the UAE and Turkey. So if anybody feels that their specific nuance has not been responded to, please write into us through Investor Relations.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [69]

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No other questions, Mollie?

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Operator [70]

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We have no further questions on the line at this time.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [71]

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Well, thank you very much for joining us on today's call. It's always a pleasure to get some good questions from you guys, and we will talk to you next. But I would be remiss of me not to thank Surya for 9 hard years helping us through when it was pretty difficult times in Dubai to build the bank to where we are now. So thank you very much, Surya, for 9 years of hard service. We will miss you. But maybe not as much now that we've got Patrick. So -- well, we welcome, Patrick, and we look forward to Patrick providing the same level of competency and transparency that we always have.

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Suryanarayan Subramanian, Emirates NBD Bank PJSC - Outgoing Group CFO [72]

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I wish you and Patrick, Paddy and the team all the best, Shayne.

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Shayne Keith Nelson, Emirates NBD Bank PJSC - Group CEO [73]

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Thank you, Surya. Thank you, ladies and gentlemen. Thank you for joining us.

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Operator [74]

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For any further questions, please contact our Investor Relations department, whose contact details can be found on the Emirates NBD website and on the results press release. A replay of this call and webcast will also be available on the NBD website next week.

Ladies and gentlemen, that concludes today's conference call, thank you all for your participation.