Posted on July 26, 2016

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

Key highlights [1H 2016 vs 1H 2015]:

  • Stable growth in Operating Income
    • Operating Income up 5.1% year-on-year to AED 3.2 billion driven by strong growth in both interest and non-interest income
    • Operating Profit increased by 9.4% year-on-year to AED 2.0 billion
    • Net profit for the first half stood at AED 1.1 billion – stable compared to the normalized Net profit for 1H 2015 (adjusted for the impact of recoveries)
  • Consistently high proportion of net fee and commission income
    • Mashreq’s best-in-class Net Fee, Commission and Other Income to operating income ratio remained high at 43.2%
    • Insurance, FX & Other Income up by 5.3% year-on-year
  • Solid balance sheet
    • Total Assets decreased marginally by 0.4% to AED 114.7 billion while Loans and Advances increased by 2.6% to AED 61.8 billion as compared to December 2015
    • Customer Deposits reduced slightly by 0.4% to reach AED 73.3 billion as compared to December 2015
    • Loan-to-Deposit ratio remained robust at 84.2% at the end of June 2016
  • Healthy liquidity and capital position
    • Liquid Assets to Total Assets stood at 26.6% with Cash and Due from Banks at AED 30.5 billion
    • Capital adequacy ratio and Tier 1 capital ratio continue to be significantly higher than the regulatory limit and stood at 16.8% and 15.8% respectively
  • Sustained asset quality
    • Non-Performing Loans to Gross Loans ratio remained stable at 3.5% at the end of June 2016
    • Total Provisions for Loans and advances reached AED 3.4 billion, constituting 134.1% coverage for Non-Performing Loans

Mashreq posts a 9.4pc [qatarisbooming.com].jpgMashreq's CEO, H.E. AbdulAziz Al Ghurair, said: “Mashreq’s prudent fiscal policies and continued commitment to its focus on placing its customers at the forefront of all decisions has enabled the bank to return a stable performance for the first half 2016. I’m pleased to report that we achieved a respectable year-on-year increase in operating income of 5.1% for the first half 2016 along with a reduction in net operating expenses by 1.3%, leading to a net profit of AED 1.1 billion."

“Each of the bank’s business units has faced a variety of challenges this year and each team has risen to those challenges. Some highlights for the first half of the year include the closure of the maiden benchmark sukuk issuance of USD 500 million for Qatar’s Ezdan Holding by the Corporate Finance team in collaboration with their Coverage and TCM partners and the introduction of the groundbreaking Happiness Account- a straightforward account that allows customers to choose the options that best suit their needs.

Al Ghurair concluded, “We remain cautiously optimistic for the remainder of 2016 and we are conscious of the challenges we may face. Our focus remains on keeping a strong hand on expenses while allowing flexibility to take advantage of opportunities that present themselves over the remainder of the year and into 2017.”

Operating Income

  • Total operating income for 1H 2016 was AED 3.2 billion, a year-on-year increase of 5.1% compared to 1H 2015 operating income of AED 3.0 billion.
  • Net Interest Income, income from Islamic Financing and interest earned on marketable securities1) at AED 1.8 billion was up by 7.0% compared to 1H 2015, driven by 5.7% year-on-year increase in loan volume. On a quarterly basis, it has increased by 3.6% from AED 0.9 billion in 1Q 2016. There has been a slight increase of 4 bps in net interest margin from 3.09% in 1H 2015 to 3.13% in 1H 2016 (3.21% in 2Q 2016 vs 3.09% in 1Q 2016).
  • Net fee and commission increased by 0.6% year-on-year to reach AED 894 million. Net fee and commission income represented 65.4% of total non-interest income in 1H 2016 as compared to 66.7% in 1H 2015.
  • Operating expenses decreased by 1.3% year-on-year and by 0.5% quarter-on-quarter to reach AED 1.2 billion; Efficiency Ratio at 38.0% in 1H 2016 improved with respect to the previous year (40.5% as of 1H 2015).
  • Net profit for the quarter increased by 1.4% to AED 539 million from AED 532 million in 1Q 2016. Adjusting for impact of recoveries in 2Q 2015, normalized net profit increased by 3.5% on a year on year basis.

Assets and Asset quality

  • Mashreq’s Total Assets decreased by 0.4% to reach AED 114.7 billion in 1H 2016, compared to AED 115.2 billion at the end of 2015. Loans and Advances increased by 2.6% YTD to end at AED 61.8 billion. On a year-on-year basis, Loans and Advances grew by 5.7% driven by 46.8% growth in Islamic finance. Liquidity continues to remain healthy with a high liquid asset to total assets ratio of 26.6%. Loan-to-Total Assets Ratio at 53.9% increased slightly as compared to 53.8% at the end of March 2016 (52.2% in December 2015).
  • Though conventional deposits increased by 3.2%, Customer Deposits decreased slightly by 0.4% YTD to AED 73.3 billion driven by a fall in Islamic deposits. Loan-to-Deposit ratio stood at 84.2% vs 81.7% in December 2015.
  • Non-Performing Loans stood at AED 2.6 billion in June 2016 leading to a Non-Performing Loans to Gross Loans ratio of 3.5% at the end of June 2016 (2.8% in December 2015). Net Allowances for impairment for 1H 2016 were AED 838 million compared to AED 424 million in 1H 2015. Total Provisions for Loans and advances reached AED 3.4 billion, constituting 134.1% coverage for Non-Performing Loans as of June 2016.

Capital and Liquidity

  • Mashreq’s Capital adequacy ratio stood at 16.8% (regulatory minimum of 12%) as of 30 June 2016, compared to 16.9% as of 31 December 2015. Tier 1 capital ratio at 15.8% continues to be significantly higher than the 8% regulatory minimum stipulated by the UAE Central Bank (15.9% as at 31 December 2015)

Business Unit Updates:

Corporate Finance continued its momentum by actively pitching and growing its transaction pipeline. Most notably, Corporate Finance together with its coverage and TCM partners closed a maiden benchmark sukuk issuance of USD 500 million with a five-year tenor for Qatar’s Ezdan Holding that was successfully oversubscribed by 1.67x and attracted investors from the Middle East (68%), Europe (21%) and Asia (11%).

During the period under review, Mashreq Qatar launched Biometric Banking allowing customers to use their fingertips as password. Thanks to the advanced technologies embedded in the biometric system, Mashreq customers are now able to access their accounts without username and passwords, overview their relationship with the Bank, and undertake a range of online transactions such as mobile-to-mobile domestic money transfer, international funds transfer, instant utility bill payments mobile top-ups for prepaid service globally, open Easy Saver and Fixed Deposit accounts instantly, receive Forex rate alerts, by having their identity verified on the go.

In order to continue providing customers with the most rewarding banking relationships, Mashreq Qatar continued to add a range of lifestyle benefits for its customers: Lounge access facility through “Lounge Key” for the first time, facilitating Platinum Credit card customers to access to over 500 airport lounges across 300 cities around the world. The Bank also conducted seasonal campaigns such as “Back to School”, “Salaam Multiplier promotion on Travel Spends “, “Ramadan Spend offers”, “and Holiday Package to Maldives” on Credit Cards. With the aim to reward customers more, Mashreq Qatar increased the number of discount partners as part of its Platinum Elite Credit Card offering to 362, offering discounts up to 50% at leading restaurants, 5 start hotels, spas, clinics and beauty salons.   

Mashreq Qatar has continued to offer Business Banking customers with tailor made lending solutions, wider range of products from a business current account to trading & working capital facility in order to support the development of SMEs in Qatar.

For personal banking customers the Bank continues to motivate the development of a savings mindset and culture, encouraging the use of online channels and other innovative means to save. The Corporate Banking unit continues to work with the largest Corporates in Qatar, offering them leading edge financial solutions through innovation and customer centricity that enriches their banking experience.

Awards:

Mashreq Qatar was awarded Best Corporate Bank in Qatar by Global Banking & Finance Review reflecting the Bank’s continuous success in providing clients with innovative and customer-centric financial solutions.

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