Sector Research Update: UAE Bankscontent.argaam.com.s3-external-3.amazonaws.com/6a... · from an increased investments in financial instruments (i.e., securities, derivatives). MASQ

Sector Research Update:

UAE Banks

27 June 2013

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This year’s scorecard ranking include among the Top Five (5), the following banks: First Gulf Bank (FGB), Abu Dhabi Commercial Bank (ADCB), National Bank of Abu Dhabi (NBAD), Union National Bank (UNB), and Dubai Islamic Bank (DIB).

The high scores garnered by these banks of these banks were driven by their:

High-Earning Power and Income Generation,

Commendable Asset Quality ,

Attractive Price Multiples,

Ready Market Liquidity, and

Encouraging Technical Positions.

Important Notice: Further analysis and suitability tests are strictly required, and the scores by no means reflect recommendations or offer detailed valuations for strategic investment purposes.

The RoE and PB Paradigm

Understanding this relationship can give an insight into whether a stock is undervalued. Valuation expert Aswath Damodaran of the Stern School of Business at NYU illustrates this relationship in the following manner:

By this argument then, it follows that at least five (5) of the top 10 in the latest banking scorecard can be viewed as undervalued. These banks (ADCB, ADIB, DIB, UNB, and MASQ) have an average PB of less than 0.90x and average shareholder return (RoAE) of more than 13%. Obviously, the relationship between PB ratio and RoAE is not fixed and can vary greatly depending on the business and its prospects. As always, note that investing can never be reduced to a simple one-variable formula.

Bank Ranking By Asset Size By Market

Capitalization By PE Ratio By Dividend Yield

1 EMIRATESNBD NBAD MASQ MASQ

2 NBAD FGB UAB CBD

3 ADCB ADCB FGB RAKBANK

4 FGB EMIRATESNBD RAKBANK BOS

5 DIB DIB UNB INVESTB

6 UNB UNB INVESTB UAB

7 ADIB ADIB ADIB ADIB

8 MASQ RAKBANK CBD FGB

9 CBD CBD CBI EMIRATESNBD

10 EIB MASQ DIB ADCB

11 RAKBANK NBQ EMIRATESNBD DIB

12 BOS UAB ADCB NBQ

13 SIB NBF NBAD SIB

14 NBF SIB NBF NBAD

15 UAB BOS BOS NBF

16 CBI INVESTB SIB UNB

17 NBQ CBI NBQ

18 INVESTB AJMANBANK AJMANBANK

19 AJMANBANK

EIB has no historical price. AJMANBANK, CBI and EIB have no cash dividend distributions for 2012.

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The table to the left shows the 19 banks in our universe, arranged in four quartiles, based on their rankings as per given categories. Banks with the largest asset size subscribe to the “Size is Might” principle in that, they are the very same banks which dominate the sector in terms of loan portfolio and deposit base. However, they are not necessarily the most profitable as measured by key metrics such as the Return on Average Equity (RoAE).

RAKBANK sustains its dominance in terms of the bank enjoying the highest profit returns with a RoAE of 27.00%. Its historical book value multiple at 1.00x is below the sector average (1.27x) while its trailing earnings multiple at 6.96x is one of the sector’s lowest (coming in at third place, behind MASQ and CBD) and its dividend yield of 6.67%, is one of the sector’s highest. The bank’s extraordinary high returns stem from its being one of the stronger retail players in the field, with a particularly strong credit card market. While the passage of personal loan regulations hit retail players such as RAKBANK, as can be seen from the slight decline in RoAE (from +30% in 2010 to 27% last year), on the long run though, the more stringent credit rules are seen to help reduce risk exposures and limit provisions, arising thereof. A potential challenge for RAKBANK and similar retail players in the near-term would be the possibility of the Central Bank passing1 a new rule which sets the maximum rate on unpaid credit card loan at 1.5% per month, or 18% as an annual rate on par with other GCC countries (based on a survey in 2011, UAE’s annual card charge rate was 27%-36%).

Among the bigger banks, ADCB, FGB and NBAD were the most profitable as indicated by their RoAE (combined average of 16.36%, ahead of the sector average of 12.55%). ADCB and FGB are strong retail players too like RAKBANK and saw similar challenges vis-à-vis consumer banking regulations. Still both banks managed to be resilient as after the initial decline on fee-based income in 2011, last year saw both banks booked an average of 6% growth in fee-based revenues. FGB, for its part, remains dedicated to expanding its retail strength with the recent purchase of the credit business of Dubai First. The latter has an estimated credit card market share of 4.5%.

Emirates NBD, the largest bank by asset size, posted one of the largest growth rates in non-performing loans at 21% to AED40.68bn. This rate though is significantly lower compared to the 270% hike posted in 2010 and the 51% recorded in 2011. Emirates NBD joins NBAD and UNB as the three banks among the large players which saw increases in hazardous loans (combined average of 23%). As for the rest of the big-bank club, ADCB’s NPLs rose by +15% while, DIB’s NPL levels declined in 2012, by +10%. Though NPLs remain to be the sector’s headwind, the lifecycle of high NPL ratios may already be peaking (from an average of 7.97% in end-2011, to about 5% as of 31 March 2013).

1 As of this writing, there has been no official circular from the Central Bank regarding the maximum interest rate charged for credit cards.

Bank

Market

Capitalization

(AEDmn)

Trailing PE Ratio

(x) PB Ratio (x) Dividend Yield (%)

EMIRATESNBD 27,233.10 9.90 0.76 5.10%

NBAD 49,083.34 10.44 1.57 3.07%

ADCB 27,698.21 10.02 1.11 5.05%

FGB 47,250.00 6.50 1.70 5.29%

DIB 11,960.72 10.08 0.92 4.76%

UNB 11,922.85 7.36 0.85 2.20%

ADIB 10,404.71 8.45 0.85 5.77%

MASQ 7,278.76 4.96 0.56 8.83%

CBD 7,949.57 9.29 1.23 7.69%

RAKBANK 10,057.47 6.96 1.84 6.67%

BOS 3,381.00 12.25 0.89 6.21%

SIB 3,395.70 12.39 0.78 4.29%

NBF 4,070.00 12.26 1.48 2.70%

UAB 4,135.06 5.49 1.96 6.02%

CBI 2,489.86 9.78 1.20 ND

NBQ 5,520.00 17.26 1.67 4.64%

INVESTB 3,018.75 7.30 1.33 6.52%

AJMANBANK 2,220.00 >50 2.10 ND

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Loans and Investment Underpin Solid Growth in Earning Assets

UAE banks recorded an average growth of almost 13% in Earning Assets, as of end-2012. This was mostly pushed by the stronger growth seen in credit volume as well as growth in investments. Credit volume increased by an average of 12.15%, faster than its prior average increase of 2.42%. Investments increased by an average of 24.41% in 2012, mostly coming from an increased investments in financial instruments (i.e., securities, derivatives). MASQ and FGB led loan growth among the big banks, with their nearly 10% YoY loan growth. Among the smaller ones, RAKBANK took the lead with a +10% expansion in loan volume.

Impairment Charges Continue to Drop

Reversing the increase in 2011, impairment charges declined by almost 15% in 2012. At the end of 1Q13, they have further declined by nearly 4%. At the same time, growth in impaired loans has also tapered off by the end of 2012 and continue its decline by 1Q13 (as indicated and represented by the 11% drop in NPLs of the seven banks with NPL disclosures). At an average of 5.36% as of 1Q13, the sector’s NPL to Gross Loan ratio, still points at some headwinds for the industry.

Profitability Continues to be on the Mend

While income from traditional banking and from Islamic financing has been quite modest overall, there were stronger returns recorded by non-interest based revenues. Most of the improvement is linked to the more than double growth (~105%) in investment income to AED2.53bn, and to the 15.09% growth in trading income to AED2.75bn (which is faster than the 12.37% growth recorded in 2011). These patterns have continued until the first quarter of 2013, when banks’ operating income growth was underpinned by the 4% growth in interest income and by the 21% growth in non-interest based income.

Yields Continue to Fall, Testing Banks’ Interest Income

Average 3-mo AEIBOR (a benchmark used by UAE banks to guide loan pricing and deposit rates) fell by 31.81bps to 1.43% in 2012, supporting a rise in bank liquidity and helping to sustain credit growth. YTD, the rate has further eased to 0.92%, or another 52ps slashed from the end-2012 average. However, easing benchmark rate pressed down on the sector’s income yields and margins. While cost of funds eased as well, there was a steeper fall in yield on earning assets leading to a drop in interest spread. Another consequence of easing benchmark rate is that NIM also eased aggregately to 3.31% in 2012, from 3.39% in 2011.

2012: A Retrospective of the UAE Banks

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Definition of Terms Page 02

UAE Economy at a Glance Page 03

The UAE Banking Sector in Numbers Page 04

Sector Performance

2013 First Quarter Highlights Page 05

2012 Bank Performance Review

Overall Growth Page 07

Capital Adequacy Page 09

Asset Quality Page 11

Liquidity Page 16

Profitability Page 18

Market Performance Page 21

Latest Banking Developments Page 23

Banking Sector Scorecard Page 27

Annex

Inside this Report

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Market Code Bank Name

ADCB Abu Dhabi Commercial Bank

ADIB Abu Dhabi Islamic Bank

AJMANBANK Ajman Bank

BOS Bank of Sharjah

CBD Commercial Bank of Dubai

CBI Commercial Bank International

DIB Dubai Islamic Bank

EIB Emirates Islamic Bank

EMIRATESNBD Emirates NBD

FGB First Gulf Bank

INVESTB Invest Bank

MASQ Mashreq Bank

NBAD National Bank of Abu Dhabi

NBF National Bank of Fujairah

NBQ National Bank of Umm Al Qaiwain

RAKBANK National Bank of Ras Al Khaimah

SIB Sharjah Islamic Bank

UAB United Arab Bank

UNB Union National Bank

Definition of Terms

Common Terms Long Name

QoQ Quarter-on-Quarter

YoY Year-on-Year

YTD Year-to-Date

AED Emirates Dirham

USD US Dollars

AEIBOR Emirates Inter-bank Borrowing Rate

NIM Net Interest Margin

LDR Loans-to-Deposits Ratio

EM Equity Multiplier

NPL Non-performing Loans

CAR Capital Adequacy Ratio

PE Price to Earnings Ratio

PB Price to Book Ratio

DY Dividend Yield

ADX Abu Dhabi Stock Exchange

DFM Dubai Financial Market

SCA Securities and Commodities Authority

MoF Ministry of Finance

UAE United Arab Emirates

GCC Gulf Cooperation Council

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UAE Economy at a Glance

GDP Surpasses the AED Trillion Mark on Higher Oil Prices and Across-the-Board Expansion in Non-oil Sector

According to UAE’s National Bureau of Statistics, the domestic economy grew at 4.4% (inflation-adjusted terms) in 2012, as activity picked up across all sectors . In absolute amounts, the domestic economy’s output has topped the one trillion mark as it reached AED1.03 trillion last year.

All economic activities saw positive improvement in their growth rates during 2012, which has positively reflected on the value of the country's GDP.

Oil prices averaged USD112 per barrel last year, up from USD109 in 2011. The UAE produced an average of 2.65mn bpd of crude in 2012 and maintained similar levels on average in 1Q13, at 2.67mn bpd. According to figures reported by OPEC, the UAE's sustainable production capacity is 3.02mn bpd. This is defined as production levels that can be achieved within 30 days and sustained for 90 days. The UAE is still aiming to ramp up capacity to 3.50mn bpd by 2018.

Meanwhile, the non-oil sector1 remained the dominant component of GDP, accounting for about 67% (~AED690bn) in 2012. Inflation remained below a percent at 0.66% while gross capital formation (public + private investments) increased by almost 10% YoY to AED309bn.

1Q13 PMI has remained at solid levels

seen in 2012, underpinned by strong

domestic demand (and despite a

slowdown in exports).

1 May likely include contribution from the petrochemical sector.

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The UAE Banking System in Numbers

Key Indicators

2008 2009 2010 2011 2012 2013*

Bank Assets 1,456,200 1,519,100 1,605,600 1,662,100 1,791,600 1,866,300

Bank Deposits 922,500 982,600 1,049,600 1,069,750 1,167,800 1,241,800

Capital & Reserves 1 153,600 231,400 256,000 254,400 276,400 274,300

Loans, net 993,700 1,017,700 1,031,300 1,071,000 1,099,100 1,122,200

Provisions 2 25,000 43,300 56,800 71,600 85,400 88,900

Investments 119,700 119,100 124,200 143,000 155,200 165,400

Source: UAE Central Bank

* As of April 2013 1 Excluding current year profits 2 Calculated as the total of General and Specific Provisions 3 Based on the latest available population estimates from the National Bureau of Statistics

Number of Branches To date:

904

Persons Served per Branch 3:

9,137

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First Quarter 2013 Performance Highlights P& L Summary 1Q13 1Q12 % Change

Net Interest Income (NII) 10,280.15 9,857.79 4.28%

Non-Interest Income (Non-II) 5,266.39 4,336.37 21.45%

Operating Income 15,546.53 14,194.15 9.53%

Operating Expense 5,122.79 4,802.39 6.67%

Income Before Provisions 10,423.74 9,391.77 10.99%

Provisions 3,295.29 3,418.27 -3.60%

Net Income 6,927.40 5,834.43 18.73%

Balance Sheet Summary 1Q13 4Q12 % Change

Assets 1,591,809.42 1,532,157.34 3.89%

Equity 1 189,387.26 186,882.30 1.34%

Loans 980,172.60 961,672.54 1.92%

Deposits 1,082,347.59 1,025,441.87 5.55%

Key Metrics 1Q13 1Q12 Change (bps)

NII as % of Operating Income 66.13% 69.45% (332.46)

Non-II as % of Operating Inc. 33.87% 30.55% 332.46

ROE 1 14.63% 13.93% 70.02

Cost/Income 32.95% 33.83% (88.22)

Loan/Deposit 90.56% 93.43% (287.28)

Key Points:

UAE banks’ NIM continued to ease in 1Q13, the average posted at 3.68%, versus 3.95% posted in 1Q12 and 3.89% in 2012. Easing yields follow that of falling 3-mo AEIBOR rates. As of the end of 1Q13, the average benchmark rate was at 1.2537%, versus the full-year 2012 average of 1.4344%. YTD average is at 1.1223%. Despite this pressure on pricing, credit volume growth looked promising. During the quarter, loans grew by nearly 2%, continuing the trend set forth in 2012. Among the bigger banks, Dubai banks such as EMIRATESNBD and MASQ led in terms of QoQ loan growth, with their 4.02% and 3.23% hikes respectively. Meanwhile, the Abu Dhabi banks’ loan growth are mostly within the range of the average, with the exception of ADIB (+5.54%) and UAB (+7.52%).

Impairment charges continue to fall, with the aggregate value dropping by nearly 4% in the last quarter. This along with a robust 20%++ growth in non-interest based income (mostly from investment income) and a tight lid on operating expenses (efficiency ratio improved to 31.67% in 1Q13 versus 32.00% in 1Q12) pushed aggregate earnings to rise by more than 18% in the last quarter. 1 Equity adjusted for Non-Controlling Interest and Tier 1 Government Support Fund

In 1Q13, bank stocks received investor-wide confidence as they find the sector’s overall recovering bottomline, price multiples (low PEs and PBs) and generous dividend yields reasonably attractive. The UAE banking sector as represented by the S&P UAE Banking Index shows the strong rally we have seen in UAE banks since the low established in late 2008 and early 2009. Since then, we have seen new 52 week highs consistently every year. In 2013, after registering new multi-year highs, the index has managed to hold on to almost all its gains as it consolidates right at the high, suggesting a possible break and continuation of the long term underlying up trend.

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2012 Performance Highlights

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Overall Growth: Assets and Equity Grew at a Faster Rate

Growth in size as per asset and equity continues on an uptrend.

The total assets of the 191 banks in our universe increased by 9.79% to AED1,532.16bn in 2012. The growth represents an acceleration from the 4.34% growth recorded in 2011. As the succeeding pages will show, assets were pumped up by the triple-rise in cash levels, loan volume and investments.

Most of the banks showed growth in assets, with the exception of ADCB and MASQ. While ADCB’s cash and investments improved YoY, the biggest chunk of its assets, which are loans contracted by a little above 1% in 2012. As for MASQ, though there was a strong growth in loans, both its cash levels and investments dropped. Last year, MASQ retired more than AED3bn in borrowings.

Total attributable equity rose by 11.90% to AED186.88bn. The growth in capital base followed a strong year of profits for the domestic banks.

Growth in Earning Assets, specifically loans and investments fueled the growth in overall asset size.

Inter-bank transactions continued to grow albeit at a slower rate in 2012, coinciding with the lower 3-month AEIBOR rate.

Cash levels also grew significantly (due to the combination of higher profits and more borrowings). At end-2012, the aggregate cash levels of the banks reached AED177.53bn, or 48.60% higher YoY.

Investments, likewise, expanded to AED168.03bn, or 8.43% higher YoY. Most of the growth in total investments is linked to growth in investments on financial instruments such as long-term securities and trading securities.

1 EIBANK has been removed from our banking research universe. The firm

functions primarily as an investment bank, and is not comparable to the rest in terms of business model.

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Lower-tiered Banks Led in Asset Growth Top-tiered Banks Led in Capital Growth

In terms of asset and capital, Emirates NBD continues to dominate the other 18 banks in our research universe.

However the biggest YoY growth rate recorded in terms of assets came from lower-tiered banks, such as: EIB (63.87%), UAB (38.59%), and AJMANBANK (37.25%). Among the bigger banks, NBAD (17.57%), ADIB (15.24%), and FGB (11.15%) were notable for double-digit growth rates.

At the other end of the spectrum, ADCB (1.59%) and MASQ (3.61%) were the two lone banks, which saw their asset size contract in the last year. As noted previously, this is due to the contraction in loans and decline in cash levels after repayments, respectively.

ADIB and NBAD were consistent in size growth as their equity bases expanded by 61.35% and 21.19%, respectively. Among the bigger banks, ADCB (12.16%) and FGB (11.91%) recorded solid growth in capital as well.

Smaller banks such as CBI, NBF, and RAKBANK recorded mid-teens growth both in terms of assets and equity. RAKBANK, for instance, recorded growth of 21.26% in equity and 11.21% in assets.

Only BOS and DIB marked a contraction in capital base (0.68% and 0.52%, respectively).

Several of these banks, which exhibited strong asset and equity growth also recorded a combination of any of the following: (1) solid earnings, (2) growth in credit volume, (3) growth in investments, and (4) higher cash levels.

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Capital Adequacy: Capital Levels May Provide a Roadmap for Future Dividend Payments

Local banks have reasonably higher capital adequacy ratios (as represented by both total CAR and Tier 1 CAR) compared to the limits set by Basel II and by the UAE Central Bank. Ratios are higher too compared to the average ratios of US and developed European banks.

Equity multiplier also compare favorably versus the averages of the banks in the more developed markets, considering that local banks enjoy a higher average return on capital. Local banks enjoy an aggregate equity multiplier of 8.20x as well as an average RoAE of 12.55%, which compares favorably with the average of banks in the developed markets (~20x for EM and roughly 5% for RoAE).

These could provide a roadmap for future dividend payouts. As of end-2012, several banks have increased their cash distributions close to or at part with pre-crisis distribution levels,.

Banks such as ADCB for instance distributed AED0.25 a share or 25% cash dividends. This is higher than the 20% distributed in 2011 and almost at par with the distribution of 30% last seen in 2007 (for fiscal year 2006). Several other banks have beefed up their cash dividend distributions such as: ADIB, CBD, DIB, EMIRATESNBD, INVESTB, MASQ, NBAD, NBQ, RAKBANK and UAB.

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Capital Adequacy: Capital Levels per Bank

The chart at the top left shows in picture how local banks compare really well versus the minimum limit set by Basel II in terms of the total regulatory CAR. Even, EIB, which posted the lowest ratio at 12.34% remains well above Basel’s floor CAR of 8% .

The strong capitalization of the domestic banks as well as their improved profitability in the last year made it possible for more generous cash distributions (except AJMANBNK, CBI and EIB—the banks with no cash distributions for 2012) to their shareholders. By the end of 2012, the average dividend payout of the banks reached more than 50%, higher than 2011’s 46.51%.

Individually, several of the banks have started to distribute cash near to or at par to the levels seen pre-crisis. Case in point is ADCB—which has distributions of AED0.25 per share for 2012, higher than 2011’s AED0.20 per share and a complete reversal of non-distribution in 2008 and 2009.

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Asset Quality: Credit Volume Growth Fastest in Three Years

In 2012, total loan volume (net) reached AED961.44bn, or a YoY aggregate improvement of 5.79%. This has been the fastest growth recorded in the last three years (i.e., 1.97% in 2010, and 0.83% in 2011). Average loan growth in 2012 was at 12.15%.

The record for the growth in gross loans is very similar, having reached AED1,042.41bn in 2012, or an aggregate growth of 6.65%. The almost similar growth record connotes that loan loss provisions’ growth in 2012 was slower compared to prior years.

Loan loss provisions in 2012 reached AED80.87bn, 18.11% higher YoY but slower compared to the 52.92% jack-up recorded previously.

Cash significantly rose in 2012, reaching AED177.53bn or 48.60% higher YoY. The increase in cash went along with the sector’s higher profits (with reported income having increased by 13.65% YoY) and higher borrowings (which increased by 10.14%). The more benign debt market backdrop encouraged several banks to take advantage of cheaper funds to retire and/or refinance existing borrowings (which were acquired at higher borrowing costs).

Overall, 66% of the total funding uses are taken up by net loans, with rest split 12%, 12% and 10%, by investments, cash and inter-bank transactions respectively.

Loan growth was significant for smaller banks such as AJMANBANK (54.29% to AED4.54bn, EIB (52.87% to AED19.83bn), and UAB (35.07% to AED10.88bn).

A more modest loan growth was seen from bigger banks such as ADIB (4.84% to AED51.20bn), DIB (7.14% to AED55.18bn), EMIRATESNBD (6.19% to AED212.02bn), and FGB (9.48% to AED114.64bn).

Meanwhile, several big banks recorded notable jumps in cash levels. In fact, the top five banks, in terms of asset size, all saw the biggest increases in cash levels. Foremost is NBAD, with a whopping 144.98% to AED54.94bn. Common to these banks are the huge increases in certificates of deposits and other balances parked with the UAE Central Bank and other central banks. For instance, NBAD saw balances with the UAE CB increased by AED1.37bn, and with other central banks by AED29.44bn.

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Asset Quality: Concentration Continues to Shift Away from Property and Retail

In aggregate terms, total loans to the property sector (composite of pure property and construction) contracted by 1.50% to AED222.30bn in 2012 (versus a growth of 6.71% in 2011). Consequently, the sector’s share of the total loan pie shrank by about 176.40bps to 21.33%, as of end-2012. Besides the concern that linger regarding the health of the sector, the confusion in the last quarter of 2012 regarding mortgage cap rules, may have also deterred demand. For the record, in January 2013, the UAE Central Bank has stated that no circular has been sent to the banks regarding mortgage cap regulations. However, the regulator added that it is working on new cap rules (seen to be enforced within six to nine months, post-consultation with banks).

As for the retail sector, its share of the loan pie also contracted by more than 30bps to 24.56%, despite its size growing by 5.30% YoY to AED255.99bn.

Loans to the services sector, which grew by 16.32% to AED107.28bn also saw its market share in 2012 expand by almost 90bps to 10.29%.

The same can be said for the loans to financial institutions, which grew by 17.99% to AED104.23bn. Its market share of the loan pie expanded likewise, to 10.00% from 9.04% in 2011.

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Asset Quality: Curiously…..Sovereign Exposure Jumped Despite Central Bank Limit Rules

In April 2012, the UAE Central Bank amended large exposure limit rules and introduced caps on loans to local governments and their related entities. The new regulations prevent banks from lending more than 100% of their capital to the government and government-related commercial and non-commercial entities. Where there is an excess, banks should make arrangements to regularize their position no later than 30 September 2012. This development sent the banks into a tizzy. Despite that, the CB stood firm on its deadline and made no extensions. However, the regulator somehow opened a way out as it also declared that “each bank will be dealt with individually”.

EMIRATESNBD remains to be the one with the highest exposure to sovereign debts, as its ratio of loans to regulatory capital, as of end-2012 reached nearly 170%. Other banks identified in our last sector update such as INVESTB and SIB have managed to pare down their exposures. Almost half of the banks in our sector universe still has for an average about 70% exposure to government and quasi-government credits. This could be an opportunity for the other banks (with minimal to low exposure) with headroom to expand their lending activities.

By end-2012 lending to government increased by 21.84% to AED145.44bn. CBD and CBI are notable for their significant increase in sovereign lending. CBD, which has an exposure of 43%, grew its sovereign loans by 170%. CBI, the least exposed to government loans, recorded a 260% growth in lending to the government.

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Asset Quality: Headwinds Still Coming from Impaired Loans

Growth in NPLs has tapered off in 2012, while overall growth in gross loans continue in a steady pattern. At an average of 7.97%, the sector’s NPL to Gross Loan ratio, still points at some headwinds for the industry.

Going forward though, measures taken by both the government and the private sector could likely ease this concern on non-performing loans. In 2011, the UAE government has earmarked AED10bn to aide the qualified citizens to pay off their loans. The implementation of the support fund by the UAE government should curtail a significant growth in bad loans in the retail sector. Based on end-2012 figures, the size of the fund is nearly 20% of the aggregate provisions of the 19 listed banks included in this report. The implementation of this support fund will be positive to the bottomline of the banks, especially those with heavy exposure to mortgages and retail sectors, and at the same time with medium-to-high non-performing loans ratio, such as Emirates NBD, MASQ, DIB, ADCB, etc.

Meanwhile, the spate of corporate restructuring in recent months should also help ease worries on bad loans going forward. Most recently, it was reported that Dubai Group, an investment company owned by Dubai’s ruler, agreed this month on final terms to restructure USD6bn of debt with its main creditors. Islamic mortgage provider Amlak Finance is also proposing to extend the maturity on more than USD2bn of loans to creditors .

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Asset Quality: Investments Grew in Tandem with Lending Volume

Total investments (comprised of investments in financial instruments, associates and properties) increased by 8.43%, on an aggregate level, in 2012. The increase in total investments mostly came from the surge in investments in securities. The latter, which makes up on the average more than 75% of total investments, increased by 9.11% to AED132.33bn last year.

This jump in investments continued from the previous year, and coincided with the more receptive environment for risk assets such as equities and bonds. Overall global investor confidence seem to be on the rise. Various surveys from asset managers pointed out that confidence is returning across the board, with a significant number (~50%)1 of investors surveyed expressing more confidence about investment opportunities this year than last year. As we move through 2013, increased positive sentiment seem to be gathering momentum too. Previous nagging concerns such as geo-political risks, the Eurozone debt crisis, and the uncertainty on global economic growth have been relegated as faint buzz in the background. Of the local big banks, ADCB, ADIB, NBAD, and UNB recorded the largest increases in their investment in securities. Two of the nation’s biggest, Emirates NBD and FGB both showed decreases on their investments.

Meanwhile, investments in properties also increased to AED15.51bn, or by 7.14% YoY. The appreciation of the market values of properties, especially those based in the UAE, followed that of an improving domestic property sector. By the end of 2012, property experts such as Jones Lang La Salle and Knight Frank were united in saying that average property prices have risen by about 20% in Dubai.

1 Excerpt from the latest Schroder's Global Investment Trends Report

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Liquidity: Higher Deposits, More Borrowings Push Up Funding Base The sector’s total funding base as of end-2012 stood at AED1,268.76bn, or 9.92% higher (in aggregate terms) YoY. This improvement represents an acceleration from 2011’s 3.32%.

A solid growth seen in both current and savings deposits (which combined make up 32% of the total deposits pie) as well a healthy growth in time deposits (~58% of total deposits) underpinned the overall growth in customer deposits. The latter swelled to AED1,025.52bn or 11.88% YoY. Current and savings deposits grew by an average of 25% while time deposits advanced by nearly 9%. Other types of deposits (~4% of total) grew strongly mainly due to the growth in margin deposits, which coincides with the onslaught of margin trading/lending of brokers and banks.

Meanwhile, the attractiveness of the debt markets reappeared as the sector’s borrowings advanced by 10.14% to AED120.44bn (reversing 2011’s 9% decline). Those with the most notable hikes in borrowings include: ADIB, CBD, EIB, EMIRATESNBD,FGB, NBAD, NBF and UNB.

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Liquidity: LDR and Funding Utilization Levels Make Leeway for Business Growth

On the average, fund utilization for the UAE banks dropped for the second straight year, to 94.44%, from 96.53% in 2011 and from 99.98% in 2010. This came as the average growth in funding source at 15.18% continues to outpace the growth in funding use (14.69%) - much like the case last year (funding source growth at 4.59% > funding use growth at 2.35%).

The positive growth gap seen in 2012 came about mainly because deposits (contributing to the bulk of funding sources) grew at a higher average rate (versus loans, which is the major funding use). Most of the banks saw their utilization rates drop, the most notable of which were recorded by NBAD (1126bps to 77.94%) UAB (1191bps to 97.64%) , UNB (565bps to 97.83%), and BOS (582bps to 92.84%). Among those which saw improvements, the most notable is MASQ: fund utilization rate rose by 1196bps to 91.98%.

Lower fund utilization as well looser LDR are indicative of the banking sector’s liquidity. This and in light of a resurging local economy (pump-primed by real estate, tourism, services, oil and gas, etc.) pave the way for a positive outlook for the banks’ business growth. The sector’s average LDR by end-2012 was recorded at 93.59%, lower than 2011’s 96.35%.

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Profitability: Easing Benchmark Rates Easing Yields and Margins

The 3-mo AEIBOR (the benchmark used by UAE banks to guide loan pricing and deposit rates) has continued its downward trajectory till date. By end-2012, the average 3-mo AEIBOR fell by more than 32bps to 1.43%. The average YTD at 1.12% has so far fallen by 32bps, from that end-2012 level.

As the benchmark pricing rate eases, so do the various bank yields and charges. Aggregate yield on earning assets , cost of funds thus, net interest spread

Yield on earning assets dropped by 29bps by end-2012 to 4.77%. Meanwhile, cost of funds also dropped by 23bps to 1.49%. With the decline in earning assets yield steeper than the decline in funding cost, the banks’ net interest spread also dropped: by 6bps to 3.28%. Three of the countries largest banks recorded the most decline in interest spread, and these are: (1) DIB, dropping by 22.50bps to 3.07%, (2) EMIRATESNBD, dropping by 20.40bps to 2.77%, and (3) NBAD, dropping by 37.24bps to 2.57%.

However, some banks improved their spreads as their funding profile improved. As such, on the average, the trend for net interest spread continues to be positive. Notable among those with improved interest spread are: (1) ADCB, increase of 34.18bps to 3.43%, (2) ADIB, increase of 81.31bps to 4.02%, and (3) RAKBANK, increase of 13.39bps to 9.36%.

Another consequence of easing benchmark rate is that NIM also eased. As a whole, NIM fell to 3.31% in 2012, from 3.37% in 2011.

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Profitability: Solid Non-Interest Based Income Prop Up Weakness in Interest Income

While lending volume did grow at a better pace in 2012, the growth was offset by easing rates. As such, total interest income (interest income from conventional banking + income from Islamic financing) expanded at a slower rate of 3.98% to AED40.67bn in 2012 (versus the 12.07% growth recorded in 2011). If further broken down, interest income from conventional banking increased by 5.23% to AED33.21bn but income from Islamic financing dropped by 1.23% to AED7.46bn.

Fortunately, such weakness has been somehow countered in 2012 by the surge in non-interest based income, which grew by 17.04% to AED16.82bn (reversing its 7.45% decline in 2011). Most of the improvement is linked to the more than double growth (~106%) in investment income to AED2.53bn, and to the 15.09% growth in trading income to AED2.75bn (which is faster than the 12.37% growth recorded in 2011). The latter may have coincided with higher market trading activities in the last year and which persists to date (In 2012, the average daily turnover of the markets at nearly AED300mn, was 23% higher YoY. YTD, the average daily market turnover has reached AED740mn, or more than 150% higher than 2012’s average).

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Market Performance: Average Price Uptick at More than 40%!

The local stock markets have been enjoying a resurgence lately, especially in the earlier part of the year, driven by its cornerstone industries, which are banking and property.

YTD, the ADX main index is up by more than 32%, and the market’s banking index is up by 35%. Meanwhile, DFM is up more than 36% YTD. Its banking index is up by 45%.

As for the banks in our universe, their average price performance YTD reached more than 40%. NBQ is just a few fils away from doubling its price, others which enjoyed above average price increases include: EMIRATESNBD, UNB, DIB, ADCB, RAKBANK, SIB, INVESTB, and AJMANBNK.

The rest were mediocre, with two of the largest NBAD and FGB still enjoying upper 20s price appreciation. Meanwhile, MASQ and NBF went against the general uptrend enjoyed by the sector.

The encouraging performance of the sector has been flavored by its strong performance in the last year as well as for the last quarter. Market participants also found the repayments of Tier II MoF notes beneficial to the sector. Last but not the least, market multiples were reasonably attractive, and continue to be attractive despite the huge adjustment to share prices seen in the past several months.

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Market Performance: Multiples Remain Attractive Despite Surge in Prices

As noted in the previous page, one of the factors leading to the increasing attention to the listed banks is the attractiveness of their price multiples.

By the end of 2012, banks were trading at an earnings multiple of 9.44x, versus the UAE market’s average of 9.28x.

At present, the banks are trading at an average trailing PE of 9.45x, versus the overall UAE market’s average of 12.46x and versus the 12.40x average of its MENA peers. In terms of book valuation, the UAE banks, on the average are a little above their book values, at 1.27x (versus UAE’s average of 1.26x, and MENA peer average of 1.42x).

Banks have been more generous in the last year in their dividend payouts, with several of them returning their distributions to pre-crisis levels. These imply an average yield of 5.30% (compared to the overall average of 5.00%, and the current bond yields of Abu Dhabi 1 at 0.57%, and Dubai2 at 3.90%).

1 Mid-yield of Abu Dhabi’s 2014 bonds, as of 25 June 2013 2 Mid-yield of Dubai’s 2014 bonds, as of 25 June 2013

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Latest Banking Developments

As Yields Decline, Banks Encouraged to Retire Tier II Ministry of Finance Notes

In support of the local banking system during the height of the 2008-2009 financial crisis, the MoF injected some AED50bn of deposits into the country’s banks. The banks were then given the opportunity to convert these deposits into seven-year (7y) subordinated loans in 2009. These were classified as Tier II subordinated loan capital for the first two years, after which they amortize at a rate of 20% per year until their maturity on December 2016. The corresponding interest rate was 4% for years one and two, 4.5% for year three, 5.0% for year four, and 5.25% for the last three years to maturity.

When these notes were first introduced, banks lapped them up to cushion their liquidity and capital bases. Since then however, growth in lending volume has been quite limited which played into the banks improving their funding and liquidity levels. Likewise, capitalization in the system also improved despite some losses. Regulatory capital has improved as banks retained their earnings and limited the growth in risk-weighted assets. As of end-2012, the sector’s regulatory capital adequacy ratio stood at a high of 21.99% while Tier I CAR stood at 19.06%.

However, the past several quarters have seen funding costs and yields on debts ease. These developments encouraged the local banks to issue debts to replace their more costly issuances dated 2008 to 2009. As such, beginning the second half of 2012, a trend started in which banks retired their expensive debts and replaced them with lower-cost funds. NBAD retired a portion of its AED5.6bn MoF notes in 2012 (As of this writing, NBAD has completely repaid its subordinated loans.). MASQ and RAKBANK have completely repaid their MoF notes in 2012.

Since the start of 2013, nine other banks either completely retired or partially paid-off their MoF notes. To date, of the total initial uptake of the Tier II notes (~AED50bn), more than 75% have been retired. This leaves the outstanding amount at around AED11bn. The majority of this outstanding amount is taken up by EMIRATESNBD, which still has about AED9.6bn yet to be paid.

Another incentive for the local banks to retire their subordinated notes prior to maturity is to diminish the risk of a sudden “capital cliff” by 2016. As noted in the first paragraph, the subordinated loan capital will diminish over time. Under the terms of these notes, the weight attached to the capital decreases over time, until banks can only account 20% of the original value as capital by 2016.

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UAE Finally Secures Emerging Market Status from MSCI

Globally-recognized index provider MSCI has finally upgraded the UAE and Qatar to "emerging market" status after six years of efforts by exchange officials in both countries to win the confidence of global investors. The MSCI Emerging Markets Index, which tracks USD7.3 trillion of equities around the world, is considered the A-list of growth markets and includes countries such as China, Brazil and India. The UAE and Qatar's upgrade to membership in the index is expected to take effect around May 31, 2014.

The move is a major sign of approval from institutional investors for the countries' stock markets, and is expected to attract more stable sources of capital to local equities (a note from HSBC previously said that the inclusion could ring more than USD430mn flowing into Qatar and around USD370mn into the UAE). MSCI Emerging Markets is the most widely-used index by investors in developing markets. Because much of the funds tracking the index are passive investors, inclusion in the index compels additional capital to be funneled to the markets it covers.

According to MSCI, Qatar would account for 0.45% of the weighting of the Emerging Markets index, with the UAE accounting for 0.40%. The UAE and Qatar first sought index inclusion in the emerging markets index 2008 and had been denied entry to the grouping five times since the first review in 2009. Both had been designated as "frontier markets".

The local markets have seen prices push northwards from the date of consideration of a market upgrade as well as during the days surrounding the announcement of the actual upgrade. This is but a logical market reaction, as participants hope that the upgrade brings several tidings, which include among others: (1) more institutional and international investors that shy away from frontier markets, which are deemed more risky and non-investment grade; (2) more participation from institutional investors connote “more patience” and less speculative capital flows; (3) re-classification is usually followed or accompanied by economic and financial policy reforms (including improvements in market systems and infrastructures).

In several cases, the initial announcement of a positive re-classification leads to overshooting1 of prices (as speculative buying goes into overdrive). As such, there could be an actual negative effect on the market on the event of the actual re-classification (which as noted previously, for UAE is sometime in May 2014). Apart from the correction in prices that is consistent with the initial overshooting, there could be other consequences of the reclassification that are not necessarily benign (after the immediate positive impact, that is), at least in the medium-term.

With improved trading activities and greater participation from a wider range of market participants, the UAE markets could likely see further diversification in that more companies in various industries could be encouraged to list and trade publicly. The expected flow of foreign investments which could directly or indirectly go into these assets could likely lead to price inflation. Meanwhile, as the upgrade implies that UAE enters into the international investible space, corporate credit ratings could improve which could in turn, influence the cost of borrowings to mellow. What could ensue then is the willingness of banks to lend out more. In the process and in the overall euphoria of a seemingly vibrant economic backdrop, such bank lending could be potentially indiscriminate (such that credit facilities will be granted even to firms whose asset growth is linked more to inflation rather than deeper fundamental factors). Now, this is where the less palatable side of things come in—if such a scenario crops up, there is a potential of the domestic banking system infecting itself with a credit crunch (a scenario much like the 2008 credit bubble).

1 Overshooting Effect is a familiar concept in the foreign exchange markets. Overshooting was introduced by German economist Rudi Dornbusch in the famous paper "Expectations and Exchange Rate Dynamics," published in 1976.

The model is now widely known as the Dornbusch Overshooting Model. In a nutshell, investors bid up prices in anticipation of the entry of more capital, only to be disappointed by the actual inflow.

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Creation of National Credit Bureau May Lead to Eventual Lowering of Cost of Funds

At the end of May 2013, it was announced that the country is launching its first integrated credit bureau, Al Etihad Credit Bureau. It was started last year by the MoF as a stand alone entity with a paid-up capital of AED200mn. The bureau is owned by the federal government, although the Central Bank oversees and supervises its operations. Pilot credit scores on individual investors are slated to begin by July this year, ahead of the official start-up in 2014. . This national bureau replaced Emcredit, a Dubai-based credit bureau that did not have a sufficient mandate to cover all of the UAE’s banks. The latter has already been wound down.

A total of 13 banks will be included in the pilot scheme, the reports said, without revealing which of the country's 23 local and 28 foreign banks would participate. It is hoped that a credit bureau will help banks more accurately assess the risk of individual customers defaulting on loans. Lenders and regulators have long campaigned for the establishment of a credit bureau, so that banks might reduce their reliance on cheques for securing loans. This reliance is problematic because although the number of cheques bouncing declined in 2012, the failure rate is still significant. The value of invalid cheques totaled AED46.8bn in 2012, according to the Central Bank.

If done and implemented correctly, the credit bureau shall give rise to better risk selection (based on historical credit behavior of both individual and corporate borrowers). Ultimately, this could mean lower credit charges and lower borrowing costs. As per the management of the bureau, credit pricing could decline by as much as 30% (based on statistics from the World Bank and the International Financial Corporation) once the credit reporting system comes into full swing.

More Changes to Banking Regulations and Benchmark Rate Setting

Citibank has withdrawn from the panel that sets the UAE's interbank rates, becoming the second global bank to stand down in the aftermath of the scandal around London Interbank Offered Rates, or LIBOR. The American banking giant follows Britain's Barclays, which in July announced it would leave the panel that sets the Emirates' equivalent benchmark, known as AEIBOR. The move raises questions over the future of the Emirates' banking reference rate, as increasing numbers of banking regulators seek to move away from the discredited Libor system following a scandal which led to USD2.5bn in fines for global banks and a string of arrests. Bankers frequently complain that the UAE's interbank rates do not reflect the actual cost of funding and have long called for an overhaul.

Meanwhile, in May the Central Bank told banks to halt transfers of loans by UAE nationals for three months so that it could conduct a study of market conditions. Financial services professionals believe the move was likely an effort to protect consumers from borrowing too heavily (Many bank customers were taking advantage of introductory offers carrying zero interest to effectively refinance their outstanding debts without paying off the original amount). Recently, this move by the

CB has been challenged by the commercial banks with the industry body, UAE Banks Federation , asking the regulator to reconsider same and allow banks to resume their activities of transferring and rescheduling loans. The federation said the Central Bank’s decision limits the choices of the customer, and plays against the open-market and the free economy system adopted by the country, as well as the decision gives rise to monopoly, and harm and damage the banks reputations.

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Domestic Banks Take Up the Cudgels as European Banks Limit Their Game

Just as domestic companies are more active now as issuers in the debt markets, domestic banks are also more active in providing credit not only to local borrowers but to regional and international borrowers as well. This was not the case five years back when European banks dominated over the debt markets, in terms of extending credit to lenders.

But since the advent of the European debt crisis, which drove the European banks to deleverage and conserve their resources, there was a slack of financing sources. In the interim, UAE banks have managed to fortify their liquidity and capital levels (despite some losses due to impaired loans) and this enabled the local banks to fill the void left by their European counterparts.

This year alone, several big names have already announced (with several more rumored) bond issuances and loan agreements with domestic banks. For instance, most recently, it was reported that Atlantis, The Palm is in the market for USD800mn refinancing and luxury hotel chain Jumeirah Group is out with six-year USD1.4bn loan, while fund investment firm, Investment Corporation of Dubai has closed a USD2bn deal. The country’s biggest banks such as ADCB, NBAD, Emirates NBD, and UNB are among the lead arrangers for these issuances.

DIB Completes the Acquisition of Mortgage Provider Tamweel

DIB is nearly done with its full acquisition of mortgage lender Tamweel as its 10:18 share swap1 was executed in early May 2013. As of March 2013, DIB was in the process of issuing 156.7mn shares at AED1.00 par value to the non-controlling interest of Tamweel, who have accepted the share swap offer. As such, DIB’s shares increased from 58.20% to 86.50%. As per the terms of the acquisition, DIB will further issue new shares by way of a capital increase of the bank’s issued share capital in accordance with the Commercial Companies Law, to execute the share swap. With this entire maneuver, DIB has

consolidated its mortgage portfolio with that of Tamweel, boosting the mortgage sector. Meanwhile, shareholders of Tamweel should benefit from having shares of a big solid bank, with more than one revenue stream.

FGB Buys Dubai Groups’ Credit Card Firm

FGB has signed an agreement to acquire Dubai First, the consumer financial services business, from Dubai Financial Group, for AED601mn in cash. Dubai First has a UAE credit card market share of 4.5% and operates out of its Dubai headquarters and branches and sales offices in Abu Dhabi and Sharjah. The company has 464 employees. This acquisition complements FGB’s strategy of offering more value to an expanding UAE customer base. Established in 2007, Dubai First is a customer finance company specializing in liability and credit card products. Aggregate gross assets of Dubai First amounted to approximately AED700mn as on the date of the latest audited accounts.

1 Each Tamweel shareholder was offered 10 DIB shares for every 18 Tamweel shares. The offer valued each DIB share at AED2.25 and each Tamweel share at AED1.25. After closing the offer, DIB has applied to the regulator to

delist Tamweel from the DFM. DIB took a 57.33% stake in Tamweel in 2010, a move that rescued the mortgage lender, which was struggling during a crash of Dubai’s property market. Before the share swap offer, DIB already owned 58.20% of Tamweel. As of this writing, Tamweel remains listed on the DFM. However, the Board of Tamweel has set an extra-ordinary general meeting on 07 July 2013 to approve its conversion into a private company and delist from the Dubai bourse.

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Technical Oscillator

Market Liquidity Relative Valuation

Asset Quality Income

UA

E B

anks

: Sc

ore

card

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UAE Banks: Scorecard Highlights

Below is an update to the banking sector scorecard last presented as part of our Banking Sector Research distributed in May 2012.

As a reminder, the RAMZ scorecard was created to provide our valued readership with a quick and easy rating system that monitors relative valuation measures on both fundamental and technical fronts along with selected proxies of market liquidity, size, and trading activity. For the banking sector, scores are driven by four (4) major value drivers:

Earnings Power and Quality of Assets

Income Generation

Technical Situation

Size, Float, and Trading Activity

This year’s scorecard ranking include among the Top Five (5), the following banks: First Gulf Bank (FGB), Abu Dhabi Commercial Bank (ADCB), National Bank of Abu Dhabi (NBAD), Union National Bank (UNB), and Dubai Islamic Bank (DIB).

The high scores garnered by these banks of these banks were driven by their:

High-Earning Power and Income Generation,

Commendable Asset Quality ,

Attractive Price Multiples,

Ready Market Liquidity, and

Encouraging Technical Positions.

Important Notice: Further analysis and suitability tests are strictly required, and the scores by no means reflect recommendations or offer detailed valuations for strategic investment purposes.

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UAE Banks: Scorecard Highlights

Other Notables

Three of the banks included in this year’s Top 10 Scorecard Ranking, namely: UNB, ADIB and MASQ also appear among our value stock selections (the accompanying report was published in April 2013).

UNB and ADIB are among our traditional value stock picks. To recap, we defined traditional value stocks as those with reasonably solid fundamentals which are selling for much less compared to their intrinsic values.

MASQ, meanwhile, is part of our distressed value stock picks. Distressed value stocks are those which substantially lost their value as they are near to or at bankruptcy levels.

FGB Regains Lead

FGB returns to the top spot in this year’s scorecard ranking. The bank moved from its number three position in 2012, to retake the lead from UNB. FGB’s ranking was pushed higher as it gathered high scores in terms of valuation (particularly on trailing earnings multiple), NPL ratio (having one of the lowest among the banks), and share in trading value (more than a fifth of the total value turnover of the banks in the scorecard universe).

Meanwhile, UNB drops from the apex position to take the fourth slot this year. The two other banks included in the top five, namely: ADCB and NBAD saw their rankings move higher by an average of two notches.

Dubai’s Biggest Banks Dropped Rankings

Contrary to the status of the biggest banks in Abu Dhabi, Dubai’s largest banks such as DIB and EMIRATENBD saw their 2013 scorecard rankings drop several notches lower.

Majority of the drop in rankings for both Dubai-based banks can be attributed to their lower rankings in terms of (1) trailing PE ratios, (2) dividend yields and (3) technical oscillator as represented by their 52-week %K.

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Scorecard Top Four: First Gulf Bank (FGB)

FGB Repays Tier II Notes in Full

During the 1Q13, FGB was the first bank to repay in full its AED4.51bn Tier II notes to the MoF. The bank made the repayment on the back of strong liquidity and capital base, (Tier I capital adequacy ratio of 19% as per 1Q13).

As the repayment implies cost savings, estimated around AED135mn1, there is also an implied benefit to earnings and price multiples. Expected FY13 profits could reach to AED4.59bn (based on AED4.46bn latest consensus estimate from Bloomberg), representing a potential YoY earnings growth of more than 10% (versus the 7% growth estimated). EPS then could increase to AED1.53 from AED1.49. Consequently, the forward PE will be reduced by 2.95% to 10.28x (calculated based on the closing price of AED15.75, as of 25 June 2013).

1Q13 Performance Based on Solid Core Business Growth

FGB managed to increase its 1Q13 reported earnings by 13% to AED1.05bn. This was mainly driven by the 6.12% increase in the net interest and Islamic financing in 1Q13 to AED1.38bn, compared to AED1.30bn in 1Q12. The growth in non-interest income by 33% also supported FGB’s bottom line. Investment gains increased to AED68mn from AED32mn YoY. Foreign exchange and treasury income swelled to AED50mn from AED5mn a year earlier. Fee-based income increased by 13% YoY to AED346mn.

Effective Control in Operating Expenses

FGB is seen as one of the top among the UAE listed banks in effectively managing its expenses. The bank ended the quarter with a cost-to-income ratio of 16.12%, which is by far, the lowest ratio among UAE banks (with the sector average at 28.50%). However, the bank increased its provision by AED21mn YoY to AED433mn.

One of the Highest Loan Growth Among its Peers

Loans advanced by almost 3% YoY in 1Q13. FGB’s loan growth was above average (~2%) and was one of the highest in its peer group (only topped by ADIB which saw its 1Q13 loan growth at 5.5%). 1Q13 loan volume is broken down as: 6.% - Wholesale Institution; 30% - Retail and 4% - International. However, with the resent purchase of Dubai First, FGB’s retail portfolio is likely to expand.

1 This refers to the estimated annualized FY13 cost savings and was calculated based on FGB’s

average cost of funds in 2012.

Interim Results

(AEDmn) 1Q13 1Q12 % Change

Interest Income 1,375 1,295 6.12%

Non-Interest Inc 500 376 32.90%

Operating Inc 1,875 1,673 12.08%

Operating Exp 386 324 19.16%

Pre-Provision Inc 1,489 1,349 10.38%

Provisions 433 413 4.99%

Recurring Inc 1,051 935 12.39%

Att. Net Profit 1,046 935 11.89%

(AEDmn) Mar-13 Dec-12 % Change

Loans 117,804 114,644 2.76%

Deposits 119,152 119,305 -0.13%

Assets 172,957 175,034 -1.19%

Borrowings 13,806 17,625 -21.67%

Equity 27,742 29,348 -5%

90%

92%

94%

96%

98%

100%

102%

104%

106%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2009 2010 2011 2012 1Q13

FGB: Loans/Deposits

Loans Deposits LDR Rat io

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

ADCB FGB NBAD ADIB UNB

QoQ Loan Growth

Key Data (based on 25 June 2013 Market Price)

Market Price (AED/share) 15.75

Shares Outstanding (mn) 3,000.00

Trailing PE Ratio (x) 6.50

Price to Book Ratio (x) 1.70

Dividend Yield (%) 5.29

Return on Equity ( %) 17.31

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Scorecard Top Four: Abu Dhabi Commercial Bank (ADCB)

Slow Growth in Credit Volume and Easing Yields Contribute to Weaker Interest Income A strong growth in credit volume remains a challenge, and while ADCB in the last quarter recorded growth, it was quite measly at 0.41% to AED124.38bn. Income base was also hit by a more benign pricing, which was a natural consequence of easing benchmark yield. The 3-mo AEIBOR dipped by 17bps to 1.1263% from end-December 2012 to end-March 2013 (the benchmark rate continues to fall as it was last recorded on 25 June 2013 at 0.92%, or 38.14bps down YTD). By 1Q13, ADCB recorded a 9.83% YoY and by 7.89% QoQ drop in total interest income to AED1.66bn. The decline was cushioned in part by the resurgent Islamic financing business of ADCB. Interest income from Islamic financing grew by 62.84% YoY and by 30.81% QoQ to AED137.85mn. These growth spurts are stronger compared to the previous quarters, which come as no surprise considering that Islamic financing volume improved significantly to AED9.06bn, up 131.57% YoY and 37.34% QoQ. 1Q13 Earnings Get Further Support from Non-Core Income As opposed to prior quarters when growth in non-interest income was fueled by trading income, 1Q13 saw the growth coming other operating income, mostly gains from the retirement of hedges. In the last quarter, ADCB recorded gains worth AED97.28mn from the retirement of its hedges. Positive growths in dividend income (53.95% YoY to AED11.96mn) and property management income (21.49% YoY to AED28.56mn) also supported the rise in other income. Fee-based income declined by 12.93% YoY but up by 3.62% QoQ to AED214.89mn. Gross fees and commission income reached AED281.31mn in 1Q13, lower by 2.37% YoY primarily due to a slowdown in the growth of corporate banking fees and other fees. Trading income dipped by 4.61% YoY but was up by 65.04% QoQ to AED125.87mn. The decline in trading income coincided with the lower value of derivative financial instruments as of March 2013 at AED4.37bn, compared to its level of AED4.53bn in March 2012, and AED4.99bn in December 2012. Not surprisingly, trading income on derivatives fell to just AED5.49mn in 1Q13, from AED23.05mn in 1Q12. The silver lining is that trading income from treasury and foreign exchange remains to be resilient as combined, there was a growth of 10.53% YoY to AED120.39mn.

Interim Results

(AEDmn) 1Q13 1Q12 % Δ



Operating Inc 1,744 1,655 5.40%




Recurring Inc 905 862 4.94%

One-time Inc 0 0 -

Att. Net Profit 829 797 4.08%

(AEDmn) Mar 2013 Dec 2012 % Δ

Loans 124,378 123,195 0.96%

Deposits 111,056 109,217 1.68%

Assets 179,993 180,796 -0.44%

Borrowings 24,833 26,140 -5.00%

Equity 21,012 19,832 5.95%








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Scorecard Top Four: National Bank of Abu Dhabi (NBAD)

NBAD Investment Income Back on Track

In 2012, NBAD reversed its growth in investment income to positive from negative. This was mainly due to the macroeconomic upturn in the UAE. In the past quarter, the momentum has been sustained as investment income nearly doubled to AED263.64mn from AED91.16mn. This pushed NBAD’s overall non-interest income higher by 69% YoY to AED1,08bn. This was also supported by the 62% YoY increase to AED132.51mn in its foreign exchange and treasury income in 1Q13.

NBAD’s 1Q13 Profits Topped Estimates

NBAD earned AED1.41bn for the 1Q13, up 35.5% from AED1.04bn in the corresponding quarter in 2012. The result was higher than expected with consensus estimated at AED1.09bn. The outperformance was a due to a combination of factors, which include the surge in non-core income (courtesy of the strong showing of investment income), modest growth in net interest income, as well as other factors. Net interest income on traditional banking increased by 5.5% to AED1.54bn, driven by the lower interest expense. However, unlike the majority of the banks in UAE, NBAD YoY Islamic income declined in 1Q13 by 0.86% to AED68.74mn.

Net interest margin declined to 1.97% during the quarter, lower than 2.14% for 1Q12 as a result of increased liquidity deployed across highly liquid asset classes. Loans to total Asset ratio was 50% compared with 56% in 1Q12.

NBAD Issued USD500mn Senior Unsecured Convertible Bonds

In 23 May 2013, the bank raised USD465mn through issuing senior unsecured convertible bonds. The five-year bonds are convertible into shares in the company and carry a coupon of 1%. The initial conversion price has been set at USD4.25, representing a premium of 30% above the volume weighted average price of the NBAD Shares between launch and pricing. Unless otherwise redeemed, purchased, converted or cancelled, the bonds will be redeemed at par on maturity on 12 March 2018, in accordance with the terms and conditions of the bonds. Further, there is an option to buy USD35mn in additional bonds raising the total value of the issue to USD500mn.

Interim Results



Non-Interest Inc 1,084 642 68.84%

Operating Inc 2,510 2,030 23.68%




Recurring Inc 1,409 1,041 35.45%

Att. Net Profit 1,409 1,041 35.45%


Loans 162,448 164,599 -1.31%

Deposits 205,621 190,304 8.05%

Assets 322,022 300,599 7.13%

Borrowings 19,810 19,074 3.86%

Equity 31,223 31,133 0.29%

0

100

200

300

400

500

600

1Q12 1Q13

NBAD: Non Interset Income YoY Change

Other operat ing income Net foreign exchange gain Net gain on investments

0

500

1,000

1,500

2,000

2,500

3,000

1Q12 1Q13

NBAD: Income Growth YoY

Non-Interest Inc Interest Income



Shares Outstanding (mn) 5,333





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Scorecard Top Four: Union National Bank (UNB)

Islamic Income Growth Supported UNB 1Q13 Earnings

UNB;s income from its Islamic business increased by 64% YoY to AED134mn. This growth offset the decline seen on the interest income (net interest income from conventional banking dropped by 5% to AED508.16mn YoY compared to AED536.65mn during the same period last year).

As a result, the profits increased by 4.35% YoY. UNB’s cost-to-income ratio is considered to be among the lowest in UAE banking sector (second after FGB), with the ratio at 16.50% recorded at the end of 1Q13.

Beyond the improvement in Islamic financing as well as a tight lid on operating expenses, the growth in income from non-interest activities also supported the bank’s bottomline. Gains on trading of non-financial instruments reached AED28mn, an increase of about nine times (9x) compared to the AED3mn posted in 1Q12. Fees and commissions remained at their previous levels of around AED124mn.

UNB Provisions Under Control

The bank managed to contain the growth in provisions as it posted a modest growth of 2.86% YoY, compared to the sector average of 4.15%. Meanwhile, customers deposits for 1Q13 increased by AED4.3bn to AED67.79bn, this was mainly due to pre fund maturing deposits at lower interest rates, extend deposit maturities and to diversify customer base. The loan to deposit ratio improved in 1Q13 to 85.90% compared to 91.60% YoY and 90.40% as 4Q12.

Diversification Through Geographic Expansion

UNB expanded its branch network by opening seven (7) new branches in the UAE and two (2) new branches in Egypt in the first five months of 2013. These latest additions brings UNB’s geographic reach as consisting of over 95 branches in the five countries where its currently operates. The branch network expansion, especially targeted in the domestic market is part of the bank’s strategic plan to generate 5% to 10% earnings growth this year by focusing on local franchises. INB plans to open more than a dozen branches across UAE this year.

Interim Results


Interest Income 642 618 3.88%


Operating Inc 818 782 4.68%


Pre-Provision Inc 628 597 5.18%


Recurring Inc 495 475 4.22%

Att. Net Profit 492 471 4.35%


Loans 58,228 57,344 1.54%

Deposits 67,789 63,438 6.86%

Assets 90,823 87,138 4.23%

Borrowings 4,694 5,807 -19.17%

Equity 14,066 13,977 0.64%

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

2009 2010 2011 2012 1Q13

UNB: Conventioanl VS Islamic Income

Islamic Financing Income Conventional Banking Income

0

20

40

60

80

100

120

140

160

180

1Q12 1Q13

UNB: Operating Income

Others Non trading financial instruments Trading financial instrumentDealing in foreign currencies Fee and Commesion








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Scorecard Featured Bank: National Bank of Ras al Khaimah (RAKBANK)

Interim Results

(AEDmn) 1Q13 1Q12 % Δ

Interest Income 570.63 538.21 6.02

Non-Interest Inc 181.77 154.31 17.79

Operating Inc 752.40 692.52 8.65

Operating Exp 322.99 306.74 5.30

Pre-Provision Inc 429.41 385.78 11.31

Provisions 61.43 60.49 1.55

Reported Profit 367.98 325.29 13.12

Attributable Profit 367.98 325.29 13.12

(AEDmn) Mar 2013 Dec 2012 % Δ

Loans 20,513.46 20,607.54 (0.46)

Deposits 20,421.26 20,719.73 (1.44)

Assets 28,326.28 27,250.14 3.95

Equity 5,455.47 5,695.22 (4.21)

Earning Assets 23,910.70 23,390.25 2.23

The King of Shareholder Returns among Local Banks Among the local banks, RAKBANK has consistently been the one with the highest Return on Equity (RoE). Its annualized RoE as of end-March was at 27.58%. One of the major reasons behind such performance stems from the bank’s higher than average Net Interest Margin (NIM), which was last recorded at 10.28%, more than double that of the sector. RAKB has historically high margins as the bank is a niche retail player, with particular specialty in the credit card business – probably the highest, if not one of the highest yielding bank services. Its exposure to credit card loans affords RAKBANK to enjoy high interest charges, which translate to wider interest spread and ultimately, higher interest income. Earnings Supplemented by New Business + Higher Investment Income 1Q13 was landmark for RAKBANK as it was then the bank launched its Islamic business. Net interest income plus net profit from Islamic financing grew by 6% YoY to AED 570.6mn. Non-interest income, which stood at AED 157.28mn, climbed by 14% YoY. This increase is attributable to fee income stemming particularly from auto loans, mortgages, bancassurance, and foreign exchange services. In addition, investment income grew by 50% compared to same period last year as RAKBANK continued to invest in quoted debt instruments. Total assets as at 31 March 2013 were AED 28.3bn, an increase of AED 1.1bn over 31 December 2012, with cash (primarily reflects the 1Q13's net profit and increase in deposits from banks) and investment securities posting the most significant increases. Loans retracted by 1.45% to AED19.99bn in March 2013, from AED20.28bn in December 2012. Customer Deposits, likewise, dropped by 2.76% in March 2013 to AED 20.15bn, from AED20.72bn in December 2012. RAKBANK's advances to deposits ratio and liquidity ratio stands comfortably at 93.6% and 19.3% respectively. Shares of the bank have been on an upward momentum since 2Q13 started, most probably benefitting from the improved risk sentiment on equities overall, as well as from a solid 1Q13 earnings results and rating affirmation by Fitch1. Since the end of March 2013, share price has risen by more than _% to AED_.

1 In April 2013, Fitch Ratings has RAKBANK’s Long-term Issuer Default Rating (IDR) at 'BBB+' with a Stable Outlook and Viability Rating (VR) at 'bb+'. These ratings reflect Fitch’s view that there would be a high probability of support for the bank from the UAE federal authorities if required. This is based on the bank's systemic importance as a leading retail bank and deposit taker, the strong history of support for local banks from the UAE authorities and the Ras Al-Khaimah government's 52% stake in the bank.








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Annex:

Table 01: Assets and Equity Page 35

Table 02: Funding Profile: Fund Sources Page 36

Table 03: Deposit Structure Page 37

Table 04: Funding Profile: Fund Uses Page 38

Table 05: Loan Structure Page 39

Table 06: Loan Breakdown per Sector Page 40

Table 07: Investments Structure Page 41

Table 08: Profitability Summary 2011– 2012 Page 42

Table 09: Interest Income Summary Page 43

Table 10: Net Interest Income Summary Page 44

Table 11: Yield Evolution Page 45

Table 12: Management Effectiveness and Profitability Page 46

Table 13: Capital Adequacy Page 47

Table 14: Asset Quality Page 48

Table 15: Liquidity Page 49

Table 16: Valuation Multiples Page 50

Table 18: Price Performance Page 51

Table 19: Cash Dividend History Page 52

Table 20: RAMZ Value Scorecard Attributes Page 53

Important Notice: All data are denominated in AEDmn, except ratios.

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Bank Size: Assets and Equity

Total Assets Total Attributable Equity * Bank

2009 2010 2011 2012 2009 2010 2011 2012

ADCB 160,208.78 178,271.19 183,725.72 180,795.72 15,021.03 15,564.79 18,072.01 20,269.79

ADIB 64,084.00 75,257.52 74,335.07 85,664.56 5,141.68 6,107.58 6,568.46 10,598.11

AJMANBANK 1,927.95 3,234.35 3,999.95 5,489.74 1,003.07 1,006.94 998.35 1,055.15

BOS 18,061.85 20,617.68 20,934.37 22,832.69 4,041.17 4,171.29 3,951.10 3,924.31

CBD 36,783.05 38,508.70 38,240.48 39,451.13 5,349.96 5,878.94 6,321.61 6,797.01

CBI 10,932.12 11,796.06 11,402.23 12,739.34 1,683.92 1,674.24 1,726.79 2,004.01

DIB 84,304.27 89,884.40 90,588.46 98,697.59 8,975.89 9,326.08 9,135.44 9,087.78

EIB 25,289.64 32,746.52 22,740.16 37,263.76 2,780.50 2,836.74 2,434.70 2,578.75

EMIRATESNBD 281,576.48 286,078.32 284,613.39 308,296.35 27,876.50 29,655.77 30,934.77 32,452.31

FGB 125,472.54 140,758.00 157,480.34 175,033.61 18,517.84 20,126.37 22,651.43 25,348.21

INVESTB 9,672.35 10,296.35 10,402.95 11,409.57 1,876.54 2,010.37 2,122.42 2,346.71

MASQ 94,621.94 84,845.80 79,241.32 76,383.30 11,273.21 11,844.74 12,262.81 13,234.81

NBAD 196,807.02 211,427.27 255,667.51 300,599.17 16,440.57 20,113.42 22,389.49 27,133.09

NBF 11,890.88 12,916.61 14,913.36 17,544.62 1,668.52 1,847.54 2,061.19 2,268.83

NBQ 13,884.90 13,235.30 11,709.10 12,239.29 3,012.58 3,195.56 3,318.08 3,419.72

RAKBANK 17,117.62 21,379.95 24,502.54 27,250.14 2,796.98 3,716.36 4,696.87 5,695.22

SIB 15,974.55 16,667.16 17,733.14 18,316.23 4,264.31 4,347.87 4,406.16 4,443.90

UAB 6,994.93 7,742.07 10,832.00 15,012.59 1,662.77 1,847.96 2,031.03 2,247.88

UNB 75,725.62 81,779.76 82,469.00 87,137.95 8,504.39 9,781.22 10,925.12 11,976.73

Aggregate 1,251,330.50 1,337,443.02 1,395,531.09 1,532,157.34 141,891.43 155,053.75 167,007.81 186,882.30

* Adjusted for Tier I Notes

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Funding Profile: Fund Sources

Bank Customers’ Deposits Borrowings Government Support * Total Fund Sources

2011 2012 2011 2012 2011 2012 2011 2012

ADCB 109,170.83 109,216.93 35,752.15 35,108.03 4,000.00 4,000.00 148,922.97 148,324.95

ADIB 55,171.78 61,326.15 8,729.46 13,441.37 2,000.00 2,000.00 65,901.24 76,767.52

AJMANBANK 2,626.71 4,337.81 270.77 0.41 0.00 0.00 2,897.48 4,338.21

BOS 14,940.14 16,476.37 961.51 941.37 0.00 0.00 15,901.65 17,417.74

CBD 28,423.43 28,051.99 1,957.57 2,626.07 0.00 0.00 30,381.00 30,678.06

CBI 8,434.95 8,889.25 705.01 983.78 0.00 0.00 9,139.96 9,873.03

DIB 64,929.84 66,725.52 11,978.96 15,094.50 0.00 0.00 76,908.80 81,820.03

EIB 17,125.15 25,673.18 2,425.87 7,778.84 0.00 0.00 19,551.02 33,452.02

EMIRATESNBD 193,314.05 213,928.45 45,500.94 43,763.49 4,000.00 4,000.00 242,814.99 261,691.94

FGB 103,473.73 119,304.63 23,329.51 21,544.22 4,000.00 4,000.00 130,803.24 144,848.85

INVESTB 7,539.48 8,519.38 117.70 24.32 0.00 0.00 7,657.17 8,543.70

MASQ 45,416.88 47,452.57 14,371.55 8,632.62 0.00 0.00 59,788.44 56,085.19

NBAD 151,816.89 190,303.57 58,457.84 59,399.14 4,000.00 4,000.00 214,274.73 253,702.72

NBF 10,338.58 12,440.10 1,458.46 1,770.63 0.00 0.00 11,797.04 14,210.73

NBQ 7,089.56 7,279.30 0.59 0.68 0.00 0.00 7,090.15 7,279.97

RAKBANK 18,290.17 20,719.73 1,018.94 233.84 0.00 0.00 19,309.10 20,953.57

SIB 10,399.12 11,334.54 2,364.03 1,934.65 0.00 0.00 12,763.16 13,269.19

UAB 7,823.43 10,094.28 870.52 2,414.49 0.00 0.00 8,693.95 12,508.77

UNB 60,314.70 63,438.13 7,303.91 7,558.03 2,000.00 2,000.00 69,618.61 72,996.15

Aggregate 916,639.42 1,025,511.87 217,575.29 223,250.47 20,000.00 20,000.00 1,154,214.70 1,268,762.34

* Tier I Notes

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Deposit Structure

Bank Current Savings Time Islamic * CDs Others

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

ADCB 23,968.30 29,330.63 2,237.78 2,826.42 64,146.04 61,420.95 18,053.72 14,844.28 0.00 0.00 764.99 794.65

ADIB 14,234.79 16,963.28 11,182.63 14,947.94 29,613.77 29,191.34 0.00 0.00 0.00 0.00 140.60 223.59

AJMANBANK 589.63 763.79 140.98 166.79 1,805.76 3,343.43 0.00 0.00 0.00 0.00 90.34 63.81

BOS 3,066.92 3,461.75 1,462.12 1,511.48 10,411.11 11,503.15 0.00 0.00 0.00 0.00 0.00 0.00

CBD 9,701.75 10,523.57 1,120.79 1,283.37 14,587.94 12,825.63 3,012.95 3,419.41 0.00 0.00 0.00 0.00

CBI 1,541.74 1,757.89 134.34 151.14 6,542.53 6,760.62 0.00 0.00 0.00 0.00 216.34 219.59

DIB 17,784.56 17,802.92 10,848.61 11,264.63 35,912.22 37,310.64 0.00 0.00 0.00 0.00 384.44 347.33

EIB 4,202.64 6,620.11 2,151.52 5,304.39 7,574.56 6,309.13 0.00 0.00 0.00 0.00 3,196.43 7,439.56

EMIRATESNBD 57,991.69 66,227.00 10,669.78 13,713.04 84,004.00 95,263.72 39,300.65 37,610.29 0.00 0.00 1,347.94 1,114.40

FGB 7,819.26 13,694.40 1,172.63 1,460.64 80,091.12 88,030.52 0.00 0.00 0.00 0.00 14,390.72 16,119.07

INVESTB 1,819.60 1,741.61 106.76 112.50 5,613.12 6,665.27 0.00 0.00 0.00 0.00 0.00 0.00

MASQ 14,125.44 19,543.20 3,127.47 3,136.94 22,924.11 19,750.51 5,239.86 5,021.92 0.00 0.00 0.00 0.00

NBAD 32,150.38 37,798.16 6,814.79 8,818.33 105,288.05 132,933.77 0.00 0.00 7,563.67 10,753.31 0.00 0.00

NBF 2,117.24 2,749.29 33.31 52.29 7,145.42 8,595.92 0.00 0.00 0.00 0.00 1,042.60 1,042.60

NBQ 1,195.26 1,435.89 141.42 138.97 5,681.83 5,631.09 0.00 0.00 0.00 0.00 71.06 73.35

RAKBANK 7,044.83 8,721.46 1,912.13 2,749.20 9,333.20 9,249.06 0.00 0.00 0.00 0.00 0.00 0.00

SIB 3,013.05 3,505.60 914.42 1,222.99 6,096.64 6,210.99 0.00 0.00 0.00 0.00 375.01 394.96

UAB 2,404.94 3,258.10 94.48 394.09 5,324.01 6,442.09 0.00 0.00 0.00 0.00 0.00 0.00

UNB 6,578.34 7,579.72 974.64 1,011.18 48,503.38 52,416.14 3,225.56 1,487.32 0.00 0.00 1,032.78 943.77

Aggregate 211,350.35 253,478.38 55,240.61 70,266.33 550,598.80 599,853.96 68,832.73 62,383.21 7,563.67 10,753.31 23,053.26 28,776.69

* Islamic deposits of the conventional commercial banks

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Funding Profile: Fund Uses

Bank Loans and Advances Inter-bank Transactions Cash and Equivalents Total Fund Uses

2011 2012 2011 2012 2011 2012 2011 2012

ADCB 124,754.74 123,195.30 20,839.93 16,517.12 6,629.95 9,337.87 152,224.61 149,050.29

ADIB 48,831.34 51,196.72 7,731.87 13,876.42 11,207.15 11,286.90 67,770.36 76,360.04

AJMANBANK 2,940.87 4,537.56 263.91 96.80 168.37 222.44 3,373.14 4,856.80

BOS 12,039.33 12,444.34 3,648.65 3,726.03 1,599.15 2,738.64 17,287.12 18,909.01

CBD 26,815.09 27,302.82 1,700.86 1,827.52 5,376.08 5,563.27 33,892.03 34,693.60

CBI 7,865.30 8,741.30 466.67 284.62 521.53 572.14 8,853.50 9,598.06

DIB 51,507.05 55,182.69 3,043.10 3,293.06 12,952.32 15,474.00 67,502.46 73,949.75

EIB 12,969.04 19,825.47 4,882.74 10,922.26 1,195.17 2,004.70 19,046.95 32,752.43

EMIRATESNBD 199,669.95 212,024.32 19,851.58 17,478.45 21,526.14 30,771.86 241,047.66 260,274.63

FGB 104,719.80 114,644.48 12,225.32 18,329.08 9,586.77 12,844.34 126,531.89 145,817.90

INVESTB 7,848.58 8,141.30 773.36 1,400.66 612.68 434.51 9,234.61 9,976.47

MASQ 37,694.51 41,407.94 10,147.68 10,176.68 14,731.80 10,767.09 62,573.98 62,351.71

NBAD 159,522.18 164,599.38 31,591.78 33,125.58 24,468.64 59,943.22 215,582.60 257,668.18

NBF 10,505.26 12,196.01 614.09 1,022.44 2,103.84 2,406.99 13,223.19 15,625.44

NBQ 6,750.11 6,748.37 1,733.28 1,625.57 798.06 1,337.06 9,281.46 9,711.00

RAKBANK 18,368.47 20,283.43 1,972.25 1,195.83 1,844.19 2,904.05 22,184.91 24,383.31

SIB 10,427.43 10,749.37 2,341.53 2,372.41 1,770.43 1,783.24 14,539.40 14,905.02

UAB 8,056.30 10,881.49 1,468.30 1,332.28 548.59 1,132.16 10,073.20 13,345.93

UNB 57,581.31 57,343.65 14,465.02 14,069.86 1,822.69 6,001.51 73,869.02 77,415.02

Aggregate 908,866.65 961,445.94 139,761.92 152,672.65 119,463.53 177,525.98 1,168,092.10 1,291,644.57

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Loan Structure

Bank Gross Loans and Advances Provisions and Other Charges * Net Loans and Advances Gross Non-Performing Loans

2011 2012 2011 2012 2011 2012 2011 2012

ADCB 130,466.61 129,659.02 5,711.88 6,463.72 124,754.74 123,195.30 6,025.29 6,938.95

ADIB 66,680.04 69,975.24 17,848.70 18,778.53 48,831.34 51,196.72 4,638.37 4,582.83

AJMANBANK 2,969.56 4,596.47 28.69 58.91 2,940.87 4,537.56 33.55 82.14

BOS 12,828.59 13,415.02 789.26 970.68 12,039.33 12,444.34 333.28 402.37

CBD 28,596.16 29,676.65 1,781.07 2,373.84 26,815.09 27,302.82 2,637.96 3,015.61

CBI 8,890.94 9,796.35 1,025.64 1,055.05 7,865.30 8,741.30 2,006.20 2,289.33

DIB 58,249.58 61,322.03 6,742.53 6,139.34 51,507.05 55,182.69 6,807.62 6,118.08

EIB 14,919.16 23,603.18 1,950.12 3,777.71 12,969.04 19,825.47 2,588.45 4,047.91

EMIRATESNBD 216,824.98 236,103.93 17,155.03 24,079.61 199,669.95 212,024.32 33,631.38 40,683.70

FGB 108,341.45 118,396.23 3,621.66 3,751.75 104,719.80 114,644.48 4,301.86 3,905.66

INVESTB 8,288.41 8,733.05 439.84 591.74 7,848.58 8,141.30 393.27 610.80

MASQ 40,463.15 43,885.51 2,768.64 2,477.57 37,694.51 41,407.94 5,101.91 4,126.48

NBAD 164,825.02 170,824.15 5,302.85 6,224.78 159,522.18 164,599.38 5,341.45 6,487.81

NBF 11,157.48 12,986.69 652.22 790.68 10,505.26 12,196.01 1,210.04 991.76

NBQ 7,035.09 7,053.50 284.98 305.13 6,750.11 6,748.37 499.73 621.08

RAKBANK 18,785.98 20,702.86 417.51 419.43 18,368.47 20,283.43 474.12 516.51

SIB 10,637.30 11,004.75 209.87 255.38 10,427.43 10,749.37 401.50 667.51

UAB 8,160.10 11,059.68 103.80 178.19 8,056.30 10,881.49 324.07 402.90

UNB 59,213.83 59,519.96 1,632.52 2,176.31 57,581.31 57,343.65 2,186.74 2,768.30

Aggregate 977,333.42 1,042,314.26 68,466.78 80,868.33 908,866.65 961,445.94 78,936.78 89,259.71

* Includes interest-in-suspense, deferred charges, and other adjustments by the banks

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Loan Breakdown per Sector: 2012

Top Five Gross Loans Property Retail Sovereign Others

EMIRATESNBD 236,103.93 38,107.17 41,829.45 75,711.17 80,456.13

NBAD 170,824.15 32,215.52 26,803.78 21,153.97 90,650.88

ADCB 129,659.02 50,860.62 29,827.93 3,149.77 45,820.69

FGB 118,396.23 24,439.12 44,983.17 11,146.59 37,827.36

ADIB 69,975.24 6,703.90 32,395.88 4,784.15 26,091.31

Sub-total 724,958.57 152,326.32 175,840.21 115,945.66 280,846.38

Percent to Total 69.55% 68.52% 68.69% 79.72% 67.09%

Middle Seven

DIB 61,322.03 30,472.90 12,386.74 4,081.54 14,380.85

UNB 59,519.96 15,002.58 12,090.81 6,857.91 25,568.67

MASQ 43,885.51 2,902.34 11,267.73 6,477.29 23,238.16

CBD 29,676.65 3,554.95 2,183.60 3,488.90 20,449.20

EIB 23,603.18 5,354.74 11,797.04 0.00 6,451.40

RAKBANK 20,702.86 760.25 15,360.33 0.00 4,582.28

BOS 13,415.02 849.21 1,058.12 1,526.91 9,980.78

Sub-total 252,125.21 58,896.96 66,144.36 22,432.55 104,651.34

Percent to Total 24.19% 26.49% 25.84% 15.42% 25.00%

Bottom Seven

NBF 12,986.69 1,973.22 1,179.39 303.24 9,530.84

UAB 11,059.68 591.20 4,298.41 715.87 5,454.20

SIB 11,004.75 1,828.82 3,222.46 4,061.73 1,891.74

CBI 9,796.35 3,179.89 2,943.24 131.99 3,541.22

INVESTB 8,733.05 2,175.96 80.16 1,579.51 4,897.43

NBQ 7,053.50 969.56 1,161.84 0.00 4,922.10

AJMANBANK 4,596.47 354.56 1,120.90 267.24 2,853.77

Sub-total 65,230.48 11,073.20 14,006.41 7,059.58 33,091.30

Percent to Total 6.26% 4.98% 5.47% 4.85% 7.91%

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Investments Structure

Bank Trading Securities Derivatives Investment Securities Investments in Associates Investment Properties Total

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

ADCB 15.76 641.88 4,844.76 4,993.23 15,052.10 18,712.92 81.82 0.00 396.91 529.40 20,391.35 24,877.41

ADIB 0.00 0.00 0.00 0.00 1,652.61 4,255.15 851.50 766.03 155.24 306.17 2,659.35 5,327.35

AJMANBANK 0.00 0.00 0.00 0.00 385.91 430.95 0.00 0.00 49.96 49.96 435.87 480.91

BOS 0.00 0.00 0.00 0.00 1,847.95 1,816.35 0.00 0.00 126.82 230.82 1,974.77 2,047.17

CBD 0.00 0.00 0.00 0.00 1,911.84 2,457.93 0.00 0.00 173.82 166.12 2,085.67 2,624.04

CBI 0.00 0.00 0.00 0.00 1,222.71 1,448.86 0.00 0.00 78.44 74.77 1,301.15 1,523.63

DIB 0.00 0.00 0.00 0.00 14,722.50 13,233.53 2,336.44 2,294.03 1,785.21 1,931.81 18,844.14 17,459.37

EIB 0.00 0.00 0.00 0.00 2,197.59 2,911.38 0.00 0.00 1,111.32 1,119.13 3,308.91 4,030.51

EMIRATESNBD 588.68 1,220.87 2,398.87 2,218.38 15,883.73 14,265.48 2,041.46 2,080.16 1,130.92 1,138.73 22,043.66 20,923.63

FGB 0.00 0.00 0.00 0.00 18,789.46 17,728.27 443.81 392.97 7,537.90 7,771.81 26,771.17 25,893.04

INVESTB 0.00 0.00 0.00 0.00 525.85 830.77 0.00 0.00 0.00 0.00 525.85 830.77

MASQ 0.00 0.00 0.00 0.00 9,734.38 7,147.03 0.00 0.00 318.03 364.25 10,052.41 7,511.27

NBAD 0.00 0.00 5,605.65 5,583.08 28,180.09 35,561.17 0.00 0.00 0.00 140.06 33,785.73 41,284.31

NBF 0.00 0.00 0.00 0.00 583.90 778.83 0.00 0.00 0.00 0.00 583.90 778.83

NBQ 0.00 0.00 0.00 0.00 1,051.94 1,007.72 0.00 0.00 0.00 0.00 1,051.94 1,007.72

RAKBANK 0.00 0.00 0.00 0.00 1,163.81 1,586.88 0.00 0.00 0.00 0.00 1,163.81 1,586.88

SIB 0.00 0.00 0.00 0.00 734.54 856.68 0.00 0.00 191.04 223.29 925.58 1,079.97

UAB 0.00 0.00 0.00 0.00 595.66 1,336.48 0.00 0.00 0.00 12.90 595.66 1,349.38

UNB 0.00 0.00 0.00 0.00 5,037.98 5,959.24 0.00 0.00 1,422.60 1,453.34 6,460.58 7,412.58

Aggregate 604.43 1,862.75 12,849.29 12,794.69 121,274.53 132,325.60 5,755.03 5,533.18 14,478.21 15,512.56 154,961.49 168,028.77

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Profitability Summary: 2011—2012

Bank Interest Income Non-Interest Income Operating Income Reported Profits Attributable Profits *

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

ADCB 4,682.10 5,207.23 1,387.31 1,387.92 6,069.41 6,595.15 3,045.11 2,810.34 3,025.87 2,735.81

ADIB 2,841.15 2,905.25 584.66 660.36 3,425.82 3,565.62 1,155.09 1,201.23 1,154.97 1,199.93

AJMANBANK 130.60 153.11 49.38 74.20 179.98 227.31 6.96 33.52 6.96 33.52

BOS 527.55 520.43 140.53 153.33 668.08 673.75 253.80 277.11 228.65 266.61

CBD 1,341.38 1,332.28 521.32 519.66 1,862.69 1,851.93 822.10 852.84 822.10 852.84

CBI 415.87 448.54 125.37 257.38 541.24 705.92 64.77 250.60 65.22 250.51

DIB 2,144.83 2,025.59 1,473.22 1,684.53 3,618.06 3,710.12 1,056.42 1,192.15 1,010.14 1,150.07

EIB 299.01 384.04 225.12 306.82 524.13 690.86 (448.55) 81.11 (401.50) 81.22

EMIRATESNBD 7,258.26 6,911.64 2,671.84 3,300.22 9,930.10 10,211.86 2,483.48 2,554.02 2,531.02 2,554.03

FGB 5,078.89 5,520.38 1,411.56 1,706.30 6,490.45 7,226.69 3,705.76 4,170.86 3,707.28 4,154.35

INVESTB 391.59 424.66 134.02 141.15 525.61 565.81 317.30 324.71 317.30 324.71

MASQ 1,944.07 1,903.60 1,928.26 2,180.84 3,872.33 4,084.44 861.04 1,370.64 820.38 1,312.31

NBAD 5,802.89 6,096.09 2,077.97 2,574.69 7,880.86 8,670.79 3,707.55 4,332.23 3,707.55 4,332.23

NBF 426.53 504.89 224.22 254.59 650.75 759.47 280.93 305.80 280.93 305.80

NBQ 511.17 467.23 68.10 93.65 579.27 560.88 320.03 328.53 320.03 328.53

RAKBANK 1,984.51 2,233.29 652.94 659.88 2,637.46 2,893.16 1,203.54 1,402.80 1,203.54 1,402.80

SIB 514.06 529.08 98.75 116.90 612.80 645.97 251.12 272.00 251.12 272.00

UAB 431.38 567.05 150.12 197.98 581.49 765.03 330.15 409.82 330.15 409.82

UNB 2,389.38 2,538.61 448.43 552.35 2,837.81 3,090.96 1,500.37 1,602.39 1,507.04 1,600.49

Aggregate 39,115.22 40,672.98 14,373.12 16,822.73 53,488.34 57,495.71 20,916.94 23,772.69 38,670.75 46,741.52

* Attributable to shareholders only.

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Interest Income Summary: Conventional versus Islamic

Bank Net Interest Income Net Income from Islamic Financing

2009 2010 2011 2012 2009 2010 2011 2012

ADCB 3,353.17 3,650.93 4,542.12 5,113.31 (77.03) 31.27 139.98 93.92

ADIB 0.00 0.00 0.00 0.00 2,108.56 2,595.72 2,841.15 2,905.25

AJMANBANK 0.00 0.00 0.00 0.00 98.53 76.56 130.60 153.11

BOS 565.35 550.05 527.55 520.43 0.00 0.00 0.00 0.00

CBD 1,318.92 1,410.93 1,344.90 1,297.97 (1.39) (25.45) (3.52) 34.31

CBI 389.08 354.07 415.87 448.54 0.00 0.00 0.00 0.00

DIB 0.00 0.00 0.00 0.00 1,635.14 1,822.38 2,144.83 2,025.59

EIB 0.00 0.00 0.00 0.00 441.62 254.02 299.01 384.04

EMIRATESNBD 6,767.07 6,365.51 6,715.01 6,259.15 645.12 429.35 543.25 652.49

FGB 3,599.33 4,006.43 4,906.73 5,588.34 234.40 250.77 172.16 (67.95)

INVESTB 335.00 352.16 391.59 424.66 0.00 0.00 0.00 0.00

MASQ 1,986.61 2,176.61 1,801.14 1,776.38 116.94 114.54 142.93 127.23

NBAD 4,441.53 5,017.61 5,495.25 5,822.96 129.67 231.23 307.65 273.13

NBF 326.86 360.11 426.53 504.89 0.00 0.00 0.00 0.00

NBQ 592.15 527.01 511.17 467.23 0.00 0.00 0.00 0.00

RAKBANK 1,229.02 1,608.56 1,984.51 2,233.29 0.00 0.00 0.00 0.00

SIB 0.00 0.00 0.00 0.00 446.06 443.10 514.06 529.08

UAB 324.46 351.27 431.38 567.05 0.00 (4.49) 0.00 0.00

UNB 1,368.08 1,643.58 2,068.32 2,188.57 280.01 307.34 321.06 350.05

Aggregate 26,596.62 28,374.83 31,562.08 33,212.75 6,057.63 6,526.32 7,553.14 7,460.24

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Non-Interest Income Summary

Bank Fee-based Income Investment Income Property Income Forex & Treasury Income Others

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

ADCB 898.16 940.04 15.73 20.82 108.30 103.20 334.77 302.69 30.35 21.18

ADIB 429.34 395.61 86.06 198.21 11.92 8.60 30.08 36.76 27.27 21.19

AJMANBANK 19.18 32.46 30.20 41.74 0.00 0.00 0.00 0.00 0.00 0.00

BOS 113.37 110.59 9.54 12.46 (22.84) 0.00 23.65 21.19 16.82 9.09

CBD 362.42 337.49 19.80 25.34 0.00 0.00 112.22 124.33 26.88 32.51

CBI 100.09 128.62 0.00 96.30 0.00 0.00 11.18 20.00 14.09 12.46

DIB 590.36 655.54 556.37 681.38 85.43 113.33 110.23 77.82 130.84 156.45

EIB 237.90 231.69 (45.53) 50.01 (5.84) 1.46 29.80 33.24 8.79 (9.57)

EMIRATESNBD 1,749.06 1,731.18 275.87 472.22 (249.95) 93.17 743.38 1,017.90 153.49 (14.24)

FGB 1,212.22 1,299.90 63.17 77.38 9.13 119.41 42.92 119.49 84.11 90.13

INVESTB 109.45 112.51 4.58 6.15 (1.86) 3.22 20.83 17.96 1.03 1.30

MASQ 983.06 1,187.54 123.37 285.74 (37.88) (58.58) 192.97 201.16 666.75 564.98

NBAD 1,390.82 1,546.40 93.54 537.23 0.00 0.00 522.23 403.00 71.38 88.06

NBF 163.56 181.52 2.46 3.18 1.07 1.27 50.02 55.83 7.11 12.80

NBQ 56.96 56.58 (8.46) 18.27 7.03 5.74 9.89 8.44 2.68 4.62

RAKBANK 522.75 488.17 49.32 71.54 0.00 0.00 57.77 67.63 23.10 32.53

SIB 78.15 76.35 (49.11) (70.72) 9.01 8.91 37.12 77.28 23.58 25.07

UAB 77.74 80.60 0.00 0.00 0.00 0.00 30.98 36.25 41.39 81.14

UNB 466.72 437.16 0.00 0.00 (93.03) (64.69) 32.96 133.06 41.78 46.83

Aggregate 9,561.31 10,029.94 1,226.90 2,527.24 (179.52) 335.01 2,392.99 2,754.02 1,371.44 1,176.52

Forex = Foreign Exchange Trading

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Yield Evolution

Bank Yield on Earning Assets Cost of Funds Interest Spread Net Interest Margin Rate Paid on Funds *

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

ADCB 5.14% 5.19% 2.05% 1.76% 3.09% 3.43% 3.13% 3.46% 2.10% 1.83%

ADIB 4.54% 5.16% 1.33% 1.14% 3.21% 4.02% 3.46% 4.03% 1.20% 1.34%

AJMANBANK 5.35% 5.27% 2.62% 1.76% 2.73% 3.51% 3.55% 3.72% 1.88% 1.63%

BOS 6.25% 5.57% 3.52% 2.92% 2.73% 2.64% 3.06% 2.88% 3.54% 3.06%

CBD 5.17% 4.89% 1.39% 1.12% 3.78% 3.76% 3.92% 3.88% 1.47% 1.19%

CBI 7.34% 7.06% 2.97% 2.13% 4.37% 4.93% 4.39% 4.86% 3.09% 2.34%

DIB 5.11% 4.72% 1.82% 1.66% 3.29% 3.07% 3.10% 2.86% 2.43% 2.33%

EIB 4.02% 2.94% 1.65% 1.42% 2.36% 1.52% 1.72% 1.48% 2.46% 1.55%

EMIRATESNBD 4.68% 4.21% 1.71% 1.45% 2.97% 2.77% 2.97% 2.76% 1.95% 1.63%

FGB 5.87% 5.61% 1.62% 1.54% 4.26% 4.07% 4.22% 4.05% 1.79% 1.70%

INVESTB 6.82% 6.59% 3.09% 2.57% 3.73% 4.02% 4.24% 4.42% 2.75% 2.29%

MASQ 5.18% 4.91% 2.29% 2.00% 2.89% 2.90% 2.97% 3.05% 2.81% 2.33%

NBAD 4.05% 3.51% 1.11% 0.94% 2.94% 2.57% 2.93% 2.58% 1.25% 1.13%

NBF 5.46% 5.32% 2.18% 2.02% 3.28% 3.30% 3.51% 3.50% 2.38% 2.16%

NBQ 6.14% 5.58% 1.39% 0.87% 4.75% 4.71% 5.06% 4.92% 1.28% 0.74%

RAKBANK 11.31% 11.10% 2.09% 1.74% 9.22% 9.36% 9.49% 9.59% 2.00% 1.68%

SIB 5.16% 4.72% 1.76% 1.28% 3.39% 3.45% 3.63% 3.59% 1.76% 1.28%

UAB 6.07% 6.15% 1.23% 1.45% 4.84% 4.71% 5.03% 4.84% 1.10% 1.41%

UNB 5.22% 5.25% 2.10% 2.01% 3.12% 3.24% 3.23% 3.36% 2.09% 2.00%

Aggregate 5.06% 4.77% 1.72% 1.49% 3.34% 3.28% 3.37% 3.31% 1.89% 1.66%

Average 5.73% 5.46% 2.00% 1.67% 3.73% 3.79% 3.87% 3.89% 2.07% 1.77%

* Rate Paid on Funds = the ratio of interest expense to the earning assets—funds that generate interest income

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Management Effectiveness and Profitability

Bank Return on Average Equity Return on Average Assets Efficiency Ratio

2011 2012 2011 2012 2011 2012

ADCB 17.99% 14.27% 1.67% 1.50% 33.99% 31.38%

ADIB 18.22% 13.98% 1.54% 1.50% 42.32% 43.81%

AJMANBANK 0.69% 3.26% 0.19% 0.71% 87.25% 71.96%

BOS 5.63% 6.77% 1.10% 1.22% 28.84% 31.25%

CBD 13.48% 13.00% 2.14% 2.20% 30.61% 30.90%

CBI 3.84% 13.43% 0.56% 2.08% 51.92% 40.38%

DIB 10.94% 12.62% 1.12% 1.22% 41.36% 41.03%

EIB -15.23% 3.24% -1.45% 0.27% 82.05% 62.10%

EMIRATESNBD 8.35% 8.06% 0.89% 0.86% 36.27% 36.71%

FGB 17.33% 17.31% 2.49% 2.50% 18.84% 19.73%

INVESTB 15.36% 14.53% 3.07% 2.98% 21.66% 21.81%

MASQ 6.81% 10.29% 1.00% 1.69% 46.32% 45.42%

NBAD 17.45% 17.50% 1.59% 1.56% 32.53% 33.10%

NBF 14.37% 14.12% 2.02% 1.88% 39.42% 36.86%

NBQ 9.83% 9.75% 2.57% 2.74% 34.03% 34.06%

RAKBANK 28.61% 27.00% 5.25% 5.42% 42.95% 44.29%

SIB 5.74% 6.15% 1.46% 1.51% 51.54% 52.10%

UAB 17.02% 19.16% 3.55% 3.17% 31.09% 30.54%

UNB 14.56% 13.98% 1.84% 1.89% 25.68% 25.45%

Aggregate 12.97% 13.32% 1.53% 1.61% 35.05% 34.69%

Average 11.10% 12.55% 1.72% 1.94% 40.98% 38.57%

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Capital Adequacy

Bank Equity Multiplier Total CAR Tier I CAR Tier II CAR

2011 2012 2011 2012 2011 2012 2011 2012

ADCB 10.17 8.92 22.51% 23.05% 15.90% 17.47% 6.61% 5.58%

ADIB 11.32 8.08 17.39% 21.42% 13.50% 18.43% 3.88% 2.99%

AJMANBANK 4.01 5.20 28.60% 25.44% 28.79% 24.68% -0.19% 0.76%

BOS 5.30 5.82 23.12% 23.00% 21.89% 21.48% 1.22% 1.52%

CBD 6.05 5.80 23.11% 23.21% 16.62% 17.59% 6.49% 5.62%

CBI 6.60 6.36 15.13% 16.20% 14.99% 15.68% 0.14% 0.52%

DIB 9.92 10.86 18.25% 17.36% 14.05% 14.17% 4.20% 3.20%

EIB 9.34 14.45 18.14% 12.34% 11.86% 8.09% 6.28% 4.25%

EMIRATESNBD 9.20 9.50 20.53% 20.64% 13.02% 13.83% 7.51% 6.82%

FGB 6.95 6.91 21.54% 21.28% NA NA NA NA

INVESTB 4.90 4.86 26.45% 26.37% 22.33% 22.97% 4.12% 3.40%

MASQ 6.46 5.77 22.64% 19.29% 16.19% 17.20% 6.45% 2.09%

NBAD 11.42 11.08 20.65% 21.05% 15.61% 17.19% 5.03% 3.86%

NBF 7.24 7.73 20.31% 19.22% 12.83% 12.32% 7.48% 6.89%

NBQ 3.53 3.58 29.44% 31.78% 28.69% 30.94% 0.76% 0.85%

RAKBANK 5.22 4.78 20.56% 19.38% 17.19% 19.38% 3.37% 0.00%

SIB 4.02 4.12 36.99% 34.71% 36.42% 34.17% 0.57% 0.55%

UAB 5.33 6.68 20.30% 18.90% NA NA NA NA

UNB 7.55 7.28 21.93% 23.20% 16.66% 18.48% 5.27% 4.72%

Aggregate 8.36 8.20 21.01% 20.88% 13.51% 14.42% 4.90% 3.82%

Average 7.08 7.25 22.50% 21.99% 18.62% 19.06% 4.07% 3.15%

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Asset Quality

Bank NPL Ratio NPL Coverage Provision Charge Ratio Provision Coverage Ratio Sovereign as % of Capital *

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

ADCB 4.62% 5.35% 94.80% 93.15% 4.38% 4.99% 1.67 2.65 9.22% 9.87%

ADIB 6.96% 6.55% 64.90% 67.59% 4.51% 4.43% 2.41 2.50 30.02% 33.52%

AJMANBANK 1.13% 1.79% 85.51% 71.71% 0.97% 1.28% 1.44 2.11 17.60% 24.74%

BOS 2.60% 3.00% 205.01% 209.77% 5.33% 6.29% 2.24 2.59 29.79% 37.35%

CBD 9.22% 10.16% 57.72% 64.41% 5.32% 6.54% 2.52 2.61 15.87% 43.46%

CBI 22.56% 23.37% 33.31% 31.69% 7.52% 7.40% 1.33 2.47 2.09% 6.41%

DIB 11.69% 9.98% 51.54% 60.47% 6.02% 6.03% 1.95 2.10 19.40% 31.30%

EIB 17.35% 17.15% 52.21% 60.98% 9.06% 10.46% 0.12 0.57 0.00% 0.00%

EMIRATESNBD 15.51% 17.23% 38.35% 40.79% 5.95% 7.03% 1.27 1.61 133.51% 168.18%

FGB 3.97% 3.30% 82.02% 93.60% 3.26% 3.09% 3.39 3.51 32.60% 36.51%

INVESTB 4.74% 6.99% 103.18% 90.53% 4.90% 6.33% 4.36 3.76 76.28% 63.60%

MASQ 12.61% 9.40% 40.12% 46.91% 5.06% 4.41% 1.74 2.70 37.39% 43.15%

NBAD 3.24% 3.80% 89.88% 85.05% 2.91% 3.23% 3.55 4.34 47.92% 56.76%

NBF 10.85% 7.64% 53.90% 79.73% 5.85% 6.09% 3.48 2.76 9.21% 9.92%

NBQ 7.10% 8.81% 57.03% 49.13% 4.05% 4.33% 6.15 8.95 0.00% 0.00%

RAKBANK 2.52% 2.49% 71.29% 62.75% 1.80% 1.57% 5.00 7.71 0.00% 0.00%

SIB 3.77% 6.07% 50.30% 37.19% 1.90% 2.26% 6.47 8.27 85.61% 89.43%

UAB 3.97% 3.64% 29.56% 40.72% 1.17% 1.48% 5.68 4.37 NA NA

UNB 3.69% 4.65% 74.66% 78.62% 2.76% 3.66% 3.55 3.41 43.00% 39.43%

Aggregate 8.08% 8.56% 54.94% 57.77% 4.44% 4.95% 2.10 2.67 50.42% 60.23%

Average 7.80% 7.97% 70.28% 71.83% 4.35% 4.78% 3.07 3.63 32.75% 38.54%

* Government Loans as Percent of Total Regulatory Capital

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Liquidity

Bank Deposits/Funding Sources Loans/Deposits Ratio Funding Utilization Ratio

2011 2012 2011 2012 2011 2012

ADCB 73.31% 73.63% 114.27% 112.80% 97.77% 94.19%

ADIB 83.72% 79.89% 88.51% 83.48% 85.83% 84.77%

AJMANBANK 90.65% 99.99% 111.96% 104.60% 110.61% 106.83%

BOS 93.95% 94.60% 80.58% 75.53% 98.66% 92.84%

CBD 93.56% 91.44% 94.34% 97.33% 93.86% 94.95%

CBI 92.29% 90.04% 93.25% 98.34% 91.16% 91.42%

DIB 84.42% 81.55% 79.33% 82.70% 70.93% 71.47%

EIB 87.59% 76.75% 75.73% 77.22% 91.31% 91.92%

EMIRATESNBD 79.61% 81.75% 103.29% 99.11% 90.41% 87.70%

FGB 79.11% 82.36% 101.20% 96.09% 89.41% 91.80%

INVESTB 98.46% 99.72% 104.10% 95.56% 112.60% 111.68%

MASQ 75.96% 84.61% 83.00% 87.26% 80.02% 91.98%

NBAD 70.85% 75.01% 105.08% 86.49% 89.19% 77.94%

NBF 87.64% 87.54% 101.61% 98.04% 94.26% 93.02%

NBQ 99.99% 99.99% 95.21% 92.71% 119.65% 115.03%

RAKBANK 94.72% 98.88% 100.43% 97.89% 105.34% 102.51%

SIB 81.48% 85.42% 100.27% 94.84% 100.05% 98.89%

UAB 89.99% 80.70% 102.98% 107.80% 109.55% 97.64%

UNB 86.64% 86.91% 95.47% 90.39% 103.49% 97.83%

Aggregate 79.42% 80.83% 99.15% 93.75% 90.85% 87.81%

Average 86.52% 86.88% 96.35% 93.59% 96.53% 94.44%

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Valuation Multiples

Bank Market Price Price/Operating Income Price/Earnings Price/Book Dividend Yield

2012 Current 2012 Trailing 12m 2012 Trailing 12m 2012 Interim 2012 Current

ADCB 3.01 4.95 2.55 4.11 6.14 10.02 0.83 1.11 8.31% 5.05%

ADIB 3.18 4.40 2.11 2.88 6.27 8.45 0.71 0.85 7.99% 5.77%

AJMANBANK 1.42 2.22 6.25 9.31 42.36 >50 1.35 2.10 0.00% 0.00%

BOS 1.28 1.61 3.68 5.13 9.29 12.25 0.63 0.89 7.81% 6.21%

CBD 3.00 3.90 3.30 4.23 7.17 9.29 0.90 1.23 10.00% 7.69%

CBI 1.12 1.58 2.24 3.43 6.32 9.78 0.79 1.20 0.00% 0.00%

DIB 2.01 3.15 2.06 3.05 6.64 10.08 0.84 0.92 7.46% 4.76%

EIB NHP SP - - - -

EMIRATESNBD 2.85 4.90 1.53 2.65 6.11 9.90 0.48 0.76 8.77% 5.10%

FGB 11.60 15.75 4.82 3.71 8.38 6.50 1.37 1.70 7.18% 5.29%

INVESTB 1.62 2.30 3.58 4.31 6.23 7.30 0.86 1.33 9.26% 6.52%

MASQ 55.00 43.05 2.28 1.71 7.09 4.96 0.70 0.56 6.91% 8.83%

NBAD 9.36 11.40 4.18 5.14 8.37 10.44 1.34 1.57 3.74% 3.07%

NBF 4.55 3.70 6.59 5.22 16.37 12.26 2.21 1.48 2.20% 2.70%

NBQ 1.85 3.45 5.28 10.17 9.01 17.26 0.87 1.67 8.65% 4.64%

RAKBANK 3.73 6.00 1.96 3.41 4.05 6.96 1.00 1.84 10.73% 6.67%

SIB 0.92 1.40 3.45 5.20 8.20 12.39 0.50 0.78 6.52% 4.29%

UAB 3.08 4.15 4.01 3.00 7.49 5.49 1.37 1.96 8.12% 6.02%

UNB 2.89 4.55 2.33 3.81 4.50 7.36 0.60 0.85 3.47% 2.20%

Average - - 3.46 4.47 9.44 9.45 0.96 1.27 7.32% 5.30%

Current multiple are calculated based on the market prices, as of 25 June 2013.

Trailing multiples are calculated based on market prices, as of 25 June 2013.

Interim PB multiple are based on book values as of 31 March 2013, and market prices as of 25 June 2013.

2012 multiples are calculated based on the year-end prices.

NHP—No Historical Price

SP—Stale Price (no trades in the last six months)

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Price Performance

Bank Market Price YTD Change YoY Change 52w High 52w Low %k 30d Average Turnover

90d Average Turnover

ADCB 4.95 64.45% 49.10% 5.26 2.88 86.97% 3,102,504.57 5,853,006.00

ADIB 4.40 37.11% 44.85% 4.65 3.00 84.85% 759,939.43 783,013.48

AJMANBANK 2.22 56.34% 177.15% 2.22 0.77 100.00% 2,040,686.93 3,153,346.23

BOS 1.61 25.78% 16.67% 1.82 1.10 70.83% 1,152,412.07 689,279.88

CBD 3.90 30.00% 41.30% 4.15 2.80 81.48% 204,871.77 1,116,607.81

CBI 1.58 40.44% 96.62% 1.88 0.75 73.78% 12,404,690.38 0.00

DIB 3.15 58.21% 71.89% 3.66 1.85 71.82% 31,035,179.33 19,917,368.52

EIB SP - - - - - - -

EMIRATESNBD 4.90 70.18% 83.02% 6.00 2.60 67.65% 491,870.03 767,297.51

FGB 15.75 35.78% 100.13% 16.50 7.91 91.27% 1,772,885.73 1,483,288.72

INVESTB 2.30 42.06% 55.81% 2.60 1.44 74.18% 775,008.80 434,634.92

MASQ 43.05 -21.73% -33.77% 58.50 40.00 16.49% 0.00 0.00

NBAD 11.40 21.75% 50.90% 12.55 7.47 77.35% 626,496.60 699,939.72

NBF 3.70 -18.68% -25.25% 5.60 2.70 34.48% 347,046.67 0.00

NBQ 3.45 86.49% 85.48% 3.45 1.50 100.00% 641,706.10 0.00

RAKBANK 6.00 60.98% 65.00% 6.70 3.50 78.13% 742,329.77 489,321.84

SIB 1.40 52.17% 66.67% 1.70 0.83 65.52% 3,343,379.13 2,200,112.77

UAB 4.15 34.74% 33.87% 4.65 2.79 73.12% 318,789.47 0.00

UNB 4.55 57.67% 71.85% 4.85 2.63 86.50% 1,219,757.90 1,138,228.93

Average 40.76% 58.41% 74.13%

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Cash Dividend History

Bank 2009 2010 2011 2012

ADCB 0.0000 0.0000 0.2000 0.2500

ADIB 0.0000 0.2160 0.2450 0.2540

AJMANBANK 0.0000 0.0000 0.0000 0.0000

BOS 0.1200 0.1000 0.1000 0.1000

CBD 0.1500 0.2000 0.2000 0.3000

CBI 0.0000 0.0000 0.0000 0.0000

DIB 0.1500 0.1000 0.1250 0.1500

EIB 0.0000 0.0000 0.0000 0.0000

EMIRATESNBD 0.2000 0.2000 0.2000 0.2500

FGB 0.5000 0.6000 1.0000 0.8330

INVESTB 0.1200 0.1500 0.1000 0.1500

MASQ 1.5000 2.0000 2.0000 3.8000

NBAD 0.1000 0.3000 0.3000 0.3500

NBF 0.0000 0.0620 0.1000 0.1000

NBQ 0.1200 0.1200 0.1500 0.1600

RAKBANK 0.1000 0.2000 0.3000 0.4000

SIB 0.0500 0.0550 0.0600 0.0600

UAB 0.1500 0.1600 0.2000 0.2500

UNB 0.0000 0.1000 0.1500 0.1000

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RAMZ Scorecard Attributes

Bank Trailing PE PBV DY NPL Ratio Free Float %K Market Share - Trading value

Dividend Status Total

ADCB 16 19 13 15 9 9 30 0 111

ADIB 19 22 14 11 5 9 17 0 97

BOS 12 22 15 22 5 12 5 0 93

CBI 16 18 0 0 -1 11 1 0 45

FGB 22 11 13 21 8 8 30 0 115

INVESTB 21 16 15 10 5 11 6 0 83

NBAD 15 13 10 20 10 11 30 0 109

NBF 12 14 10 8 2 18 2 0 65

NBQ 3 11 13 4 1 7 7 0 46

RAKBANK 22 9 15 24 3 11 8 0 91

SIB 12 23 12 13 3 13 4 0 80

UAB 24 7 14 20 2 11 3 0 82

UNB 21 22 9 17 10 9 13 0 102

CBD 17 17 17 0 5 10 8 0 74

DIB 16 22 13 0 9 12 30 0 101

EMIRATESNBD 16 24 13 0 9 12 15 0 90

MASQ 25 26 18 2 0 21 0 0 92

Average Score 17 17 13 16 5 12 15 5 100

Maximum Score 34 34 26 32 10 24 30 10 200

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RAMZ Scorecard Attributes

Bank Total Score Market Price Breakeven *Price Premium/Discount

ADCB 111.26 4.95 5.70 -13.16%

ADIB 97.41 4.40 4.22 4.27%

BOS 92.70 1.61 1.46 10.58%

CBI 44.83 1.58 - -

FGB 114.85 15.75 19.00 -17.11%

INVESTB 83.33 2.30 1.76 31.05%

NBAD 109.01 11.40 12.70 -10.24%

NBF 65.35 3.70 1.50 146.67%

NBQ 46.28 3.45 1.38 150.00%

RAKBANK 91.23 6.00 5.25 14.29%

SIB 79.94 1.40 0.98 43.59%

UAB 81.82 4.15 3.25 27.69%

UNB 102.26 4.55 4.75 -4.21%

CBD 74.45 3.90 2.75 41.82%

DIB 101.05 3.15 3.20 -1.56%

EMIRATESNBD 90.03 4.90 3.83 27.94%

MASQ 92.29 43.05 36.00 19.58%

Average Score 100.00

Maximum Score 200.00

* Break-even price represents the level at which the bank's score becomes equal to the Benchmark's stated average of 100 points

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22F Sky Tower

Al Reem Island

Abu Dhabi

Phone: +971 2 6262626

Fax: +971 2 6262444

E-mail: [email protected]

Important Notice and Disclaimer

The information provided in this report has been prepared without taking account of your objectives, financial situation or needs. You should,

therefore before acting on the advice, consider the appropriateness of the advice having regards to these matters and, if appropriate, seek

professional financial and investment advice.

All observations, conclusions and opinions expressed in this report reflect the personal views of the Al RAMZ Securities, LLC. analyst and are

subject to change without notice. The information in this report has been obtained from sources Al RAMZ Securities, LLC. believes to be reliable.

However, AL RAMZ Securities, LLC. does not warrant the accuracy, completeness or currency of, and will not be liable for any inaccuracies,

omissions or errors in, or for any loss or damage (including any consequential loss) arising from reliance on the information in this report.

Al RAMZ Securities, LLC. does not guarantee the performance of any investment discussed or recommended in this report. Any information in

this report relating to the distribution history or performance history of any investment, should not be taken as indication of the future

performance of the relevant investment.

In this report, Al RAMZ Securities, LLC. may express an expectation or belief as to future events , results or returns generally or in respect of

particular investments. Al RAMZ Securities, LLC. makes such statement in good faith and believes them to be have a reasonable basis. However,

such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from

such forward-looking statements. No guarantee of future returns is given or implied by Al RAMZ Securities, LLC.

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