Mashreq Bank

March 2014 results

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2

>Performance highlights

>Financial results

3 3

March 2014 results

Performance highlights

> Significant growth in profitability (35% YoY)

> Improving asset quality and enhanced coverage

> Improved balance sheet structure leading to higher loan-to-asset ratio

> Prudent cost management resulting in improved efficiency (38%)

> Diversified revenue base from international operations

4

> Stable gains in loans and advances and customer deposits (6% each)

> Consistently high fee and other income proportion (49%)

5

Operating income

Q1 2014

Consolidated Income statement

Q1 2013 Variance

Comments

Operating expense

Operating profit

Impairment charges

Net profit

1,382

524

857

251

575

1,118

487

631

171

425

23.6%

7.7%

35.9%

47.3%

35.2%

> Operating income up by 23.6%

YoY driven by strong growth in both

net interest income and fee and

commission income

> Growth in Operating expenses

was managed at 7.7% leading to

favorable cost-to-income jaws

> Impairment charges increased by

47.3% as bank continues to

increase general provision leading

to an NPL coverage of 101.8%

> Net profit higher by 35.2% on

account of strong growth in

operating profit

Financial highlights – Consolidated Income statement [AED million]

31 Mar 2014

94,079

53,261

61,910

15,037

94,889

6

Assets

Consolidated Balance sheet

Variance

Comments

Loans & Advances

Customer deposits

Shareholder’s funds

Risk weighted assets

31 Dec 2013

89,655

50,431

58,604

15,121

88,975

4.9%

5.6%

5.6%

(0.5%)

6.6%

> Total assets up by 4.9% on

account of growth in loans and

advances

> Customer loans and advances at

AED 53 billion, increased by 5.6%,

led by both corporate and retail

loans

> Customer deposits up by 5.6%

predominantly led by 8.2% growth

in CASA which reflects bank’s focus

on reducing cost of funds

> Shareholder’s funds remained

stable at ~AED 15 billion in spite of

dividend payout of AED 676 million

> Risk weighted assets increased

to reach AED 95 billion driven by

growth in loans and advances

Financial highlights – Consolidated Balance sheet [AED million]

31 Dec 2013

16.4%

18.1%

42.2%

26.5%

86.1%

96.7%

6.0%

2.2%

2.9%

13.1%

15.3%

31 Mar 2014

16.8%

37.9%

25.8%

86.0%

101.8%

5.7%

2.5%

3.1%

16.0%

31 Dec 2012

17.2%

19.3%

45.4%

27.4%

87.3%

56.6%

9.4%

1.7%

2.6%

10.3%

7

Tier I Capital Ratio

Total Capital Ratio

Efficiency Ratio

Liquid Assets to Total Assets

Advances to Deposits

Financial highlights – Financial Ratios [%]

Financial Ratios

NPL Coverage Ratio

NPL to Gross Advances

ROA

Net Interest Margin

ROE

>Key highlights

>Financial results

8 8

March 2014 results

9

Income statement 2014 2013 Variance (% change)

AED million Q1 Q1 Q4 Q1 2014 vs Q1 2013 Q1 2014 vs Q4 2013

Net interest income1) 707 507 708 39.4% (0.1%)

Fees and commission 437 328 355 33.3% 23.1%

Investment income / (loss)1) 46 31 20 46.2% 133.7%

Other income 192 252 254 (23.6%) (24.6%)

Total operating income 1,382 1,118 1,337 23.6% 3.3%

Operating expenses (524) (487) (535) 7.7% (2.0%)

Impairment allowance (251) (171) (247) 47.3% 1.9%

Overseas tax expense (13) (12) (2) 7.1% 708.0%

Minority interest (18) (23) (49) (22.2%) (63.9%)

Net income 575 425 505 35.2% 14.0%

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

March 2014 financials – Consolidated Income statement [AED million]

s

Balance sheet 31 Mar 2014 31 Dec 2013 Variance (% change)

Assets

Cash and balances with Central Banks 10,602 10,830 (2.1%)

Deposits and balances due from Central Banks 13,711 12,947 5.9%

Loans and advances 47,432 44,280 7.1%

Islamic financing and investment products 5,829 6,151 (5.2%)

Other financial assets 8,541 7,974 7.1%

Goodwill 27 27 NA

Interest receivable and other assets 6,376 5,871 8.6%

Investment properties 475 473 0.5%

Property and equipment 1,085 1,101 (1.5%)

Total Assets 94,079 89,655 4.9%

Liabilities

Deposits and balances due to banks 6,151 5,081 21.1%

Repurchase agreement with banks 1,030 1,045 (1.4%)

Customers’ deposits 57,326 54,158 5.8%

Islamic customers’ deposits 4,584 4,446 3.1%

Insurance and life assurance funds 1,598 1,427 12.0%

Interest payable and other liabilities 5,572 5,840 (4.6%)

Medium-term / long-term loans 2,780 2,538 9.5%

Total Equity 15,037 15,121 (0.5%)

Total Liabilities and Equity 94,079 89,655 4.9%

10

March 2014 financials - Consolidated Balance sheet [AED million]

11

Net income and expense [AED million]

Net fee and other income1)

Key Points

Net interest income1)

Operating income and expenses

44% 46% 40% 40% 38% Cost efficiency

> Q1 2014 Operating Income increased by 23.6% on YoY basis led by 39.4% growth in Net Interest Income and 10.5% growth in Net fee, commission and other income

> On a QoQ basis, Q1 2014 Operating Income rose by 3.3% led by 7.2% increase in Net fee, commission and other income

> Fees & other income as % of total income remained high at 49%

> Q1 2014 Operating expenses rose by 7.7% on a YoY basis, but declined by 2.0% on a QoQ basis

> Efficiency ratio at 38%, improved by 206 bps and 560 bps as compared to Q4 2013 and Q1 2013 respectively

707708651

579507

0

200

400

600

800

2.0

2.5

3.0

3.5

4.0

3.2%

Q2 2013

2.9%

Q1 2013

2.6%

Q1 2014

3.1%

Q4 2013

3.3%

Q3 2013

NII NIM (%)

45% 51% 52% 53% 51% % of total income

328 355 402 355 437

Q2 2013

561

11

196

Q1 2013

611

31

252 46

192

Q1 2014

675

Q4 2013

629

20

255

Q3 2013

591

19 170

Fee & Comm. Inv. Income Other Income

55% 49% 48% 47% 49% % of total income

535

1,3821,3371,243

1,1401,118

524499521487

Q2 2013 Q1 2014 Q4 2013 Q3 2013 Q1 2013

Operating expenses Operating income

1) NII component booked under net investment income as per IFRS, reclassified under NII 2) Based on annualized quarterly NII

2)

12

Asset mix [AED billion]

Loans portfolio split as of March 2014

Key Points

Total assets

Loans and advances

> Total assets increased by 4.9% to reach AED 94.1 billion, as compared to AED 89.7 billion at the end of 2013

> Customer loans and advances increased by 5.6% to reach AED 53.3 billion, as compared to AED 50.4 billion at the end of 2013

> Diversified loans portfolio with top 5 sectors accounting for ~77% of overall loan portfolio

> Loans portfolio is dominated by Personal loans at 25% followed by Trade at 21% and Islamic finance at 11%; Top 3 sectors account for ~57% of the overall loan portfolio

> Loans and advances as % of total assets remained stable at 57% in Q1 2014

94.189.7

83.081.277.8

Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013

53.350.448.747.442.7

Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q1 2014

8.4%

9.3%

10.8%

21.3%

25.1%

9.6%

9.9%

1.6% 0.1%

4.1% Personal

Services

Islamic finance

Trade

Construction

Manufacturing

Govt / Public sector

Other

Financial institutions

Transport & Comm.

55% 58% 59% 56% 57% Loans to total assets

13

Liability mix [AED billion]

Key Points

Liability mix

Customer deposits

> Customer deposits accounted for 78% of total liabilities, slightly lower than in Q4 2013

> Bank increased its customer deposits by 5.6% as compared to Q4 2013

> CASA for a majority portion of customer deposits at 58% as compared to overall market at 50% in Sep 2013

> Time deposits contributed 42% of total deposits, slightly lower than the market contribution at 49% in Sep 2013

61.958.653.051.049.2

Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q1 2014

79% 78%

4%3%

1%1%

Mar-14

79.0 (100%)

8% 9%

Dec-13

74.5 (100%)

7% 10%

Customer deposits

Due to banks

Other liabilities

Medium term loans

Repo

1) Represents data of Mashreq Group including overseas deposits 2) Represents data of UAE banking sector as of Sep 2013 sourced from Central Bank Statistical Bulletin Sep 2013

Medium term loans (EMTN) split and maturity

Dec-13

2.8

1.0

1.8 May 2014 – Feb 2017

Jan 2017

Maturity

Customer deposits split comparison (Mar 2014)

Mashreq Group1

UAE banking sector2

Savings A/c 6%

Current A/c 52%

Time deposits 42% 49%

10%

40%

Notes

Sub. FRN

14

Asset quality and liquidity [AED billion]

NPLs and Coverage

Key Points

Liquid assets trend

> Liquid assets to total assets as of Q1 2014 was at 26%, as compared to 27% in both Q4 2013 and Q1 2013

> NPLs have reduced by 20.2% as compared to Q1 2013 to reach AED 3.2 billion leading to NPLs as % of Gross loans and advances of 5.7%

> Coverage ratio in Q1 2014 has improved to 102% vs. 62% in Q1 2013 and 97% in Q4 2013

> Continuing with prudent provisioning policy, Mashreq has set aside AED 251 million for Impaired assets in Q1 2014 as against AED 247 million for Q4 2013

20.718.1 19.1

23.8 24.3

30

25

20

15

10

5

0

25

20

15

10

5

0

Q1 2014

26%

Q4 2013

27%

Q3 2013

23%

Q2 2013

22%

Q1 2013

27%

% of total assets Liquid assets

4.13.2 3.3 3.2 3.2

0

1

2

3

4

5

0

20

40

60

80

100

120

Q1 2014

102%

Q4 2013

97%

Q3 2013

88%

Q2 2013

83%

Q1 2013

62%

NPLs Coverage ratio

15

Tier I and Tier II Capital [AED billion]

Key Points

Risk-weighted assets and capital adequacy

Movement of capital

> The banks’ overall capital adequacy ratio at 16.8% is higher than the regulatory requirements as per Central Bank of and Basel II

> Tier 1 and Tier 2 capital decreased slightly to reach AED 14.5 billion and AED 1.5 billion respectively

> Tier 1 capital ratio of the bank was at 15.3% as of March 2014 as compared to 16.4% at end of 2013

78.0 82.0 85.8 89.0 94.9

20

15

10

5

0

100

90

80

70

60

50

40

30

20

10

0

Q1 2014

16.8%

Q4 2013

18.2%

Q3 2013

18.2%

Q2 2013

18.5%

Q1 2013

18.9%

Risk weighted assets Capital adequacy ratio

1.61.61.61.61.5

Q1 2014

16.0

14.5

Q4 2013

16.2

14.6

Q3 2013

15.7

14.1

Q2 2013

15.2

13.6

Q1 2013

14.8

13.2

Tier 1 capital Tier 2 capital

15.94

0.03

0.01 0.58 0.03

16.15

Capital as of Mar

2014

General provision

(0.68)

CCF, CTA &

Retained earnings

adj

Inc in OIC reg. capital

FRN purchased

/ sold

(0.05)

Dividend paid

Capital as of Dec

2013

Current year profit

Capital adequacy [AED billion]

16

Business segment information [AED billion]

Segment assets

Key Points

Segment operating income

Segment liabilities

> Corporate banking accounted for the largest portion of assets and liabilities; while Retail banking was the largest contributor in operating income at 27%

> Contribution of International business formed 17% of operating income, 18% of assets and 19% of liabilities leading to a more diversified base of business

> International banking saw the largest increase in assets of 10% followed by Retail and Corporate banking at 9% each

> International banking also witnessed the largest increase of 11% in liabilities followed by Retail banking at 9%, and Corporate banking at 5%; Treasury and Capital markets reported 2% decline in liabilities

26% 24%

13% 9%

27%

11%

17%

6%

5%

Mar-13

1,118 (100%)

27%

8%

16%

5%

5%

Mar-14

1,382

Corporate

Retail

Treasury & Capital markets

International Banking

Islamic

Insurance

Others

29% 30%

14% 13%

14%

15%

18%

7% 4%

Dec-13

89.7 (100%)

13%

15%

18%

7% 4%

Mar-14

94.1 (100%)

Corporate

Retail

Treasury & Capital markets

International Banking

Islamic

Insurance

Others

41% 40%

3%3%

Mar-14

79.0 (100%)

20%

9%

19%

6% 3%

Dec-13

66.4 (100%)

20%

9%

18%

6% 3%

Corporate

Retail

Treasury & Capital markets

International Banking

Islamic

Insurance

Others