Mashreq
INVESTOR PRESENTATION December 2018 Over 50 years… S P I R I T Socially Passionate Respect for Innovative Integrity Transparent Responsible about clients colleagues
“To be the region’s most progressive bank enabling innovative possibilities for our clients, colleagues and communities”
2 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
3 UAE ECONOMY – MACROECONOMIC OUTLOOK UAE is the 2nd largest economy in the GCC, with promising economic growth prospects
UAE - The second largest economy in the GCC Real GDP Growth Potential Sovereign Rating – 2018-23F (%) by Moody’s ▪ Second largest economy in the GCC with nominal GDP of USD 433bn in 2018 A1 Baa3 B2 Aa3 Aa2 Aa2 ▪ Well diversified economy with oil & gas contributing only 3.5 ~29% of the total GDP 3.2 2.6 2.7 2.7 ▪ Despite volatile oil prices, UAE economy remains strong 2.2 with current account surplus at 7.2% of GDP for 2018E ▪ Holds 8.1% of the proven OPEC crude oil reserves, primarily concentrated in Abu Dhabi ▪ Young population with ~61.1% aged between 25-54 years KSA Oman Bahrain Qatar UAE Kuwait and a literacy rate of ~94%
Nominal GDP per Capita – 2018 Nominal GDP GDP Breakdown by Sector – 2017 (USD thousand) 2018 (USD billion) (%) Crude Oil and Natural Gas 82 770 39 145 433 188 Wholesale Retail Trade 17% Financial Corporations 67.8 29% 5% Construction 41.5 Transformative Industries 31.9 6% 23.2 26.5 Public Administration 19.2 6% 12% Real Estate 8% Transport and Storage 9% Oman KSA Bahrain Kuwait UAE Qatar 8% Other
Source: IMF WEO October 2018,CIA & OPEC, Moody‘s Ratings, National Bureau of Statistics 4 UAE ECONOMY – MACROECONOMIC OUTLOOK One of the best ranked economies on global competitive index among the GCC nations
Current Account Balance to GDP – 2018 Govt. Net Borrowing to GDP – 2018 (%) (%)
8.4 11.3 11.7 4.8 7.2 0.6 3.6
-3.3 -2.5 -4.6 -2.0 -8.9
Oman Bahrain Qatar UAE KSA Kuwait Bahrain KSA Oman UAE Qatar Kuwait
Global Competitiveness Index – 2018-19 Ranking1 Inflation to Remain Stable Over the Medium Term (%) 3.5 54 47 50 2.2 39 1.9 2.1 1.9 1.9 27 30
UAE Qatar KSA Oman Bahrain Kuwait 2018E 2019E 2020E 2021E 2022E 2023E
1 Rank out of 137 economies Source: IMF WEO October 2018, World Economics Forum-Global Competitiveness Index 2018 5 UAE ECONOMY – MACROECONOMIC OUTLOOK Solid institutional and policy framework as reflected by relatively higher scores among the GCC nations
Scores Highest Among GCC on Govt. Among the Best Ranked in GCC on Rule of Law Effectiveness Index1 Index1
1.4 0.80 0.72 0.7 0.45 0.43
0.2 0.2 0.2 0.10 0.10
-0.2 UAE Qatar Bahrain Oman Kuwait KSA UAE Qatar Bahrain KSA Oman Kuwait
Highest Ranking in GCC on Control of Corruption Enforcement of Contracts - Ranked Best in GCC Index1 1.1 122 128 0.7 0.4 73 77 0.2 59
-0.1 9 -0.3 UAE Qatar KSA Oman Bahrain Kuwait UAE KSA Oman Kuwait Qatar Bahrain
1 Score ranges from -2.5 (weak) to 2.5 (strong) Source: World Bank – Worldwide Governance Indicators 2018 Update, World Bank- Doing Business 6 UAE ECONOMY – MICROECONOMIC OUTLOOK Non-oil growth is supported by strong hospitality and logistics sectors
Non-oil growth continues to be steady with PMI remaining Non-oil direct trade flows have witnessed steady growth over the above 50 last few years
Emirates NBD UAE PMI index UAE non-oil direct trade flows (AED billion) Increasing rate of growth CAGR 65 Re-exports Exports Imports ’12-’17
60 1,556 1,564 1,563 58 57 57 56 56 56 56 14.6% 55 55 55 55 419 400 433 54 54 55 1,057 1,065 1,072 185 195 185 1.8% 219 232 244 784 50 170 148 132 Dec- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec- 232 7.2% 17 18 952 969 944 89 45 668 685 696 463 Increasing rate of contraction 40 50 – no change on previous month 2012 2013 2014 2015 2016 2017 1H 2018
The hospitality sector, especially in Dubai, is one of the major … along with the logistic sector
growth drivers … Dubai Abu Dhabi Hotel guests (million) Air passengers (million) UAE container volumes (TEU million) 21.2 21.0 15.8 15.9 88 89 18.0 18.6 20.2 20.4 14.9 84 14.2 78 13.2 70 66 11.0
UAE air freight (million tonnes) Dubai Abu Dhabi
4.9 # 23 25 25 3.5 3.5 4.1 4.4 4.6 20 22* 2.9 3.1 3.2 3.3 3.4 2.8 17 2.3 2.4 2.4 2.5 2.6 2.7 0.6 0.7 0.8 0.8 0.8 0.8 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017
Source: Emirates NBD, Federal Customs Authority, Hotel and Airport authorities of UAE, World Bank, Khaleej Times, National # YTD November 2018 *Estimated 7 UAE ECONOMY – MICROECONOMIC OUTLOOK
Consumer borrowing has slowed due to flat employment levels
Rents continue to be falling … … as can also be seen in the fall in Dubai property prices over the year
Dubai 4Q ‘18 Abu Dhabi 4Q ‘18 Dubai residential sale prices
(AED / SQM) YOY % 14,500 2 Rent Rent Rent Rent 0 14,000 (2 ) growth falling growth falling 13,500 (4 ) slowing slowing (6 )
13,000 (8 )
14,313
14,011 14,012
14,008
13,971 13,971
13,937 13,928
Rent Rent Rent Rent 12,500 13,820 (10 )
13,532
13,358 12,804 growth bottoming growth bottoming 13,128 (12 ) acceler- out acceler- out 12,000 (14 )
ating ating
2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Residential Office Retail Hotel Sale price Dubai (LHS) Sale price growth Dubai (RHS)
Consumer borrowing growth has slowed… … due to flat employment levels
Domestic credit to Individuals (AED Bn) Emirates NBD Employment index (#)
65 Increasing rate of growth +4% 60 338 337 311 326 283 55 52 51 51 51 51 51 50 50 50 49 49 50 50 50 Dec- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec- 17 18 45
Increasing rate of contraction 40 2014 2015 2016 2017 2018 50 – no change on previous month
Source: JLL, UAE Central Bank, Emirates NBD 8 UAE ECONOMY – BANKING SECTOR OVERVIEW Regulated & Diversified Banking Environment
Diversified and Well Regulated Banking Sector GCC Banking Assets1 – 2018 (AED billion) ▪ As of December 2018, UAE banking sector comprised 49 Total Banking Assets to GDP Ratio banks 181% 82% 203% 153% 487% 95% – 22 National Banks with 743 branches and – 27 Foreign Banks with 80 branches 2878 ▪ Diversified loan portfolio - Real Estate and Construction 2310 sector accounted for only ~21% of loan book in FY 2018 1400 ▪ Well regulated banking system, in line with internationally 802 705 followed best practices 285 ▪ UAE Banking sector has a long-standing track record of UAE KSA Qatar Kuwait Government support during crisis situations Bahrain Oman
UAE – Gross Credit & Deposits (AED billion) UAE – Loans by Sector – FY 2018 (%)
Gross credit CAGR 2013- 2018: 5.4% Agriculture Deposit CAGR 2013- 2018: 6.5% 0% 1% Mining and Quarrying 1,756 1% 1,657 Manufacturing 1,574 1,563 1,581 1,627 1,485 1,472 5% 1,378 1,421 Electricity, Gas and Water 1,276 1,279 10% 21% 22% Construction and Real Estate Trade Transport, Storage & Comm Financial Institutions (Ex. Banks) 10% 6% Government 12% 3% Personal Loans for Business 2013 2014 2015 2016 2017 2018 9% Personal Loans for Consumption Others 1Data for Qatar and Bahrain relates to Nov 2018 Source: UAE Central Bank, Central Bank of other respective countries, IMF WEO October 2018, Khaleej Times 9 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
10 MASHREQ HERITAGE Mashreq is one of UAE's leading financial institutions
. Established in 1967 by the Al-Ghurair Group Heritage . 51 years experience in the UAE banking and financial services market
. Oldest regional bank based out of UAE Publicly listed . Combines the entrepreneurial spirit of Dubai with enduring trade banking relationships across the region . Listed on the DFM on the creation of the local stock exchange
Strong . Prominent Regional bank with a presence in most GCC countries and a leading international network regional / with 24 branches / rep-offices in MENA, Asia, Europe and United States international presence . Well positioned to finance regional trade flows
. Universal bank offering a comprehensive suite of products and services to individuals and corporates Diversified across all lines of business business case . Most diversified revenue streams with fee and other income contributing over 40% of total income; and high degree of geographic diversification with 21% of revenue coming from outside of the UAE
Strong . Long serving senior executives along with international management expertise delivering a robust management growth model team . Led by Abdul Aziz Abdulla Al-Ghurair, Chief Executive Officer for 28 years
Strong and . Al-Ghurair Group, the main shareholders of the bank, are a leading conglomerate in the UAE with supportive numerous business interests ownership . Featured in the Forbes billionaire list for the last 10 years structure . Mashreq has been the flagship business for the family for over 50 years
11 MASHREQ HERITAGE Stable and supportive ownership structure
Mashreq’s Leadership Ownership – Al-Ghurair flagship brand Mr. Abdulla Bin Ahmad Al-Ghurair ▪ Al-Ghurair families holds the majority stake in Chairman Mashreq (approximately 87%) and are the ▪ One of the most prominent businessmen and founders of the Bank industrialists in the UAE ▪ Al-Ghurair family has a strong commitment to ▪ Former Chairman of the UAE Banks Association the continued growth and financial solidity of H.E. Abdul Aziz Abdulla Al-Ghurair Mashreq Chief Executive Officer & Director ▪ Al-Ghurair family is one of the oldest and ▪ Chairman of UAE Banks Federation wealthiest families in the UAE ▪ Vice Chairman of the higher board of DIFC – Featured in Forbes billionaire list for over ▪ Chairman of Masafi 10 years ▪ Chairman of Oman Insurance ▪ Board Member of Emirates Foundation – Business interests include shopping ▪ Former Speaker of the Federal National Council malls, real estate, cement manufacturing, food industries, Masafi (mineral) water, Key shareholders (December 2018) contracting, trading, retailing, shipping, printing & packaging, aluminium 9.6% Saif Al Ghurair Investment LLC extrusion, building materials, oil refinery, Abdulla Ahmed Al Ghurair Inv. Co. manufacturing, steel and canning 3.6% Masar Investments 3.5% 39.5% Majid Capital ▪ Mashreq’s shares are listed and traded on 12.7% National Cement Company the Dubai Financial Market Other shareholders
31.1%
12 MASHREQ HERITAGE Strong distribution network in the UAE with 26 branches in Dubai
Alternate Channels ▪ 50 branches (out of which Mashreq Gold has presence in 29 branches and SME Banking has Umm Al Quwain Ras Al Khaimah presence in 24 branches) and a Retail Customer Ajman 1 branch 1 branch Service Center in UAE serving ~500K customers 1 branch ▪ ATMs and CCDMs increased coverage to 343 units in UAE
Sharjah ▪ 35,000 POS machines spread 14,000 merchant location in the UAE. Second Largest Merchant 8 branches acquirer in the UAE with close to 30% market share ▪ Internet Banking through Mashreq Online (Retail incl. Dubai Brokerage), Mashreq Business online (Corporate), Mashreq-FI online (Correspondent Banking); 306,662 26 branches active users are registered with online banking ▪ Mobile banking services: Snapp registration has grown up by 29% year on year and financial transactions has grown by 21% as compared to last year figures. Snapp has been recently upgraded with unique new features such as transfer your credit card balance from other banks card control, Quick remit to Pakistan, Mashreq Pay and Samsung Pay. ▪ Fully integrated electronic platform for transaction banking (GTS) Abu Dhabi Fujairah ▪ State of the art Polaris System (mashreqMATRIX) to provide online services to corporate customers 12 branches 1 branch ▪ 24 x 7 Direct Banking Call Centre
13 MASHREQ HERITAGE Regional and international banking presence with 20% of revenues from outside of UAE
London New York Pakistan Nepal Bangladesh
Kuwait India Hong Kong International Egypt branches Bahrain Financial Institution Qatar branches Representative Offices
14 MASHREQ HERITAGE Strong track record in International expansion
10 12
Egypt, London,
UAE Pakistan, Hong Kong Bahrain Bangladesh Nepal
1967 1978 1981 2001 2010
1971 1980 1984 2009
Qatar India New York Kuwait
2 7 9 11
Presence in number of countries 15 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
16 STRUCTURE AND LEADERSHIP Mashreq organization chart
Board of Directors
Chief Executive Officer
Corporate Banking Retail Banking International Banking Treasury & Capital Group (CBG) Group (RBG) Group (IBG) Markets (TCM) (23% of revenue) (26% of revenue) (20% of revenue) (10% of revenue)
Audit & Fraud Corporate Operations & Compliance Risk Credit Prevention Affairs Technology Group Management Management Group (CA) (O&T) (CG) (RM) (CM) (AFPG)
Note: Financials as of 30 December 2018 17 STRUCTURE AND LEADERSHIP Mashreq is a well diversified universal bank that covers significant lines of business with a full product and channel suite
Corporate Banking Treasury & Capital Retail Banking Group International Banking Group (CBG) Markets (TCM) (RBG) Group (IBG)
Offers treasury & Offers banking services Offers wholesale banking Offers personal banking investment products outside UAE
. Energy, Services & . FX and Investments . Personal Banking . Wholesale and Manufacturing investment banking . Rates & Structured . SME . Trading Solutions . Treasury and investment . Mashreq Gold products . Contracting Finance . Mashreq Capital . Private Banking . Personal banking . Real Estate . Islamic banking products . Payments . Financial Institutions . NBFI . Equity Derivatives & globally Institutional Sales . Islamic banking products . Emerging Corporates . Islamic banking products Division . Mashreq Securities . Distribution
. Global Transaction . Investments . Alternate Channels Services . Direct Sales
. Corporate Finance . Direct Banking Centre . Islamic Banking products
Note: Islamic banking and Insurance segments contributes the remaining revenue 18 STRUCTURE AND LEADERSHIP Oman Insurance is the largest subsidiary of Mashreq
Mashreqbank Psc
Oman Insurance Company (63.94%) Mashreq Al Islami Finance (99.8%) ▪ Largest insurance company in the UAE ▪ Islamic Finance Company ▪ Provides full range of Insurance Products & ▪ Provides full range of Islamic Products & Services Services ▪ Dec ’18 Equity: AED 865 Mn ▪ Dec ’18 Equity: AED 1.7 Bn ▪ FY 2018 profit: AED 33 Mn ▪ FY 2018 profit: AED 10 Mn
Mashreq Capital (100%) Mashreq Securities (99.98%) ▪ Registered in DIFC for Brokerage, Asset ▪ Securities brokerage Company registered at Dubai Management and Fund Management services Financial Market ▪ One of the largest asset management in UAE with ▪ One of the leading brokerage in the UAE USD 800 mn in asset under management ▪ Dec ’18 Equity: AED 72 Mn ▪ Funds rated highest in the market ▪ FY 2018 Profit: AED (6) Mn ▪ Dec ’18 Equity: AED 28 Mn ▪ FY 2018 profit: AED 5 Mn
Note: Figures are based on draft audited statements 19 PERFORMANCE BY DIVISION Business highlights – Domestic Corporate
Business Highlights Operating Income (AEDm)
. Corporate banking contributes 25% to total assets and 23% to total operating income (as of FY 2018) 0.9% (1)
. Key product offering includes: trade finance, contracting finance, project finance, corporate finance advisory and cash management 1,324 1,319 1,361 1,359 . Operates via expertise-led coverage model catering to contracting finance, government, MNCs, real estate, trading companies, NBFIs and emerging corporates in the UAE (including DXB and Northern Emirates & Abu Dhabi)
. The Corporate Finance team has retained its position amongst the premier institutions for debt capital raising in the region 2015 2016 2017 2018
− Mashreq was amongst the top 5 loan Bookrunners in the GCC, as per Bloomberg
. Mashreq’s Global Transaction Services (GTS) team maintained its regional Segment Assets and Liabilities (AEDbn) dominance in the transaction banking space by winning 8 awards in 2017 for trade finance, factoring and cash management 37 . Mashreq was also the 1st bank to go live in the region with SWIFT’s Global 34 33 33 Payment Initiative 30 31 30 27 . GTS won the innovators award 2017 by Global Finance for providing card less cash to its corporate clients, a first in the region
2015 2016 2017 2018
Assets Liabilities
Note: (1) Data represents CAGR 2015-18. 20 PERFORMANCE BY DIVISION Business highlights – Domestic Retail
Business Highlights Operating Income (AEDm)
. Domestic Retail contributes 9% to total assets and c. 26% to total operating income (as of FY 2018) (5.6%) (1)
. Product offerings include: current, savings & fixed deposits, investment products, personal, auto and small business loans, mortgages, credit cards, 1,838 1,684 bank assurance, private banking and wealth management 1,530 1,546
. Currently operates 35,000 POS machines spread across 14,000 merchant locations in the UAE
− 2nd largest merchant acquirer in UAE with ~30% market share 2015 2016 2017 2018 . Select focus on fee based business including: account management, forex and remittances among others, while unsecured lending has been ceased in the SME segment
. Key innovations include: Segment Assets and Liabilities (AEDbn)
− 1st bank to integrate Apple’s Siri for voice-powered payments
− 1st bank in the region to have early access to Samsung Pay - a secure 25 mobile payment service that works as a contactless credit or debit card 24 23 22 − POS Plus - UAE’s 1st ever handheld payment acceptance device with built-in 14 digital product catalogue (customers can see a merchant’s entire product 14 13 13 line and variants on a digital tablet)
− Launched Mashreq NEO, a full-service digital bank to cater to the day-to-day needs of a world on the move
. Key awards for 2017 include Best Digital Bank in the UAE and Best Mobile 2015 2016 2017 2018 Banking Application in UAE by World Finance and a number of awards from Global Finance like Best Consumer Mobile Banking Global, Best Consumer Assets Liabilities Digital Bank Middle East
Note: (1) Data represents CAGR 2015-18. 21 PERFORMANCE BY DIVISION Business highlights – International Banking
Business Highlights Operating Income (AEDm)
. International Banking contributes 26% to total assets and 20% to total operating income (as of FY 2018) (3.5%) (1)(1)
. The decline in operating income in 2017 was primarily the result of devaluation 1,463 adjustment impact in Egypt while the fall in 2018 was the result of slowdown of 1,301 business in Qatar 1,241 1,169
. International banking business covers Financial Institutions (FI) services globally and also offers Corporate and Retail Banking services to customer segments in Bahrain, Egypt, Kuwait, Qatar and India
. The Bank was mandated lead arranger in important loan syndications in 2015 2016 2017 2018 overseas markets
. Introduced key sales management systems and processes like Client Relationship Management and Automated Account Planning Segment Assets and Liabilities (AEDbn) . In key African countries, the bank assisted in raising funds for the top banks and development FIs and continued to be the leading Middle Eastern bank in the FI business 36 33 33 . During the year, a new corporate banking strategy for India was rolled out, 31 which shows a promising start with a healthy pipeline 23 21 22 − In addition, an OBU unit was established in Bahrain 19
. Key Awards: Best Corporate & Institutional Digital Bank – Qatar by Global Finance 2017
2015 2016 2017 2018
Assets Liabilities
Note: (1) Data represents CAGR 2015-18. 22 PERFORMANCE BY DIVISION Business highlights – Treasury and Capital Markets
Business Highlights Operating Income (AEDm)
. Treasury & Capital Markets contributes 14% to total assets and 10% to (1) total operating income (as of FY 2018) 2.9%(1)
. Operating income in 2018 remained stable compared to 2017, driven by investments and FX 616 602 553 564 . Treasury and Capital Markets business consists of customer flow business and proprietary business
− Customer flow business includes transactions for FX, derivatives, hedging, investment products, equities and regional asset management undertaken on behalf of customers 2015 2016 2017 2018
− Proprietary business includes trading and investing activity undertaken on behalf of the Bank
. The Rates and Structured Solutions business closed several large ticket Segment Assets and Liabilities (AEDbn) hedging transactions for clients across the region, including a structured profit rate swap for a real estate loan
. Treasury product suite grew across asset classes, supported by an online trading platform and 24 hour dealing room 20 17 18 16 . Makaseb Income Fund won Thomson Reuters Lipper Fund award for Best Fund 13 Performance over 5 Years 2010 9 9 7 . Global Finance award for the best Treasury and Cash Management in the UAE 2017
. EMEA Finance – Best Treasury services in the Middle East 2018 2015 2016 2017 2018
Assets Liabilities
Note: (1) Data represents CAGR 2015-18. 23 PERFORMANCE BY DIVISION Business highlights – Islamic Banking
Business Highlights Operating Income (AEDm)
. Islamic Banking contributes 10% to total assets and 9% to total operating (1) income (as of FY 2018) 20.2%(1)
. Mashreq Al Islami is the Islamic Banking arm of Mashreq (Mashreq Al Islami Finance Company PJSC and Islamic Banking Division, Mashreqbank PSC) and 535 479 offers a wide range of Shari’ah compliant products and services 308 321 . Amongst the top ten Islamic institutions in the UAE based on market share as per MEED
. Products offered include Ijara home finance, Mudarabah deposit and savings, Musharaka finance, Murabaha commodity finance, Ijara equipment finance, 2015 2016 2017 2018 Sukuk underwriting, Musharaka LC, Murabaha LC, TR Murabaha, Kafala, Wakala deposit, Reserve Murabaha deposit and sukuk advisory
. Successfully closed a 5 year US$500m senior secured syndicated facility for Ezdan Holding Group Company, the largest private sector real estate developer Segment Assets and Liabilities (AEDbn) in Qatar - Mashreq Al Islami UAE acted as Mandated Lead Arranger, Sole Book Runner and Facility Agent for the facility
. “Most Innovative Islamic Banking Solution Provider” by Global Banking & 14 Finance Review 2018 11 10 8 9 8 8 7
2015 2016 2017 2018
Assets Liabilities
Note: (1) Data represents CAGR 2015-18. 24 PERFORMANCE BY DIVISION Business highlights – Insurance Business (Oman Insurance Company)
Business Highlights Net Profit (AEDm)
. Oman Insurance Company contributes c. 5% to total assets and 8% to total
operating income (as of FY 2018) (1) (50.2%)(1) . Mashreq owns 63.9% of Oman Insurance Company
105 . Oman Insurance Company (OIC) is the largest insurance company in the UAE products offered include life, medical, motor, marine cargo and hull, aviation, 81 79 property, fire and general accidents, engineering, energy, liabilities and personal lines insurance 10 . Largest distribution network in the UAE; OIC has 12 branches, with operations across all Emirates in the UAE, the Sultanate of Oman, Qatar and Turkey 2015 2016 2017 2018 . The company is rated ‘A-’ Stable Outlook by Standard & Poor’s and ‘A Excellent’ Stable Outlook by AM Best, supported by leading multinational reinsurers such as Everest Re, XL Re and Scor Gross Written Premium (AEDm) . Oman Insurance Company continued its digital focus and now offers online sales and service capability through web portals and mobile apps for its Motor and Medical lines 3,555 3,718 3,699 . In 2018, in addition to substantially increasing its free cash flow, OIC 3,190 Management took proactive measures to strengthen its balance sheet, bolster its claim reserving and implement forward looking IFRS 9 provisioning. These actions have generated additional reserves and have impacted OIC’s earnings
. 2018 exceptional achievements to ensure long term sustainable profitability: ̶ Local solvency has been again improved from 162% to above 170% ̶ Normalized net underwriting income increased by 18% ̶ Expense ratio went down from 21% to 19% ̶ Net receivables dropped by more than 50% 2015 2016 2017 2018 ̶ More than AED 400m of free cash flow generated over 2018 . 80% of clients are Satisfied or Very Satisfied with OIC’s services
Note: (1) Data represents CAGR 2015-18. 25 STRUCTURE AND LEADERSHIP Profile of Senior Management
Abdul-Aziz Abdullah Al-Ghurair Ali Raza Khan Chief Executive Officer Head of Corporate Affairs • A Graduate of California Polytechnic State University, H.E. Abdul-Aziz Al- • Ali Raza Khan is a Member of the Institute of Chartered Accountants of Ghurair joined Mashreq, then Bank of Oman, in 1977 India (1978) • He worked in different Divisions and through rigorous training in various • Joined Mashreq in 1980; as Head of Corporate Affairs, he is assignments climbed to his current position as of March 1991 responsible for Finance, HR and Administrative functions in the bank
Ahmed Abdelaal Subroto Som Head of Corporate Banking Group Head of Retail Banking Group • Ahmed Abdelaal is an MBA from the London Business School • Subroto Som is a graduate of IIT Delhi and has an MBA from IIM • Joined Mashreq from HSBC where he was the Regional Head of Ahmedabad Corporate Clients Coverage MENAT and Head of Commercial Banking • Joined Mashreq in 2015 from the Boston Consulting Group UAE • Prior to this, he has experience at senior positions at Citibank, • Prior to this, he has experience at senior positions at ABN Amro, Standard Chartered & Seoul First Bank American Express and Arab Bank
Jan-Willem Sudmann Nabeel Waheed Shaikh Head of International Banking Group Head of Treasury & Capital Markets • Jan-Willem Sudmann has a Masters in Economics from the University of • Nabeel Waheed Shaikh has a BSc from Syracuse University, New York Hamburg, Germany • Joined Mashreq in 1996, from Bank of America, Pakistan where he • Joined Mashreq in 2015; prior to joining Mashreq he was a Managing spent over 15 years and held various positions including Head of Director at Commerzbank Shanghai Corporate Banking • Before joining Commerzbank he worked for close to two decades at Dresdner Bank across various geographies such as Germany, UK and Egypt
Nasser A. Paracha Sandeep Chouhan Head of Audit & Fraud Prevention Group Head of Operations & Technology • Nasser A. Paracha has a BSc from the University of Leeds. He completed a • Sandeep Chouhan has a Masters in Technology, Management & General Management Program from HBS Systems from IIT, Delhi, India • Joined Mashreq in 1995 from Deutsche Bank AG in Pakistan • Joined Mashreq in 2015 from CBQ, Qatar • Overall banking experience of approximately 25 years, covering corporate • Prior to this, he was CIO with Barclays and Morgan Stanley banking, internal audit and compliance
26 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
27 STRATEGIC OBJECTIVES Well Defined Strategic Objectives…
Strategic Objectives Mission Become primary bank & grow ‘New to Bank’ Build longterm relationships by:
Enhance brand Delivering superior service to clients
Foster innovation & drive digital transformation Actively contributing to the community VISION through responsible banking Strategic cost management & middle “To be the office rationalization region’s most progressive Leading with innovation bank enabling innovative Enhance human capital possibilities for our clients, colleagues and communities” Leader in service excellence/ customer Treating colleagues with dignity experience and fairness
Further leverage Islamic Banking Additional risk taken into opportunities Pursuing opportunitiesconsideration that grow shareholders’ value Ethical, regulatory, internal policy compliance – zero tolerance
28 BUSINESS OBJECTIVES …Supported by Clearly Laid Down Business Objectives
. Win new customers and increase customer penetration through a differentiated customer Accelerate centric, service oriented approach and focus on continued product innovation domestic growth . Leverage balance sheet strength and liquidity position to grow market share . Capitalize on leadership position in fee-generating businesses
. Support franchise client needs internationally and international client needs in our franchise Grow by providing solutions to corporate clients across network international . Provide cross border accessibility to clients, such as offshore booking location for private and contribution gold customers and non-resident proposition across the network . Maintain momentum in our core South Asia FI market and build scale in Egypt & Africa
Optimize balance . Optimize liability mix to lower cost of funds and enhance margins sheet . Increase leverage and deploy liquid assets into higher yielding opportunities
Strengthen risk . Reduce charge-to-loans ratio through continued focus on portfolio and asset quality management and asset quality . Selective portfolio / asset sales as part of an ongoing portfolio balancing strategy
. Leverage existing infrastructure to drive growth and returns Drive operational efficiencies . Significantly improve efficiencies across the bank to bring cost/income ratio in line with market
Business objectives are strongly integrated with the long-term strategic direction of Mashreq 29 DIVERSIFICATION Diversified earnings base with strong growth potential
Gross Loans portfolio split as of (AED 73.1 bn) Business segments outlook December 2018 ▪ UAE Retail: Pick up in mortgage business; strong growth in Manufacturing cards and payment business and wealth management 9.1% 10.0% Construction ▪ UAE Corporate: Strong growth from trade, manufacturing, Trade tourism and logistics driving overall UAE GDP in the coming years leading to increased demand for credit & trade services 17.7% Transport & Comm. 22.6% ▪ International Banking: Tap and strengthen Regional market Services footprint to assist local corporations operating regionally Financial institutions ▪ Insurance: As the largest insurance company in the UAE, 2.4% Personal Mashreq’s Oman Insurance Company (OIC) subsidiary is 16.6% Govt/GRE expected to grow in line with the market 15.9% 5.6% ▪ Treasury: Build on the market leading menu of TCM products including hedging and FX products and increase cross-sell
Revenue split FY 2018 (AED 5.9 bn) Asset split as of December 2018 (AED 139.9 bn)
10.1% 6.2% Corporate 22.9% Loans & Advances 6.1% Retail 9.6% 9.0% Treasury & Cash and balances with CB Capital markets Interbank deposits & balances 49.5% International 16.4% Financial Investments 19.7% Islamic Other assets 26.0% Insurance Others 10.1% 14.4%
30 INNOVATION Strategic Advantage through Product and Service Innovation
Mashreq was the first bank in the UAE to:
Introduce consumer loans Introduce a comprehensive corporate Integrate Emirates ID with bank account cash management solution offering and allow its usage as a Debit Card (GTS)
Introduce “Branch of the future – self Introduce “Tap & Go”, mobile NFC service autonomous branches” sticker payment method
Centralize branch operations and Introduce Point-of-Sale terminals foreign trade services
Innovation Issue debit/credit cards Offer a direct banking centre
Offer Visa Connectivity across the Install ATM cash dispensers world
Launch full service digital bank “Mashreq Launch UAE’s first fully EMV Chip & PIN Neo“ compliant mobile POS solution
31 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
32 FINANCIAL TRACK RECORD Solid performance over the past decade
Net profit (AED million)
+2% 2,401 2,402 2,052 2,060 1,926 1,806 1,643 1,312 1,000 803 820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Net loans and advances (AED billion)
+2% 69 61 63 58 60 55 48 50 41 41 38
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
33 FINANCIAL TRACK RECORD Rapid improvement in performance over the last four years
Loans & Advances (AED billion) Customer deposits (AED billion)
5% 5% 69.3 62.7 83.2 58.0 60.2 61.0 77.0 76.1 68.5 73.6
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Total Revenue (AED million) Net profit (AED million)
Fee and other income Net interest income1) -4% 2,401 2,402 0% 1,926 2,052 2,060
4,837 5,978 6,169 6,016 5,938
2,720 2,555 2,602 2,437 2,295 2014 2015 2016 2017 2018 3,125 3,423 3,567 3,579 3,643 ROE 15.7% 14.2% 10.6% 10.5% 10.2% 2014 2015 2016 2017 2018
1 NII component booked under net investment income as per IFRS, reclassified under NII 34 FINANCIAL TRACK RECORD Key financial ratios
31 Dec 2018 31 Dec 2017 31 Dec 2016 Capital adequacy
Tier I Capital Ratio 15.3% 16.0% 16.0%
Total Capital Ratio 16.5% 17.2% 16.9% Liquidity
Liquid Assets to Total Assets 33.2% 31.2% 31.9%
Advances to Deposits 83.2% 82.5% 79.2% Asset quality
NPL Coverage Ratio 137.2% 149.7% 151.1%
NPL to Gross Advances 3.1% 2.9% 3.1% Performance
ROA 1.6% 1.7% 1.6%
ROE 10.2% 10.5% 10.6%
Net Interest Margin 3.24% 3.41% 3.52%
Efficiency Ratio 44.1% 39.2% 39.0%
Fee and other income to total income 38.7% 40.5% 42.2%
35 FINANCIAL TRACK RECORD Well-funded balance sheet …
Operating leverage (%) Liability by type as of December 2018
Loan to Deposits 12.6% (AED 119.2 bn)
84.8% Other Liabilities 81.7% 79.2% 82.5% 83.2% 6.9% 1.3% Med. Term FRN Insurance Funds 9.4% Due to Banks Customer deposits 69.8%
2014 2015 2016 2017 2018
Liquidity (%) Liability segment split as of December 2018 Liquid Assets to Total Assets (AED 119.2 bn) 9.7% 33.2% 2.1% 29.9% 30.4% Corporate 27.7% 29.6% 9.4% 31.2% Retail Treasury & Capital markets International 18.4% Islamic Insurance 2014 2015 2016 2017 2018 18.4% 10.7% Others
36 FINANCIAL TRACK RECORD …along with stable adequacy
Risk weighted assets (AED million) Tier 1 and Tier 2 capital (AED million)
Tier 1 capital Tier 2 capital 126,545 118,874 113,514 117,969 20,042 20,993 20,819 106,628 19,179 1,377 1,422 17,726 1,178 1,077 1,450
18,965 19,616 19,397 16,277 18,001
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Capital adequacy (%)
17.2% Tier I Capital ratio 16.6% 16.9% 16.0% 16.9% 16.0% 16.5% 15.3% 15.9% 15.3% Total Capital ratio
2014 2015 2016 2017 2018
37 Market performance in FY ‘18
Total assets (AED bn) Total loans (AED bn) Peer group1) Mashreq Peer group1) Mashreq
DXB AUH DXB AUH
1,961 797 1,165 125 1,160 517 644 63 Dec’17 Dec '17
+7.4% 6.8% 7.8% +11.8% +5.9% 7.6% 4.4% +10.4%
2,107 851 1,256 Dec’18 140 1,228 556 672 Dec ‘18 69
Total deposits (AED bn) Total revenue (AED bn) Peer group1) Mashreq Peer group1) Mashreq
DXB AUH DXB AUH
1,292 554 738 Dec '17 76 64.1 29.6 34.5 FY ’17 6.0
+9.2% 6.6% 11.2% +9.4% +8.9% 8.7% 9.2% -1.3%
1,411 591 820 Dec ‘18 83 69.9 32.2 37.7 FY ’18 5.9
1) Dubai Banks: ENBD, CBD, DIB & RAK; Abudhabi Banks: FAB, ADCB, UNB & ADIB
SOURCE: Banks’ financial statements 38 GROWTH - Mashreq YTD December 2018 performance compared to peer group1) [AED billion]
Bank Total assets Total loans (net) Total deposits
Growth vs Growth vs Growth vs Dec '17 Dec '17 Dec '17
FAB 744 11% 353 7% 466 18%
ENBD 500 6% 328 8% 348 7%
ADCB 280 6% 166 2% 177 8%
DIB 224 8% 145 9% 156 6%
Mashreq 140 12% 69 10% 83 9%
ADIB 125 2% 80 2% 100 0%
UNB 107 0% 72 2% 77 (2%)
8% CBD 74 5% 51 53 10%
2% 6% RAK 53 8% 33 34
1) Total growth over the period and not CAGR 39 Source: Banks’ financial statements GROWTH - Mashreq FY'18 performance compared to peer group1) [AED billion]
Bank Revenue Net interest income Fee & other income
YoY YoY YoY growth growth growth
FAB 19.4 19% 13.0 14% 6.4 29%
ENBD 17.4 13% 12.9 19% 4.5 (3%)
ADCB 9.2 3% 7.2 8% 2.0 (11%)
DIB 8.2 7% 6.0 13% 2.2 (6%)
Mashreq 5.9 (1%) 3.6 4% 2.3 (9%)
ADIB 5.8 2% 3.9 4% 1.9 0%
RAK 3.8 0% 2.8 2% 1.0 (3%)
UNB 3.3 (9%) 2.8 6% 0.5 (48%)
CBD 2.7 3% 1.9 5% 0.8 (1%)
1) Total growth over the period and not CAGR 40 Source: Banks’ financial statements PROFITABILITY - Mashreq FY '18 performance compared to peer group [AED bn, %]
ROE1) [%] Bank Net profit [AED billion] 20.2 18.4 17.8 16.3 YoY 12.7 12.6 12.1 9.8 Ø 14
growth 6.4 DIB
32% FAB
RAK UNB
FAB 12.0 CBD
ADIB
ENBD ADCB MASQ
ENBD 9.9 20% ROA2) [%] DIB 4.9 14%
2.1 1.9 1.9 1.8 13% 1.7 1.6 1.6 1.6 ADCB 4.8 1.0 Ø 1.7
ADIB 2.5 9%
DIB
FAB
RAK
CBD UNB
ADIB
ENBD ADCB MASQ Mashreq 2.1 0%
RoRWA [%] UNB 1.2 (28%) 3.4 2.6 2.4 2.4 2.4 2.2 CBD 1.2 16% 1.9 1.7 1.1 Ø 2.2
RAK 0.9 14%
DIB
FAB
RAK
CBD UNB
ADIB
ENBD ADCB MASQ
Source: Banks’ financial statements 1) Equity excludes tier 1 capital notes and their interest expense is deducted from net profit 41 2) Total net profits after minority and Tier 1 interest expense divided by total assets UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
42 TRADING HISTORY Trading performance over the last 1 year
Mashreq’s trading price (February 2018 – February 2019) Share details Share performance Currency AED Mashreq – 12 months -1.5% Par value/ share 10 DFM GI – 12 months -22.5% Number of shares (Mn) 177.5 P/E (21 Feb ’19) 6.2x Market Cap (21 Feb ’19) (Mn) 12,782 P/B (21 Feb ’19) 0.6x Mashreq DFM 80 3,500 70 3,000 60 2,500 50 2,000 40 1,500 30 20 1,000 500 10 Mashreq DFM General Index 0 0 Feb ’18 Feb ’19
EPS as of FY 2018 and Book value as of December 2018 Source: DFM 43 DIVIDENDS Progressive dividend policy based on solid performance
Net profit and Cash Payout (AED million) and Cash dividend (%)
Net profit Cash payout Cash dividend (%) 40% 40% 40% 40% 40% 38%
2,500 2,401 2,402 2,052 2,060 2,000 1,806 1,926 1,500
1,000 676 676 710 710 710 710 500
0 1) 2013 2014 2015 2016 2017 2018 Dividend Payout 29.56 36.86 Ratio (%) 37.43 28.15 34.60 34.46
EPS 10.68 13.53 13.53 10.56 11.56 11.60 (AED)
BVPS 85.45 91.04 100.09 105.66 119.00 116.97 (AED)
1 Plus 5% Bonus Shares 44 CREDIT RATING Rated by four rating agencies
Rating Agency Long term Short term
A F1
A- A-2
Baa1 P-2
A A1
45 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
46 CORPORATE GOVERNANCE Mashreq is regulated by the UAE Central bank and follows international banking standards
Supervisory Authority ▪ Mashreq’s home supervisory authority is the UAE Central Bank which is responsible for licensing, monitoring and supervising banks, finance companies and exchange companies in the UAE ▪ Internationally, Mashreq comes under the purview of respective country regulators such as the Federal Reserve and NYSDFS in the USA and Prudential Regulation Authority & Financial Conduct Authority in the UK
Basel II and III Accounting Standard ▪ Banks are expected to follow the Standardized Approach for both ▪ The Central Bank made it mandatory in 2000 for all Banks to credit and operational risks publish their Annual Financial Statement as per International ▪ UAE CB has rolled out Capital Adequacy Ratio (CAR) as per Financial Reporting Standards (IFRS) Basel III effective 1st Jan 2018 ▪ IFRS 9 has been implemented w.e.f 1st Jan 2018
Bank monitoring - liquidity Credit Limit
▪ Cash reserve ratio requirements (1% on Time Deposits and 14% ▪ Lending limits fixed by the Central Bank in relation to capital: on Demand Savings and Call deposits) – Commercial entities of Federal Govts and UAE Local Govts: ▪ Maintenance of 1:1 ratio is mandatory, i.e. utilization of funds 25%, 100% aggregate should not exceed stable sources – UAE Local Govts and non-Commercial entities: 25% ▪ As per Basel III, liquidity coverage ratio (LCR) and net stable Individual, 100% aggregate funding ratio (NSFR) have been implemented and submitted to – Principal shareholders and their related entities: 20% Central Bank of UAE periodically Individual, 50% aggregate
47 CORPORATE GOVERNANCE Robust corporate governance framework
Chairman, Vice-Chairman and five Directors form Mashreq’s Board. Two of the seven board members are independent Board CEO is the only executive director Supervision The Board of Directors meet at least once every quarter Management issues are raised at Board level where the bank’s senior management presents details to the Board Board has delegated certain powers to CEO for effective day-to-day management
Remuneration Committee Audit Committee Risk Committee
Management Supervision
Executive Management Committee (reporting to the CEO) discusses and debates bank-wide issues, develops strategic plans for the Board’s approval and takes decisions on pan-bank issues
Executive Management Committee
Audit & Information Technology Human Risk Investment ALCO Credit Compliance Security Steering Resources Committee Committee Committee Committee Committee Committee Committee Committee
48 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
49 ACCOLADES Key Awards
Gallup Great Workplace Award 2018, 2017, 2016, Daman Corporate Health Awards 2015, 2014 ▪ CSR EMPLOYEE ENGAGEMENT OF THE CSR Label – Dubai Chambers – 2018, YEAR 2017,2016, 2015, 2014, 2013, 2012 & 2011 Gulf Business Awards Banker ME Awards ▪ Business Leader of the Year – Banking ▪ Best Credit Card - Smartsaver Global Industry (H.E. AbdulAziz Al Ghurair) ▪ Best Savings Product- Mashreq Millionaire Retail Banking Conference & Awards: London ▪ Best Premium Credit Card- Solitaire ▪ Middle East Retail Bank of the Year ▪ Best Customer Loyalty Program- Salaam Rewards Global Banking & Finance Review Awards Global Finance 2018 2018 ▪ Digital Bank of Distinction - UAE ▪ Best Mobile Banking Application UAE ▪ Best Mobile Banking App – Middle East ▪ Best Retail Bank UAE ▪ Best Online Deposit, Credit and Investment Product Offerings – Middle East ▪ Best Bank for Factoring UAE ▪ Best SMS/Text Banking – Middle East ▪ Mashreq Al Islami - Most Innovative Islamic Banking Solutions Provider UAE Banker ME Industry Awards ▪ Best Regional Retail Bank 2016, 2015, 2014 IDC FinTech Real Results award ▪ Best Retail Bank in the Middle East • Digital Trust & Stewardship category - “Mashreq ▪ Best Digital Bank in the UAE BOT's Servicing Dubai Police with Virtusa” Euromoney Islamic Banking & Finance Awards 2018 ▪ Best Digital Bank in the Middle East • Innovation in Islamic Banking – Mashreq Al Islami World Finance 2018 FinX awards 2018 ▪ Best Digital Bank - 2018 - UAE • Best Digital Bank MENA ▪ Best Mobile Banking Application - 2018 - UAE EMEA Finance’s Treasury Services Awards • Best Cash Management Services in the Middle East • Best Factoring Services in the Middle East • Best Payment Services in the Middle East • Best Treasury Services in the Middle East 50 4Q 2018 financials – Consolidated Income statement [AED million]
Income statement 2018 2018 2017 Variance (% change)
4Q 2018 vs 4Q 2017 4Q 2018 vs 3Q 2018 4Q 3Q 4Q (Y-o-Y) (Q-o-Q)
Net interest income 851 938 908 (6) (9)
Net Fees and commission 351 323 381 (8) 9
Investment income / (loss) 1 7 4 (69) (83)
Other income 141 222 288 (51) (37)
Total operating income 1,344 1,490 1,580 (15) (10)
Operating expenses (671) (637) (605) 11 5
Operating profit 673 853 976 (31) (21)
Impairment allowance (393) (249) (571) (31) 58
Overseas tax expense 3 (6) (8) (138) (148)
Non-Controlling Interest 29 (11) (9) (421) (351)
Net Profit 312 587 388 (20) (47)
51 FY 2018 financials – Consolidated Income statement [AED million]
Income statement 2018 2017 Variance (% change)
FY 2018 vs FY 2017 FY FY (Y-o-Y)
Net interest income 3,643 3,579 2
Net Fees and commission 1,413 1,558 (9)
Investment income / (loss) 27 107 (75)
Other income 855 772 11
Total operating income 5,938 6,016 (1)
Operating expenses (2,618) (2,361) 11
Operating profit 3,320 3,655 (9)
Impairment allowance (1,230) (1,488) (17)
Overseas tax expense (25) (78) (68)
Non-Controlling Interest (5) (37) (87)
Net Profit 2,060 2,052 0
52 December 2018 financials – Consolidated Balance sheet [AED million]
Balance sheet 31 Dec 2018 31 Dec 2017 YTD (% ) Assets Cash and balances with central banks 20,148 16,899 19.2% Deposits and balances due from banks 23,009 20,135 14.3% Other financial assets measured at fair value 1,738 1,581 9.9% Other financial assets measured at amortised cost 11,681 12,583 (7.2%) Loans and advances measured at amortised cost 56,353 53,394 5.5% Islamic financing and investment products measured at amortised cost 12,916 9,339 38.3% Other assets 2,332 3,016 (22.7%) Acceptances 9,782 6,380 53.3% Investment properties 490 518 (5.4%) Property and equipment 1,482 1,343 10.3% Total Assets 139,932 125,188 11.8% Liabilities Deposits and balances due to banks 9,060 9,313 (2.7%) Repurchase agreements with banks 2,117 557 279.9% Customers’ deposits 72,522 69,380 4.5% Islamic customers’ deposits 10,697 6,681 60.1% Other liabilities 5,267 3,942 33.6% Acceptances 9,782 6,380 53.3% Medium-term loans 8,185 6,226 31.5% Insurance and life assurance funds 1,536 1,583 (2.9%) Total Equity 20,766 21,126 (1.7%)
Total Liabilities and Equity 139,932 125,188 11.8% 53 54