Mashreq
INVESTOR PRESENTATION March 2017 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 – MICROECONOMIC OUTLOOK UAE is the 2nd largest economy in the GCC, with promising economic growth prospects
UAE - The second largest economy in the GCC Average Real GDP Annual Growth Sovereign Rating Rate – 2016E-21F (%) by Moody’s ▪ Second largest economy in the GCC with GDP of USD 375 billion in 2016 Ba2 A1 Baa1 Aa2 Aa2 Aa2 Well diversified economy with oil & gas contributing only ▪ 3.2 ~23% of the total GDP 2.8 2.8 2.3 2.4 ▪ Despite fall in oil prices, UAE economy remains strong 1.9 with current account surplus at 1.1% of GDP in 2016E ▪ Holds 8.1% of the proven OPEC crude oil reserves, primarily concentrated in Abu Dhabi ▪ Young population with ~61.3% aged between 25-54 years and a literacy rate of ~94% Bahrain KSA Oman Kuwait Qatar UAE
Nominal GDP per Capita – 2016 Nominal GDP GDP Breakdown by Sector – 2015 (USD thousand) 2016 (USD billion) (%) Agriculture 1% Crude Oil and Natural Gas 60 638 32 110 375 157 6% 3% Manufacturing 60.7 10% 23% Construction Wholesale Retail Trade 38.1 Transport, Storage & Communication 24.1 26.1 Real Estate 15.1 19.9 13% 10% Financial Corporations Government Services 10% 11% Other 13% Oman KSA Bahrain Kuwait UAE Qatar
SOURCE: IMF WEO October 2016,CIA & OPEC, Moody‘s Ratings, National Bureau of Statistics 2016 4 UAE ECONOMY – MICROECONOMIC OUTLOOK One of the best ranked economies on global competitive index among the GCC nations
Current Account Balance to GDP – 2016E Govt. Net Borrowing to GDP – 2016E (%) (%)
3.6 1.1
1.8 4.7 3.9 3.5 6.6 7.6 14.7 13.5 13.0 21.3
Oman KSA Bahrain Qatar UAE Kuwait Bahrain Oman KSA Qatar UAE Kuwait
Global Competitiveness Index – 2016-17 Ranking1 Inflation to Remain Stable Over the Medium Term (%) 66 4.1 3.6 3.5 3.2 3.3 48 3.1 38 29 16 18
2015E 2016F 2017F 2018F 2019F 2020F
UAE Qatar KSA Kuwait Bahrain Oman 1 Rank out of 138 economies SOURCE: IMF WEO October 2016, World Economics Forum-Global Competitiveness Index 2016 5 UAE ECONOMY – MICROECONOMIC 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
1.5 1.00
1.0 0.70 0.60 0.6 0.40 0.30 0.3 0.2 0.05
0.1
UAE Qatar Bahrain Oman KSA Kuwait Qatar UAE Oman Bahrain KSA Kuwait
Highest Ranking in GCC on Control of Corruption Enforcement of Contracts - Ranked Best in GCC Index1 1.2 112 1.1 101 86 70 0.3 0.3 0.1 58 18 -0.3
UAE Qatar Bahrain Oman KSA Kuwait UAE Kuwait Oman Saudi Bahrain Qatar Arabia
1 Score ranges from -2.5 (weak) to 2.5 (strong) SOURCE: World Bank – Worldwide Governance Indicators, 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) CAGR 65 Increasing rate of growth 1,556 1,563 ’11-’16
60 419 402 Re-exports 13.8% 1,057 1,065 1,072 55 55 55 55 928 185 199 Exports 11.8% 55 53 54 53 54 53 54 219 232 244 53 53 53 211 170 148 132 114 50 952 962 Imports Dec- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec- 603 668 685 696 9.8% 15 16 45 Increasing rate of contraction 2011 2012 2013 2014 2015 20161 40 50 – no change on previous month
The hospitality sector, especially in Dubai, is one of the major … along with the logistic sector, which has been growing
growth drivers … Dubai Abu Dhabi continuously over the last three years. Hotel guests (million) Air passengers (million) UAE container volumes (TEU million)
14.9 84 13.3 13.6 15.2 15.6 16.1 14.2 13.2 78 66 70 11.0 10.0 58 UAE air freight (million tonnes) Dubai Abu Dhabi
4.1 4.4 23 25 3.3 3.4 3.5 20 2.9 3.1 3.2 2.4 2.8 15 17 2.3 2.4 2.4 2.5 2.6 0.6 0.7 0.8 0.8 0.8 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 1 Annualised – based on 9M (Jan – Sept) data SOURCE: Emirates NBD, Federal Customs Authority, Hotel and Airport authorities of UAE, DP World, Khaleej Times, National 7 UAE ECONOMY – MICROECONOMIC OUTLOOK Consumer borrowing continues to rise along with an increase in employment levels
Rents continue to be falling … … as can also be seen in the fall in Dubai property prices over the year Avg MPPI inc (%) Cum MPPI inc (%) Dubai 4Q ‘16 Abu Dhabi 4Q ‘16 Mashreq Property Price Index (%)
19.2 18.7 20 18.3 18.1 17.8 17.4 17.3 17.1 16.8 16.6 16.4 16.2 15.9 Rent Rent Rent Rent 15 growth falling growth falling 10 slowing slowing 5 Rent Rent Rent Rent -0.1 -0.5 -0.4 -0.2 -0.2 -0.4 -0.2 -0.2 -0.3 -0.2 -0.2 -0.3 -0.2 growth bottoming growth bottoming 0 acceler- out acceler- out
ating ating -5
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Apr May Jun Jul Aug Sep Oct Nov Dec Dec Jan Mar Residential Office Retail Hotel Feb
Consumer borrowing has been rising… … supported by continuous increase in employment levels
Personal loans to residents (AED) Emirates NBD Employment index (#)
65 Increasing rate of growth
+7% 60 331 348 300 54 261 280 55 53 53 52 52 52 52 52 52 51 51 51 50 50 Dec- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec- 15 16 45
Increasing rate of contraction 40 2012 2013 2014 2015 2016 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 – 2016 (AED billion) ▪ As of December 2016, UAE banking sector comprised 49 Total Banking Assets to GDP Ratio banks 190% 94% 223% 179% 117% 174% – 23 National Banks with 846 branches and – 26 Foreign Banks with 85 branches 2,611.0 2,207.0 ▪ Diversified loan portfolio - Real Estate and Construction sector accounted for only ~18% of loan book in 2016 1,281.0 ▪ Well regulated banking system, in line with internationally 724.0 followed best practices 257.0 203.0 ▪ UAE Banking sector has a long-standing track record of Government support during crisis situations UAE KSA Qatar Kuwait Oman Bahrain
UAE – Gross Credit & Deposits (AED billion) Loans by Sector –2016 (%)
CAGR 2011- 2016: 7.9% Agriculture Gross credit Deposit 0% Mining and Quarrying 1% Manufacturing 1% 1,574 1,563 Electricity, Gas and Water 1,485 1,472 1,378 1,421 10% 5% Construction and Real Estate 1,276 1,279 18% 1,184 1,168 Trade 1,074 1,070 9% Transport, Storage & Comm Financial Institutions (Ex. Banks) 20% Government 11% Personal Loans for Business Personal Loans for Consumption 4% Others2 11% 2011 2012 2013 2014 2015 2016 10%
1 Data for Oman relates to Nov 2016 and for Bahrain relates to Oct 2016; 2) Others include loans made to service sector & Non profit Institutions SOURCE: UAE Central Bank, Central Bank of other respective countries, IMF WEO October 2016 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
Heritage ▪ Established in 1967 by the Al-Ghurair Group ▪ ~50 years in UAE banking and financial services market Private sector ▪ Oldest regional bank based out of UAE ownership ▪ Combines the entrepreneurial spirit of Dubai with enduring trade banking relationships across the region ▪ Publicly traded since inception; Listed on the DFM on creation of local stock exchange Strong regional ▪ Well positioned to finance regional trade flows presence ▪ Regional bank with 41 branch network in the UAE and 24 branches / rep- offices in MENA, Asia, Europe and United States Diversified business ▪ Universal bank offering a comprehensive suite of products and services to case individuals and corporates across all lines of business ▪ Most diversified revenue streams with fee and other income contributing around 45% of total income Strong ▪ Combination of long serving senior executives with international management team management expertise delivering a robust growth model ▪ Led by Abdul Aziz Abdulla Al-Ghurair, Chief Executive Officer for 26 years Strong and ▪ Al-Ghurair Group, the main shareholders of the bank, are a leading supportive conglomerate in the UAE with numerous business interests ownership structure ▪ Featured in the Forbes billionaire list for the past 10 years ▪ Mashreq is the flagship business for the family for nearly 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 & President 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 the ▪ Chairman of Masafi past 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 2016) contracting, trading, retailing, shipping, printing & packaging, aluminium Saif Al Ghurair Investment LLC 10.3% 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 12.0% National Cement Company the Dubai Financial Market Other shareholders
31.1%
12 MASHREQ HERITAGE Strong distribution network in the UAE with 22 branches in Dubai
Alternate Channels ▪ 41 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 3 Retail Customer Ajman 1 branch 1 branch Service Centers in UAE serving ~500K customers 1 branch ▪ ATMs and CCDMs increased coverage to 272 units in UAE
Sharjah ▪ 35,000 POS machines spread 13,000 merchant location in the UAE. Second Largest Merchant 7 branches acquirer in the UAE with over 35% market share ▪ Internet Banking through Mashreq Online (Retail incl. Dubai Brokerage), Mashreq Business online (Corporate), Mashreq-FI online (Correspondent Banking); 22 branches 263,999 active users are registered with online banking ▪ Mobile banking services: Snapp registration has grown up by 38% year on year and financial transactions has grown by 28% as compared to last year figures. Snapp has been recently upgraded with unique new features such as card control, ChatBot and voice banking. ▪ 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 8 branches 1 branch ▪ 24 x 7 Direct Banking Call Centre
13 MASHREQ HERITAGE Regional and international banking presence with 24% 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 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
15 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) (21% of revenue) (27% of revenue) (24% of revenue) (9% of revenue)
Audit , Fraud & Corporate Affairs Risk Operations & Compliance Group (CA) Management (RM) Technology (O&T) (AFCG)
Note: Financials as of 31 December 2016 16 STRUCTURE AND LEADERSHIP Mashreq is a universal bank that covers significant lines of business with a full product and channel suite
Retail Banking Group Corporate Banking Group (CBG) (RBG) Offers wholesale banking Offers personal banking ▪ Energy, Services & ▪ NBFI ▪ Personal Banking ▪ Distribution Manufacturing ▪ Emerging Corporates ▪ SME ▪ Alternate Channels ▪ Trading Division ▪ Mashreq Gold ▪ Direct Sales ▪ Contracting Finance ▪ Global Transaction ▪ Private Banking ▪ Direct Banking Centre Services ▪ Abu Dhabi Division ▪ Payments ▪ Marketing & Customer ▪ Corporate Finance ▪ Real Estate Experience ▪ Islamic banking products ▪ Islamic Banking products Treasury & Capital Markets International Banking Group (TCM) (IBG) Offers treasury and investment products Offers banking services outside UAE ▪ FX and Investments ▪ Equity Derivatives & ▪ Wholesale and investment banking Institutional Sales ▪ Rates & Structured ▪ Treasury and investment products Solutions ▪ Mashreq Securities ▪ Personal banking ▪ Mashreq Capital ▪ Islamic Banking – ▪ Financial Institutions globally Product House ▪ Islamic banking products ▪ Islamic banking products
17 MASHREQ - KEY SUBSIDIARIES 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 ’16 Equity: AED 795 mn ▪ Dec ’16 Equity: AED 1,934 mn ▪ 2016 profit: AED 70 mn ▪ 2016 profit: AED 79 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 ’16 Equity: AED 183 mn ▪ Funds rated highest in the market ▪ 2016 Profit: AED 7 mn ▪ Dec ’16 Equity: AED 32 mn ▪ 2016 profit: AED 7 mn
Note: Figures are based on draft audited statements 18 STRUCTURE AND LEADERSHIP Corporate Banking (CIBG) business
Business highlights CIBG Revenues (AED million) ▪ Corporate Banking Group provides financing solutions to -7% corporate and commercial customers in the UAE 0% 1,429 ▪ Major products offered include trade finance, contracting 1,324 1,319 finance, project finance, corporate finance advisory and cash management ▪ Corporate Banking has moved to a best-in-class, expertise- led coverage model for clients. The relationship teams have been realigned into industry verticals that best serve the corporate financial needs. Our diverse industry coverage includes among others: Contracting Finance, Services & Manufacturing, Government, Multinational Corporates, Real Estate, Trading Companies, Non-Banking financial Institutions and Emerging Corporates – including DXB NE & 2014 2015 2016 Abu Dhabi. ▪ Successfully closed number of multibank deals establishing CIBG Assets (AED million) the best DCM platform amongst local / regional banks ▪ Mashreq’s Global Transaction Services team maintained its 0% +5% regional dominance in the transaction banking space by winning the Global Finance - World’s Best 29,617 29,501 30,911 Corporate/Institutional Digital Bank Award in UAE in 2016 for the second consecutive year. ▪ Mashreq won the best trade finance award in 2Q of 2016 by M&A awards
Dec-14 Dec-15 Dec-16
19 STRUCTURE AND LEADERSHIP Retail Banking (RBG) business
Business highlights RBG Revenues (AED million) ▪ With 28% market share & 35,000 POS machines across the +13% -8% UAE, we are now the second largest acquirer in the country 1,838 ▪ Achieving 36% growth in 2016, we are the fastest growing 1,626 1,684 ecommerce acquirer in the country. ▪ Products offered include current / savings / fixed deposits, investment products, personal loans, auto loans, mortgages, small business loans, credit cards with unique loyalty programs, bank assurance, private banking and wealth management. ▪ Key innovations include; first bank in the Region to have early access of Samsung Pay, a best in class and secure mobile payment service that works as a contactless credit or 2014 2015 2016 debit card, POS Plus - UAE’s first ever handheld payment acceptance device with built in digital product catalogue RBG Assets (AED million) (customers can see a merchant’s entire product line and variants on a digital tablet);1-click payments; a unique +3% -6% service that lets merchants collect payments from customers by sending them an SMS or email; first bank to 14,061 14,431 13,579 integrate Apple’s Siri for voice-powered payments; introducing UAE’s First Chat Bot; an AI agent to interact with customers ▪ The Award-winning mobile banking application ‘Mashreq Snapp’ has added recent user friendly features ▪ Key awards for 2016 include Best Regional Retail Bank by Banker ME Industry Awards, Best Digital Bank by Global Banking & Finance Review Awards, Best Private Bank for Super Affluent Clients in UAE by Euromoney’s 13th Annual Private Banking Survey. Dec-14 Dec-15 Dec-16
20 STRUCTURE AND LEADERSHIP Treasury and Capital Markets (TCM) business
Business highlights TCM Revenues (AED million) ▪ Treasury and Capital Markets business consists of -8% customer flow business and proprietary business. Customer +2% flow business includes transactions for FX, derivatives, 599 564 hedging, investment products, equities and regional asset 553 management undertaken on behalf of customers. Proprietary business includes trading and investing activity undertaken on behalf of the bank ▪ Mashreq was able to grow its Treasury product suite across asset classes, supported by an online trading platform and 24 hour dealing room ▪ The Rates & Structured Solutions business closed several large ticket hedging transactions for clients across the region, including a structured profit rate swap for a real 2014 2015 2016 estate loan ▪ The Makaseb Income Fund received the Liper Fund Award TCM Assets (AED million) as the best fund over 3 & 5 years in the Bond Emerging Markets Global-Hard Currency category +9% +14% ▪ Our best in class Asset Management business achieved 17,004 strong growth: Mashreq’s fixed income funds (both 15,657 conventional and Sharia’h compliant) remain amongst the 13,698 top performing funds in the market – Best Sharia’h Compliant MENA Fund Manager Award from CFI – Best Sharia’h compliant Fixed Income fund of the year award from MENA Fund Manager magazine – Moody’s upgraded Mashreq Capital’s Investment Manager rating to MQ2
Dec-14 Dec-15 Dec-16
21 STRUCTURE AND LEADERSHIP International Banking (IBG) business
Business highlights IBG Revenues (AED million) ▪ International banking business consists of retail and +13% corporate business in Qatar, Egypt, Bahrain and Kuwait and +23% Financial Institutions business in other locations including 1,463 trade services, reimbursements – arranging debt capital 1,301 market transactions, undertaking and financing, export bill 1,059 collections and risk participations ▪ Mandated lead arrangers in important loan syndications in overseas markets and also consolidated our position in some of our markets as leading bank for strategic project finance ▪ Introduced the upgraded SNAPP (mobile banking app) in Qatar simultaneously with UAE and now offer our 2014 2015 2016 customers the convenience of cardless cash withdrawals, mobile to mobile cash transfers and the Money Manager IBG Assets (AED million) feature ▪ Electronic Fund Transfer System (EFTS) was launched for +15% -1% Corporate Houses through the Mashreq Matrix portal 32,831 32,505 ▪ In key African countries we expanded our offerings from transactional banking to raising funds for the top Banks and 28,548 Development Financial Institutions in Africa and continue to be the leading Middle Eastern Bank in the FI business in Africa ▪ 2016 also witnessed success in the efforts to increase the exposure to the NBFI (Non-Banking Financial Institutions) segment. ▪ Key awards- Global Finance Digital Bank Conference: Best consumer digital bank in Qatar Dec-14 Dec-15 Dec-16
22 STRUCTURE AND LEADERSHIP Islamic Banking (ISB) business
Business highlights ISB Revenues (AED million)
▪ Mashreq Al Islami is the Islamic Banking arm of Mashreq -1% +5% (Mashreq Al Islami Finance Company PJSC and Islamic Banking Division, Mashreqbank PSC) and offers a wide 311 308 321 range of Shari’ah compliant products and services ▪ 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, sukuk underwriting, Musharaka LC, Murabaha LC, TR Murabaha, Kafala, Wakala deposit, Reserve Murabaha deposit and sukuk advisory 2014 2015 2016 ▪ Successfully closed a 5 year USD 500 million senior secured syndicated facility for Ezdan Holding Group ISB Assets (AED million) Company, the largest private sector real estate developer in Qatar - Mashreq Al Islami UAE acted as Mandated Lead +16% Arranger, Sole Book Runner and Facility Agent for the +16% facility 8,797 ▪ “Most Innovative Islamic Banking Solution Provider” by 7,595 Global Banking & Finance Review 6,574
Dec-14 Dec-15 Dec-16
23 STRUCTURE AND LEADERSHIP Insurance business (Oman Insurance Company)
Business highlights Gross written premium (AED million) ▪ Mashreq owns 63.94% of Oman Insurance Company +11% -2% ▪ Oman Insurance Company (OIC) is the largest insurance 3,555 company in the UAE Products offered include life, medical, 3,249 3,190 motor, marine cargo and hull, aviation, property, fire and general accidents, engineering, energy, liabilities and personal lines insurance ▪ 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. In addition, OIC has over 20 bank partners in the region ▪ The company is rated ‘A-’ Stable Outlook by Standard & Poor’s and ‘A Excellent’ Stable Outlook by AM Best, 2014 2015 2016 supported by leading multinational reinsurers such as Everest Re, XL Re and Munich Re Profit (AED million)
▪ Oman Insurance launched its exclusive Healthcare Net Profit Underwriting Profit Wellness Program ‘LivFit’ in May 2016 ▪ Oman Insurance in collaboration with Commerzbank and 229 Blackrock introduced a Invest Protect Plan for its clients further enhancing the menu of products +253% -70% 101 106 81 79 30
Dec-14 Dec-15 Dec-16
24 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
Nabeel Waheed Shaikh Subroto Som Head of Corporate Banking Group Head of Retail Banking Group • Nabeel Waheed Shaikh has a BSc from Syracuse University, New York • Subroto Som is a graduate of IIT Delhi and has an MBA from IIM • Joined Mashreq in 1996, from Bank of America, Pakistan where he spent Ahmedabad over 15 years and held various positions including Head of Corporate • Joined Mashreq in 2015 from the Boston Consulting Group Banking • Prior to this, he has experience at senior positions at Citibank, Standard Chartered & Seoul First Bank
Jan-Willem Sudmann Hammad Naqvi Head of International Banking Acting Head of Treasury & Capital Markets • Jan-Willem Sudmann has a Masters in Economics from the University of • Mr. Hammad Naqvi has an MBA from the IBA, University of Karachi Hamburg, Germany • Prior to joining Mashreq in 1996, he was Head of Treasury with Bank of • Prior to joining Mashreq he was a Managing Director at Commerzbank America, Pakistan and he was also posted as Treasurer of Bank of Shanghai America, Poland • Before joining Commerzbank he worked for close to two decades at • He has also spent 2 years in the merchant banking division of ANZ Dresdner Bank across various geographies such as Germany, UK and Egypt Grindlays in Pakistan
Jose K Joseph Sandeep Chouhan Head of Risk Management Head of Operations & Technology • Jose K. Joseph is a Commerce Graduate and an MBA in Finance from XLRI, • Sandeep Chouhan has a Masters in Technology, Management & India Systems from IIT, Delhi, India • He joined Mashreq in October 2013 • Joined Mashreq in March 2015 from CBQ, Qatar • Prior to joining Mashreq he spent over 28 years with Citibank • Prior to this, he was CIO with Barclays and Morgan Stanley
Nasser A. Paracha Head of Audit, Fraud & Compliance Group • Nasser A. Paracha has a BSc from the University of Leeds. He completed a General Management Program from HBS • Joined Mashreq in 1995 from Deutsche Bank AG in Pakistan • Overall banking experience of approximately 25 years, covering corporate banking, internal audit and compliance
25 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
26 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
Recalibrate margins vis-à-vis Additional risk taken into market benchmarks Pursuing opportunitiesconsideration that grow shareholders’ value Ethical, regulatory, internal policy compliance – zero tolerance
27 STRATEGY Business Objectives
Accelerate ▪ Win new customers and increase customer penetration through a differentiated customer centric, service oriented approach and focus on continued product domestic growth innovation ▪ Leverage balance sheet strength and liquidity position to grow market share ▪ Capitalize on leadership position in fee-generating businesses
Grow ▪ Support franchise client needs internationally and international client needs in our franchise by providing solutions to corporate clients across network international ▪ Provide cross border accessibility to clients, such as offshore booking location contribution for private and gold customers and non-resident proposition across the network ▪ Maintain momentum in our core South Asia FI market and build scale in Qatar, Egypt and 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
Drive operational ▪ Leverage existing infrastructure to drive growth and returns ▪ Significantly improve efficiencies across the bank to bring cost/income ratio in efficiencies line with market
Strengthen risk ▪ Reduce charge-to-loans ratio in line with pre-crisis levels, through continued focus on portfolio and asset quality management and ▪ Selective portfolio / asset sales as part of an ongoing portfolio balancing asset quality strategy
28 STRATEGY Diversified earnings base with strong growth potential
Gross Loans portfolio split as of (AED 64.3 bn) Business segments outlook Dec 2016 Manufacturing ▪ UAE Retail: Pick up in mortgage business; strong growth in cards and payment business and wealth management 6.5% 6.9% Construction UAE Corporate: Strong growth from trade, manufacturing, 0.0% Trade ▪ 0.6% 11.6% tourism and logistics driving overall UAE GDP in the coming Services years leading to increased demand for credit & trade services Financial institutions 28.5% ▪ International Banking: Robust regional trade flows and 15.2% Govt / GRE lending opportunities in higher growth countries such as Qatar Personal and Egypt Transport & Comm. ▪ Insurance: As the largest insurance company in the UAE, 11.7% Other Mashreq’s Oman Insurance Company (OIC) subsidiary is 16.3% expected to grow in line with the market 3.3% Other
Revenue split as of YE 2016 (AED 6.2 bn) Asset split as of Dec 2016 (AED 122.8 bn)
Loans & Advances Corporate 7.1% Cash and balances with CB 7.1%6.2% 21.4% Retail Interbank deposits & balances 12.5% 5.2% Treasury & Financial Investments Capital markets Other assets International
Islamic 13.6% 53.9% 23.7% Insurance 27.3% Others 13.0% 9.1%
29 STRATEGY Strategic advantage through innovation
Innovation
Mashreq was the first bank in the UAE to:
▪ Introduce consumer loans
▪ Install ATM cash dispensers
▪ Issue debit/credit cards
▪ Introduce Point-of-Sale terminals
▪ Offer Visa Connectivity across the world
▪ Centralize foreign trade services
▪ Offer a direct banking centre
▪ Introduce a comprehensive corporate cash management solution offering (GTS)
▪ Introduce “Tap & Go”, mobile NFC sticker payment method
▪ Introduce “E cube retail branch” concept in distribution
▪ Launch UAE’s first fully EMV Chip & PIN compliant mobile POS solution
▪ Launch i-mashreq - the first fully automated branch in the region
▪ Integrate Emirates ID with bank account and allow its usage as a Debit Card
30 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
31 FINANCIAL TRACK RECORD Solid performance over the past decade
Net profit (AED million) +2% 2,401 2,402 1,901 1,806 1,926 1,571 1,643 1,312 1,000 803 820
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Net loans and advances (AED billion) +8% 60 61 55 58 48 50 41 41 35 38 29
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growth & Expansion Crisis & Risk Management Accelerated Growth & Profitability ▪ Significant expansion on the back of ▪ Prudent management focused on strengthening the bank, ▪ Growth-led strategy with a focus on buoyant macroeconomic conditions de-risking and conserving capital portfolio quality, balance sheet structure – Balance sheet de-risking and de-leveraging optimization, improved cost efficiencies and – Strengthening capital and liquidity position higher infrastructure utilization – Enhancing risk management functions
32 FINANCIAL TRACK RECORD Rapid improvement in performance over the last four years
Loans & Advances (AED billion) Customer deposits (AED billion)
7% 60.2 61.0 10% 58.0 77.0 50.4 68.5 73.6 58.6
2013 2014 2015 2016 2013 2014 2015 2016
Total Revenue (AED billion) Net profit (AED billion) Fee and other income Net interest income1) 2% 2,401 2,402 1,926 8% 1,806 5,845 5,978 6,169 4,837 2,720 2,555 2,602 2,393 2013 2014 2015 2016 3,423 3,567 2,445 3,125 ROE 13.1% 15.7% 14.2% 10.6% 2013 2014 2015 2016
1 NII component booked under net investment income as per IFRS, reclassified under NII 33 FINANCIAL TRACK RECORD Key financial ratios
31 Dec 2016 30 Sep 2016 31 Dec 2015 Capital adequacy Tier I Capital Ratio 16.0% 15.7% 15.9%
Total Capital Ratio 16.9% 16.7% 16.9% Liquidity
Liquid Assets to Total Assets 30.4% 26.8% 29.9%
Advances to Deposits 79.2% 82.8% 81.7% Asset quality
NPL Coverage Ratio 151.1% 136.0% 145.0%
NPL to Gross Advances 3.1% 3.6% 2.8% Performance
ROA 1.6% 1.7% 2.2%
ROE 10.6% 10.9% 14.2%
Net Interest Margin 3.52% 3.59% 3.60%
Efficiency Ratio 39.0% 38.3% 41.4%
Fee and other income to total income 42.2% 42.6% 42.8%
34 FINANCIAL TRACK RECORD Well-funded balance sheet …
Operating leverage Funding as of 31 December 2016 Loan to Deposits (AED 103.3 bn) 0.6% 86.1% 84.8% 4.8% Repo 81.7% 79.2% 1.5% Medium term loans 8.6% 9.9% Insurance Funds Due to banks Other liabilities Customer deposits 74.6% 2013 2014 2015 2016
Liquidity Liquid Assets to Total Assets Corporate Retail 2.5% 29.9% 30.4% 26.5% 27.7% 8.2% 7.6% 28.7% Treasury & Capital markets International Islamic 22.4% Insurance Others 23.4% 2013 2014 2015 2016 7.2%
35 FINANCIAL TRACK RECORD …along with stable adequacy
Risk weighted assets Tier 1 and Tier 2 capital
Tier 1 capital Tier 2 capital 118,874 19,179 20,042 106,628 113,514 17,726 16,146 1,178 1,077 88,975 1,450 1,568
18,001 18,965 14,578 16,277
2013 2014 2015 2016 2013 2014 2015 2016
Capital adequacy (%)
18.1% Tier I Capital ratio 16.4% 16.6% 16.9% 16.9% 15.3% 15.9% 16.0% Total Capital ratio
2013 2014 2015 2016
36 FINANCIAL TRACK RECORD Market performance in 2016 – Outperforming the market in Revenue Growth
Total assets (AED bn) Total loans (AED bn) Peer group1) Mashreq Peer group1) Mashreq
DXB AUH DXB AUH
1,737 655 1,083 115 1,091 435 656 60 Dec ‘15 Dec ‘15
+8.2% 11.4% 6.3% +6.6% +4.9% 9.5% 1.7% +1.4%
1,880 730 1,150 Dec ‘16 123 1,144 476 668 Dec ‘16 61
Total deposits (AED bn) Total revenue (AED bn) Peer group1) Mashreq Peer group1) Mashreq
DXB AUH DXB AUH
1,155 466 689 Dec ‘15 74 65.3 28.2 37.1 FY ’15 6.0
+7.4% 8.8% 6.5% +4.6% +0.6% -0.8% 1.7% +3.2%
1,241 506 734 Dec ‘16 77 65.7 27.9 37.8 FY ’16 6.2
1 Peer group includes 9 banks: ENBD, NBAD, ADCB, FGB, CBD, UNB, ADIB, DIB and RAK SOURCE: Banks’ financial statements 37 FINANCIAL TRACK RECORD – DECEMBER’16 (AED BILLION) Market position in UAE
Bank Total assets Total loans (net) Total deposits
Growth vs Growth vs Growth vs Dec ’16 Dec ’16 Dec ’16
ENBD 448 10% 290 7% 311 8%
NBAD 421 3% 201 (3%) 253 8%
ADCB 258 13% 158 3% 155 8%
FGB 245 8% 157 5% 149 5%
DIB 175 17% 115 18% 122 11%
Mashreq 123 7% 61 1% 77 5%
ADIB 122 3% 78 0% 99 4%
UNB 104 2% 74 8% 78 4%
CBD 64 11% 42 8% 44 8%
RAK 43 5% 29 3% 29 6%
38 FINANCIAL TRACK RECORD – FY ‘16 (AED BILLION) Market position in UAE
Bank Revenue – FY ’16 (AED bn) Bank Net profit – FY ’16 (AED bn) YoY YoY growth growth
ENBD 14.9 (3%) ENBD 7.2 2%
NBAD 10.8 2% FGB 6.0 0%
FGB 9.6 2% NBAD 5.3 1%
ADCB 8.5 3% ADCB 4.1 (16%)
DIB 6.8 4% DIB 3.6 1%
Mashreq 6.2 3% ADIB 2.0 1%
ADIB 5.4 5% Mashreq 1.9 (20%)
RAK 3.8 (3%) UNB 1.6 (15%)
UNB 3.5 (7%) CBD 1.0 (6%)
RAK CBD 2.5 5% 0.7 (53%)
39 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
40 TRADING HISTORY Trading performance over the last 1 year
Mashreq’s trading price (1 March 2016 – 1 March 2017) Share details Share performance Currency AED Mashreq – 12 months (8.5%) Par value/ share 10 DFM GI – 12 months 10.2% Number of shares (Mn) 177.5 P/E (1 Mar ’17) 6.9x Market Cap (1 Mar ’17) (Mn) 13,315 P/B (1 Mar ’17) 0.7x Mashreq DFM
140 3,621 4,000 3,287 120 3,500 100 3,000 82 75 2,500 80 2,000 60 1,500 40 1,000 20 Mashreq DFM General Index 500 0 0 Mar ‘16 Mar ‘17
EPS as of YE 2016 and Book value as of December 2016 SOURCE: DFM 41 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% 38% 40 35 30 2,500 2,401 2,402 25 2,000 20% 1,806 1,926 20 1,500 1,312 15 1,000 643 676 676 710 710 10 500 5
0 1) 0 2012 2013 2014 2015 2016 EPS 7.76 10.68 13.53 13.53 10.85 (AED)
BVPS 78.28 85.45 91.04 100.09 105.66 (AED)
1 Plus 5% Bonus Shares 42 CREDIT RATING Rated by four rating agencies
Rating Agency Long term Short term
Baa2 P-2
BBB+ A-2
A F1
A- A1
43 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
44 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 NY-SBD 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. Migration to Foundation Internal publish their Annual Financial Statement as per International Ratings Based Approach (“IRB”) for Credit Risk is expected Financial Reporting Standards (IFRS) ▪ Basel III is under implementation in line with the Basel III schedule ▪ The CB has also recently initiated impact analysis on IFRS 9 (by 2019) implementation – impact study is underway and we will be ready for implementation in 2018
Bank monitoring - liquidity Credit Limit
▪ Cash ratio requirements (1% on Time Deposits and 14% on ▪ Lending limits fixed by the Central Bank in relation to capital: Demand Savings and Call deposits) – Lending to large private borrowers: 25% (10% for funded) ▪ Maintenance of 1:1 ratio is mandatory, i.e. utilization of funds – Commercial entities of Federal Govts and UAE Local Govts: should not exceed stable sources 25% (15% for funded), 100% aggregate ▪ As per Basel III, liquidity coverage ratio (Jan 2016) and net stable – UAE Local Govts and non-Commercial entities: 25% funding ratio (Jan 2018) is under implementation; in the meantime Individual, 100% aggregate Central Bank has introduced ‘eligible liquid assets ratio (ELAR)’ ▪ Mashreq has applied to Central Bank to be allowed to use Basel III standards for LCR reporting
45 CORPORATE GOVERNANCE Board and Management Committees
Board Supervision
Chairman, Vice-Chairman and 4 Directors form Mashreq’s Board. Two of the six board members are independent CEO is the only executive director 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
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 Compliance Security Steering Resources Committee Committee Committee Committee Committee Committee Committee
46 UAE economy
Mashreq heritage
Structure and Leadership
Mashreq Strategy Investor Presentation Financial track record Trading history, rating and dividends
Corporate governance
Accolades
47 ACCOLADES Key Awards
Gallup Great Workplace Award, 2016, 2015, 2014 World Finance Awards CSR Label – Dubai Chambers – 2016, 2015, ▪ Best Digital Bank – UAE 2014, 2013, 2012 & 2011 ▪ Best Mobile Banking Application – UAE Banker ME Product Awards Daman Corporate Health Awards ▪ Best Mobile Banking Service – Snapp ▪ Best Corporate Health and Wellness Organization ▪ Best Customer Loyalty Programme – Salaam Award ▪ Best Premium Credit Card – Solitaire Gulf Business Awards ▪ Best Trade Finance Offering – Trade Finance ▪ Business Leader of the Year – Banking Industry ▪ Best Real Estate Advisory (H.E. AbdulAziz Al Ghurair) Global Finance Digital Bank Conference Retail Banking Conference & Awards: London ▪ Best corporate digital bank in the U.A.E ▪ Middle East Retail Bank of the Year ▪ Best consumer digital bank in Qatar Global Banking & Finance Review Awards 2016 ▪ Best consumer digital bank in the U.A.E ▪ Best Retail Bank UAE Banker ME Industry Awards ▪ Best Customer Experience UAE ▪ Best Regional Retail Bank 2016, 2015, 2014 ▪ Best Digital Bank UAE ▪ Best Banking Innovation ▪ Best Corporate Bank Qatar ▪ Best Real Estate Finance Cards & Payment Middle East 2016 Euromoney’s 13th annual private banking survey ▪ Best Credit Card ▪ Best Private Bank for Super Affluent Clients in the ▪ Most Improved Payment Card UAE Islamic Finance News Awards MEFTECH Innovation Awards ▪ Corporate Finance Deal of the Year – ENOC US$ ▪ Best Customer Experience Initiative 1.5 Billion Syndicated Loan Facility Annual Islamic Business & Finance Awards ▪ Syndicated Deal of the Year – Aujan Coca Cola Beverages AED900 Million Commodity Murabahah ▪ Best Innovation in Islamic Banking Solution Financing
48 49