Abu Dhabi Islamic Bank PJSC (ADIB) Earnings Call Transcript & Summary

This will be an interactive call. [Operator Instructions] I will now hand you over to your host for this call from JPMorgan, Naresh Bilandani. Thank you.

Thank you. Good day, everyone. I'm Naresh Bilandani, Head of Media Equity Research at JPMorgan, and I'd like to welcome you all to the First Quarter 2024 Earnings Call of Abu Dhabi Islamic Bank, which JPMorgan is very pleased to host. We have with us today, Mr. Mohamed Abdelbary, the acting Group CEO; Mr. Ahsan Ahmed Akhtar, Acting Group CFO; and Ms. Lamia Hariz, Head of Investor Relations, Marketing, Communications and ESG. I will pass the call now to the AD IV team to commence the presentation. Thank you.

Thank you, Naresh. Good afternoon to everyone on the food, and thank you for joining us today. Before we get started, I just want to remind everyone that today's presentation on all our financial disclosures are already available on the IR section of our website and on the IR app. As Naresh mentioned, I have with Mr. Mohamed Abdelbary, our acting Group CEO; and Mr. Ahsan Ahmed Akhtar, our Group CFO. The agenda of today is consistent with the previous quarter. So we will start with good highlights of the quarter, and we will give you a quick update on our strategic progress and then a detailed analysis of the performance. We will then conclude with the guidance for the rest of 2024 and open the floor for Q&A. With that, I will now hand it over to Mohamed to start the presentation.

Right. Thank you, Lamia, and good morning, good afternoon, everyone, and thank you for joining us on today's call. We are very pleased to have reported a strong start for 2024 with net income for the first quarter of COP 1.45 billion, which is an impressive increase of 32% year-on-year or if you were to adjust for the impact of tax, it's a 41% up year-on-year. This result was driven by sustained revenue momentum, which was up 24% year-on-year, driven by all business segments. Return equity has improved to 27%, which is an improvement of around 3.5 percentage points. And, if one would just look at from last year, the number was 25%. Underpinning this performance was 13% year-on-year asset growth, driven by 9% growth in net customer financing. This was efficiently funded by 13% year-on-year deposit growth with CASA increasing 9% and our CASA contribution to total deposits now stands at 66%. At the same time, our credit quality metrics continue to improve with our NPE ratio declining to its lowest level since the fourth quarter of 2019 to 5.5%. With that, I move to the next slide, Lamia. Okay. On the strategy. So what's important to note that in our strategy remains to be unchanged. And we have a very clear vision, which is to become the world's most innovative Islamic Bank. Our strategy is built on 4 key pillars, which I will just quickly just call out. First, continued innovation of new Shariah-compliant banking products; second, segment focused to build on our existing strengths in the Mulattos detailed segment, while still attracting and developing new business segments where the bank can grow profitably and sustainably. Number three is our digital excellence to elevate customer experience through STP and leveraging advanced analytics. And last but not least, sustainable future, which involves embedded sustainability and ESG into our existing standing back in Amwali. Moving forward, under continued innovation. We continue to launch new innovative products and campaigns. The last one was the famous 100% salary campaign. Over 17,000 new Amwali use accounts were acquired since its launch. We have also improved our revenue mix with nonfunded income now representing 33% of total revenue compared to 30% a year ago. And we continue to focus on nonfunded income in the form of asset under management, which has now grown to 5 billion. Under segment focus, again, a few key highlights. In the first quarter of 2024, we have attracted our onboarded or welcome 46,000 new customers, out of which 15,000 were in nationals. We maintained our strong relationship with customers, keeping our cost ratio above the 1.5x. And we're also growing our corporate banking with new mandates from GREs and large corporates. Under digital excellence, again, a few points to call out. We are monitoring very closely all our digital metrics. 51% of our sales are now going end-to-end to our digital channels. And during the quarter, we completed end-to-end journey customer journeys for covered cards and personal finance, and we introduced new features on our mobile app, which continues to be widely used. On under sustainable future, which is the last pillar here, we finalized our net zero plan for the highly emitted targets. We maintained our position with a single aid under the MSCI ESG rating, and our amortization issue now stands at 40%, while we continue to be ranked the #1 UE bank in customer experience. Okay. Let's now move to highlight on the financial performance. So as I mentioned in my opening remarks, we are very happy to see the strong start for the year. Again, in just reminding of the key numbers, 1.45 billion of net profit, which is up 32% year-on-year and normalizing this for the UE corporate income tax or the tax line, we are at a 41% increase year-on-year. Revenue has grown 24% backed by robust funded and nonfunded revenue and assets and financing both was sustained while maintaining our high funding profile. This was achieved despite that we had seen the Egyptian pound the value in the first quarter of 2024. And given our exposure in Egypt, it had an impact, which we will articulate at a later stage. But these numbers are net of that impact. So with a forward-looking view that could only then be hopefully upside. Our cost-to-income ratio improved to 30.4%. And as mentioned in my opening remarks, we are reporting a return on equity of 27%. Okay. On this slide, maybe I think I covered most of the points, but one maybe point to call out, and this might come in the question is that our effective tax rate, which we have calculated for the group stands currently at 11.7%. I just would like to remind the audience who have been on our course previously, we always said that we're going to be anywhere between 11% to 12%, concluding this exercise, we are quite happy that we are close to that number. Moving forward on the income statement. We are very pleased with the quality of the profit that we are delivering. As you can see from the top right chart, the key drivers of profit growth were 19% funded income and a 35% increase in nonfunded income. At the same time, effective cost and risk discipline results in a moderate 5% expense increase and a 25% lower impairment charge. From a segmental perspective, the retail and wholesale bank have equally contributed very strongly to the net profit we have reported in the first quarter of this year. Let's move forward. Funded income. In terms of performance by segments, or maybe just a few key highlights to the mine audience because, again, I would just always like to take you back to what we have been always consistently signaled to the market over the past 5, 6 quarters. Our funded income versus 90 income contribution. Clearly, our nonfunded income has done very well. And as you can see from the slide, that is contributing to our net profit margins and enhance the noon equity. And more importantly, as we see our funding cost SAT and then beneath margin accordingly, a consistent growth quarter-on-quarter something I think we have not seen in the and market recently. But given, again, Abu's efficient funding structure, we continue to benefit from that upside. Nonfunded income. Nonfunded income grew 35%, as mentioned and growth has been coming from fees and commission, investment income and an underlying strategic focus on revenue diversification. I would draw your attention to the waterfall chart on the top slide, which highlights the components of the movement in nonfunded income for the year. Investment income improved 53% versus last year, mainly from our ongoing expansion of the investment book. Fees and commission income grew by a solid 40%. And the drivers, as you can see in the bottom right chart, it's mainly coming from retail cards, risk participation and other AUMs. I think the key message really on this slide is that while we are focusing on unfunded income, it is not a specific area, but we are ensuring that we have enough diversity that we are putting on all shown. Hence, we are betting a natural, I would say, cover if one earlier is not going as fast as we expect to see. Moving forward on the cost line. So expenses grew only by 5% year-on-year. And the underlying good has actually been lower than that. It's only 2% if one would exclude the growth we have seen in Egypt. And Egypt, I can talk about it also a bit more later, but it's important to understand that Egypt dynamics is that while there is a currency devaluation in Egypt, which would suggest that even on the cost translated and the Durham would be lower? The reality of the matter is that most of the vendors in the country were already pricing their services linked to a dollar rate and not even the efficient one. So while you're actually losing on the top line is the valuation, you end up still paying almost the same expenses, if not higher, if once translated into those or the now sitting at 38 bps in the first quarter of 2024. Again, we have not seen any significant reversals. Just for our audience to get that picture because sometimes these numbers can be a bit confusing when there are too many reverses on that line. We started the year last year and first quarter of '23. Nonperforming asset ratio sale was stood at 7.7%. Again, we did commit to the market that this is going to be a focus. NMC impact was last year. So the drop from 6.1 billion to 5.5 billion is a combination of further write-offs as well as recoveries and as we progress through the year. Also, our coverage ratio in Juniper has now also reached a 145% mark without collateral [indiscernible] book, you are hitting slightly your coverage ratio, excluding the latter, but this is going to start building up again and we are [indiscernible] further. All right. So Slide 18 on the balance sheet. So the bank reported a 1% balance sheet growth in the first quarter of the year, but the number is slightly distorted at Election pound devaluation had an 8 billion impact eating away most of the growth we have seen. So underlying growth was 5%. On the financing side [indiscernible] growth has been in the first quarter, our retail bank. We are very happy to see how the pipeline on the Corporate Bank is also now converting [indiscernible] Quickly on the retail side, we are continuously focused on all our key products. So auto finance, personal finance and one financial one [indiscernible] even the distinguished landing or conventional, we are between #1 and #2 in terms of portfolio size for these 3 pilots. One of them is the all deployed position and the other 2 are [indiscernible] We've hit a 26 billion mark by the first quarter of 2024. It is important for us that we cautiously and in a focused manner, it does give us that natural hedge as rates will start to probably decline starting maybe this year, but more profound next year, but we are very [indiscernible] give us that color and also the life yield and return. Okay. On the customer deposits, we have seen a growth of approximately 6% from the beginning of the year and in the wider market and in that rate environment, growing CASA at any point in time is not an easy task. If you look at this number actually from a year-on-year perspective, we are growing CASA close to 10 billion of that book. Next, cushion in terms of having flexibility. When we make pricing decisions on the asset side was out by any means compromising our net profit margin, and you've seen it in the earlier slide that our net profits margin. Okay. So on the capital side, a very predictable story for us as well. We are reporting a CET1 of 12.6% and total capital adequacy ratio of 17.2 million. Impact of the dividend payout. That is a very intentional drop. But as you can see, we are always very cautious to keep that flow of 12%. And hence, we are focusing on continuously to create a mix of capital life versus a bit of more higher-yielding financing opportunities to ensue still enough buffer and ammunition to follow our, I wouldn't say time but dividend policy. However, ADIB has a very consistent way of thinking about how much we will think about dividends, how much we will reinvest into the business. And hence, it's important that as we ensure that we continue to grow our business, all of these key metrics are important for us to be kept in mind. Okay. So I think on the last Slide, just on the guidance perspective, gross financing year-on-year is 8%. We're guiding to anywhere between 5% and 7%, very doable. And we are saying that this will be even after incorporating the FX impact. So the underlying growth is going to be actually more in double digits, but the FX enters something we don't control. Net profit margin at 4.67%. We're saying above 4.5%. Now, you might argue saying, are you being overly conservative about this number? Probably the answer would be, yes. But we are saying above 4.5%. So not 4.5%. We are trying to segment to the market that we do not think that we fall below that number, but more likely than not, I think we will be closer to where we are today, if not a bit higher. Cost of risk, we are now at 38 basis points. We are signaling anywhere between 40 to 60. What we see today it is probably going to be at the lower range of that number, but we are still wanting to keep a flow at 40 basis points because we are factoring in any possible surprises if there is anything in the economy we need to look at. Particularly in the Dubai segment, we did say that we are focusing more on that segment, which is naturally slightly a higher effect to this segment. But again, at the 40 basis points, we're very confident with that number. Cost-to-income ratio 30.4%. We were looking forward to celebrate taking that fee number very soon. And hence, we are signaling that by the end of the year, we will be entering the to the 20-plus number in terms of cost-to-income ratio. And this will come with focusing on top line growth and keeping our costs under control. It doesn't mean that we will not invest. We are actually heavily continuously investing in all of our strategic pillars. However, we are able also to create efficiencies to support that investment growth. In hands, I think you will be pleased to see that our operating jaws have been very positive, very wide with a revenue growth of 24% and cost of only 5%. We intend to continue somewhere closer to this phase. And against the comment I made on net profit margin, we have 27%. I don't think we will fall below 25%. 25% could be cause of the 27 we have today. But really, our floor where we are looking at is not to go below 25%. So I think with that, we can open it up for any Q&A. Thank you, Lamia.

So we concluded the management presentation, and now we're ready to take any questions.

[Operator Instructions] So our first question is Rahul Bajaj.

This is Rahul from Citi. I have 3 quick questions, actually. The first one is on margins, net profit margin. We saw a decent increase sequentially in the first quarter. How should we think about the net profit margin going forward sequentially over the next couple of quarters? I think Mohamed mentioned that you would expect margins to grow from current levels over the next couple of quarters. Is that correct? I mean are you not seeing cost of funding pressure on your margins? So that's kind of my first question. My second question is on your kind of new customer addition mix. So I saw in one of the slides that you've added 46,000 new customers during 1Q and only 1/3 of that were UAE nationals. Just wanted to understand, is this a change in strategy? Or is this a continuation of the strategy? Is the same mix, one is to do in your back book as well in terms of customer profile, wherein you have 2 nonnational customers or one national customer? I mean just wanted to understand, has there been any deliberate attempt to expand more in the nonnational segment in the last few quarters? And if there is a focus in that segment, what areas are you focusing on? So that's my second question. And my third and final question is on NMC. So I recall NMC is out of the NPL book now, but what is the latest status? I mean, are we still expecting any write-backs from NMC in the future? Or it is done and dusted for ADIB where are you now with respect to the NMC.

Thanks, Rahul. I'll take a couple, I will take 2 of these, and then I'll pass on to Lamia as well to address. So on the net profit margins, given where the portfolio mixes, Rahul, because we monitor the repricing of the book and the bill it is very carefully, I see that there is still a strip of lower finance or lower price financing, which is still to go up our books which is happening. And it's being replaced by the higher strip. And that's why I said is that in the quarter of this year, you might still see some uptick. Now, given if the rates start to kind of moderate in the second half of the year, now the verticals out, some are now talking about 2 rate cuts. And if you look at the forward swap rate, I think it does indicate that there will probably be 2 cuts happening. Then it's almost like going up a bit and then maybe coming back to where we are today and hence, maybe the endpoint of that here is probably where we are today. I would say I'm still cautiously optimistic that the ability for us to reprice downwards on the assets is always good because it's a mix between fixed and floating book, which always gives us its air cover. However, on the funding side, because of our buildup of contraction profit carrying that were careless, these are usually short term in nature, like 3 months, 6 months. And hence, the moment you start seeing the curve declining, you would be fast also enacting on these. So I'm still quite happy with how I see the profit margins moving to a bit up and then maybe moderate to where we are to date. And I think ADIB has been known for really managing that very, very well. On the third question on NMC, before I pass on to Lamia to take the question on the customers. So NMC is off our books from state here from the nonperforming assets in the fourth quarter of last year. It has turned into an investment in a holdco, which is treated as such. Now, what you could expect to see from any impact on the financials going forward is this investment will be mark-to-market on a regular basis. And if there is an upside to that number, this would be the reflection you will see in our financials. But recoveries in form of financing, having a provision release or recovery from NMC itself, no, that's not going to happen anymore. It's only going to be the meat evaluation of the investment [indiscernible] And the last one if Lamia you can take the last question.

So on your question on customers, I just wanted to highlight here that there is no change of strategy. We will continue to build on our existing tech, which are the nationals. However, we are expanding our customer base and expanding into new segments, specifically in Dubai. We have done a campaign which was a salary cash-back campaign with colder where the focus of the marketing was mainly Dubai, and this has helped us not in attracting expense customers.

And our next question comes from Shabbir Malik.

A couple of questions from my side. In terms of the recent cuts that we've seen in the UAE, do you foresee any negative impact as such on your financials coming from that? That's my first question. Second question is regarding -- the provisioning in the first quarter was quite low. If you can maybe touch on were there any particular one-offs? Is this more of a longer-term trend that we're likely to see from the bank? So if you can shed some light on that one, please? And thirdly, if I look at your growth in the fee income that has been also pretty strong. Again, is there any one-offs that you will highlight or for modeling purposes, should we assume a similar kind of fee income going into the second half or the rest of the year?

Just to ensure your first question or In, I think, maybe fair…

Yes, deferrals and any potential impact on credit quality.

Okay. So on the first point, we haven't seen any impact yet other than that the month of April has been slower, of course, because of the disruption in terms of client access to clients as well as our own sales team being able to reach our clients. So naturally, April will be lower, but I believe that by now, we are more into BAU mode. And hence, May and June will go back to our historical high level in terms of sales. So April is to be covered. So other than that, premises are fine. Our editor client. It was again the best for our digital capabilities, which I think again stood the test of time. We were very happy with that. And our BC plans work with as well. So nothing on that point. In terms of the provisions, I think it's just a reflection of, again, the quality of the book. The good thing about the important thing about a dip is that we stay very true to our strategy and that we stand at and our risk appetite. And even when we extend some of the segments, we still ensure that the overall book does not dip so far. Now, in the first quarter, the originations have been very strong, and hence, the provisions have been also good. I don't think there was any material release. There could be some usual reversals, which you could see from collections, but nothing to be consumed like I need to significantly adjust to see a more underlying number. So 38 bps, probably a good reflection of our first quarter number. And then the third one, in terms of gross fee income, this is a reflection again of our high sales number. And Akhtar, you want to talk a bit about what is driving the fee income and year-on-year?

So the key drivers of the fee and commission income was essentially retail bank. And particularly, our card business, where we've seen acquisitions grow significantly over the last 1 year, and that has contributed towards the increase in spend. In addition to that, the other retail products like Pestan Finance, auto financing has also seen significant increase in sales, so increasing processing fee, and that have contributed towards that.

Just maybe one more question from my side. In terms of the environment of higher for longer rates, would you view that as positively for your NIM outlook? Maybe not for 2024, but let's say, 2025?

Yes, absolutely. So we benefit, I would say, exponentially if compared to the wider market when rates go up. And that's because our repricing ability is faster, I think, than the market. And our ability or the opportunity not to really have to source to expense of funding channels is also quite strong in Idea. So the jaw widens as quite fast if you see that chart on net profit margin. So for us, it's welcome. The only point we are really focusing on now is if there is any stress going to be on our clients because high rates for a long period of time, some clients might find it challenging. For now, we have not seen that pressure. Again, thanks to our strong client base of nationals, which represent almost 80% of our portfolio today. But we are very aware of that. And wherever we can, we are quite conscious of how much we pass on of rates into our financing structure for products, and why that is because we can. And we have that optionality, and we can make these stores.

Sorry, pardon my interruption. May I please just the question that Shabbir asked on fees. Could I please just add a follow-up there. Just on the COGS fee income, there has been a relative drop as compared to what we saw in the fourth quarter. Now I realize the fourth quarter, you had a significant spike because you had roughly about 100 million or so of what would be considered as a one-off income in there. But the drop seems quite significant in the first quarter. Would you attribute that to a seasonality because of Ramadan? Or has there been any other factor contributing that drop? And would you see a recovery from this line going into the second quarter?

Yes. So let me comment, but just from a high-level perspective, quarter 4 and also I think we signaled in our quarter 4 numbers our call is that it had a seasonal fee element from some contracts we have with our third parties, which usually come in Q4. So Q4 is a higher number, which you usually see in our fee number as well. Ahsan, you want to add?

That's absolutely right and that is really the reason why it has come down. But I think we can see this comfortably building for the rest of the year.

Our next question comes from Aybek Islamov.

And I think a couple of things I want to ask you is, what are your thoughts about your NPA ratios? Where is the flow in your opinion, given how well things are going at the moment? I think NPL ratio of 5.5% you showed earlier, where do you see falling to? That's one. And secondly, I think we're talking about rates being higher for longer. But nevertheless, if we see rate cuts sometime, maybe later this year or next year, what could be the implications for loan pricing here? Do you think you will start to kind of pass on these lower risk on to your customers? Does your reaction depend on what the bigger competitors will do in the retail market? Can you give some color on this, please?

Sure, happy to. So in terms of NPA, while we don't want to give a specific number for forward-looking NPA, but I think the trend has been quite healthy, and we do believe that the trend was continue to. I think we are very close to where we are comfortably looking at sub-5 is a good number for us. We are targeting that. And this did not come by chance and it's been a work in progress for at least for the past 1.5 years, very targeted plan executed and being executed still, so it's not over yet. And hence, I think that's important. And it's important to also understand that NPA issue can only demand in 2 ways also that you have to control the flow into the NPA, right, from stage 2 to stage say otherwise, we almost on 1 million. And that also has worked for us very well with the migration into Stage 3 has been strong by having very strong proactive early alert signals when we actually can cure the situation before it gets out of hand. So yes, that's really our stand on NPA. In terms of I think your second question was regarding the net profit margins and rate cuts and what it means for us next year. Again, I think you mentioned it, we are not alone in the market. We are in a market where we have competition, we are very aware of our competition, and we always do what is best also for the franchise and the client. So if rates start to come off there is a place to be made between how fast you start absorbing these cuts into your fixed product opportunities for the client because your floating will to market price as well, right? So that's just a fixed element. But the pace and velocity of us starting to even reduce our fixed rates will have to be looked at. Now the good thing is that our fixed sale products are already built in 2 things. One is it self-help floating and fixed eliminate. So I'll give you an example. On finance, we're offering fixed rates for 1 year, 3 year, 5 years, and the well move into floating. So it's all there, right? The client can choose what he wants to do and it becomes a winning for the bank as well. So I think to answer your question, we will be mindful of that. We will be aware of our finding. But I think if rates go down, we are not out of the market. We will have to follow the market probably as much.

And the next question comes from [ Aaron Armstrong ].

Firstly, could you give any comments on international M&A? Anything that's come up kind of the press reports over the last week or so and how that fits into the broader strategy?

Yes, sure, happy to. So it's the question regarding the news on the Indonesian bank. So we put out a note on that, and we are strongly denying that. We've never had these discussions not today, not in the past. And to be honest, we don't know where they're coming from. But it didn't help I know and that's why we felt strongly that we had to put out this official note out in the market and we corrected the news as well. On the wider strategy from M&A, we've always been very conscious of the fact that for us to grow, it's an element of organic and inorganic. And hence, we continuously are mindful of if there are opportunities which will add to the value of the franchise, we look at them. At the moment, there's nothing we can really comment on as what we go public. But all I can assure to all this is that it is a standing agenda item for us to look at how much we grow organically, but also inorganically. But what thing I can say is that we are more focused on our footprint in our surroundings. We are not rounding off too wide because we are playing to our strength. And our strength currently sits in that part of the world. And hence, that's what we're looking at.

And I think the particular kind of article, although it's not accurate, and I appreciate that. I was speaking about taking a minority stake, a financial stake rather than a full acquisition and full kind of integration. Can you talk about how you think about that side of things on M&A, would you be looking to buy something outright and fully integrate it or taking financial stakes?

So everything is on the table we are known to not prefer the minority stake. We'd like to be having a bit of more kind of on tech control, but I did have a base strong DNA and culture, right? And the only way that the franchise can operate is that if the entity embraces the culture and DNA, you cannot do that as a minority stake. So it just becomes an investment, which is a commercial transaction doesn't add any value to the franchise or reputation, not on our priorities. And hence, we do prefer to have, when we consider our target that we will be able to bring them to our DNA culture, which I think has proven to be working quite well, and we can leverage underwit 2%.

And could you talk about how a potential overseas M&A could add value to the franchise? Is it an international customer base, remittances traveling for hydro Omar, kind of how it fits with your business and how it could add value.

So the first thing to add value is that we don't want to start from stat. So we always see what is our existing value proposition who are your clients? And first of all, how best you can serve these clients into the wider network. So we follow our clients. That's number one. Where is our client interest. And hence, that's why I made the point about this part of the world. Our client demographics and the background is the interest in this part of the world and maybe in London we are there, we are in the U.K. So that is really where we're focusing on. Number two, if we are finding an opportunity to serve this client either by having to do an acquisition on the ground, having to do some kind of fintech, digital solution, everything is on the table, right? And that's why I'm saying is that the reason why you haven't come out in the past announcing heavy because there was nothing really which we felt will add value to the franchise. And we try matter for us just hitting the news and saying we have done one to see, but it's actually value structure. So we've been very quite careful about it. There will be a time when we will come to the market. And hopefully, the market will understand also the nation because if the market does send, why we did a certain task, then this is the first red flag of why this transaction is anyway being considered in the first place.

That was my first question. Second question would be on the NPA side. So you mentioned sub-5% is a good number for the bank. Can you talk about why you couldn't potentially be more aggressive why, given that the organic inflows of new NPAs are so well controlled? Why couldn't you be a sub-3% NPA bank, for example?

Well, we're 100%, even sub 2%, but what I meant is that we're taking it in phases, right? So the SDM, the very aggressive action and I said, we have been on this journey for some time. And we could have taken that aggressive option and without it much earlier, but we felt that this is not the right way to go about because you need to fix or to address the root cause of what happens for us to be in that situation and address it head on. And then, as you go into your future operating model, ensure that it becomes sustainable. I could take that number to 2% today. We like to put it, we write off the book. We take the pain and move forward. But that is not sustainable. Hence, I'm saying my Phase 1, let me just get below the 5%. And naturally, with our strong underwritten and by us continuing further plans, we will continue to advance. But really Phase I is now.

Maybe a final question for me, if I may, please, would be. Just one on the NIM dynamics. Could you talk a little bit about how much of the book is fixed versus floating? And then on the CASA side, are you having to pay up for new deposits, depositor behavior customers asking to move from CASA into time deposits within interest rate? And then perhaps just to conclude would be, we've spoken about rates being higher for longer. Can you talk about how you're thinking about your mid-cycle ROAs and ROEs given how you're thinking about interest rates on a 2, 3-year view, please?

So in terms of box verification, let me even also go with you by second. So if one would look at our retail book, which is approximately 60 plus million. I think the first quarter home finance, home finance is a mix that is predominantly fixed. There's an element of floating, but our clients don't like to floating too much likely so because you want to add some piece of mind and our fixed rate is very competitive. So that's the predominantly FX trade book and our personal finance is fixed, auto finance is fixed, right? So that you consider 62 billion for is outside is a fixed. Now, comes to your corporate book. The corporate book is all flow, right? It is based on the benchmark and the hands, I would say, probably 60% to 65% of your book is fixed and the remaining on a floating level if you take the 2 segments combined. I think that was the first one. The second question was -- Yes. So the other for us -- and again, my best proxy, I always go back in time, right? And there's a day correlation between your ROE, your net profit margins and your serving assets. It's mathematic. You can almost work it out. These levels of net profit margin 27% is the number. The moment we start getting below the 4%, I think it's probably because of the 2022 number. When we went back to the COVID levels where our net profit margins are probably 3.5 or 3.4%, we were 18% ROE. So that is the correlation. So I don't think our net profit margin will go to that level next year, definitely not. Probably, we get the '25, '24 mark towards the end of next year, it cut starts to happen, but not lower than that. And all these are quite health numbers in my view still in terms of shareholder return.

And our next question comes from Fredrik Nyh.

Well done on the results. So I have just one question about the disclosure that you provided on your customer financing slide, where you show the breakdown of gross loans by sector and also the retailable composition. So historically, loans to individuals have largely matched the retail financing number. However, this quarter, we see that loans to individuals is about 5 billion larger than the retail gross loans. So I wanted to know what explains the difference between those 2 numbers. Is that due to a change in classification of some of your loans to corporates, for example? And the reason I asked that is because this 5 billion difference seems to be one of the main drivers of your strong quarter-over-quarter loan growth performance.

In the financial statement, there was some reclassification in December. So that has resulted in [indiscernible] normally, the first quarter data is actually correct. So if we were to compare apples for apples, the increase in the individual under the HR line would be closer to 3 billion if we do the reclassification in December. And if we do that, then obviously, that number would then tie with the retail numbers on Slide 19 in the Investor Relations back as well.

Next question will come from [ Waruna Camera ].

I have a couple of questions. The first question is on the gross loan yields. Now, I see that since it has crossed the 7% mark, it's almost 7.4% and I want to know -- Yes. What I want to understand is that in terms of ability to pass on these increases and the pain that the customer, I mean in accepting this from that perspective, what could be kind of the medium-term impact on this, could it result in NPLs, especially since this is related to the personal loan sector? That's my First question. And secondly, on the home financing. Now this is amongst the retail segment. This first, like you mentioned the pole position. I just want to understand, was there any initiatives which you launched during the quarter? And secondly, can this be sustained in the next few quarters? And lastly, I mean, if I may add a third question, so this quarter, the corporate had a back seat. They took a backseat. So going forward into the rest of the year, do you think corporate demand will return? Or do you think the retail will drive the expected loan growth for the year?

Okay. Thanks. First question on the net profit margin. You mentioned regarding if these could probably impact the client in the long time. We haven't seen that happening yet. And I think given again, as I mentioned with the [indiscernible] our client base, we're watching the situation very carefully, but no stress yet observed on this. And the upside always happens particularly on the financing, which is on a valuable rate basis because you're able to capture an upside much faster. And these are usually the corporate side. So the short answer to that is we haven't seen any stress on this year. On the home financing, you mentioned the sustainability of our home finance broker. So ADIB has always been very strong in home finance, but I do have to say with a lot of pride that we have really taken the market by the head. So quarter 1 has been phenomenal for us home finance. I think we have record bookings and in home finance batten we do different. I think it's an element of again, we have a lot of campaigns happening. We had a very targeted ADIB in terms of developers. I can't tell you all the recipes, I don't know it will be picked up, but it is clearly working. And all I can tell you is that we will continue to do so, and you should expect similar trends. And obviously, the economy is healthy. I think we have to face it that the record transactions which we're seeing in the property market is allowing all the players to really participate quite efficiently, and it becomes a win-win situation for all the players in that specific industry. I'll say your corporate question on corporate bank or the wholesale bank book. Yes, the assets, we are expecting to get that book picking up quite nicely in Q2. And I'm saying that because I see what I see as we speak today, and it will continue stand quarter 1 being a bit slow on that specific segment is not an unusual because what tends to happen is all these corporates would close all their financing needs quite quickly in the last quarter of the year. And by the time you start building the pipeline, again, building the needs and converting them, you are already in Q2. So I think it's just a seasonal impact and going back in time, it's always been the case in Q1. And actually, the market as well. So we're looking at the market. I think it's not very different from what you're seeing here as well.

That is all the questions we have on the line currently. [Operator Instructions] Otherwise, is there any closing remarks from the bank, which you'd like to make?

So thank you, everyone, on the call. If there is any follow-up questions, as usual, we'll be available to take your call or email. And thank you, I hope to see you in the next quarter. Thank you, guys, as well.