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

Good afternoon or good morning wherever you are. Welcome to Abu Dhabi Islamic Bank's Second Quarter Results Call, co-hosted by EFG Hermes. My name is Shabbir Malik. The management will take some time to go through the slides, and then we will open the floor for the question and answers. At this time, I will hand the call over to Lamia, the Head of Investor Relations, Communications and Marketing. Lamia, over to you.

Thank you, Shabbir. Good morning, good afternoon for everyone on the call, and thank you for joining us today on this call. Before we get started, I just want to say that the presentation is already on our website and on our Investor Relation app, and you as well have received the e-mail with the presentation and the MD&A. It's also posted on AGX. I have with me on the call, Mr. Mohamed Abdelbary, our acting Group CEO; and Mr. Ahsan Akhtar, our acting Group CFO. The agenda of today is very consistent with the previous quarter. We will start with a detailed analysis of our financial performance. We will then conclude with the guidance for the rest of 2024, before we open the door for the Q&A. With that, I will hand over to Mr. Mohamed Abdelbary, who will take us through the presentation.

Thank you, Lamia. Thank you, Shabbir, and good morning, and good afternoon, everyone, and thank you for joining our call today. So we are very pleased to report yet another strong set of financials for the first half of 2024. And again, it's reflecting the consistent growth story we have been signaling for a few quarters now. We are reporting a net income after tax of AED 3.03 billion, which is 30% up year-on-year. And if you were to exclude or normalize for the tax impact from last year, we are talking about AED 3.42 billion, which would take us to approximately 40% up year-on-year. The profits for the quarter, we are reporting before tax, AED 1.78 billion, which is up 8% from the previous quarter and 38% up year-on-year. If one will just dive into the main drivers, so the driver was -- so the results were driven by strong growth across all our business. Particularly, we are very happy to see the progress on our funded and non-funded income combined and the way we have seen our underlying volumes growing quarter-on-quarter. It's also worth highlighting that our cost-to-income ratio has dropped to 28.6%, which is an improvement of 183 basis points from the last quarter. And for those who have been following ADIB for some time now, I think that's definitely a number worth acknowledging given that a few years ago, we were probably in the higher-40 mark. And from that onwards, we have been always signaling to the market that we are on the right path in achieving a cost-to-income ratio which we are reporting today. We have also welcomed around 100,000 new clients, which is, again, a reflection of our ability to continue to attract clients to ADIB. From a balance sheet perspective, we are very pleased to have passed our first milestone, exceeding a balance sheet of AED 200 billion for the first time, which was supported by a growth in net customer financing of 21%. And as known for ADIB, we have been able to efficiently fund that growth, a combination between CASA and Wakala/contractual financing opportunities. And hence, we are protecting the efficient funding mix we have. At the same time, we have not lost sight in terms of continuously enhancing our NPA ratio, and we'll come to it in the next few slides, where we are reporting a net profit asset ratio of 4.7%. And again, this chart will speak for itself when we come to it, where we see quarter-on-quarter the progress. And I would like to always go back and say that we have been signaling that projection over the quarters, and I'm very pleased that with the team here, we have been delivering on the promises we made. Lamia, if we move forward to the next slide. Okay. So I think it's important also to understand where the performance has come from. So our revenue has grown 25% year-on-year. And that was supported by, as mentioned, both from a funded and non-funded income perspective. It's absolutely critical for us that as we deliver growth in our profitability quarter-on-quarter, it is very important for us to understand where the profitability is coming from. And as we grow our core business, it gives us a lot of sustainability and continuity as we go into probably next year cycle, where the rates are expected to be lower. I spoke about the cost-to-income ratio. But also, if one would look at our capitalization situation, we are reporting a total CAR of north of 17%. We Will come to the CET1, which has touched 12.9% as well. Okay. I think we can move forward on this slide, Lamia, it's okay. Let's talk about the income statement. Again, from an income statement perspective, if you look at the top-left chart, we are seeing consistent growth every quarter. Net profit has grown 8% versus last quarter, and that's after incorporating UAE tax. One number I'm particularly proud of is that when you look at the quarter net profit after tax, it has almost recovered from the first quarter of 2024, where we said that if you exclude tax, we will still be showing growth quarter-on-quarter. But now even after incorporating tax for the second quarter of 2024, we continue to show growth from a quarter-on-quarter perspective. And moving forward, Lamia, on the funded income side, as was already mentioned, funding income grew 13% year-on-year to AED 3.3 billion in the half 1 from 9% growth on average profit earnings. The number which I'm really proud of is that our net profit margins have held up quite nicely in a very challenging environment because we're not only mindful of the fact that as we stand now, our portfolio has largely repriced. So we kind of hit the top angle of our gross yields. But also given the competitive environment in the market, we have been very disciplined in our pricing approach, and hence, our net profit margin is even when compared to first half of 2023, moving from 4.41 to 4.6-something I think would be quite unique if one would compare to other financial institutions in the market. All right. On the expenses, the story continues. So our expenses have grown 6% year-on-year to AED 1.5 billion. And if you were to look at where predominantly the expense growth has come from, it's from 2 main categories. First one is employee costs, and that's just a reflection of us continue to invest in our people. The 4% is the net growth. The underlying actually is a bit higher because we made sure that our compensation to increase are in line with market, but also we have taken some efficiencies as we went ahead on our digital journey. Now that reflects on the second pillar you see, which is 12%, and that's predominantly the cost of the flow-through of our digital spend. Now being on a journey for now almost, I would say, 3 to 4 years in terms of really focusing on our digital agenda, we are at an inflection point where our delivery cycle is becoming shorter and shorter. What it means is that projects which we have invested in maybe 12 to 18 months ago are being delivered, but also the ones which started 6 months ago are also being delivered much faster. I think we're learning as we go, and we have demonstrated that we are leading in terms of our digital servicing capability and making significant progress in terms of our sales origination efforts as well. Moving forward on impairments. So impairments has increased 9% year-on-year. And that is something which, again, we are very keen to ensure that our cost of risk or our impairment is keeping in line with our financing growth. Now if one would look at, okay, so financing has grown around 21%, we need to ensure that we are keeping a lot of discipline in terms of our underwriting standards. And hence, our provision has also come off -- have been actually higher despite the fact that the actual underlying cost of risk has remained quite benign. But that's important to reflect, on the next slide, Lamia, which we see is that our coverage ratio from a cash perspective has gone up to 77%. Again, shouldn't be a surprise to the market. We did commit to the market that this is the number we are focusing on and we will continue enhancing. But also our NPA ratio dropping to 4.7%, where it was 7.5% only 12 months ago, again, something which is structurally being executed at best focused levels. And as we are looking at our pipeline, we do expect that this trend will continue as we finish 2024. It's a combination of actual legacy recoveries, which we again told the market we are focusing on, but also we have been very prudent in terms of our write-off approach. Moving forward to the balance sheet. So bank total assets, as I mentioned, have now crossed the AED 200 billion mark for the first time. We are reporting AED 213 billion as of the second quarter of 2024. Now underlying is actually AED 223 billion, and the AED 9 billion is the impact of the FX devaluation in our Egypt subsidiary. Egypt underlying, on a local currency basis, has done extremely well, has grown. But given the FX devaluation, I think the banks has, as mentioned, has been impacted by AED 9 billion. What we are quite proud of is actually when we start talking about our financing growth. And then if you can go to the next slide, where we see where the buildup is coming from. So 17% growth from the beginning of the year. And as we can see, nicely contribution from retail as well as from our corporate or wholesale banking division. So both engines are firing, delivering and are staying on course. Now if one would now bifurcate the retail delivery in the lower right-hand chart, you will see that Home Finance has had a significant contribution to our growth as well as personal finance and auto finance. And I would like to believe that if one would look at our home finance book and personal finance book now, I think we're probably market-leading for these 2 specific books in the UAE. From a corporate perspective, I'd just make one point is that the importance of having a good mix between GLEs and corporate is of significance, given the RWE benefits, which we are getting as well as enhancing our credit quality. This is in terms of our Sukuk investment, again, quite nicely on track, on strategy. We have added a few billions from the beginning of the year. Now we are reporting AED 27.2 billion. Our portfolio remains to be predominantly investment-grade, which is, I think, quite unique for this market and for ADIB. In specific, it's helping us to give stability. It helps us to give long-term financing fixed rate opportunities in an environment where we expect rates to go down. We will continue to build on that portfolio selectively and where it best fits ADIB's profile and risk appetite. From a deposit perspective, we have grown, as I mentioned in my opening remarks, in line with our financing growth. Now ADIB always had the benefit of being a fairly liquid bank, which has not changed at all. But what it meant is that when we spoke in the previous quarters of keeping liquidity on hand, keeping our powders dry, being able to deploy when we need to deploy, that is crystallizing now as we speak. So as engines are firing on all fronts, we have the ability to call on effectively price funding opportunities with a mix of Wakala to ensure that as we support our asset side of the balance sheet, the funding mix by no means is impacted from any of the acceleration we're seeing on the asset side. It's also important that we are making conscious decisions of mixing between CASA as well as Wakala. And while we have the ability to continue growing our CASA, given the uniqueness of ADIB's profile, it's important for us that we are creating duration on the liability side to ensure that we will not create any mismatch from a funding perspective as we grow our financing book. Last but not least, I will talk about our capital and liquidity position. So our CET1 is now standing at 12.9%. It gives us a lot of comfort, especially if I were to compare to second quarter of 2023, 12.9% versus 12.8% 12 months ago. We are definitely heading in the right direction. We are creating value to the franchise. We are ensuring that capital is deployed at its best level. As you can see, balance sheet growth, financing growth, strong liquidity, but more importantly, by no means we are diluting our capital position as we position also ourselves for year-end to ensure that dividends decision can be made within the bank policy. Now on the right-hand side, we see the liquidity position. Again, very, very liquid bank, I have to say. And for -- even despite the fact that the change in the CRR ratio, which happened a couple of months ago, moving from 11% to 14%, while it might have some profitability angle, it did not create too much pressure on us in terms of having to raise funding for that, given that we always have that ammunition on hand and able to deploy as and when required. Moving on to the outlook and guidance. Now I have to say, given the impressive performance, which we are all very proud of, particularly in the second quarter of 2024, we are revising only one metric in our guidance, which is our gross financing. So year-to-date, we're already at 14%. We are saying that we are closing the year probably above 16% year-on-year. Net profit margin, we've always said, going to be above 4.5%. I'm maintaining this position. I do believe that we have probably hit the high point in terms of financing yield given our -- the profile of products we have, but also given that, as I mentioned, the cycle of repricing our assets has probably concluded by now. So our net profit margin is probably above 4.5%, and we are very confident that this number will be maintained. Cost of risk has remained the same, between 40 and 60 basis points. Cost-to-income ratio, we are saying south of 30%. We're already at 28.6%. I think that probably that's the number we're going to land on. And return on equity, north of 25%, we're already running at 29%. So with that, I'm concluding our introduction, and we are happy to take any questions.

Thank you very much, Mohamed and Lamia. We will now open the floor for Q&A. [Operator Instructions] So we have a couple of questions. So Adnan, please go ahead. Adnan Faruk, can you hear us? Okay. I think we'll try the next participant. Naresh, please go ahead.

Hi, can you hear me?

Yes, we can. Go ahead.

Perfect. Congrats on a very good set of results. Sorry, I didn't get a chance to go through the great detail, but just a few quick questions after listening to your presentation. One is, it would be very helpful to understand the sustainability of the very strong volume growth that you have recorded in the first half of this year. I see your guidance, which on the first look does not imply that the similar trend could continue in the second half. Are you just being conservative here? Or is there more room for the sort of like growth surprises? And how should we think of the growth in the second half of the year? That would be my first question. My second question is on the margin outlook. As you currently mentioned that you seem to have hit the high point in the yields, could you please throw some light on the expected trajectory of the NIMs once we start seeing rates go lower? Is it fair to assume that you will still continue to see some support from the Egyptian franchise where the NIM still remain quite strong, but the UAE NIMs could sort of like be much more in the direction of where the Fed rates go? So if you can throw some light there, that would be extremely helpful. That's the second one. And my third and final question is, having heard the investor calls in some of your peers, there has been a discussion around the new revised provisioning standards that are being promulgated by the UAE Central Bank. If you can please just share your thoughts on the first take on the potential impact that we could see from these new regulations, that would be super helpful.

Thank you so much, Naresh. So I'll take them one by one. And if I miss any point, do let me know. So the first question was, how sustainable do we believe this performance will be in half 2? And my answer would be is that I think we are cautiously optimistic that the growth story will continue. Your question was specifically on the financing book. Now second quarter has seen tremendous activity, particularly in the GLE side. And I think that's probably just glancing over the other bank's announcement, that's probably a market dynamic which we have seen. So ADIB wasn't alone on this. And hence, when we talk about half 2, I'm not sure that this will repeat. There was a lot of demand from GLE in Q2. There will still be, in my view, but not with that extent. Hence, we believe that on the retail side, the growth story will continue and actually, will do a bit more. But on the corporate side, it will probably slightly modernize or moderate. And we've seen cycles where quarter 3, corporates tend to be down slightly slower in terms of activities, has to do with the summer months and the vacation months and you had a very strong Q2. And then it picks up again by the end of the year as some of these corporates try to get the balance sheet in order before the year-end closes. So probably a slower Q3 and a higher pickup in Q4, particularly on the corporate side. On the retail side, all engines are firing. All our products are taking market share, and we've just seen the numbers. The numbers are publicly available. I think our team has done extremely well in terms of positioning ADIB from a retail perspective, particularly in home finance and personal finance, really taking the market by storm. So that will definitely continue in half 2 and hence if I now link it back to the profitability in half 2, we are very cautiously optimistic that these are numbers where it's predominantly core business, it does not have a lot of volatility. There are pluses and minus like any other business would have, but the core itself is reflective of what we see today, and I think we'll continue in half 2 as well. Now on the second point, which was the margin outlook, what would probably happen, and that is just reemphasizing the points I had flagged with the team here in our quarter 1 results announcement. When we looked at Q1, we did say that -- by half 1, we're still going to be fairly okay in terms of margins because we saw some of the elements of the portfolio price. Today, I can confidently say, I think we are at that point now, which means that for half 2, the year will hold, but maybe some of the funding costs might catch up with you because they have not been hit from the beginning of the year. It's always kind of a year-to-date impact. So the gross yield will hold, but funding costs might creep up a bit. But the good thing about it, and maybe that is not known to the market, is that when we talk about our CASA ratio, which is around 63%, 64%, on the retail side, it's almost 90%. And on the corporate side, it's around 35% -- between 30% and 35%. So what really drops or puts pressure on your net profit margins and raises your funding cost is the corporate side as expected and rightly so. Because if you're a corporate treasurer, you would demand the return for your deposits much more, I think, aggressively than any other client. So what it means for us is that as the curve start to turn next year, we will be able to efficiently reposition ourselves in terms of our funding costs and bringing back the funding, our net profit margin corridor to a level which will ensure that we will be able to continue to provide these numbers you have seen in front of you. The last point -- Yes, the last point is on the rise risk standards. And I think it is something which we have been discussing with the regulator for some time. We are very close probably to see the regulation coming out. What will be the impact on ADIB? We will have at that point look at it. I think there's still a few questions which need to be resolved. But the good thing is that our expectation is that implementation, particularly on the value of collateral and, hence, a reflection in provisions, there will be an implementation time line. That's our expectation. I don't want to make assumptions until we see the circular coming out. But usually, when these circulars come out, there is a time line of implementation. Now what I would advise also the committee or the analysts to look at is that some of the elements, which are the provisions, particularly -- which are booked against equity directly would be a good proxy to understand the impact for us. And these are publicly available numbers. We disclose them. I think this time AED 165 million we have on our books. So that's the extent what you can think about that is if that gets recycled probably in P&L, that's the AED 165 million. In ADIB's context, Okay, it's AED 165 million is not very material, right? And hence, we are watching the space. We're waiting for the regulation. But once implemented, I think we'll be in a better positioned to tell the market what it means for us going forward.

Understand. Yes, that's very clear. Just one very quick follow-up. On the GRE loan growth, could you please offer some more insight into what parts of GREs, which areas, what projects basically drove this loan growth in the second quarter?

I think it's a little bit quite difficult to disclose more information on this given the confidentiality of the matter. But these are -- particularly, I can classify them as strategically important projects for the government, right? And hence, it was not [indiscernible] by a slightly more banks you would have seen that. But beyond, I think that point, it will be difficult for us to disclose.

We'll now move to the next question. Aybek, your line should be open.

We can't hear the question, Shabbir. I don't know if the problem is at our end or...

Aybek, can you hear us?

Yes, I can hear you. Can you hear me okay?

Yes, please go ahead.

Okay. Well, I think a couple of things I wanted to clarify with you on this call is, first is fee income, very difficult to see what happened with fee income in the second quarter, how it compares to Q1 and particularly last year and your expectations for the remainder of the year, right? That's one question. And I think otherwise, will be also interesting to know on your asset policy. So if you were to write off your NPLs, which are older than 5 years, what would be the impact on your loan portfolio? Or you put another way, what percentage of your loan book is in the NPLs, which are older than 5 years? That will be my second question. And I think in terms of my third question, your dividend payout, right, in view of your historical dividend payout ratios, what kind of CET1 ratio are you comfortable with? And do you think your focus will be on continuing to accumulate CET1 heading into the second half of the year?

Thanks, Aybek. Okay, so I'll take your question one by one, not particularly in the same order, but if I miss any point, let me know. So I think that the last one first, the dividend payout, again, we do not really disclose the number itself, but we have been very consistent in the past few years of the percentage of net income we always recommend as dividends. And at this point, probably I don't see a reason why this should change. Again, no commitment. There's Board approval there we have to clear with. But our dividend policy has been consistent over the past few years, probably will continue as such, barring any other regulatory approvals. What it means for us is that we will have to probably hit a CET1 ratio of 13.5%, [indiscernible] We are today a very closely mongering situation. We see, again, no reason why we will not be able to create internal equity and not to meet that CET1 ratio and, hence, meet the requirements of our shareholders or expectations of shareholders as well as create enough internal equity to support 2025 and beyond growth aspirations. That's on the dividend point. In terms of the impact on, again, on the regulation, now I think it's still yet to be seen. And you mentioned the 5-year bucket, right? So it's a 5-year bucket or the collateral in terms of its aging of 5 years, when does it start? And if it is a starting point today and we look back, anything older than 5 years will need to be taken into consideration as write-off, then how many years do you have to actually comply with? We didn't at least at this point, expect that, let's say, that we have a collateral value of AED 1 billion or so, we don't expect that this goes into your P&L immediately, but probably you will have time to implement. Now in terms of aging, if one would just look at our collateral value, we can probably send you separately the aging of that, but a big portion of what you would see as collateral and property is already taken in account of 50%, but also they are legacy. We have to be very clear with the market, right? Because we have been very disciplined in terms of our NPAs for the last 2, 3 years. So what you see today in terms of collateral against nonperforming assets is legacy and probably a lot of it is older than 5 years, right? So what we would do at [indiscernible] send as a follow-up, the bifurcation, we can do that. But this should be only used as a proxy because the implementation time line, we still believe that there should be a time frame for implementation. And that's not for ADIB specifically, but it's an industry phenomenon, right? We're not talking only ADIB. ADIB is probably not going to be the problem of the market. But given the side of where collapses will sit in the industry, I think they would definitely have to be an implementation time line, which will be recommended and consulted as such. And then Aybek had a question on fee income. Now on fee income, what we've seen is approximately a 52% growth year-on-year. I would say that of the growth moving from AED 1.3 billion to AED 2 billion, I would probably say you can shave off approximately AED 120 million, AED 130 million considered as one-offs in our portfolio, in our financial statements. Does it mean that one-offs will not repeat in the future? No. Because I think we've also learned that one-offs after a while become core, and we are looking at these. But if you want to normalize this non-funded income of the 52% growth, take probably out AED 120 million, AED 130 million. And it's a mix of many things. So I'm not able to pinpoint one element of it. But part of our core, obviously, we do a lot of -- we have an investment portfolio. We have a property company, which holds a lot of properties. And as we always told the market, we -- as we acquire organic financing opportunities, in some cases, we also look at buyout of portfolios, which we have been doing, and they always give you some upside in that as well. And this will continue. It's not new to ADIB, but I just want to flag that this is some of the numbers we have here as well.

But Aybek, just to add on how much fee income year-on-year, we're up by 28%.

This is second quarter or first half?

H1, first half. Fee income only.

Okay. I was talking non-funded income, Aybek, sorry. Non-funded income is up 52%. Fee and commission, yes, alone is 28%, correct.

Not in fee income, it's other elements, right?

Yes, that's what I was talking about. So the fee income is pure BAU, you can consider it will continue in the other income line, probably take out between AED 120 million, AED 130 million of various items. Some of them are NPV adjustments we had, right? So I cannot pinpoint one point. But my challenge always to myself and the team is that one-offs becomes BAU, right? The business does not go only on BAU. Yes, you build the core, but you also have to continue looking for -- I would -- I'm not calling one-off opportunities, but more significant transactions, which gives you air cover as and when required, and they almost become BAU.

We'll move to the next question. Olga, your line should be open.

I have several remaining questions. One is on lending to GREs. Can you maybe quantify for us what part of the substantial loan growth in the first half or in the second quarter came from the GREs? And more holistically, do you think that this shift towards GREs will be pressuring your net interest margin and supporting your cost of risk going forward? So this is my first question. Another question on the financing growth, your retail financing growth were so solid. And I'm wondering what helps you to keep delivering such a strong growth in this segment? Do you bring payroll customers from GREs? Do you make special offers? So anything that might see you really different from the rest of the market in the segment. This is on financing growth. The other question is on impairment charge. Sorry, I didn't have a chance to look in detail in the financials. But I think on one of the slides, you show that the credit risk went up in the second quarter, but it was driven by retail or corporate segment. So what was it? Was there some impairment on non-financing or not? This is my second question. And third question, back to the previous question, I hear that there were some one-offs in non-funded income line. But even if I take AED 120 million, AED 130 million one-offs, still, the non-funded income was extremely solid. Maybe you can share with us what exactly was there in this line in the second quarter?

Thank you. Okay. So I'll start with, again, the first point on the financing growth in corporate and the retail. You asked what was specifically big-ticket items in the government or GRE sector. It's between AED 4 billion and AED 5 billion. I cannot be more than this specific because, again, we don't disclose too much detail, but as you can see, AED 8 billion growing. And if you go to Q1, you would almost see it flat. So it's all a Q2 phenomena in the corporate and government sector and of which probably AED 4 billion, AED 5 billion is one specific category of transaction. So that's why when we said for the rest of the year, probably this part will not continue unless this specific situation repeats itself again. But for now, I would caution that maybe take out AED 4 million, AED 5 million from the government and public sector financing growth. Now in terms of retail growth, this is a recorded call, so I cannot tell you all our secrets of how we are able to deliver such strong performance. But all I can tell you is that it is -- I'd say the mix of redefining our strategy, particularly in the last 4, 5 months, in terms of really using what we have, that is in simple words, right? It's a -- ADIB has potential in its client base, in its corporate relationship, whether it's on retail linked to its corporate relationship, which I think has been unpacked for too long. We are focused on that specific element. We did not do any price concession. You can check the market. We're not the cheapest in the market. Definitely, we are competitive, but we're not the cheapest. But these alignments where you create these strategic alliances with some of your corporate relationships and link it to other products, that's the outcome you see in the slide. And hence, when I see these numbers, I'm comfortable because I know they're not a one-off phenomenon, but they will continue as such. Home Finance, again, is a reflection of the market. The market is doing extremely well in the property market, whether it's Dubai, Abu Dhabi or even in Northern Emirates. So we are with the client, we are following the needs of the client, and we try to ensure that we give them best service. And as I said, it's a mix between origination effort as well as buyouts. It has to come from both because the only way to take market share is you capture new demand and you go after existing financing books as well, which we have done very successfully, particularly in the second quarter of '22. And then if you look at personal finance, auto finance, these are the net growth, which we are seeing. But from a gross perspective, our personal finance has doubled in terms of origination over the last 12 months. Auto finance has more or less stayed the same. Auto finance, we are competitive. But as the market knows, auto Finance is an anchor product, which we sell to our clients because the clients want it. And we will continue to be there to serve our clients. So that's the financing part. On impairment charges, I think your question was in terms of what is driving the growth and impairments. It's an element of a few things. One is predominantly that we are looking at usual financing growth, and we want to ensure that we are in line with our origination efforts, it is by no means a reflection of us relaxing our risk underwriting standards. They have not changed. They show in our staging where you can see it in our financial statements, very healthy projection. We are -- from a bifurcation of the retail book perspective, still 80% of the book is still financed to UAE nationals, 20% is to expats. The pie has become bigger. So we are financing more to expats, but at the same time, can't complain. UAE nationals have also been quite active in that front. And hence, the 80% has remained the same. On the corporate side, this is a recovery which you see due to some repayments, which happened. Again, we don't -- we can't disclose the names, but you might have seen in the news, Dubai -- some Dubai entities have repaid, have consolidated and have raised new financing in a different way. And hence, when you get repaid, we released our ECL charges against these names, and we're able to take some additional provisions to ensure that I would almost call them overlays to protect our provision coverage ratios, whether it's cash or collection levels as well. And the third question I think you had was on the non-funded income. Okay, non-funded income. So non-funded income over has grown 52%. Fees and commission loan has grown 28%. The main driver, again, if you look at investment income, investment income, this also includes the Sukuk part, right? So it is a reflection of our Sukuk book or the fixed income book really growing. And hence, that is the reflection of the profit earned on the Sukuk book. It is reported as nonfinancial income. I think this is accounting standard, which we follow. We must going to do that. But you could almost qualify it's on the back of balance sheet financing. That's the investment income side. That is alone 38% growth. Other than that, there is nothing -- I mentioned the AED 120 million, AED 130 million one-off, it's a list, as I said, we need to understand ADIB has a property company has a bit real estate book. We do crystallize on it from time to time as well as some of the buyouts we make, and then we can realize some day one gain whenever we acquire the portfolio.

Yes. If I may, can I ask a very small question on this Central Bank proposal about new carrier standards. What do you think is behind? Why are they proposing new standards now?

I think we understand why, where it's coming from. And for us, I think it makes a lot of sense. It brings a lot of stability. It's not uncommon. We've seen it in other markets as well. The only point I think, which I think the Central Bank is doing very well, it's in consultation. We are doing it, how we do it the way which will serve the purpose of why we're doing it. And it just gives us, I think, more stability to the market, right? So what will it do eventually is that it kind of says if your collateral has not been realized for the last 5, 6 years, maybe probably the ability to crystallize it when needed becomes a bit smaller. And if you are to crystallize it, it's going to be an upside for you, right? So we're not saying it has no value, but we're just saying once after 5 years, we're able to crystallize it, take it in your P&L. But after 5 years, just reduce your lines gradually on it, and hence, you're strengthening your position. It could also imply that maybe some categories of that might be untested. And hence, while it ages, you put less and less reliance on it. From my perspective and from a team perspective, we understand the logic. For us, it makes a lot of sense, and it's all about implementation when and how.

We have about 10, 15 minutes left. We have a couple of questions in the Q&A box. I'll start with those. This is from [ Ahmad Manihani ]. The nonperforming asset ratio improved to 4.7%. What steps did the bank take to achieve this improvement? And how sustainable is this lower NPA ratio?

Sorry, this was on the NPA, the 4.7%?

Yes. So the NPA ratio has improved to 4.7%. What steps has the bank taken to achieve this improvement? And how sustainable is this lower NPA?

Very good. I really like this question because we just started a journey like 2 years ago, and we stayed the course. We said always, number one, we have to ensure that the inflow and the NPA has to be controlled, right? You cannot fix one side and the other side keeps on pumping NPAs. So over the past 2 years, our inflow from Stage 2 and to 3 has been, I think, phenomenal. It has shown understanding of credit standards and early alert system, which allows us to cure before it goes into stage 3. So that's the first thing we did. The second of all, we have almost bifurcated our nonperforming asset book and ensure that a team, a specialized team has been put on the case to ensure that we recover. We have been pragmatic about our approach, and we do what is best for the client and the bank as well. So on that basis, we have been able to recover significant amount of legacy exposures, which has been sitting on the books probably for more than 5, 6 years. The third thing is that as we have been building provisions over time, and again, Islamic banks are having slightly more different structure than commercial banks, is that we were able to also proceed with write-offs against a fully covered exposure. It doesn't mean that we let go of our legal approach. We still will preserve our rights to go after the rights of the bank, but it allows us to write off the exposure against the provision at a time where it will enhance your NPA ratio, but also protects your provision coverage ratio as well as your coverage with collateral. So all this combined is what you see today, which means that the 4.7%, as I said, will continue to improve over the next few quarters. At one point, it probably will stabilize because you are in the business of taking risk. And this number dropping too low is actually also not so good because it means that you're almost stalling the machinery, but we are not where we want to be yet. I know we are at market levels today, but we still have ambitions to go even lower than that number.

Next question is from Adnan Faruk. Can you please elaborate on the source of other income booked during this quarter?

Okay. So we touched on this in the previous question. Again, it's a combination of a few one-offs. And again, we're not bifurcating as such, but what we can tell you is, number one, we do have properties which are in the money that has value. We have in the process of, particularly in Q2, been able to acquire a few portfolios. And again, I said, we acquired or we grow the book organically and inorganically. So we go after base specific sets of assets, which then once booked have an intrinsic value where you can book a day 1 gain. Again, it's not material in the bigger context. But putting this all together, as I mentioned, you can assume a benefit in our quarterly number between AED 120 million and AED 130 million. Again, I need to stress it is -- has to be a clear element for us. One-off is part of the business. We enhanced our organic core business. We look at one-offs and also we continue to be on the lookout for inorganic opportunities in the form of portfolios, which add value to the franchise.

We'll go to the next question. This is from [ Metehan]. Given the very strong gross financing growth in 1H 2024, when would be the time to upgrade your growth guidance? I think you've done it, if I'm not mistaken.

Yes, we've done it, yes, 16%. We've done this. About 16% -- more than 16%, yes.

Okay. We now move to the next question. This is again a follow-up from Adnan. In addition, what were the sources of FX income?

FX income, when you say sources, it's very difficult to quantify because FX income is a product which you offer all your clients, right? So if the question is which specific segment is driving the growth, I think it's a fairly balanced approach. So our corporate clients we are able to provide them services within the scope of business, and hence, FX is part of that origination. Our retail clients, particularly on BBBs SME, BBB, our business banking for us is a big source of FX income as well. It's the nature of the business for what they have. And hence, we provide that service. And then on the retail side, our FX proposition is, again, a digital proposition. It's automated, so clients are quite comfortable transaction on the mobile app, and that's again a source. But never underestimate the FX made on international spend on our cards. We are the biggest spend in our cards on cards full stop in the UAE. We just look at the numbers, we are #1. So in terms of debit and credit cards combined spend, we are #1 in the UAE. And particularly when there's international spend, that attracts FX income as well.

Thank you. I think we don't have any other questions. Maybe we can give another minute for people to log in any follow-up questions. Maybe one question from my side. Your mortgage growth has been pretty good this year. If you think about mortgage growth this year and last year, do you think that mortgages -- the volume of growth you've seen in mortgages this year is better than last year? Or is it similar or lower? Considering that interest rates are high and property prices have gone up, have you seen a slowdown? Or still there is a decent demand on the mortgage front?

Shabbir, I think if I compare it to last year ,definitely very healthy growth particularly for us, we have grown faster than the markets. This number, I wouldn't say it's reflective of the market. It's actually us growing with the market and taking market share as well. But demand for property is still very high. The numbers are very healthy. There's lots of confidence from real estate as well as internationally invested in the market. People just need to be mindful is that of the numbers they see in terms of product transaction, probably 60%, 70% are cash versus being financed by banks. And once you capture that market share, you see the projection. But answering your question, I think this year will definitely continue to be higher than last year in terms of the home financing book.

Great. We have -- I see a raised hand. Just let me try this one more time. Adnan, your line should be open. Please go ahead. Yes, I can hear you now. Please go ahead.

Sorry about that. And sorry for going back to it, but the other income book during this quarter is AED 331 million, which is significantly higher than your normal run rate. You did mention that there are AED 120 million to AED 130 million in one-offs, and you highlighted some of the sources of that. So would it be fair to assume that other income on a quarterly basis could be in the range of AED 200 million going forward?

Yes, I would say not a -- I think if you want to model projection, I would probably put AED 150 million. But as I mentioned, I would want to target for more because while it is one-off, one-off has to continue, right? Because you have a book, you have to find opportunities. And you almost originate and distribute and create more value to what you create today and in a place, it was something which can be monetized in the future as well. It's almost like a rolling activity, which we have. But for your modeling perspective, I would probably put AED 150 million there for the future.

There's one question in the Q&A box. What will be the impact on funded income, considering 1 to 2 possible rate cuts by the end of 2024?

Okay. So, your question is that the impact of our funded income if rate cuts happen this year or next year?

This year, 1 to 2 rate cuts by the end of 2024.

Yes, this year, I think minimal impact because, again, there are different views in the market, and our guess is probably as good as anyone's guess. Some views are now September and November. It used to be only November. We don't see it now, right? So I think we will eventually know. But it's 1 cut or 2 cuts this year, then we'd not be too concerned about any material impact on the numbers going into next year, we would have hopefully optionality. We will have grown the book enough to compensate through any compression in the variable portion of the financing book, and we take it from there. But this year, I'm not seeing any material impact. The whole focus for us is really exiting on a strong note to give us air cover next year as rate starts to moderate a bit.

Got it. Maybe one more question. This is in the Q&A box. The strong loan growth that we saw in 2Q 2024, would it be fair to say a large component came through towards the end of the quarter? Or was the growth fairly balanced during the second quarter? This is from Alok.

On retail, balanced, except for May, May when the flood happened, I think the flood was in May, right? Yes, April yes. So April was soft and made up for it in the following months. So -- but overall, on average, retail has been fairly consistent. You're right, the corporate book has been at a later part of the quarter, not in the beginning.

I think that's all the questions that I can see. I can hand it back over to you for any concluding remarks.

Thank you, Shabbir. Thank you, everyone. So as I said, I know you didn't have time to digest it, but we're available for questions. So if you have any follow-up questions, we are available here. Okay. Thank you.

Thank you, everyone. Thank you so much. I appreciate your time to.

Thank you very much. Take care. Have a good evening, everyone.