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

Hello. Good morning, good afternoon. This is Rahul Bajaj from Citi Research in Dubai. We are delighted to host Abu Dhabi Islamic Bank on third quarter and 9-month 2025 earnings call today. Representing ADIB, we have Mr. Mohamed Abdelbary, Group Chief Executive Officer; we have Mr. Ahsan Ahmed Akhtar, Acting Group Chief Financial Officer; and we also have Ms. Lamia Hariz, Group Head of Corporate Communications, Marketing, ESG and Investor Relations. Without further ado, I'll pass on the call to Lamia. Lamia, over to you.

Thank you, Rahul. Good afternoon to everyone on the call, and thank you for joining us. I would like to welcome you all to ADIB Q3 2025 financial results. Before we get started, just a quick reminder that today's presentation and all our financial disclosures are currently available on the IR section on the corporate website as well as our dedicated IR app. The agenda of today is consistent with our previous quarters when a much we cover the key highlights of the quarter, followed by high-level guidance for the rest of the year. This will be followed by a more detailed analysis by Ahsan on the financial performance. After which, we will open the door for Q&A. With that, I will now hand it over to Mohamed to start the presentation.

Thank you, Lamia, and good morning, good afternoon, everyone, and thank you for joining us in today's call. We are pleased to report another period of robust performance with a strong third quarter results where we delivered a net income before tax of AED 6.1 billion, which represents a 16% growth year-on-year. I'm very happy to see that every business lines performed exceptionally well. One also very important aspect, which we are very proud to see is that the level of customer acquisition has increased, and we have welcomed approximately 225,000 new customers from the beginning of the year. That's net addition to our client base. Also from a revenue perspective, we have seen a growth of 14% year-on-year. And as you will see in the presentation, it has been delivered across all business lines and business segments. From a balance sheet perspective, also, we have seen good momentum, but maybe before going to the balance sheet, one point on revenue as well, which we will see is that we have been talking for a while about ensuring that our revenue is growing both from a funded and nonfunded income perspective. We have delivered on that promise, and you will see that particularly on the nonfunded income part, we have grown approximately 17% year-on-year. And talking about the cost, again, cost-to-income ratio at 28.3%. After -- if I go back in time a few years, you would have seen our costs decreasing, but then we also signaled to the market that we have entered a phase of productivity. So costs have been increasing, but always ensuring that revenue is growing at faster pace and hence, focus more on productivity rather than just cost reduction and that's why you see that consistent improvement in our cost-to-income ratio. From a balance sheet perspective, again, exceptional performance. We are seeing growth in our total assets. We will talk about it in a second when Ahsan discusses those numbers, but hitting AED 270 billion of total assets, representing almost a 20% growth year-on-year. And 26% on customer financing, I think, has been a phenomenal performance. On the ADIB liability side, we have continued our strategy in terms of ensuring that we are funding before financing. And hence, you will see that the quality of our funding has remained to be resilient and robust, and we are delivering on that promise as well. Talking about asset quality, our nonperforming assets ratio has now dropped to 3.3%. Again, very proud to see that number moving in that direction. Particularly if you go back in time, this number at one point in time, it used to be 8.8%. Now we're heading towards 3.3%, the way below actually market average. If you see the banking sector in the UAE, expanding actually above that number. Moving forward, let's talk about the guidance for a second. So we remain to be extremely positive about the UAE macro fundamentals. And when we talk about customer financing momentum, we are revising our guidance for the full year to be above now 20% in terms of customer financing growth. Net profit margins, we are keeping it at the same level as we have flagged from the beginning of the year. We are now at 4.17% year-to-date. I think we're going to still be within the range, which we have flagged between -- anywhere between 4% to 4.25%. Cost of risk at 46 basis points today. So our guidance remains unchanged between 40 bps and 60 basis points. Cost-to-income ratio, we've always said below 30%. That trend will continue and this will be our landing point as well. And our return on equity now is touching almost 30%. Our kind of guiding point has been above the 25%, which we are also maintaining. And I think more color will then be provided as we go through the detailed slides. So with that, I'm handing over to Ahsan to take us through the slides before we then can open up for more Q&A across the performance of the bank. Thank you.

Thank you, Mohamed, and very good morning and good afternoon to everybody on the call. To start with a quick summary. As Mohamed mentioned, we have continued to deliver an exceptional set of financial results with all core businesses and product lines continuing to perform extremely well. As a result, our net profit growth before tax was particularly strong at 16% year-on-year to reach AED 6.1 billion and this has essentially been driven by diversified revenue momentum, which we see across the bank. Our third quarter profit also increased 16% year-on-year to reach AED 2.1 billion pretax. On a post-tax basis, our net profit for 9 months has been AED 5.3 billion and this has been reflecting a 15% increase compared to the same time last year. And in terms of quarter 3, we were at AED 1.8 billion, up 14% year-on-year. Our revenue base has increased to reach AED 9.1 billion, and while revenues increased by 14% due to underlying strong business volumes, at the same time, expenses have grown by 11%, which reflects positive jaws. Our cost-to-income ratio has further improved to reach 28.3%. And as our CEO mentioned, these have been driven by enhanced efficiencies, productivity measures and disciplined cost management. Our asset growth has been remarkable with our total balance sheet growing 21% year-on-year to reach almost AED 270 billion, which has been fueled by strong financing growth across both our retail and wholesale business segments and growth in our investment portfolio within our treasury business. The growth in assets has been funded through a very cost-efficient, healthy deposit base, which we maintain within the UAE. And as a result, our deposits have increased by 23% year-on-year to reach AED 222 billion, maintaining a healthy mix between current and saving deposits -- and other forms of depositors. As we move forward, you can see, from the operating table, operating revenues have increased 14%. And while cost increased 11%, we continue to invest in new lines of business, products and modern technology to drive future growth and efficiencies. This has led us to increase our operating profit margin by 16% year-on-year to reach about AED 6.5 billion. Kindly also note that the implied tax rate for the 9 months reflects 9% local UAE tax, while the effective tax rate for the group has remained pretty much unchanged at around 12%, and this has been in line with our expectation and the guidance which we have previously provided. Moving forward, in terms of our income statements, as we delve into the income statement drivers, we can see from the top left-hand chart that we have consistently recorded an upward trend in our net income growth over the last few quarters to reach AED 2.1 billion. Within that, I would like to call out the increase between funded income and nonfunded income and both of them have been very strong. Funded income increased 13% despite the rate cut in 2024. That has now more than been offset by a strong increase in customer financings over the last year or so and funded by our stable and low-cost deposit base. Additionally, our nonfunded income is 17% higher and more importantly, 7% above the last quarter and that has been driven by growth in fee and commission income, underlying our strategic focus on revenue diversification. And this growth has been achieved across all customer-focused segments of the group. As a result, our nonfunded income now contributes a healthy 40% of the total revenue base. From a segmental perspective, the bottom right-hand chart, our core retail and wholesale business, both have contributed significantly towards driving the net income improvement. As we move forward into our funded income, as previously mentioned, this has increased by 13% and this increase has come about across both retail and wholesale businesses aided by strong business activity. On our funding side, we continue to benefit from our cost-efficient liability base and we had reconsidered ourselves the market leader within the UAE market segment. Our net profit margin has come down slightly to reach 4.17% compared to last quarter due to the rate cuts that have happened over the last year or so, but this has more than offset by higher volumes. With regard to NIM sensitivity, this remained unchanged at AED 120 million impact on net income, resulting from every 50 basis points change of interest rates. As we move forward into the nonfunded section of our income statement, as previously mentioned, this has now reached to 40% of the total income. The increase of 17% year-on-year to reach AED 3.6 billion and up 7% sequentially to reach AED 1.3 billion in quarter 3 2025. The key drivers in the nonfunded income have been fee and commission income, which are up by 18% year-on-year, reflecting increased customer activity and successful cross-sell efforts across our retail and wholesale business. At the same time, we have registered a 90% growth in our corporate finance, investment banking related fees with our WBG team now playing a bigger role in syndication arrangement and debt capital markets. Additionally, happy to report that our investment income has also improved significantly to -- by about 33% on the back of increase in our Sukuk investment portfolio, while FX income has also increased by 60%, resulting from higher customer flows. Moving on to expenses on Slide 12. So as reported by me, we've increased operating expenses by 11%, demonstrating continued investment in talent and strategic initiatives to support business group. A big chunk of these investment expenses are revenue-led and co-relate directly with revenue-related activities. However, we have achieved positive jaws since revenues have outpaced our expense growth, and there has been an overall improvement in our cost-to-income ratio to reach 28%, reflecting operating efficiency, robust operating efficiencies and we are comfortably within our guidance as continued acceleration of investment for growth is supported by existing income level. In terms of impairments, as we move forward, Impairment charges have been up moderately to reach AED 511 million for 9 months 2025, in line with our balance sheet growth and AED 206 million for quarter 3 2025. This reflects a cost of risk of 46%, well within our guidance and approximately in the same range as it has operated throughout the year. It is worth noting that at this stage, we are not seeing any credit quality pressures either within our wholesale business or in the retail business and the overall credit environment remains very stable. Moving forward on to our nonperforming assets. You can see from the top left-hand chart, overall stock of nonperforming NPAs have dropped down to reach AED 5.7 billion or 7% decline as you make inroads into resolving some of our legacy credits. From the top right-hand chart, we can see that the NPAs have reduced in both in our corporate business as well as in our retail business, and these have been driven primarily by some recoveries and some write-offs. As a result, our nonperforming assets ratio continues to improve to reach 3.3%, which has been the lowest recorded level since 2016, reflecting the strong mill recoveries as well as some write-offs. In terms of coverage, as shown in the bottom right-hand chart, this has been on continuously improving trajectory. This has now reached 170%, including collaterals. And if we look at our cash coverage ratio, it has further improved to reach almost 90%, the highest level we've seen historically. What is also important to note here is that we have had subdued formation in nonperforming assets and the asset quality remains good amid a strong macroeconomic environment. So if we move into our balance sheet now, in terms of our key drivers, the balance sheet momentum that we saw in the first half of the year continued into quarter 3 and total assets have now increased by almost AED 47 billion since a year ago. The total assets, which reached AED 270 billion has been mainly driven by increase in net financing assets, which grew at a very healthy 26% year-on-year, an increase in our investment portfolio by 21% for the same period. In terms of our financing assets, credit momentum remains very strong with an overall increase of AED 36 billion in new financing net since the beginning of the year with significant increase of AED 18 billion in retail banking and almost AED 12 billion in our wholesale business as they are gaining new market share in addition to corporate banking closing several deals. Within retail, all our flagship products have grown very well, and we continue to be #1 in terms of market share in products such as home and personal finance, with home finance growing by 46% -- 44% year-on-year, aided by successful new product campaigns and tie up with the dealers. The portfolio has remained well balanced with retail almost accounting for about 57% of the total portfolio, mostly at a fixed rate, while the GRE proportion has also improved to reach 23% of the total portfolio, which reflects our strategy on booking capital-accretive business. So as we move forward in terms of our investment portfolio within the treasury business, this has expanded by AED 6 billion year-to-date, reflecting our strategy to deploy excess liquidity of the bank into Sukuk and to further lock in longer duration assets at a higher rate. This will serve as a natural hedge when rates start to come down in the second -- in the fourth quarter. Moving on to deposits. The strong customer franchise has driven broad-based growth in customer deposits by 23%. What has been more impressive is the fact that our current and saving deposits have increased by AED 17 billion year-on-year and 15% -- AED 15 billion year-to-date with our retail CASA now touching the AED 100 billion mark. It is also pertinent to note that our retail CASA now contributes almost 90% of the total retail deposits in that business. Our current and saving deposits ratio continue to stand at a very healthy number at 65% and continues to support our low cost of funding within the UAE business. If we look at our right-hand chart, this deposit growth mainly came from our core retail and wholesale businesses. Our ability to continue to attract CASA balances in the current rate environment has been a key success factor for the bank and, therefore, reflects our focus on product innovation and on attracting Emirati salary accounts. I'll conclude the financial section review by talking more about our capital and liquidity ratios on Slide 19. So as you would appreciate, ADIB has maintained robust capitalization and liquidity levels. Despite the significant growth that we have witnessed in our balance sheet, our capital adequacy ratio continues to be at a very healthy 17% while the common equity Tier 1 has further improved to reach 13%. Even with the higher asset growth of 21% and 26% in the financing business, the overall risk-weighted asset increase has been and by all -- has increased by only 16%. This has been achieved through focus on capital optimization initiatives implemented during the year. Our liquidity position remains very healthy and stable with key ratios such as advanced-to-stable-fund ratio at 81%, financing-to-deposit ratio at 77% and ELAR at 17%, all relatively stable on a sequential basis. With that, we conclude our financial side of the presentation and open the floor for any questions.

[Operator Instructions] Our first question comes from Naresh Bilandani.

Congrats on a very good set of results. I have 3 questions, please. One, how would you expect the current strong retail origination to trend as we go into the next year? I think the way you're going, you probably end the year at around mid-20s growth rate in the retail book. If you could please offer some broad indication on what the right comparable pace that you're thinking of at this stage into the next year, that would be super helpful. That's the first one. My second question is will the cards fee income line follow the same trend as it did last year? I mean last year, we saw a drop in Q4, which was followed by a strong Q3. Would that repeat itself at this time? And my third and final question is on the property sector. Now we've seen majority of the participants like Fitch and S&P talking about risk of some lower property prices in Dubai as we go into 2026. I'm just keen to gauge some comfort from you on how the emergence of lower prices affects your volume growth trends and the cost of risk outlook? So any thoughts there would be super helpful.

Sure. Thank you for the questions. Let me take them one by one, and let me know if you need further elaboration. So retail origination was your first question. So from what we are seeing today, we have tailwind. So it's actually been growing quarter-on-quarter. And I don't see any reason why that trend should not continue into next year as well. In fact, you mentioned should we assume a similar level? Actually, I was hoping for more, right? So we should be seeing that uptick continue to happen because the underlying framework of business origination, if anything, is moving more and more to digital. So I would also assume that the acceleration of closing transaction will enhance and accordingly, turnaround time will decrease and hence, we will be able to close even more deals faster. So that is on the retail origination. In terms of card fee income, card fee income is a function of your monthly spend on both debit and credit cards. That has been increasing also quarter-on-quarter. The dip you might have seen last year is due to a change or regulatory change in terms of the basis points you are charging or the interchange fees basically. This now has been recalibrated and hence, it becomes only a function of volumes and volumes have been going up in terms of cards. I think I'm not sure whether this number is available for public consumption. But ADIB has the highest volume in terms of card consumption and spend every month across the UAE. These are numbers available from the Visa or Mastercard originators. In terms of the third question regarding property prices, and now it's an interesting one because I think this has been on the table for some time. And I can -- let me take it from 2 angles. If property prices are to decrease, what will it mean in terms of our quality of the book? I think it would have a minimal impact because the loan-to-value or finance-to-value in the book is quite wide and comfortable. So even before you need to eat into the equity of the bank, there's a huge cushion in terms of still finance-to-value. So that's from a credit perspective. Now from an origination perspective, the prices, I think, in my view, will hold, another question is will they continue at the same accelerated level than we have seen in the past few years? Probably there will be a bit of slowdown. That's, I think, something we should expect. But in my view, this would not necessarily that the volume of home finance origination will decrease. It could actually mean that maybe it will encourage other market participants to enter the market and accordingly, that volume will continue to pick up. So at this point, we are cautiously optimistic that we are going in next year with strong tailwind and we'll see how it plays out. But so far, all things seem to be pointing in the right direction.

Our next question comes from Mehmet Sevim.

I have just 2, please. One, on the margins. I was just wondering how you see the trajectory of NIM as we're now entering the second, so to say, cycle of the rate cuts. You're obviously well within guidance for this year, but gross margin has been coming down over the past few quarters. So I'd appreciate any color there. And my second question is on capital, which has grown quite nicely this year. You're obviously very capital generative given the profitability. But considering the rising capital requirements, would you see it as a constraint to growth any time, let's say, next year, the year after or so? And particularly, I was also interested in hearing your thoughts on the possibility of being recognized as a systemically important bank, given I believe the closest bank to has just been recognized as one and whether that would change anything?

Let me actually start with the second question on capital. So capital has been -- I think, remains to be a focus area for us. It's a precious -- I would always call it precious commodity, right? So it is your license to grow and operate. And hence, there's a lot of focus on how we protect capital as we grow. And I think the numbers speak for themselves. So by growing financing by more -- or total asset by close to 21%, financing by 26% and still landing CET1 at close to last year's level, I think it's a reflection of our -- under our origination discipline to ensure that we have a good mix between capital-light forecast -- to protect the capital, slightly more capital heavier from a profitability perspective, but also generating enough internal equity to grow. So the capital, as we speak, I think, is in a very comfortable position, and the strategy is to follow suit and to maintain it as such. Now in terms of whether we are going to be considered as a D-SIB anytime soon, this information is not available at this stage, at least to us. We have not been approached for this discussion. Could it be a possibility? Not unlikely, as you mentioned. But at this stage, there are no discussions whether formal or informal to consider us as a D-SIB. Having said that, if that ever is going to happen, I think at our capital levels, we are comfortable. The add-ons range from 50 basis points to 2%, right? So even when you are introduced into a D-SIB environment, you don't jump to 2%. This will probably be a 50 bps and then build up from there. And looking at the capital issues, we are very comfortable. So I think that is on the capital side. On the margins, so margins, I think it's always -- what we have always been signaling that ADIB is very resilient. And when it comes to a rate environment or rate cuts, if you see the gross margins, they have held up quite nicely. So we are -- if you see quarter-on-quarter, despite rate cuts, despite market competition, we're still at around 24%. Now what is driving the margin slightly down is more on the cost of fund and the cost of fund is not that we have changed our strategy or anything. But in an environment where you are growing exponentially, I wouldn't say exponentially, but actually faster than the market. You look at your ability to create current accounts and savings accounts, which have been growing year-on-year. So that engine is actually working much better than before. But for you to ensure that you continuously support financing growth, you would tap into slightly more, I would say, institutional deposits, which attract a certain profit rate. So hence that's where you see a bit of uptick in cost of fund. So it's not a lack of generating current account and saving accounts. That's why we're still at 65% or so percentage, but it's just tapping slightly more into the profit-paying deposits, particularly institutional. Fast forward into next year, how do we see that playing out? I think there was rates coming off. The wholesale bank book will continue to reprice. That is the structure of the corporate bank. But the good thing is that we have a good match between the size of our corporate book and the size of our care deposits. And it's not by chance, it's by design and strategy. They're almost the same, right? So your ability to actually protect some of the headwinds from repricing the assets will be absorbed by your ability also to reprice some of the deposits. But I think the profit margins will definitely come a bit under pressure. That's something which will happen. But I think the level of reduction will, in my view, be much slower than what you will see in the rest of the market.

Our next question comes from Louis Schmidt.

This is Jon Peace actually from UBS. I had, first of all, please, a question on the capital again. Is there anything you could do around risk-weighted asset optimization just to improve your buffers a little bit? I think one of your peers referenced that as an exercise that might free some capital. And then the second question is, obviously, strong revenue growth. The other income line looked to be a little larger than usual this quarter. Just wondered if you could give us any color on what happened there.

Sure. So on RWA optimization, that is, for us, not a project, but it's almost like a BAU. So it comes from 2 angles. One is your origination efforts to ensure that the balance between financing and RWE is always efficient. And thanks for saying efficient because it doesn't have to be low. Low means just less profitability. But you have to strike the right balance between the 2. But at the same time, you're absolutely spot on. There is a stock which we are dealing with. And there are many opportunities you are handling at this stage. Now will we go to the extreme of what we've seen sometimes in the market of selling some of the nonperforming assets? I think ADIB is slightly different because we don't need to go into that space to continue optimization, but there are other levels of optimization we can do in terms of collateral assignments, the levels of where you can look at building provisions, particularly in the nonperforming assets, even beyond sometimes that you need because there is a percentage of coverage -- cash coverage in your nonperforming books where the RWE moves from 150% to 100%. So that's something, which we have been actively working on and accordingly, building that capacity. That will continue, and I think this will help us to protect our capital issues as we grow the business because the last thing we want is that we go into a kind of what we call always start-stop mentality where you hit a wall, you have to stop and then to restart the machine will be very difficult. That's something which we are very keen to avoid at any cost. So that's on the capital side. Now I think you had a question on fee income. I think fee income, if you're comparing it year-on-year, I think it's probably to do with some of one-offs we had last year as well. But nonfunded income itself quarter-on-quarter has been going up. Maybe last year, there was a dip and the dip was predominantly on the cards interchange when it was recalibrated. But other than that, as you can see, it has been growing year-on-year. Maybe not, as you rightly said, probably slightly lower than the quarterly add-on we have, but that's also seasonality because you have some of these months where the -- particularly on the wealth management side, it could be slightly softer. But as we go into the year, it picks up again, not necessarily concerned about the trend because the underlying machinery is definitely working.

Our next question comes from Olga Veselova.

I have several remaining questions. One is on refinancing of existing mortgages. So I'm wondering when interest rates go down or will go down, how easy is it for you -- for your customer to refinance an existing mortgage or auto loan? So what would be a usual penalty fee for refinancing of existing ones? Number one. Number two, we noticed that cost of risk at retail was gradually trending up in third quarter versus previous 4 quarters. And what is your cost of risk on new production? How cost of risk is different between secured and nonsecured retail loans? Maybe you can give us some sense by segments. And my third question is on competition. Was Revolut receiving a license in the UAE? Have you made an assessment for which lines of your fee income this can be a potential competitive risk in mid-long run?

Sorry, I didn't get your last question, but let me answer the first 2 and then if you could repeat the third question. I think your question on home finance or how -- and the ability of clients to move between basically banks and refinance, it is not a very high barrier, to be very honest, right? So for example, home finance with AED 10,000. You can just move between banks. And that is something we are used to. We are seeing it. There is a heavy market competition. Some clients tend to do that. Maybe less so on home finance, more on personal finance. But if you ask me, can they move between banks? Absolutely, yes. But if you look at the price points today, the opportunity or the complexity of just moving between banks with all the process, which comes with it sometimes does not justify offering the offering in terms of lower rates. We haven't seen too much movement in home finance, but is it a possibility? It is a possibility. But for us, we have not seen that too much. And in terms of cost of risk...

Secured versus unsecured products. Cost of risk between secured and unsecured products like personal finance versus cards versus...

Maybe you can take it, Ahsan.

Yes. Okay. So I mean our cost of risk is actually on the secured products, we have a lot of salaried-based customers. So especially things like personal finance, card is not very different from a secured product. So weighted average, we are roughly around 60 basis points.

But do you see...

Does this answer your question, Olga?

Not really. I can't see this in the presentation. So do you see gradual growth in cost of risk on new origination? And how is it different now versus back book? And how is it different by segment, secured and unsecured?

Okay. I got you. Okay. So I think, look, the blended rate -- let's talk about retail for a second. The blended rate, we are seeing there is a bit of spike here in 9 months to 60 basis points, but this is, I would say, more seasonality one-offs, has to do -- I don't want to get you in the complexities, but something has to do with if the payments have fallen a weekend, then there is some bucket movements, which then normalizes back again. But I would really say that on the retail side, you can comfortably use the 50 basis points. Now how do I compare that with old vintages versus new vintages? We have not seen any deterioration in our cost of risk despite that we have explored new segments, but the important thing is that we have not, at any point in time, relaxed our underwriting standards for the cost of risk. Between secured and unsecured, I think the 2 differentiation would be home finance and personal finance. And again, there's a caveat, which I'll talk about in a second. Home finance is clearly covered by the underlying assets. So that's, in our view, more secured. Personal finance, while it might be perceived as unsecured, there's a salary transfer, which has to come with it, right, in our model, basically, our risk standards. So most of these personal finances are salary backed. And hence, while they might have not an underlying asset, they are secured by the salary transfer coming with that. So at an average, I would say 50 basis points, 60 basis points at its high point in retail, that's very comfortable. In my view, I would almost argue saying is there an opportunity to take even more risk, right? Not that you're going to do it, but for a retail book that is very efficient. Now add on also the card or covered card piece, which might not be seen in this. We have the -- again, we don't have the full market in front of us, but we have one of the lowest cost of risk against our card portfolio. And again, this has to do with the client profile we have, and this has to do with the low revolver rates we have. Now revolver also creates more revenue. But from a cost of risk perspective, it does give you a fairly low charge every month. Does that answer your question on cost of risk?

Yes. Yes, it does. And sorry, back to the first question, you said there is complexity of moving between the banks. So what exactly is complex? Do clients need to reregister something with DLD or so what exactly is difficult?

Yes, exactly right. So personal finance is very straightforward. But home finance, there is mortgage registration, the assignment of the collateral. They have to go to DLD. It's a fairly lengthy. Not impossible, but lengthy process. So the client has to really think hard, does the lower rate really justify for me to go through that complexity. Many would openly, but the rate has to be there. But at today's rate, to be honest, the mortgage rates or the home finance rates are fairly competitive. So across the banks to really find the competitive edge to go through that hassle, either way actually from us and/or we take from others is fairly limited at this stage.

Yes. I was more thinking about not now, but when the rates go down. And my last question was about competition and in particular competition from nonbanks, we noticed that Revolut received a license in the UAE or principal approval. Have you made any assessment of which lines in your fee income can be potentially at risk from competitive pressure?

So I think if you look at some of the new entrants to the market versus what we have today, because we are fairly digitally advanced versus the new digital banks coming in, the bridge between the 2 is not very wide. Now clearly, where these entries have a competitive advantage is probably they have the advantage of going with new technology. So some of their trading platforms are clearly more advanced, which we acknowledge, but the gap is not wide. Having said that, we don't at least at this stage, see a huge gap between the product offering because at the end of the day, it's a client needing a product and they need it fast. We are at the stage where we are comfortable and we can do more. And new entrants are also providing that to optionality. The only thing is that we have to continue enhancing and developing our value proposition, speed to market, digital acquisitions and digital channels, which is not something we're starting today, but it's been a journey, I think, more than 6 years now in the making. We acknowledge the new entrants, we acknowledge the competition and we acknowledge that there will be market disruptive, but we are in a fairly good shape to protect our turf as well.

Our next question comes from Aybek Islamov.

Well, a few questions from me. So one question is, I want to circle back on the capital ratio, right? If we just simply look at the total dividend you paid last year, like AED 3 billion, if we compare that with your third quarter itself 2025 risk-weighted assets, that's 160 basis points of your risk-weighted assets, yes? And that's the dividend you paid last year based on your payout, the lower net income that you were generating, right? So if we apply the dividend like to your CET1 ratio, which is 13%, right, so you may easily fall below 12% if you kind of maintain the payout unless you seriously optimize your risk-weighted asset-to-asset ratio by the end of the year, right? I mean what are your thoughts about this, like CET1 ex dividend falling below 12%? Is it a comfort zone? Is it not a comfort zone? And then I think relating to the example of Abu Dhabi Commercial Bank, which announced the rights issue and the reason for the rights issue is to fund growth. You obviously are also raising your loan growth guidance, right? So I mean what are your thoughts about structurally improving capital, right? And it's a good excuse, stronger growth outlook. You speak very positively on the retail momentum. Would be very useful to have your thoughts around this subject.

Yes, sure. So I think for this year, and these are forward-looking statements, so we cannot be too explicit. But we are comfortable that we will be able to maintain the promise -- as per the promise to the market of what we have been doing. And will we drop below the 12%? Will it be comfortable to do so? I think the short answer would be, we don't really have to think about it at this stage because I think we will be aiming to be above the 12%. This is, again, 12% is our internal kind of measure. We're not held against it, but we're always comfortable around the 12%. And I think we are trending towards that. Comfortably, we are 2 months away from year-end, right? So we could say quarter 4 is still out there. But we are already approaching November, right? So it's 2 months away. And we have good line of sight of our landing points. So that should not be a problem for us at all. Having said that, dropping below 12%, is that a problem? Not at all. We're still comfortable. But our internal measure and my aim is really not to be below that level. So that's on this point. Now growth into next year, good returns, good momentum. Could that mean that you could do any captive actions? At this stage, we have not really looked at it too much because we are still comfortable. Is that a remote discussion? No, because any bank would always look at their capital position and ensure that your capital is an enabler to growth, not something which will stop you or hinder you somewhat because there are 2 ways to do it, either you create your enabler and continue to build on a franchise, which will return 30% ROE or you shrink to greatness, right? So you almost the machine and you report and very high capital ratios. So the second one is definitely not at all an option. And it's a franchise, which is a growth trajectory, and we would like it to continue, and we make sure every enabler is going to be there. The moment we feel that there is any capital action to be made, we'll definitely flag it to the market at this stage where there's nothing on the table of such. But the moment we believe we need to do that, I think the sensible thing is that we should provide the enabler of growth, not stopping the business from growing as well.

Okay. And 2 more questions, right? So second question, you spoke about the cost growth and that it's generating revenues, right? So to what extent your revenue growth these days depends on the incremental costs that you are investing? So I see the positive jaws, et cetera, very good. But yes, I think the question really is to what extent your incremental revenue growth depends on this incremental costs that you commit to your business?

Yes. So I think a lot of it would be geared towards revenue generating, but I'll be also very open with the market that this year specifically, and you might have heard it from other institutions as well, the cost of regulatory compliance has been slightly on the higher side, right? So if I compare it with the previous year. So what we have consciously done is that we have continued to pursue our investment part without sharing anything else, right, because we are following a very strict plan in terms of what we want to do, when we want to do it, for a specific time of delivery. So that has not changed, but the add-on this year has been really the regulatory compliance, which we are fully supporting the national agenda for it's not only us, but it's the whole market. So that might have shown a bit of higher cost growth year-on-year. Having said that, in -- for example, if I tell you about the employee cost specifically, where you see a 12% growth, actually majority of it is linked to revenue generating because a lot of our cost is incentive-based. So we are a performance-driven organization. We tend to pay more for variable cost or revenue generation than fixed cost, which gives us optionality when revenues soften a bit. But a lot of these costs would not be asset-linked. So it is not amortizable. You will see it immediately as and when it happens, which is also a good thing. It's not a hidden cost. Like, for example, when you compensate for wealth management, for liability generating for FX, these are all valuable costs. And that's why because we have done so well this year, it comes with a cost. And that's where you see the uplift on cost. So for me, actually, it's a good cost to have. But it's definitely something which will be more productive than cutting that cost because the impact on revenue is really much higher.

Yes. And the last question, if I may. So when I look at your corporate banking, right, and I'm comparing the nonfunded income you generate through corporate segment, obviously, we know your nonfunded income is less sophisticated compared to some other peers in the country. And I believe on the corporate CASA deposits, you're probably also performing not as well as some other peers, which is stronger in the corporate segment. Any plans to invest in the corporate segments, cash management, treasury products, derivative businesses, trading, markets, which can take your nonfunded income to a fundamentally higher new level and also may also bring CASA deposits onto the balance sheet from the corporate customers?

Yes. No, absolutely. The short answer is yes. We will continue to invest in systems, which will support the corporate banking side. Now this year, I think Corporate Bank had actually a very strong year. We've seen a huge liability buildup, and this is coming from embedding ourselves into the ecosystem, particularly on the real estate side because the moment you are in that sector, you capture the escrow accounts, you capture the cash management, the FX, the GTS as well as the financing. And this year has been transformation for wholesale bank. Having said that, there's much more still we can do. And the answer is yes, we will be investing in these products. As an Islamic bank, unfortunately, we are not able to participate in some of the products which are slightly speculative in nature, like options or short selling, which will make a lot of money in times of volatility. And I've seen it in the previous slide, right? So that's the time where you can really make a lot of money on mark-to-market and volatility. For an Islamic institution, we will not be able to -- we don't want to do that. We don't want to do that. It's not within the Sharia law. So we have other avenues to explore to enhance the nonfunded income for the wholesale bank and treasury business.

Our next question comes from [ Shahrukh Nawaz ].

My first question is, what is the rationale behind lower NPA levels? And do you expect the decline in the 4Q '25 as well? And also the impairment provisions which were higher this time. It's expected to going ahead higher in the 4Q '25 or decline? The second question is like which segments will be under new loan disbursements for the 4Q '25, which will lead to the -- achieving the financing guidance of 20% growth for 2025?

Good. So I think first question, nonperforming NPMs basically or NPA, I'd say, what are the drivers? I think drivers can be categorized in a few buckets. One is the natural growth in our financing book. So that has helped the ratio. Number two is ensuring that there is no new migration from Stage 1 into the nonperforming book. And as you can see, that number has been coming down consistently quarter-on-quarter from a high of AED 8.2 billion at one point in time, we're now at 5.7% stock. That has helped as well. And number three is proactively writing off nonperforming assets as well as recovery efforts, which have been very successful this year as well. Putting all this combined, you see a 3.3% and this trend of decline we expect to continue in this year into next year as well. Provisions levels are higher. There's nothing really concerning me at this stage from that. We again follow very strict guidelines in terms of how we build our provision. Most of it is actually Stage 1 provision natural growth as your book has grown. If you're growing your book by 26% year-on-year, you would expect that the provisions also will be higher. And it also has been helping us to ensure that our coverage ratio of our nonperforming book from a cash perspective continues to enhance. I think we're now close to touching 90%. A few years ago, we are in the mid-50s, and this trend will continue, and we're going to touch the 100% fairly soon. So that's on the provisioning levels, sectors of new financing growth. The good thing about us, our diversified business model has ensured that all sectors are contributing. So whether it's retail, FI, our wholesale bank, all have grown in a very healthy manner. Within even that segment, it is diversified. Now retail is slightly more tilted towards home finance as we can see. But in the other corporate sectors, it's a good mix between government sectors, GREs and public sector as well.

Okay. I have also one more question like if you -- for the income statement, the other income, what was the reason? Can you just highlight one more time leading like from 2.6 million to 76 million, what was the reason behind that?

Talking about year-on-year comparison, I think last year, we had an acquisition of a portfolio which had a onetime income. So that's why the comparison year-on-year might be lower. But normalizing for that, it would be actually growing double digits.

Our next question comes from [ Mahmood Ansari ].

Congratulations on a great set of results. Just one quick question. I just wanted to get some understanding around the fee income for this quarter. So if we look at it versus the previous quarter, there were just 2 things that kind of stood out. There was a risk participation fee, which was a bit higher last quarter and was declined from that level in second quarter. And secondly, the card-related fees, I think, went up. So just wanted to understand how to think about those as we go into the fourth quarter? And maybe a little bit on the corporate side. I mean it's been -- you've mentioned in the past, it's in an area which you've been focusing on in terms of growth. How do we -- should we see in terms of mix of the book on the corporate side going forward? I mean retail is obviously very strong. But corporate side, how should we think of it going in over the next, let's say, 12, 18 months?

So I think that on the fee income part, there was some seasonality in the previous quarter, particularly on the corporate and FI side. And that's why you might not see that same trend in Q3. But in Q4, I think the pipeline suggests that this probably will be picked up again. And again, for the corporate bank, particularly when you talk about corporate finance, it's a seasonal business, right? So it's not retail where it's a flow business and it can be extrapolated easily, but it depends on closure of deals, syndications, other transaction, which would attract some of the one-off fees, especially when you close sizable transactions. And as you said, yes, on the retail side, it's been a very strong story, and this story will continue, particularly on the card fee side. I think the question you had -- what was the second part, Ahsan?

Corporate side growth mix.

Yes. Okay. No, I think Corporate Bank actually has been doing very well this year and the numbers show. And this is why we are very happy that the growth story has been very diversified. So Retail and Corporate Bank both have done exceptionally well. And that is part of the strategy to ensure that all businesses contribute to growth. This we expect to continue into next year as well.

Our next question comes from [ Varun Kumar ].

I just have 2 questions. The first one, again, I'm sorry if this question was answered earlier, but I just want to get an idea as to what is the other income element, which seems to be a bit high in this quarter is about? That's my first question. And secondly, on stage migration. What I can see is that there is a migration out of Stage 2 this quarter. I mean, I think in the second quarter, there was an uptick in Stage 2, but it has come down in Stage 3. Just want to understand what was the underlying factor. So that's it from my side.

Yes. On the other income side, nothing specific. This is just the normal business. You would -- as I mentioned, we would have some one-offs maybe on the corporate side, which are seasonal in nature, but there's nothing really specific. In fact, I don't know how you want to look at it, but this year, we didn't have actually any really one-offs to speak about. I wish we had a bit more, but it's really a very, very slow seasonal predictable growth of underlying core business, whether it's Q1, Q2 and Q3, right? So it's almost like fairly easy to even predict the next few quarters, bearing any one-offs, but there's nothing really of such this year. The second point, Ahsan, what was -- what was the second point, sorry?

It's regarding the stage migration, the Stage 2...

Yes, stage migration. Yes, again, I think sometimes you would move some accounts into Stage 2, and then they will be cured and go back in Stage 1. There's nothing really significant or any names to talk about. We have no concentration and any specific names, which are concerning us, which is good because for me, more the proactive measures we have to take to ensure there's migration into nonperforming book is the most important for me because we are dealing with certain ratios, which have been very successful. And one of the key criteria is to ensure that there's no migration into nonperforming book, which has been -- I think that was very strongly. Nothing really concerning us at this stage.

Our next question comes from [ Ahmad Baniani ].

Congratulations for the results. I have one question related to the return on equity, which reached to around 30% in 9 months 2025, updated full year guidance of higher than 25%. How do you plan to sustain this above the industry level amid potential economic moderation?

Yes. So we're currently at 30%. Our guidance remains to be above 25%. I think the business model itself of ADIB supports that specific return. And one of the biggest drivers for that is clearly you have very efficient cost of fund, which gives you a lot of optionality. Your capital-light business model, which still gives you enough to return on profitability to sustain growth and create internal equity. And at 30%, guiding above 25%, I think that is definitely something, which we have line of sight on, and we will believe -- we believe that this business model can continue.

So that, I think we're coming to the end of our session. If you have any follow-up questions, we would like to take them offline. So either e-mail me or Ahsan, and we are happy to set up a different call.

Thank you. Operator, can you, please, close the call now?