Abu Dhabi Islamic Bank PJSC ($ADIB)

Good morning, good afternoon, everyone. Welcome to Abu Dhabi Islamic Bank's First Quarter ' 26 Results Call. My name is Shabbir Malik. I cover MENA Banks from Morgan Stanley. Please note that today's call is not for the media. Please also note that this call is being recorded. I will now hand the call over to Lamia Hariz, who is Head of Corporate Communications, Marketing and Investor Relations at Abu Dhabi Islamic Bank. Lamia, over to you.

Thank you, Shabbir. Good afternoon to everyone on the call, and thank you for joining us. I would like to welcome you to ADIB Q1 2026 Financial Results Call. Before we get started, just a quick reminder that today's presentation and all our financial disclosures are currently available on our corporate website as well as our IR app. With me on the call, we have Mr. Mohamed Abdelbary, our Group CEO; and Mr. Ahsan Akhtar, Group CFO. In line with the last quarter, we will begin with the key highlights of the quarter, including the guidance for the rest of the year. This will be followed by a deep dive into the financial performance for the first quarter, which Ahsan will take us through in detail. And as always, we'll end the session with a Q&A. Thank you, and Mohamed, over to you.

Thank you, Lamia, and good morning, good afternoon, everyone, and thank you for joining us on today's call. We will be taking you through the slides as usual and then at the end, obviously looking forward to some engaging Q&A. So a few highlights. So we had a strong start for the year, and we've delivered a net profit before tax of AED 2.1 billion, which is 8% up year-on-year. And we've also seen our revenue growing by 12% as we will see later in the slide, if one were to normalize for the 12% growth for the impact of rates, that's probably closer to a 19% growth year-on-year. Okay. From a client perspective, we've welcomed around 66,000 new clients for the quarter, which I think is a continuation of our trajectory we have seen in previous quarters. Balance sheet perspective, we are now reporting a balance sheet of AED 287 billion, which is a 18% year-on-year growth, but financing has grown 28% year-on-year. And we'll talk about why there is a bit of disparity between financing growth and total asset growth, and it's predominantly due to us utilizing some of the reserve requirement we had with the Central Bank. From a liability perspective, a very healthy growth on deposits. Again, very happy to see that our trajectory in terms of originating CASA balances has remained strong. We've added around AED 15 billion or so in terms of CASA year-on-year. Again, our return on equity stood at 27%, way above our full year guidance of 25%. If we move to the next slide, again, on performance and -- not performance, the outlook, okay. Good. Again, full year guidance, nothing has materially changed. So we are reconfirming [ aggregate ] guidance for 2026. During this period, again, the UAE has demonstrated resilience, supported by strong fundamentals, a stable financial system, and we are very happy to see the proactive intervention by the UAE Central Bank. I'm sure we're going to talk about this later on the call as well. The confidence in the system has remained strong and the quarter has also delivered accordingly. During this period for -- in the first quarter, particularly in March, where the situation was a bit fluid, we are very happy to report that ADIB remained fully operational. All our digital channels were up and running and all our ATMs were functional. Also, our IT infrastructure has demonstrated resilience, whereby we had 100% uptime during that period. Talking then about gross financing for the year, 28% year-on-year, and our guidance remains to be unchanged at 12% to 14%. Net financing margin at 3.9% today. Full year guidance remains as reported before, anywhere between 3.8% to 4%. And I think we've also seen that the outlook on rates, it has been moving, but now from probably no cuts to also we've seen some consensus for possible rate hikes. Let's see how this goes. But as we stand, we are very comfortable where our margins are and where they will head for the rest of the year. Cost of risk, we reported 48 basis points, well within our guidance. We maintain our guidance between 40 to 60 basis points. Cost-to-income ratio at 29.6%, sub-30% remains to be our guidance for the year. And our 27% ROE again above the 25% remains to be unchanged. Okay. This slide just summarizes some of our key pillars. So it's a good story to tell you. So we're starting first by our unique position, summarizing between capital, liquidity, performance, controls, and they're all heading in the right direction. Our cash and liquidity has remained very healthy and robust. And I think it's been tested very heavily in quarter 1 and the resilience of the franchise has been visible. Business momentum is strong. Asset quality on track. We've been signaling that now for the last 3 years that we will be continuously enhancing our asset quality ratio. Now we are reporting a 2.6% nonperforming asset ratio. Our coverage ratio from a cash perspective, so not including collateral is now inching towards 100% and continues to improve quarter-on-quarter. Okay. So before we move into detailed financials, let me just quickly talk about our Vision 2035 because that's important. What we see today situations where there is volatility, there are changes in the market, but we remain -- we keep our eyes on the medium- to long-term view and hence, our Vision 2035 pillars remain to be intact. So we -- just to summarize, we continue to scale our UAE franchise. We maintain our leadership in the Emiratis segment and continue also to expand selectively in the Expat segment as well. We are reinforcing our differentiating position as a leading Islamic bank. On the wholesale bank side, we've seen growth quarter-on-quarter, reemphasizing our position as the go-to bank for now most of the GREs and select local corporates. And more importantly, we have always been saying that we're leading with technology and AI. We have done lots of strides. We are very happy to report our leading position and being the first bank to offer open finance. We had -- we are the first bank to have the [ TPC ] license in place, and we continue to lead the market in terms of our technology and AI infrastructure. So with that, now I'm going to hand over to Ahsan to take us through the financials. And then at the end, we will open up for Q&A. So Ahsan, over to you.

Thank you, Mohamed, and good morning and good afternoon to everybody on the call. As the CEO mentioned, we witnessed a very strong performance momentum coming from last year, and this has continued in Q1 2026. As ADIB delivered another record quarter as we achieved a profit before tax of AED 2.1 billion, up 8% year-on-year and profit after tax of AED 1.8 billion, up 7% year-on-year, while at the same time, delivering a strong ROE of 27%. This growth has been on the back of continued top line performance as revenue grew to reach AED 3.2 billion, higher compared to last year by 12%, and this has been supported by healthy customer activity and robust balance sheet growth as total assets have now reached AED 287 billion, primarily driven by both sides of the balance sheet as gross customer financing are now inching towards the AED 200 billion mark at AED 198 billion, higher compared to last year by 28%, while at the same time, our funding on the deposit side increased to reach AED 239 billion, higher by 20% year-on-year. Importantly, our CASA performance during the same time was very good, and we grew by 11%, supported by our funding mix and which has helped us to manage the funding cost. Please note that we have used a tax rate of 9% in the UAE, while the effective tax rate for the group as a whole continues to be around the 13% mark, which was in line with our expectations and the guidance previously provided. Turning on to our income statement on Slide 10. You can see on the left-hand side that we have delivered the highest quarterly performance in our history with net profit before tax of AED 2.1 billion. This chart also shows that net income has continued to grow over the last 5 quarters, quarter-on-quarter exceeding the AED 2 billion mark, reflecting sustained business momentum in the group. The key drivers of this performance have been growth in our funded income, which grew by 17% year-on-year, supported by expansion in our balance sheet and resilient margins. Non-funded income at the same time also increased by 4% and is now contributing a healthy 36% of total income, reflecting a diversified business model, revenue streams across all the businesses. If we combine these two, then together, our total revenue increased 12% with growth across all major business segments. In terms of expenses, these increased 1% sequentially and 14% year-on-year as we continue to invest in people and technology as well. While at the same time, impairments were higher by 50% year-on-year, in line with our financing growth of 29%, reflecting a more prudent provisioning approach while asset quality indicators continue to remain sound as well. Now turning towards the funding income in terms of the key drivers. As you can see, our net profit margins have remained resilient at 3.91%. This represents a nominal sequential decline of only 2 basis points compared to the last quarter, where we ended Q4 at 3.93%. But in comparison to last year same time in March, we are lower by about 40 basis points. The decline is essentially as a result of the gross margin coming down over the year as the impact of the 2025 rate cuts is now fully reflected in the margin, while this still remains healthy at 6.8%. The impact has been mitigated through effective cost of fund management by growing our CASA portfolio which increased by AED 15 billion and optimal pricing across our Wakala deposit portfolio. As a result, our cost of funding has remained well under control at 2.5% for the group. While if you look at our UAE business, it's now at 1.7%, reflecting a diversified model and predominantly CASA-driven deposit base. The funding income growth was broad-based with retail contributing 22% of fees, while wholesale contributed an increase of 16%, reflecting growth in core client segments in government and public sector. Moving on towards our nonfunded income. In the first quarter, we recorded an increase of 4% to reach AED 1.16 billion, and this now contributes 36% of our total income. Growth was primarily driven by investment income, which increased by around 10% year-on-year. This was also complemented by a modest contribution in our foreign exchange income, reflecting steady client activity, which was partially impacted by the ongoing situation and some reduced trade flows. Fees and commission income declined by 5% year-on-year, mainly due to lower card and trade-related fees. However, this was partially offset by strong performance in our wholesale banking business related to transaction fees. If we now go on towards expenses, while the overall increase was 14% year-on-year, it does reflect disciplined investments in certain growth initiatives. The key driver of this increase was primarily employee cost by 16%, which reflects continued investment in critical areas of the bank, such as the frontline capacity, revenue-related activities, technology, risk and regulatory readiness. Other than that, general and administrative expenses increased by 16%, largely linked to technology spend and business enabling initiatives. Our overall cost-to-income ratio, while it declined sequentially to reach 29.6% on a year-on-year basis, it increased by 74 basis points. So the overall cost growth is targeted and aligned with our strategic priorities or money were spent driving benefits for the organization as a whole. Moving forward to Slide 14 in terms of our provisions. As I said previously, while the portfolio has increased by 29%, our provisions increased by 58% to reach AED 158 million. The increase in provisions, as you can see, is primarily driven by our wholesale portfolio, reflecting a normalization from the very low levels last year. While at the same time, in our retail business, the increase has been relatively modest, and it has remained aligned with our portfolio growth and stable underlying performance. As a result, our cost of risk continues to track within our through-the-cycle guidance. As mentioned, it is 48 basis points. But importantly, our asset quality indicators remain relatively stable. So if we move on to our nonperforming assets. Our asset quality improved year-on-year with our nonperforming assets declining by 9% to reach AED 5.24 billion. This has been as a result of reductions across both the individual as well as in our wholesale business portfolio. Our nonperforming assets now is at our lowest level recorded ever at 2.6%, down 3.7% a year ago, underscoring the strengthening quality of the book despite a more cautious macro and geopolitical backdrop. More importantly, our coverage ratio has further improved to inch towards the 100% mark, while if you were to include the impact of the collateral, this is at a relatively high level at 178%. Turning on towards our balance sheet. While total assets as previously mentioned, increased by AED 44 billion to inch towards AED 287 billion. This represents 18% growth. This increase has been primarily driven by strong expansion in our customer financing portfolio of 29%, supported by robust and diversified funding position. It also reflects continued momentum across both our core businesses, wholesale as well as our retail businesses, and this has been supported by disciplined underwriting and selective growth in priority segments. On the funding side of the balance sheet, the asset growth has been supported by a strong customer deposit growth of 20% year-on-year, essentially matching the asset growth, underlying our funding stability and supporting balance sheet expansion. In terms of our customer financing, our portfolio remains resilient with net customer financing increasing by AED 12 billion in the first quarter of the year and a growth rate of approximately 5%, reflecting broad-based growth across diverse sectors and client segments also. On a year-on-year basis, as previously mentioned, this increase is 28%, driven by retail government and our public sector area. Within the retail space, the portfolio grew 25% or AED 20 billion, and we are very happy to say that we have now hit the AED 100 billion mark as far as our total retail portfolio is concerned, and this has been supported by sustained demand across all our core products. The growth has been led by home finance, reflecting continuing momentum in our residential financing alongside solid growth in our personal finance and auto finance portfolio as well. Within our wholesale business, our overall growth has been 33%, reflecting strong contribution from the government and public sector entities, which grew 50%, reflecting participation in priority and lowest carriers. In terms of our investments, the portfolio has increased by 11% year-on-year to approximately AED 35.5 billion, reflecting a measured approach as we build portfolio, ensuring strong liquidity and income diversification. This portfolio remains conservatively positioned with approximately 84% held at amortized cost, underscoring our focus on stability, predictable income and limited earnings volatility. So in terms of our deposits as we move forward, while deposits increased by 20% year-on-year, this reflected strong franchise momentum and continued success in attracting low-cost stable funding. More importantly, our current and saving deposits increased by AED 15.5 billion, reinforcing a healthy and improving funding mix. As a result, our total CASA deposits now represents AED 160 billion, which is 67% of our total deposits, essentially supporting our funding stability and helping offset pricing pressure in a low environment. Lastly, in terms of capital and liquidity, ADIB continues to maintain robust fundamentals across our key capital and liquidity metrics with ratios comfortably above our regulatory requirements, supporting both growth and resilience. As a result, our common equity Tier 1 now stands at 12%, while total capital adequacy is at 15.5%. Our focused deployment of capital and continued efficiencies have ensured that our risk-weighted assets increased by 15% year-on-year compared to our financing assets growth of almost 28% Liquidity remains strong and continues to improve. The advances to finance funding ratio is at 87%, while our funding-to-deposit ratio improved -- further improved to reach 81%, reflecting a healthy funding structure and strong deposit flows. With that, we conclude the financial side of the presentation, and we open the floor to questions.

Thank you very much to the management team for this presentation. If you allow me to start the Q&A section by asking a question from my side, and then we'll open the floor to the audience. My first question is around liquidity. What has your experience been with regards to liquidity in this quarter, especially in March. Considering that you've seen a pretty good growth in loans and investments, even though deposit growth has been pretty good, it has not kept pace with loans and financing and investment growth. So what has your strategy been considering the geopolitical backdrop? My second question is around fee income. So your comments and your presentation suggests that cards and trade finance, those fees from those sources were a bit weak potentially because of the situation. Any -- can you give us any color on what we could -- should expect in terms of -- in the second quarter, the first quarter or 2 of the 3 months was business as usual. So could there be further weakness that can be expected in the second quarter in the fee income line? And finally, I guess my question is around NIM. So your NIM guidance, you're currently sitting in the middle of your NIM guidance for 2026. I just want to understand what your expectation for rate cuts is for 2026? And how do you see NIM playing out for the rest of the year?

Okay. Thanks, Shabbir. I'll cover your three points and let you know if any follow-up is required. So let me start with the liquidity question. I think -- what we have seen in March is that the movement in liquidity was offset by some of the Central Bank interventions, which we have seen. So I think the proactive approach taken by the regulator was very welcome. And the most impactful one in my view, is the action on the reserve requirement. So that almost released AED 80 billion to AED 90 billion into the system. And for us, because the reserve requirement is a function of 14% on current accounts and 1% on contractual deposits. And given that our huge size of current accounts, so we had a huge amount with the Central Bank in terms of reserve of the 14%, effectively, almost 4% of that was released back to us immediately, which translates to almost AED 6 billion to AED 7 billion. So hence, even some of the outflows, which we have seen and which were expected given the situation were offset by that inflow. What also we have is that we have in our balance sheet what we call structural cushions. And these are instruments where we can easily engage and create additional buffers. So we have these instruments with other airlines and happy to share more details from them later on is that why we can call on some of these instruments collect against some of our Sukuk. And hence, we've also created almost AED 4 billion to AED 5 billion additional liquidity at very attractive rates. So to answer your question, has there been liquidity pressure in the market? Probably yes, given the situation. For us in A, we were able to mitigate some of these. And hence, all our liquidity ratios for quarter 1 have been resilient, whether it's from an [ LCR ] and [ SFR ] or even AD ratio. So that was good. And in fact, in such times, still able to grow your CASA accounts is, again, a demonstration of how I is able to leverage on its client base and the wallet we have with the clients. So that's on liquidity. On the fee income, you're absolutely correct. January and February is one story. March is a complete different story. And that is natural because what happened in March is that, number one, as you mentioned, the cards fee income was impacted. And the reason that is coming from international spend. A lot of fees come from cards transaction, particularly when used internationally. And given the situation where international travel was pretty much shut down. There was no international spend and hence, our card income was negatively impacted, and that's what you see in the quarter. And for us, it's quite sizable because we do have, I wouldn't say one of the largest, but the largest spend on our cards in the UAE. And when a complete channel is almost closed, that's what you see immediately translating into our numbers. Now early days in quarter 2, but we have seen a really good ramp-up again coming back into the system with the opening up of travel. And hence, I believe that the situation will start normalizing in Q2 again. So that's on the fee side. your comment on net profit margin, we are sitting at 3.9%. Our guidance is anywhere within that range. The reason why we are comfortable still with that outlook is that our gross yields on assets is likely to come off any further because the biggest repricing initially happens on the corporate side. This is now fully absorbed given the rate cuts which happened. So that's already built in. And in terms of the retail side, we have not priced up when rates were high. So the downside pricing will also not be there as well, right? So if you look at it, on average, our personal finance, home finance or even auto finance are priced very competitively in high rates and low rates. And hence, the gross yield on assets will probably stay where it is. In terms of our cost of funding, I think we've seen the highest now. We are actually expecting to see it moderating. But again, the situation is a situation and there's no going away from it is that the liquidity cost has gone up in March. So two points. We have options for liquidity, but liquidity cost also was high. So hence, going forward for the next few months, I don't expect that cost of funding to be inching up any further from where we are today. Having said that, we will observe and be very closely watching the situation because it all depends whether how fast the situation from a geopolitical perspective is going to be normalized and we go back to business as usual. The when -- it's a matter of when, not if, but when is very important because it will also dictate how the future will look like from a performance perspective. So Shabbir, miss any of your three points? Do you want me to...

No, that was very comprehensive. We'll now move to the participants. The first question is -- give me 1 minute, please. The first question is from the line of [ Muran Sari ].

So I had three questions. One is more of a clarification, which is on the cost of risk. So just to confirm that you haven't taken any ECL overlays in this quarter? And if that's the case, I just wanted to get a view from you as to how you've considered the current environment in terms of ECL models? And would you consider building in any further ECL overlays in second quarter? Is that something that's an ongoing discussion? My second question is on the capital ratios. So the first quarter growth was -- if you look at the split was half of it was public sector and GRE lending. But when we look at your RWA density, it seems to have moved up, although I think fourth quarter was a low number on RWA density. But just wanted to understand that, that sequential improvement from fourth quarter to first quarter in view of the fact that majority of the growth was from GRE and public sector. And my third question is on -- I think maybe you've touched upon this, but maybe for my clarification, the [ Note 42 ] in the financial statements where you've talked about the Central Bank measures that were put in place. And you've mentioned that there were relaxation of the minimum reserve requirements, which the bank is utilizing. Maybe is there anything else that you've kind of those relief measures that you've realized? And because I've looked at other banks, and I think majority of the banks that I've seen this note on happen pretty have kind of mentioned that they have introduced any facilities since -- till 31st March. So just wanted to understand how to view this that's it.

So actually, I'll start with the last point first. So relief measures, there were a lot of them offered by the UAE Central Bank. We've only utilized the reserve requirement. We have not used any of the clips or any other measures. It's always good to know that they exist. They are there. and they will give a lot of relief at very short notice. But at this stage, we have not used them. Having said that, the relief measures were not only directed to the banks, but also for the clients. So we did offer a lot of support to clients who have requested deferrals on the corporate side, there were less than a handful, to be honest, right? So it's been quite pleasantly surprising that not many have come asking for deferrals. And the ones which I asked for are predominantly in the retail and hospitality side. So again, not a surprise there as well. In terms of other initiatives we have taken, so we have launched also a campaign called [indiscernible], and that's something from our side where we supported frontliners across many providing deferrals and fee waivers, which I think we felt is important for us and important for the community. And just a small thank you for the support being provided. So that's on the relief measures. On the cost of risk in Q1, while we have not taken any overlays, we did do a full stress testing, and we have reclassified accounts where we saw it's necessary to be done. So the 48 basis point cost of risk is a reflection of where we are today and also taking into consideration the external environment. We do not believe that will be a significant change to the effective cost of risk for us. And that's why we also have kept the guidance stable. I would also advise the audience to probably use that guidance progressively as well barring anything happen. But I think our portfolio is very resilient. We did a very thorough stress testing. And actually, we are quite comfortable with the situation we are sitting at, at this stage. Capital ratios, again, we have continued to create internal equity. And I think this is something which sometimes is not given the due credit, but the bank has been growing in 20% plus over the past 2, 3 years in terms of asset growth, in terms of investment and financing has continued to pay 50% of its dividend, has increased the effective dividend per share to now almost AED 0.97 and still maintain this capital ratio. So I think that is the reflection of prudent originating and balancing between a capital-light transaction, but also a transaction which gives you the income because you can't have it both ways. And hence, you see that the capital density for us being monitored very carefully. We're currently sitting CET1 at 12%. If one would look at even without the support from the Central Bank, our capital buffers are at least 2% above our minimum requirements, which is very healthy. We continue to monitor the situation, but I think if you take it all in one bucket, financial performance is strong in terms of creating almost 8% growth with a strong balance sheet momentum while preserving capital and ensuring that our liquidity situation is catering even for the future pipeline, not where we are today. So very happy with the situation where we stand today.

Just to confirm, then ECLs are not -- overlays are not something that you're looking to -- you're considering in the second quarter? Is that something that model stress testing could go up over the course of the year? And then just the increase in RWA density, is that more of a calculation timing issue or something that's kind of led to that?

No. It's just the mix we have because we are creating -- when we originate assets, it's a mix between the capital-light and also some of the more capital heavier transaction. But the density we are in today are quite comfortable at.

We'll move to the next question. This is from the line of Jon Peace. We'll move to the next person. This is from the line of...

I have three questions. The first one is related to the public sector, the loan growth that the previous question is related to. I want to ask, do you have -- I mean given the fact that there are a lot of infrastructure projects being announced in Abu Dhabi, I just want to understand what's the pipeline like? So could we expect more deals from this segment? And secondly, related to that is -- I mean, traditionally, the yields on the public sector loans tend to be low. And because will that be a reason for the margins to compress a bit further sequentially? And then the third question is on the retail business. Just want to understand -- I mean, you had decent growth in retail. But in terms of -- if you break it down into months, did it happen mostly in January, February? I just want to understand what is your experience in March and April in terms of retail growth? And I mean, the last one, if you can squeeze in one more question. What is the split between your retail portfolio? What is split between Expat and UAE National, if you can provide that?

Yes, sure. Thank you. So let me start with the first question. Your question regarding public sector financing and the pipeline. So we had -- we've been very close to clearly, as always, to our clients, but especially even more in the first quarter. And I can assure you that everyone is open for business. I have not seen any change in the pipeline. Maybe some entities are recalibrating the phasing or pace of some of them, but I have not seen any -- I would call them strategic transactions, which have been either reconsidered or there is second thoughts about them. So I think the word we keep on using open for business for us and for the clients. And I think you will see that in the balance sheet growth even in Q1, but also I believe Q2 will continue to be at the same pace, particularly in that space. So no change in pipeline for public sector financing. Yields, yes, of course, it's all about a return discussion, right? So clearly, if you have the lower capital consumption, your yield will be lower, credit risk is lower and accordingly, gross yield would be also impacted as such. But I would not think that our gross yields are coming down because of compression on the mix, but it's just a function of that the base rate is also coming off, right? So it's almost because you are pricing base and margins. The margin has not changed, right? The margin is the margin, but the base has come off. Very happy to see that actually that specific sector is going ahead and the mix continues as such. So nothing has changed on this front. And as I said, the repricing of the portfolio in terms of lower rates in the corporate book happens very quickly. It's usually on a short-term repricing. So given that the rate cut, which happened last year have happened now all and have flown in. So what you see today is the repriced model for the gross yields. For retail, yes, March was slow as expected. We are big on home finance. So we have seen some slowdown in transactions executed. You also make a point, some of the March transaction could be flow over from January and February because it does take time to close. But the good thing is that now looking into April, the pipeline is building up. sentiment is coming back. And I always keep using the word very important sentiment. The client sentiment is what drives your performance. And we're starting to see more and more that the positive sentiment is coming back. I would say too early to judge, but we are hopeful that this will come back. Let's also not forget the summer months, sometimes it could be slightly slower in terms of transactions. But early April signs are extremely encouraging for us to see where the transactions are coming back. I think your last point was Expat and UAE nationals. Yes. So our book -- so while half of our clients are UAE nationals because we have a 1.7 million clients I would say, 800,000 or so are national, but the financing side is almost 80% UAE nationals and 20% expert. This mix has not changed. While the expert segment has maybe grown a bit faster than the UAE nationals by this share of the population size, but in terms of financing amount, it's still an 80-20 mix towards UAE nationals.

We'll move to the next question. This is from the line of Olga.

I have several questions. One is on your business mix. We see growing role of government and public sector on both sides of the balance sheet, and it's a significant increase in the first quarter. Do you think this will continue? And if yes, do you think that long term, this is a risk for your net interest margin over the next quarters or years? Number two is your funding. There was a very nice inflow of funding from public sector and GE. What was the nature of this funding for how long this money came in? Is it 3 months, 6 months, 12 months? How should we think about cost of this money versus existing funding or versus [ eBOR ]? Just any color on the nature of the inflows would be very useful. And finally, on cost growth, it was not very high quarter-over-quarter, but in annual terms, it is a relatively high figure, higher than revenue growth. Given -- if we assume that there is a bigger focus on government business and maybe a bit smaller focus on retail business, shall we think that cost growth will slow down? And by how much would you think cost growth can slow down in the next maybe 12, 24 months?

Sure. Thanks, Olga. So again, let me start maybe with the last question first on the cost, cost. I think the way I think about cost is very simple is that it is important that an institution takes a medium- to long-term view in terms of its strategic initiatives, right? So I always say you have to invest through the cycle. If you take a start-stop approach whereby you have outlined clearly what are your strategic investments you have to make to take the bank to the next level. And then a short-term volatility comes and maybe shows a bit of the distortion between your operating leverage and then you pull the brakes I think this is a very best strategy for the bank medium to long term. So my answer is that we will continue to invest in our strategic investments. And when I say strategic, it means in our digital proposition, in our AI agenda in terms of in our channels, customer proposition and just end-to-end value proposition. This is not going to change. And also, some of the cost growth has always been linked to revenue initiatives, right? So when you make more money and you are predominantly retail bank, your incentives also are being -- I wouldn't say not impacted, but it's good money to spend. So that's what -- this is usually normalizing with the top line growth. So I think our cost trajectory is possibly going to not show the 14% you see here, but we're not going to take our foot off the pedal in terms of ensuring our investments happen. Now the answer is the revenue has to come back again. This is for me more important. It's productivity. We are at 12% today, underlying probably more to 18% to 19%. I think that once the situation normalizes, client sentiment comes back, clients transact, retail particularly start to travel again, this number will look very differently. And I would rather have a higher revenue number than pulling back on strategic costs. Having said that, there are a lot of initiatives which are in flight, which will create capacity for us to continue investing as always my philosophy, you have to earn the right to invest. And this will come in naturally as your value proposition in terms of digital adoption comes in naturally and hence create this capacity for spending. So that's on the cost. Second question was on the funding and GREs. The funding from GREs has always been a very important part for us. They are not only Wakala, but there is a good mix between Wakala and non-Wakala or nonprofit paying deposits. You asked about the tenor. The tenor can vary between 3 to 6 months. This has not changed pre or post conflict. And it's usually on a rolling basis. And these are important for us because they do give us leverage stability and also the forward-looking view in terms of ensuring that our funding mix is a good structure between retail deposits, who are -- might be quite sticky even when you say CASA, for me, CASA in retail behaving almost like a long-term financing opportunity, but also you need some of these CRs and corporate deposits. From a cost perspective, our effective cost on profit paying has actually come down quarter-on-quarter, and they are probably now at its lowest point even where we see the conflict. So we price for market, but we usually have not seen a situation where we have to price up to get deposits at this stage. Your first question was, I think, the mix between government and local in terms of our business mix. We are very careful to balance between our ability to grow our financing book without putting undue pressure on capital while still creating a strong asset quality mix, but also make money, right? So we are in the business of making money. So that all put together is the model you are seeing today. We are slightly heavy on GREs and public sector, which I think is working for us because for us, while the margins on that front might not be very high, but because it's a complete value proposition, you get the cross-sell in, you get the escrow accounts, you get also the cash management, GTS, FX at the relationship level, it works very well for us, and we're happy with that mix. And I think proven time in this situation has helped us very well because even in a stress test scenario and you set some of these names, you find out that we are very comfortable with the situation we are in today.

Just to double check, you said you want to accelerate revenue growth to 18% from 12% today. Did I get this correctly?

No, no. What I said is that our 12% is actually underlying 18% if you adjust for the rate impact we have seen year-on-year, almost 18%, 19%. But for me, I want to get it up again from the 12% we have today for me to earn the right to invest because if my cost is going today at 14%, and I think these are good cost to spend, I would like to see my revenue outpacing it as well. So that's where we are trying to inch in the next few quarters.

We'll now move to the next question. This is from the line of Rahul.

This is Rahul Bajaj from Citi. I have three mainly. The first one is on loan growth. So you've done 7% year-to-date loan growth during the first quarter, but you haven't changed your guidance, which looks quite easily achievable, if I believe the kind of commentary around April trends. So is this just being conservative and you would probably take a fresh look at your guidance after 2Q? Or do you expect some major repayments to occur in the foreseeable future, which would get the full year loan growth in that range, 12% to 14%. So that's my first question. My second question is on the capital ratio. So capital requirements. So as I understand, the countercyclical buffer requirement has been pushed or kind of delayed by the Central Bank. Just wanted to understand, have you had at the same time, any discussions around D-SIB requirements that might apply for added? And if you had any discussion, how are you thinking about any potential rights issue in the future? Is that something on your table at some point in 2026? So that's my second question. And my third and final question, just wanted to understand -- I mean, while I see the credit quality has remained pretty resilient. If I kind of focus on the mortgage portfolio, could you please provide us some color on the kind of mix of this mortgage portfolio, especially how much is Dubai versus Abu Dhabi? And what is the average LTV of this portfolio?

Sure. Thanks, Rahul. First question, financing growth, you're right. So I think we had a fantastic quarter 1. can complain. It's been really good. And even on retail side, despite all what I said, I think we're just being a bit modest, but also retail had a fantastic growth as well as corporate. Now question is our guidelines conservative? I think we've given this guidelines even before the year started. So that we have not changed that. I think we will probably achieved to overachieve maybe that number. But let us maybe revise it in Q2. I would say I'm cautiously optimistic that this number is achievable. We have -- the pipeline we have is taking us there. Probably we'll do a bit more, but we'll give you an update on this probably in Q2. But yes, the number is definitely within sight. From a capital perspective, you had a few points there. Any discussion on D-SIB? The answer is no. We have absolutely no discussion with Central Bank, whether formal or informal on a D-SIB situation. Hence, leading to a rights issue discussions. as I said also last year and this even before the situation we had in Q1, I always said cap is an enabler, right? So if ever I see that there is a need for us to do any capital action for us to ensure that this positive momentum remains, I think A is very well positioned to think about the rights issue. It will be accretive to the bank and to the shareholders. At this stage, we're not thinking about it given the capital ratios we have seen in front of you. But for me, as I signaled also last year, definitely always on the table, can be discussed, will be assessed at that point in time and to ensure that the momentum is never being held hostage or pulled back because of the capital situation. I think the opposite is much better for shareholders and investors that we think about how we make capital available to continue creating the return ROEs which we've seen at 27%. And even if we are to do any action on the capital, we will ensure that it will never be dilutive to the ROEs we have seen guiding at least to above 25%. So the amount also you can take into consideration will never be as big as ever diluting that return metrics. Your last point on mortgages or home finance, it's currently 60% Abu Dhabi, 40% Dubai. That is the split we have. And I think it's performing extremely well. I think our underwriting standards, the collateral we have taken have been very, very sound. It's one of our best performing books. It's collateralized. It's strong and has been really a driving force for the business for us in the past few years. And will continue to be our flagship product in my view. It gives us a good underlying secured product and overlaying it with personal finance and auto finance gives us additional yield as well. So it's a very good mix...

Just want to small point to clarify. Could you provide the LTV of the mortgage portfolio?

Yes, around 55%, just saying 55%.

We'll move to the next question. This is from the line of...

Thank you also for all the comments on liquidity earlier, which I think was very helpful. If I may follow up on there, can I please ask where you saw these outflows from specifically? I'm asking particularly obviously, because of your very comfortable local resident-driven deposit base. And maybe could you clarify which lines you've seen outflows specifically from? And looking into April, have all these come back so far? And basically, how is the situation evolving in your view? My second question is new customer additions were still pretty strong in the first quarter. How is this evolving in April so far? And last question, if I may. And thanks again for the disclosures on asset quality and overlays, framework you're using currently in your IFRS 9 models? Specifically, what are the weightings you apply to your portfolio for the different macro scenarios, that would be helpful to understand.

So first question on the liquidity, where we've seen the outflows and have they come back? I think April, we are very pleasantly surprised how things have normalized, right? So despite that, we know that the situation has not been resolved yet, but clients, I think, are starting to come to terms of the situation. And hence, we are seeing more and more money coming back. Outflows I think if I'll be very honest, I think -- which is surprising, the cash was one of the biggest outflows we've seen. So people have been using the ATM quite heavily. We have 600 ATMs in the country. So you can imagine the work we have been doing to ensure they are all stacked up. But this cash was taken out and has come back again. And I think it's natural, right? So people would be wanting to have some cash on hand when things a bit uncertain, but this has come back. In terms of the corporate. Corporates have been utilizing some of their cash as well because to fund their operating requirements day-to-day, especially when the revenue or the even -- let's put this way, people were not traveling, people are not using hospitality. So some cash was used, but most of that has also come back. And that's why you see the year-to-date, actually, deposits have grown even from December. So what has -- what we probably lost in March, we have more than recovered by April and even before March end. So liquidity is comfortable. And we haven't changed our approach at ADIB. We always fund before we finance, and this will continue. We always make sure that we have ample liquidity before even thinking about putting the pedal on the financing growth as well. Client acquisition, yes, very strong as well. And I think this has helped us that our digital channels are doing most of the heavy lifting. Again, happy to the mix as well. Most of them have been in the UAE national space, and most of them are actually even salary clients, salary clients. So that is a huge boost for us in terms of deposits, but also asset origination. Last point on ECLs. We have done a stress testing separately across our entire portfolio. We have stressed that most of the macroeconomic variables. But model change has not happened, and this is across the industry. Model change will not happen before probably June even, and these are very clear guidelines. So we've separately done our stress testing. We made sure that we have enough ECL and hence, the 48 basis points, but model changes will not happen at this stage. And that is -- as I mentioned, that's industry-wide, it's not only any...

Just want to check because we have a few people in the queue. Can we let one more person ask a question? The next question is from the line of Naresh...

It's Naresh Bilandani from Jefferies. Just two questions, please. One, could I please confirm just to reiterate the point, if you have chosen to employed the Pillar 4 of the relief package offered by the Central Bank on 17th March and not yet classified any credit exposures into Stage 2 or Stage 3? Because if I'm taking a look at the asset quality metrics, these almost look pristine and kind of reflect no signs of the conflict at all. I think the early impact seems to have only come through on liquidity. So I'm just keen to understand whether this is a delayed reclassification of Stage 2 or Stage 3 exposures? That's the first question. My second question is on the loan growth. There's been a very strong 31% over the quarter loan growth in the FI segment. We've seen the same in your larger peers. Could you please reconfirm the nature of this growth and what has driven the strength? And my third and final question is, could you please reconfirm again what is the composition of Saudi Arabia within your loan book and how that has grown quarter-on-quarter and year-on-year?

Sure. Thanks, Naresh. So I think two elements to your first question, delayed classification, I would say no. Despite that this option was on the table, right? So this financial package was giving us the option that we delay classification. But the good thing is that when we actually scanned or look at our entire book, whether it's on the corporate side, retail side, even business banking, we were very pleased to see that we actually did not need to classify. In fact, we did classify a couple of names, but because we felt in natural circumstances, we have classified them anyway. They were not big, but I just want to tell you that we are not having any delayed classification at this stage in our books, even if we had the option to do so. So that was a good outcome for us. In terms of financing growth in the -- we talked about the FI segment. right? So yes, we didn't have that much, but this is our usual transaction which we had. And these are mainly, Naresh, also transactions which are closed in quarter 1 would have been in the making for a few months before and hence, you would see them. So nothing specific related to the March event that we had to do more FI, but it's just part of the pipeline conversion, which was even in the making before March came about. The last point you had in terms of Saudi exposure. Saudi exposure, do you have the number?

Yes, we have approximately AED 13 billion, which is about AED 7.5 billion, this is within the financing assets, approximately 7% of

So that's the number, 7% for Saudi exposure.

That's very kind of. How has that grown over the quarter, if I may please just check...

Saudi hasn't grown that much. Maybe there was a couple of Sukuk we've done. So maybe you've seen in the investment book and our treasury book because we parted in some of the Saudi Sukuk, but financing directly, nothing specific.

Just wanted to check again, there are a couple of questions in the queue. If you would like me to, I can get them through.

Sorry, go ahead...

Sure. So the next question is from the line of Aaron.

It's Aaron from Ashmore here. Can you talk a little bit more about the scenarios, the ECL and what's changed on the provision cost side? So obviously, your NPA ratio has touched all-time lows, but provision costs are materially higher this quarter, particularly on the wholesale side, they are much higher. So you can talk about what kind of underpins that? And then you mentioned kind of no changes in your models, and that's an industry-wide kind of initiative. Can you talk a little bit more about that, please? And you ideally have made a few changes that you need to keep it standardized for whatever reason to be in line with the rest of the industry, kind of overall picture of what's going on and what you're thinking and what's driving your decisions on the provisioning that you through the P&L...

Sure. So I think on NPA, at 2.6% or the cost of it is around 48 basis points. So the increase you have seen in the last... Yes. Okay. So I think -- yes, so the increase you have seen is a natural change. And because if you compare particularly year-on-year, most of them have been also Stage 1 provisions, which are naturally as the portfolio grows. Nothing specifically on macroeconomic. Again, when I mentioned industry-wide is that we're not jumping into changing macroeconomic because it's way too early to do any assessment on that. Having said that, we did all -- or I'll just talk about ADIB, we did a full stress testing using some of the more stressed mom environment. And hence, we decided that there was no need for us to take any overlays. But we are very comfortable with, I think, where the NPAs and our model stands today.

Excellent. And then one, I guess, a very kind of high-level question. If you just talk about which areas of the book have you seen the biggest change if you compare, say, March and April versus January and February because the Q1 numbers are kind of a mix of both scenarios that we've been in. But comparing March and April versus January and February, have you seen a significant change on the retail side or perhaps more specifically on the expat retail side or corporate and SMEs or kind of where are the changes in sentiment, as you mentioned a number of times, where are things kind of showing up?

I think the biggest change in sentiment has been probably March and retail side, which is normal, right? So at times of uncertainty, people just take a pause, take a breather and reassess their priorities. But didn't -- I don't think didn't last for too long because people have normalized to the situation. And hence, when we look at April, a very strong start. I think we are very close to hopefully pre-conflict levels, but at least the trajectory is definitely moving in the right direct...

So Shabbir, unfortunately, we have hard stop now. But we're available for any follow-up later on, so we can schedule one-to-one later on.

Sure. I think there are a few questions in the text box as well. So you can reach out to the Investor Relations team at Abu Dhabi Islamic Bank if you have -- if any of your questions have been left unanswered. So I'll hand it over to ADIB's management for any concluding remarks before we close the call.

No. Thank you. Thank you all for attending the call. And as Shabbir said, if you have any follow-up questions, please do write for us or call us any time. We're available to answer them. Thank you all.

Thank you. Have a nice day, everyone.