Dubai Islamic Bank P.J.S.C. (DIB) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us today. This is Janany Vamadeva. And on behalf of Arqaam Capital, I'm pleased to welcome you to Dubai Islamic Bank's Q4 Full Year 2020 Earnings Conference Call. I have with me here today from DIB management, Dr. Adnan Chilwan, the group Chief Executive Officer; Mr. Salman Liaqat, the Chief Strategy and Investor Relations; and Mr. Kashif Moosa, the Head of Investor Relations and Strategic Communication. Without any further delay, I'll now turn the call over to the Head of Investor Relations, Mr. Kashif Moosa. Kashif, over to you.

Thank you, Janany, and greetings, everyone, and thank you for joining us on our full year 2020 results announcement and webcast. The session, as always, is led by Dr. Adnan, the group CEO; accompanied by Salman, the Chief of Strategy and IR; and myself. Request you all to keep the questions coming through the e-mail addy provided, and we will then take them up once the presentation is concluded. So with that, let's start the session. Moving on to Slide 4. And here, whilst we see that the world still continues to face constrained growth during the pandemic, the GCC and the wider region continue to remained strong and steady with the economic rebound set for 2021. This follows the reinstatement of governmental relations amongst its member space, which is expected to strengthen business, trade and investment targets amongst the -- investments amongst the GCC block. Now the various economic stimulus packages provided by the government and Central Bank in the region amounting into billions of dollars that cushioned the impact of the pandemic as relief measures make their way towards critical economic sectors, such as health care, logistics, transport as well as to the individual customers in supporting them through one of the most unprecedented economic times in our history. Moreover, the UAE banking sector continues to be healthy and robust with continued growth in banking assets throughout the height of the outbreak and remaining the top performer in GCC in terms of growth as well. Capital levels, funding and liquidity are expected to remain strong with digital banking capabilities continuing to be the overarching theme as we move towards a more digital operating environment into 2021. Moving on to Slide 5. The UAE macroeconomic indicators at home remains strong with national economy expected to recover in 2021 following the various government stimulus programs and the fact that the UAE is one of the fastest -- world's fastest vaccination programs amongst its local population, with nearly half the populace already receiving their minimum first dose. So with a commendable health care system and through effective, preventive and precautionary measures, UAE leads in many indicators in dealing with the pandemic, giving hope that the economy recovery can be brought back relatively sooner rather than later. The more than AED 7 billion in terms of the economic stimulus program for Dubai, which was distributed in several stages over the past year, is expected to benefit various businesses and services. And with recovering oil prices, investor confidence is expected to revive business and trade in Dubai's economy, which looks into moving towards a steady rebound in the new year as well. So with these brief updates, I would now request Dr. Adnan, group CEO, to take us through the earnings review of the bank. Dr. Adnan, please.

Thank you, Kashif, and good afternoon, everyone. I'll take your attention to Page 7. Like always, the purpose of this call is going to be to throw some insights into the key performance of the bank. On Page 7, just in brief, you can see that despite the challenges of an unprecedented pandemic, the bank has managed to sustain its growth momentum. And by that, I mean we have witnessed a 25% year-on-year growth within our balance sheet, which stands at very close to around AED 290 billion. Now this is predominantly driven by low-risk growth within focus on typically government and quasi-government financing. And the key has always been to maintain our asset growth and qualitative asset growth, i.e., with prudent risk management principles. Obviously, we will, throughout this presentation, focus a little more on where this growth is coming from, what does asset quality entail and what have we done about it in 2020. Obviously, given the adverse global environment, prudence, like I said, has taken center stage. And we have done that by building excessive provisions to build cushions and safeguard against future shocks, while also ensuring that we continue to grow within low-risk sectors such as the sovereigns. Noor Bank, an acquisition that we had done at the beginning of the year, we have concluded the integration well ahead of its time. And in upcoming slides, we will further highlight the details of how successful this integration was. Our digital aspirations continue to gather momentum. And on subsequent slides, you'll also see the uptake in the digital initiatives of the bank and how customers have responded to all of that. Slide 8, very quickly, just gives you the culmination of our integration journey with Noor Bank. And you can see that we started off actually integrating the bank in the beginning of 2020 and completing the integration of the bank in a record time of around 8 months. And what have we done? We've onboarded all these customers, and they now form part of DIB's fabric. And we managed to make sure around 100-plus systems have been integrated, and now we have one common platform. On Page 9, our digital drive continues. We've witnessed continuous engagement from our customers on both our digital portals, Internet as well as mobile banking. Now you can see the slide, and I go from left to right. The mobile banking users have increased in number when compared to what they were in 2019. And also, the number of transactions, you can see, have gone up by 50% to what they used to be in 2019. Roughly around 11 million transactions used the mobile banking platform. A similar story on the Internet banking usage, the number of users have increased by around 30%. And the number of transaction volumes that we have witnessed via the Internet banking channel is also up by 37%. This is -- this all gels well with our ambition to be called a digitally intelligent bank. That's the acronym DIB. And the idea is to just make sure that the customers get hassle-free, paperless and digitally enabled experience with whatever they do in the bank. So that has done well for us in the large part of 2020. Moving on, on Page 11, a quick highlight of the financial performance of the bank. You can see that despite the unusual circumstances that the entire world has been facing, including the UAE and so would a lot of peers within the banking industry, DIB has managed to achieve a solid set of financial results for the year. Now as explained earlier, our balance sheet has expanded by around 25% to reach around AED 290 million. And make no mistake, this is not just the result of the acquisition of Noor Bank but also the organic growth that DIB has witnessed during 2020. Given the significant headwinds in 2020, this obviously clearly showcases the bank's ability to unearth business opportunities using its well-entrenched franchise. Now despite the growth and significant provisioning that you will see in subsequent slides as well, you can see that this growth as well as this level of provisions has not impacted the total capital adequacy level of the bank, and that stands at around 18.5% with Common Equity Tier 1 standing at around 12%. Now where is this balance sheet growth coming from? You can see that it has come predominantly from customer deposits. Those have gone up by around 25% to end at AED 206 billion. A very quick look at the income statement. Our total income, our gross income, has gone slightly down from the 2019 levels and down by around 4%. We've ended the year at AED 13.1 billion. And that, in my opinion, has been a strong point of the bank because despite this pandemic and despite the economic headwinds, the bank has continued to garner momentum, build on its portfolios, grow the balance sheet, grow its financing book. And as a result of that, in a very mundane and low interest rate environment where the interest rates continue to fall and have fallen for the large part of 2020, the bank has still been able to demonstrate strong results in terms of total income. Now had the growth not been done in line with what the bank has done, we would have seen a significant drop in total income, which is you will appreciate something that the industry and most of our peers are facing. So the reason why the bank is only reporting a negligible loss of gross revenue is purely for the reason that the bank did not deter and derail from its strategy and continue to put its strong foot forward and continue to build on earning assets that is obviously going to pay rich dividends in the years to come. The net operating revenue, obviously, which is a function of not just the gross revenue but also the cost of funding, that is on the positive side. Once again, when you compare us with all the banks that have announced the result, I think we are an outlier when it comes to net operating revenue. And our operating revenues, net operating revenues, have increased, whereas you'll appreciate that, given the challenging interest rate environment and the lack of growth that some of our peers have witnessed, their net operating revenues have gone down by double digits. We maintained, I think, a good control over operating expenses. The increase that you see is fairly on account of the acquisition that we've done of Noor Bank. And obviously, we started to unlock synergies. And you can see that there are already 50% synergies in the operating expenses. And as we go forward, we will continue to unlock more synergies in a large part of 2021. It then brings me to a very important point, and I think we are going to spend a large part of this presentation on provisioning and impairments and asset quality. Today, we have used the strength of our P&L, i.e., the strength of our net operating revenues or profit before impairment and charges, to make sure that we put a very strong foot in 2021 by ensuring that we classify accounts where we feel that there might be deteriorating quality in the year to come or also build up on provisions where we feel that provision should be required. Maybe not at this stage. Possibly, we could have made lesser provisions in 2020 than what we have done. But I think what we have -- the way we've approached this is that we've been extremely prudent and making sure that this would be a year where we've witnessed good growth. Net operating revenues continue to go up in the right direction, whereas everybody else has gone down. So I think let's use the strength of our P&L and make sure that we have adequate level of provisions being built. And that's why you see a charge of around AED 4.5 billion, which obviously includes one-offs as well. Now the group's net profit, for obvious reasons, when you add up all these lines and do the deductions, reaches at around AED 3.1 billion, 38% less than what it used to be. But in today's macroeconomic environment as well as the headwinds in -- that we have witnessed so far as well as one anticipates in 2021, I think these are very, very strong set of results being posted, which is backed by pure organic growth of the bank. On the right-hand side of the page, you can see some key ratios. Net financing to deposit ratio stands at 96%. Despite a 30% growth in the loan book of the bank, you can see that our ADR position continues to be very strong. That shows you the capacity of the bank to further grow, if required. Capital adequacy and CET1, like I've already mentioned, despite this growth and despite the level of provisioning that we've made, they stand intact. And that all of this points to an opportunity to grow further. Our nonperforming financing stands at 5.72%, and you will see greater details of this on subsequent slides when we touch asset quality. Of course, on the face of it, it looks like we have gone up by 120 basis points, but I think it's very important to understand what is skewing this and how comfortable are we with this level of nonperforming financing. And obviously, when you compare ourselves with the industry average, we are below than where some of our large peers are. Return on equity and return on assets is just a function of the total net profit of the bank. And whilst the equity position and equity base increases and the net profit has decreased when compared to what we were at the beginning of the year or the end of 2019, that's just a function of where the returns are. Having said that, it's also very important to understand that both ROEs of 10.5% and ROAs of 1.2%, we are -- we remain at the higher end of the market despite these adverse conditions. So in a nutshell, before I turn on to the next page, the key takeaways from this slide would be that the bank has continued to grow despite the situation and despite the pandemic and despite the economic headwinds. Balance sheet has expanded. The loan book and the sukuk book of the bank has expanded. The capital ratios remain intact despite the level of provisioning. And the reason for this large level of provisioning is because the bank wanted to be in a comfortable position in terms of some of the accounts that have been classified as Stage 3. On Page 12, we can see that the balance sheet has grown primarily by focusing on diversification and quality assets. The AED 290 billion that I was alluding to, you can see that most of it, in fact, around 82% of this, is within financing assets as well as sukuks, which is what we call as earning assets. And very insignificant portion of the balance sheet stands to yield very low returns. So predominantly, a large part of our balance sheet is well diverse as well as well efficiently managed and invested in. In terms of the balance sheet and if you look at where this AED 290 billion can be divided, you can see corporate banking continues to lead. It enjoys a large part of the balance sheet, close to around 50%, followed by consumer as well as treasury. So that just gives you a breakup of the pie. In terms of the AED 205 billion of loan book or earning advances that we call them, you can see that they are well diversified across various segments, whether it is real estate, consumer, home finance or just vanilla consumer financing, trade, aviation as well as services. On Page 13, you can see that we've managed to maintain our top line performance despite the current economic headwinds. This was particularly reinforced by solid funded income. Now if you see, the funded income has gone up by around 11%. And predominantly, you can see that it is coming from income from our financing book as well as our sukuk book, followed by fees and commissions. And in terms of our OpEx strengths, we've also given you some granularity as far as our 2020 OpEx is concerned. You can see that a fairly large part of the total OpEx belongs to staff costs. In terms of cost of funds, in a declining interest rate scenario, we are obviously going to also take an advantage of our cost of funds that has come down by close to around 90 basis points -- or 110 basis points, rather. And we are standing at around 1.41% overall cost of funds. Clearly, there is pressure on yields because a large part of our book is variable in nature. So clearly, with interest rate reset, we can see that our interest rate is also affected. However, with net interest margins of close to around 2.61%, we are on the higher side of the market when compared to our peers. So I think we've done well on both sides of our balance sheet. So growth has been done without compromising on asset quality as well as without compromising on pricing. Obviously, the book will have to be reset given the interest rate environment, and we've done that on both sides of our balance sheet, thereby, maintaining a net interest margin of around 2.61%. On Page 14, a look at the operating performance. You can see that profitability remains relatively solid. And I'm, again, going from left to right. The profitability bars show that on a net operating revenue basis, the profitability of the bank pre-provision levels continues to be very strong. I've told you already about the 2% increase. And I think that is something that we will keep reinforcing because, given the testing times that one has witnessed and given what has happened in the economic landscape, to report net operating revenues increase is, I think, deserves a lot of appreciation and applause. In terms of net profit margins, I've already mentioned that margins have declined, and that is primarily because of where the interest rates are. And with our book being repriced, there has obviously been pressure on net interest margins. Cost-to-income ratio has gone up slightly, and this is on account of 2 components. One, obviously, the acquisition of Noor Bank, and these costs are now totally consolidated. But also with the overall revenues going down marginally, there is an impact on the cost-to-income ratio. But mind you, if you then look at it on a quarter-on-quarter basis, Q4's cost-to-income ratio shows a significant improvement already. So if you actually see, we are going into 2021 with a better cost-to-income ratio in Q4 than we were in Q3 or Q2 or Q1. That just shows you that integration has taken its effect, and synergies are now being unlocked. And as we move ahead, more and more synergies will continue to be unlocked. I'm not going to spend time on ROAs and ROEs because I've already covered that. But in a nutshell, ROEs and ROAs, despite the levels that you see in front of you, we are on the higher end of the market. And we can now safely say, because all the banks have already announced their results, we are clearly market leaders when it comes to ROEs and ROAs. On Page 15, this is a slide that shows you where the funds are being deployed, and you can see all the bars going up in the right direction. In terms of the corporate bank, consumer bank as well as the sukuk book, you will see that we continue to grow these books, and we've done that in 2020. And I think that is -- that has paid good dividends for us in 2020 but will pay better dividends for us in 2021. Clearly, with the base increase in quality assets being booked at good prices, we will see all these adding to the net operating revenue of the bank in 2021. You've already seen a part of those -- of that impact in the last part of 2020, so I see this being extrapolated further. And if we continue to grow in quality assets just like what we've done in 2020, I think the bank would have done much better than some of its peers. In terms of breakdown of the financing portfolio by sector, you can see that nothing much to report there. Corporate banking clearly is taking the lead, but more importantly, we make sure that real estate remains at the same level, in line with the guidance that we have given. That actually shows you that the growth that we witnessed in 2020 is not on account of increasing our exposure within, let's say, the real estate sector, which is easy to grow, and we've witnessed that ourselves maybe a decade ago. The bank has steered away from those strategies and continues to maintain a very prudent approach towards real estate, which is now demonstrated in the whole of 2020 where the bank has witnessed a 30% growth in its loan book, but the real estate concentration remains at the same level. So that actually shows you the kind of diversification that we've managed to maintain. On Page 16, a very quick look at the sukuk portfolio. And it's important, and I show this because you will see that in the last 6 years, we have witnessed a compounded annual growth rate of around 14% on this book. And I've always, on various calls, told you the importance of this fixed income book for us. And clearly, this book pays us good dividends on an average of close to around 4%, which, in today's low interest rate environment, is the right investment that we've made in the last 0.5 decades or so. So you can see that the book currently stands close to around $10 billion, and it is very well diversified in terms of 25% is, other than UAE and the GCC, predominantly, 50% of the book is in the UAE. But that's just a reflection of the issuers. Most of the issuances that come in the Islamic bond market come from the Middle East and the GCC, and that's just a reflection of what we hold. On Page 17, a very quick look on our consumer banking segment. You can see the pie chart in the middle shows that the consumer banking book has grown from what it was at the beginning of the year. If my memory serves me right, it used to be at AED 41 billion. It's at AED 51 billion now. So a AED 10 billion increase in net book. But in order to do that, we've had to underwrite gross financing of close to around AED 13 billion. And that book is very well diversified across personal finance, auto finance, home finance, followed by cards. What is heartening to see is that with this growing book, obviously, our net operating revenues on the consumer banking side has increased, up by 13%. That's clearly an outlier again when compared to our peers and the market. So I think we've done well there. Not surprisingly, the yields have gone down from where they were, slightly so. As you would appreciate, that majority of this book is a fixed rate, so we continue to enjoy that. And a part of the book is variable rate. And typically, those long-term financing that we see with mortgages, and those have to be reset. But despite that, we've seen on prior slides that the interest rate in 2020 has gone down by close to around 140 basis points. But you can see that this -- the yields on this book has compressed by close to around 80 basis points. So that shows you that we managed this book quite well. Another important thing is that there has been a significant improvement in the CASA contribution of the consumer bank, and that stands close to around 45% increase year-on-year. So I think the consumer banking book has done well for us in the years gone by. And even 2020, it has contributed well to the overall income of the bank. In terms of the corporate bank, a growing book. It stands at AED 150 billion, and that's a 31% year-on-year growth. You can see with the various colors on that pie that the portfolio remains very well diversified. And in the large part of 2020, we have focused our new underwriting on -- within the sovereign space or low-risk sectors because that was important. We just wanted to make sure that we continue the growth momentum because the idea was to plant a seed and then eat fruit in subsequent years to come. Our hindsight is a luxury. I think when we sit here at the end of the year, I think we have -- we -- it makes us feel good that this was a strategy that we embarked upon early January when the world was going into a lockdown. And 12 months since then, I think we are very happy that this was the right strategy we adopted, and it is now starting to pay us rich dividends and will definitely pay us better returns in 2021. In terms of the yields on the corporate bank, obviously, majority of the book is variable in nature. And for understandable reasons, you're seeing a pressure on the yields. The yield has come down from 5% to close to around 3.5%. That, again, I've already mentioned to you, that's actually the reflection of the total interest rate that has gone down. The result of that is we've made a net operating income of around AED 3.2 billion. That has a component of fees as well as a component of net funded income. But if you look at the total revenue that comes from this book, it's at about AED 3.2 billion. Now mind you, if we did not grow -- it's very important to understand that if we did not grow this book in 2020 by close to around the 30% that I've mentioned to you, things would look different. And obviously, the net profit of the bank would look different. And if the net profit would look different, then the level of provisioning would have a more severe impact on the bank. So I think everything has stacked up very well for us. One, our clear strategy of continuing to grow organically in low-risk segments, across the corporate banking book, across the wholesale banking book and across consumer banking has continued to pay rich dividends in the last part of 2020. And more so, we will see how that will reflect positively for us in 2021. On Page 19, we can have a very quick look on the treasury book of the bank. You can see that it stands at around -- close to around AED 38 billion. And you can see it's also diversified across, but clearly, the lion's share goes to the government sector. Because clearly, the issuances happen more so on the sovereign space within the sukuk market. We stay away from investing our liquidity within the corporate space within the fixed income book. We try to take underwriting -- we do underwriting on the sovereign and quasi-sovereign space. The treasury yields continue to remain healthy. I've already mentioned that they are close to around 4%, slightly come down. Clearly, it's a reflection of where the new issuances are coming at. They're priced quite well now, given where the interest rates are. Bond prices are record high, and that just had inversely proportionate correlation to the interest rates. In terms of our asset quality, we'll spend some time on this on Page 20. Now you can see that the nonperforming financing at 5.7% is higher than where it was at the beginning of 2020. But I must say, it continues to be still resilient during the current times. And on the next slide, we will see the -- a little breakdown of what this 5.7% entails. But very quickly, in a nutshell, if you strip out a couple of accounts that are skewing this ratio, you will see that on a stand-alone basis, we would be at 4.3%, which means that, that would be a 40-basis-point increase in the nonperforming loans. But we'll throw some more light on what that means on the subsequent slide. How does that translate to the cost of risk? You can see that the cost of risk is at around 1.37%. We started the year at close to around 90 basis points. And again, excluding the one-off charges, we will see where the cost of risk would be. And in terms of cover, while the cash coverage is at 76% and the total coverage is at 104%, important to move our attention to the next slide. But before we do that, it's very important to give you some comfort that from where we sit and from the vantage point that we have, in terms of asset quality, we do not anticipate a deterioration in assets over 2021. And the idea of classifying accounts proactively in 2020 was to use the strength of our P&L, make the adequate level of provision for some of the accounts that have gone down. Even though there's a plan of reorganization and there is -- there are repayments coming from some of these accounts that have been classified as Stage 3, the idea was to build some provisions on -- for these accounts. And as we go into 2021, once the plan of reorganization for some of these assets are complete as well as the repayments, which we have witnessed over 2020, continue in 2021, the outstandings are going to come down as well as the coverage will continue to improve, thereby, not requiring us to make any additional provisions on these accounts in 2021. So how we've approached 2021 was that we want to make sure that the balance sheet is robust. And you have a robust balance sheet if you've got better quality of assets and adequate level of capital and adequate level of liquidity and your earning assets are giving you good margins. So I think we've done all of that to make sure that we witness part of that within 2020. But more importantly, we go into 2021 with a very clean slate, so that we focus on growth, and that is the key for our strategy in 2021. But a little granular look on asset quality on Page 21. Now again, I'm picking up these absolute numbers from the prior slide. You can see that the absolute NPL of the bank stands at AED 12 billion. Now there is a reason why I have stripped out a particular account there because you can see that the amount is so large, it skews everything. As far as this account is concerned, obviously, we have classified it as Stage 3. And whilst you will see at the beginning of the year the account was in excess of AED 2 billion, we've managed to reduce the outstanding by another AED 300 million. So it stands at AED 1.7 billion today. So that outstanding continues to come down, as I have been mentioning to you on my previous slide. As well as, as the outstanding comes down and the level of provision that we hold on this account is close to around 50%, 52% to be precise, which you can see in the bottom pie, the coverage on this account will continue to improve. And of course, with a very decent reorganization plan that is being worked upon with the administrator, we feel that this account will come in the money pretty soon, and that will be positive for us, given that we've taken the pain on this account in 2020. But other than that, if you look at the purchased/originated credit-impaired assets, which came from Noor Bank, that stands at AED 1.2 billion, the idea of this first pie is to show you that the underwriting that DIB has done in the past continues to hold good despite the kind of macroeconomic environment that we have seen. And that, on a stand-alone basis, is at AED 9 billion. When you add the POCI into the assets that we have or the nonperforming loans as well as the 1 account that we are -- we have just referred to, you will see that, that ratio gets skewed. On a percentage basis, you can see that the AED 9 billion constitutes around 4.3% of the total 5.7%. And the 1 account itself constitutes close to around 1%. And the POCI is close to around 0.5%. So when you add that number up, the resulting percentage is around 5.7%. And then, whilst the coverage ratio on an overall basis stands at 76%, I think it's important to also bring some granularity. So the AED 9 billion accounts that I have -- AED 9 billion NPLs that I have spoken about on my previous pie have a coverage of around 91%. So that shows you the kind of comfort that we derive out of the loans that have gone back in nonperforming loans. On the 1 account, which has a large contribution to the numerator, on that account, we've got around 52% provision. And I think from where we sit, we feel that we are adequately provided or more than adequately provided for this account, given everything that I have said in terms of repayments and reorganization plan and what you have. Now the 1.37% cost of risk, which has been charged to the P&L for 2020, you can see what are the components of that charge. And you will see that 30% of that charge is just coming from 1 account. So that actually tells you the kind of prudence that we have adopted in managing our P&L for 2020 as well as in managing our asset quality. The idea was just to make sure that we are as prudent as we can and use the strength of our P&L to enter 2021 on a strong foot. On Page 22, again, stage-by-stage classification, and that is just for your information. And I think you have to read this slide in perspective with what I have just told you because, obviously, it may seem that ECL coverage on an overall basis is going down; and clearly, because the numerator has a skew by 1 or 2 accounts within the health care sector that have skewed everything. But the comfort that I can give you is that these accounts are well under control, and we continue to monitor these accounts, and we've made adequate provision on these accounts. Now obviously, the provision on these accounts is not 100% because we don't require 100% provision on these accounts, thereby, bringing down the overall coverage ratio from 91% that you saw to around 76%. So it's just a reflection of a large contribution to the numerator that is just bringing the percentage of coverage down, cash coverage down, as well as increasing the nonperforming loan percentage. Having said that, on a total collateral coverage basis, we are above 100%. In terms of Stage 1, the provision coverage has increased. Stage 2, the provision coverage has decreased, and that's only because accounts have moved from Stage 2 to Stage 3. And they transfer the level of provision that we were carrying on them when they were in Stage 2 accounts. On Page 23, you can see the funding sources of the bank. And again, liquidity continues to remain strong. And that can be witnessed with the advance-to-deposit ratio being at 96% despite a 30% growth in the overall financing book of the bank. Obviously, the liquidity is coming from growth in deposits. I've already told you that they have grown by around 25% year-on-year. And you can see that despite this growth, not just the ADR but also the liquidity coverage ratio of the bank, continues to be way above the minimum requirement. The minimum requirement for the LCR is at 70%, so it was relaxed from 100% to 70%. But even at 100%, if the requirement is reset to 100%, we are sitting at 129%. Liquidity has always been the strength of the bank, and we have already demonstrated that strength many times. The good part on this slide is also the CASA mix of the bank. And you can see that the CASA balances have jumped by around 58% year-on-year, and the total CASA mix stands at around 42%. At the beginning of the year, it was at around 33%. So you can see that we've made excellent progress. It allows us to bring our cost of funding down. Page 24. I've already mentioned that despite strong growth and despite the level of provisioning, and we could only do that because of the strength of our P&L. We have reported a CAR ratio of around 18.5% and a CET ratio -- CET1 ratio of 12%. Both are above the minimum requirements for a domestically systemic important bank. The equity position of the bank continues to grow from where it was. And overall, I think very strong growth and capital level impacts above the regulatory requirement shows you the strength of the bank. We obviously have also been successful, and in fact, very successful, in tapping the capital markets. And we issued a sukuk at probably one of the lowest-priced Tier 1s from a financial services industry within this part of the world. Dividends. Obviously, the Board is recommending to the shareholders in the general assembly a dividend of 20%. That would mean that substantial portions of the profits are being retained. Once again, a strategy of prudence in order to make sure that there is adequate capital to, one, support future growth as well as make sure that we are in line with regulatory requirements from a limit perspective in terms of growing our risk-weighted assets. On Page 25, I think target metrics. And as always, I mentioned that we do not change the target metrics. And the idea of that is we really want to see where the goal post is and how we've done at the end of the year. You can see that in terms of growth, the 26% growth is higher than the guidance that we had given at the beginning of the year. And that has been deliberate. We've grown because we had capacity in terms of capital and liquidity. We've not compromised on asset quality. We've not compromised on pricing. And I think that was the right thing to do. In a very challenging interest rate environment, one would be encouraged not to grow, but I think we've done the opposite. We are an outlier. We've grown. We've grown in good-quality assets, and I think that has paid us rich dividends in demonstrating that we have a better net operating revenue by -- when compared to all our peers. And that also puts us on a very strong foot in -- to go into 2021. In terms of nonperforming loans, I have already mentioned in detail that we stand at 5.7%, but also, I've given you granularity as to the breakdown of that 5.7%. And you will see that other than the 1 account and the POCI that we have picked up from the acquisition, the nonperforming loans would have been at 4.3%. But no excuses there. We've got to make sure that we bring this nonperforming loans down and we build coverage where required. And we've already demonstrated that quarter-on-quarter, but more importantly, with our end year results. Real estate concentration, it stands at the levels that we were at the beginning of the year at 21%. ROEs and ROAs, very challenging 2020 is now behind us. We've reported the results. And even with the results that we reported, it's now fair to say that we are on the higher side when compared to all our peers in the market on both ROEs and ROAs. Cost-to-income ratio, slightly higher than where we were and where we were anticipating. Again, a very challenging environment, but we've completed the integration in record time, and now it's opportunity for us to bring about synergies. We've already brought about 50% of the synergies in terms of costs, and we anticipate to do this going forward as well. But as revenues will increase and improve, and they will only do so because we've managed to grow the book the way we have, as the revenues will increase, the cost-to-income ratio is apparently going to come down. In terms of cash coverage, obviously, at 76%. But if you strip out some of the skews, you will see that our cash coverage is at 91%. But even at 71 -- 76%, it really does not bother us because on a total collateral basis, we are at 104%, and even we have taken the level -- the adequate level of provisions we're required, very well demonstrated in 2020. Net profit margin, honestly, we did not anticipate this kind of pressure on our net profit margins at the beginning of the year. Nobody had a crystal ball and nobody knew that the interest rate is going to come down so significantly. But having said that, again, at 2.61%, we are on the higher side of the market, and we will now try to make sure that we maintain this or even inch up in 2021. It fits well with our 2021 strategy. So what should one expect from DIB in 2021? Obviously, we are going to look at guidance in a bit. But clearly, we are entering 2021 as a more resilient franchise. We've done that by increasing our domestic share. You can see that our domestic market share has increased now with the kind of growth that we have witnessed in the last 12 months. Being an outlier is going to pay us rich dividends, clearly, because we've not compromised on quality of assets or on profitability. Our balance sheet is more strengthened, more diversified. The kind of provisioning prudence that we have adopted is going to stand good for us in testing times. It has done so in 2020, but it will do so in 2021 as well. Profitability. Before the provisions, which is very important for all analysts because they focus on pre-impairment profits or pre-operating profits, and I think you can see that we are the only outlier that has demonstrated better net operating profits when compared to everybody who have announced a double-digit decline in their operating profits. That obviously should be seen as a very important and strong step into 2021. Capital continues to remain robust and adequate liquidity that can support further growth. With the full integration of Noor Bank, I think there's only now more positives to come out of it in terms of cost synergies, which are remaining as well as unlock revenue synergies as well. Digital capabilities, I've spoken enough already, but 2021 is going to be an extension of 2020 in terms of our digital capabilities. And I think we are only going to now emerge stronger from where we were in 2020 in terms of our digital banking landscape. Our international footprint continues to be the same, albeit growing because of our balance sheet in the 3 key important regions for us, Pakistan, Indonesia and Kenya, continues to grow. Of course, each of these markets have their own challenges, but our strategy that we've adopted in 2020 in UAE has also been extrapolated among these geographies. On Page 29, I won't bore you with this, but the bank's vision is very clear. We have a purpose, and that has already been cascaded to everybody within the organization. And our values are more succinct. They talk about being inclusive, collaborative, agile, responsible and engaged. And we're already changing the positioning of the bank. You might probably have already picked this up. The hashtag goes as Ready For The New. And I think it's just something that we've learned from this very difficult year, where I think we were ahead of a lot of other people in understanding the landscape a little better in trying and taking opportunities and converting challenges into opportunities. And the positioning of the bank goes very well with what we've done in 2020 and what is expected from us in 2021, which is Ready For The New, i.e., with the changing landscape, with the changing global outlook, I think we are ready. We have demonstrated that in 2020, and we are ready even to demonstrate that in 2021. Brings me to my last slide, which is, I think, very important. We always shed light on what you should expect from us in 2021. With a larger balance sheet, obviously, and tough times ahead of us, we are embarking on our journey in 2021 with prudence in mind. And by that, I mean we are never going to compromise on asset quality, and we are not going to compromise on profitability. The growth ambition that we've set for ourselves is at 5%. Mind you, it's a bigger balance sheet. It also would have to factor in the changing regulatory environment in terms of full implementation of Basel rules. The relaxation that the regulator has done in some of these ratios will be reset. So keeping all of that in mind, we've got to be looking at 2021 in -- through the right lens. And from our vantage point, at this juncture, we feel that growth should be at a modest 5%. Nonperforming loans, obviously, it will be our aspiration to bring that down, and it would also be a result of the numerator going down as well as the denominator increasing. So that would be -- we are setting ourselves up with a challenge to bring that down from the current levels to around 5.5%. Real estate concentration. Again, I want to give you comfort that the bank is not going to cut corners and not going to expand within its real estate concentrations. Return on assets and return on equity. Obviously, these are levels which are higher than what we are at the beginning of 2021. That shows you the kind of challenges we are setting ourselves up for. With return on equity forecasted at 11% or aspirational at 11% and ROAs at 1.4%, one would obviously acknowledge that this is challenging, but we are ready for that. Cost-to-income ratio, we want to bring it down. And that is clearly a reflection of both sides of that equation. Cost -- further cost synergies as well as increase the income to end up with a cost-to-income ratio close to around 28%. Our total coverage, which is -- we stand at 104% today. We want to bring that down -- or we want to bring that up to around 110%. And net profit margins at similar levels. Interest rate environment is muted. Rates are forecasted to be at this level or go down a little further. And at that level, we would want to maintain our net profit margins. That brings me to the end of my presentation. It has been a lengthy presentation. This time, we are coming close to the end of the hour, but I am going to overshoot my time, give you at least 15 minutes to ask me questions. You will have a lot of questions on the performance of the bank. I have deliberately spent a lot of time on asset quality. Happy to take all the questions. But the last part of the call, I would, again, once again, use it to summarize everything that I have said. But in the meantime, happy to take questions. Please feel free to ask.

[Operator Instructions]

Okay. So the first couple of questions from Hootan from Bank of America Merrill Lynch. Your loan growth for 2021 looks relatively low to the past. Is this driven by lower economic activity in Dubai? Or are you actively seeking to shrink the loan book?

Thank you, Hootan. Well, obviously, from the guidance that we had given at the beginning of 2020, we were looking at a guidance of around 8%. We've done very well for ourselves. And I think that in hindsight, that was the right thing to do. We don't want to get ahead of ourselves. I think any guidance that I'm going to give is obviously going to be criticized by a set of people. If I give a guidance, let's say, of 10% to 15%, that would be met with a lot of cynicism. If I give a guidance of 5%, people are saying that we are under-balling. I think from where we sit and from our vantage point, it's the right thing to do. We want to be very cautious of how we approach 2021. Remember also, 2021, by the end of June, the economic stability stimulus package or the program that the Central Bank has put in place and is existing for a large part of 1.5 years is going to end. So I think at this stage, a 5% loan growth is, once again, I wouldn't say it's modest, it is much better than what some of the players have done in the whole of 2020. So clearly, I think it's 5% on a larger base. Our base has grown substantially over 2020. It's grown by around 30%. So if you work out the math, 5% on a larger book is very close to the kind of absolute volumes that we've underwritten in 2020 as well, organically. Of course, if you add then the acquisition and the book that we have grown by -- inorganic acquisition of Noor Bank, it gives you a different picture. But on an organic basis, the bank has grown in absolute numbers. And that's the kind of same absolute number growth that we are looking at even in 2021. So I wouldn't say it's very low relative to the past. Of course, on a larger balance sheet, the percentage would always come down. But again, you've got to understand the absolute underwriting that we intend to do. It's very close to the organic growth that we witnessed in 2020 as well.

[Operator Instructions]

So another -- I think the question on NPF has already been answered in detail. So we'll take another one from Hootan on the NPF coverage, which is 110% expected by the year-end, and ROE is remaining broadly around the same levels. So does this suggest that the cost of risk in 2021 would be at similar levels? And what sort of outcome are you looking?

No. Of course, we are anticipating that the cost of risk are going to be at levels lower than what we have seen in 2020. And I say that for a very simple reason: because in my detailed analysis of the asset quality, I've shown you how the cost of risk has been skewed by a couple of accounts that we had to charge to our P&L for 2020. I do not see that repeating in 2021. So I'm anticipating that the P&L will be better. Clearly, obviously, from where we sit at this stage, we are broadly looking at ROEs at the levels that I've already mentioned to you, but they are slightly up than where they were at the end of 2020. It would be fair to say that, with nonperforming loans anticipated to come down and the kind of economic activity that we are anticipating and the kind of growth that we are anticipating, we feel that the cost of risk is going to be slightly lower in 2021 than what it was in 2020.

[Operator Instructions]

So a couple of questions from Janany of Arqaam. The Stage 2 exposure that has migrated to Stage 3 [ in Quarter 2 ], could you shed from light and color on the new NPL formation as to whether COVID-related or pre-COVID NPL formation? And would you be able to share your current coverage levels for NMC?