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

Thank you, Hanna. Good afternoon, everyone, and thank you for joining us today. This is Janany Vamadeva. On behalf of Arqaam Capital. I'm pleased to welcome you to Dubai Islamic Bank's Q3 2021 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 of Strategy and Investor Relations; John Macedo, the Chief Financial Officer; and Mr. Kashif Moosa, the Head of Investor Relations and Strategic Communications. Without any further delay, I'll now turn the call over to the Head of Investor Relations, Mr. Kashif Moosa. Kashif, over to you.

Thanks, Janany, and welcome, everyone, to the third quarter 2021 results webcast of Dubai Islamic Bank. The session is led, as always, by our group CEO, Dr. Adnan Chilwan, accompanied by Salman Liaqat, the Chief Strategy and IR; Mr. John Macedo, the Chief Financial Officer; and myself. We request everybody to keep the questions coming through the e-mail provided webcast at dib.ae and they will be then addressed by Dr. Adnan at the end of the presentation. So with that, let's start. We move on to Slide 4. The global economic landscape has started exhibiting good signs of improvement albeit the recovery remains dependent on the access to vaccination and policy challenges and lingering supply chain disruptions. But the economic recovery, however, has been more pronounced for the GCC, whereby IMF has upgraded its outlook on the region primarily due to a pickup in oil prices, which have already crossed the USD 80 level. And meanwhile, the GCC banking sector has continued to show growth, reinforced by a rise in private sector equity, enhanced oil prices supportive fiscal policies and GCC banking assets have increased by 7% year-on-year in second quarter to reach USD 2.6 billion, with UAE bank accounting for more than 30% of the total. Now we move on to Slide 5. The UAE cabinet has recently announced a new strategic roadmap for the upcoming 50 years, and that has paved the way for the country's next phase of growth and advancements. And part of this is a series of projects were announced, including green and freelance visas, resorts Project of 5 billion to support Emirati initiatives in some sectors, the 10 x 10 programs to achieve 10% annual increase in UAE exposed to 10 global markets and the 100 Coders Every Day initiatives amongst many others. The much anticipated expo is also here and it's open its stores finally to visitors earlier this month. And the key themes for the expo being opportunity, mobility and sustainability. 192 countries are participating in this exceptional event and it's targeting about 25 million visitors during the first 6-month period. Hard thing to note that more than 770,000 people have already visited the export in the first 18 days and that's recording a VP growth of around 12% already. The projects of 50 road map along with the onset of Expo 2020. and significant plant in the number of new corporate cases are expected to further boost the domestic economy in the UAE. Now moving on to Slide 6. The UAE banking sector continues to show resilience despite the current underlying market conditions with both assets and deposits continuing to grow well. In the second quarter of the year, profitability and balance sheet indicators for the top 10 UAE banks have exhibited a remarkable improvement. And asset quality has generally stabilized and provisioning has declined, whilst capitalizations and liquidity remained intact. And with the opening of the economy and the large improvement in the market activities and sentiments, the performance of the banking sector set to further strengthen going forward. So with that preamble, I will now hand over to Dr. Adnan Chilwan, Group Chief Executive, to take you through the third quarter 2021 results and the way forward. Dr. Adnan, please.

Thank you, Kashif. Good afternoon, everyone. I'm going to start by doing a page turn as always and then leave some time for question and answers. And then the final 5 minutes is what I'll use again to summarize everything that we are hearing so far. On Slide 8, a few key points to focus on. If you look at the overall performance, we have ended the quarter with a robust set of results on the back of improving economic conditions, with continued strengthening of our P&L and a resilient balance sheet. Obviously, we've continued our sequential improvements in profitability, liquidity and capitalization metrics that has obviously helped the bank sustain its strong performance throughout the year. The bank has booked and it's important to note that new financing to the amount of nearly AED 30 billion year-to-date, obviously, in the first 9 months, which has been offset by early repayments as well as normal settlements. So clearly, you will see that the bank's balance sheet has not been stagnant, but expanded had it not been for these settlements that we've spoken about. And we will shed some more light on this as we go forward. The continued record low interest rates have impacted top line, and this is something that we are seeing industry-wise where the total income across the sector has declined. Cost management, which has always been key over the last few years continues to progress well, with expenses on a downward trend in line with our strategy driven by well-managed efficiencies, particularly within our branch, network and further realization of acquisition synergies that we always spoke about in the last 18 to 24 months. In line with the business and economic environment trend, impairments and provisions show marked improvement. And if you quantify that is nearly an 18% drop in impairment charges compared to last year. And we are talking about normal impairments here. Moving on, on Slide 9. Margins maintained despite the low rate environment and given that the bank has strategically shifted towards lending to sovereigns and low-risk sectors, something that we've mentioned at the beginning of the year, margins have obviously been maintained despite this low rate environment. Now aligned to the strong positive profitability, you can see that our ROAs and ROEs have started to pick up and these continue to be on track with our guidance that we had given at the beginning of the year. We expect that these ROEs and ROAs will continue to go upwards. Important to note that the cost-to-income ratio of around 26% puts the bank in a market-leading position as far as this metric is concerned. Now as efficiency builds up and realization of the synergies that we've spoken about we continue to enjoy a very good cost-to-income ratio and stands at 26.2%, as you can see on Slide 9. Moving on to Slide 10, and this just shows you the breakdown of our financing book. You will see that during the third quarter, the bank has booked gross new financing. I mentioned about close to around AED 30 billion. But if you actually look at it from a consumer banking perspective, we are talking about only in this quarter, around AED 3.6 billion, which was 12% higher quarter-on-quarter. And if you look at the total consumer financing that we've grown in the first 9 months, that's a 9% year-on-year improvement, and that stands at gross financing of around AED 10.2 billion. And the key contributors to the consumer financing book have been home finance as well as personal finance. Within the wholesale bank, while the bar does not do justice to what I'm going to say, new bookings on the wholesale side have totaled in the first 9 months to close to around AED 19 billion, of which AED 4.4 billion -- roughly around AED 4.4 billion have come only in the third quarter. Now put together, both consumer gross financing and corporate gross financing, it's very important to see that the bank has grown by close to around AED 30 billion. And this is the number that I was referring to in the previous slides. Gross new financing, both consumer and corporate put together was close to around AED 30 billion, but that, unfortunately, has been offset by early settlement and normal repayments. Our focus continues to be on lower-risk growth avenues. And by that, I also mean that we will continue to focus on our Sukuk investments and that book, you can see stands at around AED 40 billion. So in terms of financing, we've had a good first 9 months as well as a good quarter in terms of gross financing, but those have been offset and hence, the portfolio seems to be muted because of the early settlements and the normal repayments. A look in detail on each of our businesses. On Slide 9, we start with Consumer Banking. In terms of revenue, the revenue has been impacted in the consumer business, primarily due to the low rate environment. And that you can see across all our businesses. The third quarter has witnessed the strongest period for Consumer Banking in terms of just gross financing growth. And we've mentioned that close to around AED 3.6 billion. And in the first 9 months, if you just add up that, we've seen around AED 10.2 billion of gross financing. So that clearly shows that the consumer banking traction is now moving in the right direction. Home Finance has been good in the last quarter, and we've seen a 5% quarter-on-quarter growth, and that is just purely the recovery witness within the real estate sector. Second, to lead the pack is personal financing. Again, we've experienced a very strong quarter-on-quarter growth of around 25%, and that is ably supported by the various promotions and marketing campaigns that are targeted towards customer segments, and that is purely supported by another very important aspect of our strategy, which is data analytics. On Slide 12, we are very quickly going to look at our corporate business. Our corporate portfolio where it stands is relatively stable at around AED 150 billion. Now we -- I've mentioned it, and I'm reiterating the fact that we've seen close to around AED 20 billion of new gross financing on the corporate side, but that clearly has been offset by some extraordinary repayments and normal settlements that we have witnessed in the first 9 months. Yields, again, a reflection of where the interest rates are. Majority of our corporate book is variable in nature and hence, as expected, the yields in the first 9 months when compared to the first 9 months of 2020 have come down the pie in the middle just shows you how well diversified our book is in terms of our corporate exposure. And in terms of our current and savings account also corporate is a significant contributor. So overall, we've maintained a very well-diversified corporate book. And the book is well spread within the key sectors of the economy, which have now started to bounce back. On Slide 13, a look at our treasury business. A solid 13% year-to-date growth in our fixed income book. It stands at close to around AED 43 billion. We started the year at around AED 38 billion. And this has always been a very deliberate strategy, and we've made sure that we continue to see at low-risk asset growth opportunities. The fact that we have grown even in our corporate book, and I've mentioned around AED 20 billion, that was offset by some early repayments and prepayments. But the treasury book has supported the bank in terms of growth ambition, and we've grown our treasury income book. It's just a reflection of the availability -- the available options within the market in terms of Islamic Sukuks. The portfolio, as you can see, comprises of highly rated sovereign and that constitutes around 70% of our book close to around 70% of our book. And in terms of the growth strategy, we've seen close to around 28% year-on-year growth in net operating revenues across our treasury business. So all in all, I think a good business, well run, and we've seen that the first 9 months have panned out well as far as this part of our business is concerned. Obviously, our consumer business as well as our corporate business has grown in the right direction, had it not been for the normal repayments on the consumer side and the extraordinary repayments on the corporate side. The asset position or the balance sheet position or the financing position of the bank would have been different. Treasury of this year enjoys the advantages of no prepayments and hence, the book is standing at AED 43 billion, clearly AED 5 billion or 28% increase from where it used to be. In terms of our asset quality, a few slides, we will spend some time on this. Slide 14 talks about the increase in nonperforming financing ratio. And that is primarily due to some past-due exposures that are being leased structures, and we've decided to move them into the NPA category as per our prudent risk management approach. Note that the NPF that today stands at around 6.7% includes NMC, which we've spoken about in prior quarters. as well as POCI coming out of our Noor Bank acquisition. Now this actually makes up around a fit of the book without which the NPF ratio would be sitting at around 5.4%. So had it not been for these 2 items that I've mentioned, NMC as well as the POCI originating out of the acquisition, we would be today being at a nonperforming financing ratio of around 5.4%, which would have been in line with our guidance. Having said that, we are where we are, and we are taking that within our stride. We stand at 6.7%. Important to still say that this is below the industry average. Cost of risk, we've witnessed a steady decline, and that has dropped by around 36 basis points. Year-to-date, we just stand at around 1.01% when compared to around 1.37% in 2020. So I think we've done well on the cost of this side. And that just is a reflection of the economy improving as well as our strategies that have paid rich dividends for us till date. On Page 15, again, is just a graphical representation in the form of pie charts. I've already covered this in the previous slide, but it just shows you that the total NPF stands at an absolute amount of AED 13.8 billion, out of which AED 11.1 billion refers to DID score NPL. And if you then strip out a new medical center, again, that's a declining amount. We were north of AED 2 billion, and you can see that we've made recoveries in that portfolio in that particular facility as well as the Noor POCI. If you just strip them out, the NPF actually stands at around 5.4%, which can be seen on the second pie left right on top of the page. In terms of Slide 16, again, that's a stage-by-stage coverage of our exposures. You can see that our Stage 1 exposure stands at around AED 169 billion. And you can see the ECL coverage is just slightly short of 1%, roughly at the same levels where we were in 2020. Our Stage 2 coverage stands at around 6.2%. And that seems to have reduced. But the reality is that when the Stage 2 numerator has increased. Obviously, it is not being covered with 100% provision. And hence, the coverage on -- the ECL coverage on Stage 2 would be reduced. Similar story on the Stage 3, it stands at a slight increase of around AED 13.8 billion versus 2020. So overall, in terms of asset quality, what is important to note that, obviously, the numerator has increased slightly from where we were at the beginning of the year. And those are some of the accounts that we've decided to classify based on our conservative approach. But more importantly, in terms of NPL percentage, not just the fact that a stand-alone NPL of DIB, should you strip out the 2 items that I have deferred to stand at 5.4%, but also the 6.7% is impacted by the lower denominator because had it not been for these prepayments and early settlements, I think the percentage of NPF would have been completely a different story. But like I said, we are where we are, and we are taking this within our stride. And from here on, we don't see increase in the numerator. And should the denominator increase or even remain to where it is, we will be comfortable with the levels of NPF that we've reported so far. On Slide 17, we should analyze the economic stability program that was put in place by the UAE regulator and how that translates for DIB. It's a slide that we update every quarter. We started to show you this from prior quarters. You can see that following the stabilization of the banking system, we are now -- the worst of the pandemic is behind us. You clearly are reading headlines that the UAE economy continues to recover clearly at a faster pace than its global counterparts. The recovery evidence also within the DIB test portfolio were declining outstanding deferrals. And we have provided deferrals to more than about 50,000 customers this far. As of the first 9 months, September 2021, the outstanding deferrals have declined from around AED 3.6 billion in the beginning of the year to around AED 3 billion. So outstanding deferrals as they stand today at around AED 3 billion. So that shows you the -- it depicts an improvement in the portfolio as well as the general macroeconomic landscape. On Slide 18, we are very quickly going to look at our funding sources and our liquidity. Liquidity has always been a strong point for the bank, and 2021 has been no different. Customer deposits have grown by a healthy 4%, and our customer deposits stand at around AED 214 billion. And the liquidity position that we are in allows us to enjoy a very healthy LCR. You can see that we are at 160% way above the minimum requirement. And even in terms of the advance-to-deposit ratio, we stand at around 90%. Clearly, demonstrating that we have adequate liquidity in order to support our growth ambitions. This liquidity has allowed us to maintain the growth momentum that we have seen in terms of underwriting the gross financing that I was talking to you about, close to around AED 20 billion in corporate and close to around AED 30 billion in -- when I say AED 20 billion, it includes wholesale as well as around AED 10 billion in consumer. So clearly, liquidity has been one of the strong points of the bank and we continue to be a liquid as we speak. On Slide 19, d a's look at our capitalization levels Improving business conditions has allowed us to have a sequential enhancement of profitability whilst obviously lower provisioning, the cost of risk is low as well. We've seen that in the asset quality slides. And that then just generally allows us to improve our capitalization levels. And you can see that both our CET levels as well as our car levels are comfortable. Our CET has actually improved from 12% to 12.8% and our capitalization level stands at 17.5%. At 18.5%, it's important to note that for the brief period, we were sitting with 2 outstanding Tier 1 perpetuals. And since then, one of them has been repaid. So whilst it looks like a decline, the 17.5% is clearly above the comfortable levels that we put internally for ourselves. In terms of Slide 21, and I'm now going to start very quickly looking at the strategic focus and where we are and we we've been so far in 2021 and what we intend to do for the remaining part of the year. On Slide 21, a look at our digital business. Digital continues to be a key growth area for us. I said that before. And if you see across major metrics, our user base has increased and so have our transaction volumes. During the quarter, we've also added, I think as a language to our bank's core branch system, and that obviously is going to help generate consumers in that segment. Our customer experience continues to be enhanced in addition to new-to-bank customers, we can now also process documentation out of our digital channels. So clearly, digital continues to be within our core strategy, and we expect further branch rationalization in terms of size, space as well as number of -- to play a major role in further enhancing efficiencies. And if you just look at some of these graph that had been put on the slide in front of you, you can see that there is an uptick across mobile banking transactions or across Internet banking transactions. Same period or even year-on-year. So I think digital drive has clearly supported the new look DIB. On Slide 22, we continue to follow our strategic team and that you can recollect is protect, innovate, nurture and grow. This is key to our strategy that we have adopted this far. In terms of everything that I've said so far, how this -- has that translated into target metrics. Let me start by saying that the growth -- the targeted metrics of around 5% when we had put our guidance at the beginning of the year, 5% was a number that we were very comfortable with. And had it not been for these early settlements and these prepayments, we would have achieved that number in the first 9 months. So I think in terms of growth, gross financing, we literally have had exceptional year. In the first 9 months, we have grown better than what we had done in any of the previous years that have gone by. So I think in terms of pure gross financing, it has really, really worked for the bank, but in terms of where the financing book stands, we've not achieved the number and we'll fall short of that in terms of guidance, clearly because not because we've not had new business opportunities, but because we have been experiencing extraordinary repayments, which on the positive side is a good thing also because it shows you signs of recovering economy. The nonperforming financing, again, a similar story because the denominator has not grown as anticipated at the beginning of the year, that has a reflection on our nonperforming financing ratio. It stands at 6.7%. Even though it is below the industry average, we would have wanted it to be at 5.5%. Having said that, we have not seen significant new NPL formation. The names that today sit in our book are names that have been existing in the bank, and we've decided to classify this based on our prudent risk strategies. Other than that, if you look at the total coverage ratio very closely linked to where we are vis-a-vis NPFs and our cost of risk. Our total coverage stands at 103%. We would have loved to be at 110% at this point in time, and that's a year-end target. We will be very close to that, I must say, in terms of total coverage. And it's, again, a reflection of the accounts that we are classifying when they come into the bucket, they are not 100% provided, and it will be -- provision happens over time and over quarter. So clearly, you will see the cash coverage being enhanced as we go on. But at a point in time today, it stands at around 110% short off where the guidance was. Other than that, I think we've done exceptionally well in terms of all the other key metrics. If you look from that to right, you look at the real estate concentration in line with our own internal guidelines of being close to 20%. We are at 21%. Both our ROEs and our ROAs are on track to meet year-end guidance. In fact, we would better them. ROE stands at 10.9% and ROA stands at 1.4%. Both are up from where they were at the beginning of the year. In terms of net profit margin, we are on the higher side of that range. And again, in a declining interest rate environment, we've done very well to maintain our net interest margins at around 2.6% at the higher end of that range. Our cost-to-income ratio is something that has worked very well for us. That's just a reflection of the excellent cost management exercise that we've been doing in -- or we've been witnessing in the last 24 months. And again, with the enhancement in our income lines and bringing about synergies from our businesses, I think this ratio is -- stands at 26.2% well below our guidance, which is positive. And important to note that this is probably the lowest when it comes to where our market peers are. With that, I come to the end of the presentation. I'm going to spend about 25 minutes taking questions after which the last 5 minutes would once again be used by me to kind of summarize everything that we have seen this time not just this quarter but in the first 9 months, so that we're paying the right picture for the bank and tell you how the strategy has worked. So we'll take a brief pause here and we'll try and review the questions and then sum them up and come back to you with answers to each of them.

Thank you, Dr. Adnan. And everybody, please keep sending your questions through. We're going to take like a brief pause as doctor said, and we will revert to you with the answers in a few moments.

[Operator Instructions]

Okay. So we start with questions from Janany from Arqaam. First question is, could you show some color on NIM drivers of quarter 3 '21? Maybe attribute specific as we continue and are there any one-offs? And also on interest suspended value-added at NIMs. How do you see NIMs trending in the quarter 4?

Thank you, Janany. Obviously, like I've mentioned on one of the slides, the bank has done well in maintaining its NIMs and the NIMs are slightly up than where we were in the -- at the end of quarter 2, and we are on the higher end of our range that we had set for ourselves. To answer your question, there has not been any reversal of interest suspended that enhances the NIMs or for that matter, any one-offs that are included in the NIM. What is driving the NIM enhancement is purely on both the lines. We are making sure that the new booking that is happening in the portfolio is happening at rates that are better than what they used to be. i.e., the margins. And in terms of our cost of funding, we are making sure that our current and savings account mix is bringing our cost of funding down. Even on the term deposit side, we are not paying higher than market rates or in fact, we are very competitive on our cost of deposits. And that just clearly tells you better cost management -- cost of funds management. And I think we are in a comfortable position, and we can afford to do that given that the bank has been adequately liquid and that actually has been core to our strategy, not just for this quarter or this year, but that has always been the reflection of what the bank has done. So net interest margins stand at around 2.6%, and we anticipate that we will not see a pressure on our net interest margins during quarter 4. So they -- we would expect that they would either improve or even stay at this level, which would be, I think, an achievement and meeting the net interest margin guidance in a very, very competitive environment would mean that we've done well on that front.

The second question from Janany is on the cost of risk. How do you see cost of risk of quarter 4 after the sequential improvement in quarter 3? And how do you see cost of risk going into 2022 and that's quality going into 2022?

Well, I'm not going to tell you about our cost of risk for 2022 as of now because clearly, as you know, we plan that and once we plan for 2022, we'll come and give you some market guidance on where the NPF should be, recovery should be, what sort of cost of risk. But one thing I must say that we are seeing a marked improvement in our provisioning levels. Despite being very prudent and being very cautious, as you would appreciate in the first quarter and in the second quarter, we were being very cautious. We made the required level of provisions. In quarter 3 also, we have used the strength of our P&L, and we made the required level of provisions, albeit it is lower than quarter 1 and quarter 2. And I can tell you that in quarter 4, the level of provisions required for us to do will be lower than what you've seen in quarter 1, quarter 2 and quarter 3. Now that doesn't mean that we are going to have a kick back and we are going to enhance our P&L by cutting corners we will make sure that we will build our provision levels across the accounts that are required to do so. Now that optically is not visible when you look at coverage ratios in terms of cash provisioning. And the reason for that is because when we classify accounts, those accounts come in, the numerator increases, but the level of provision is built over time. And that's just why there is a brief time period where there is a lag in the coverage ratios in terms of cash provisioning does not mean that we are reversing provisioning or reversing the level of provisions that we carry on each of these accounts. It's just a time lag. We continue to use the strength of our P&L. We continue to make the required level of provisions, not more, not less. And none of our profits are being enhanced by reversal of provisions or reversal of interest suspension. So I think overall, cost of risk has -- we are very comfortable at around 1.01%, lower than 1.37% at the beginning of the -- or what we've seen in last year. Now quarter-on-quarter, we are seeing that the cost of risk is coming down, and we anticipate that quarter 4 is going to be much better than quarter 1, quarter 2 or quarter 3.

Final question from Janany is on how is corporate demand now, and we expect any meaningful recovery driven by Expo 2020?

Well, even before Expo 2020, we've seen exceptional corporate demand, and I can only say that for our bank. I'm not going to talk about the industry. I have told you that we have underwritten corporate financing close to around AED 18.5 billion, AED 19 billion. And together with our consumer financing, which is around AED 10 billion, you add that up, we are close to around AED 30 billion in the first 9 months. You would remember, Janany, that over the years that have gone by. As a bank, we used to grow by around AED 25 billion to AED 30 billion in a year, net of all the repayments and all that. Now should these early presettlements not have happened, we would be in a completely different position in meeting all the key metrics that we have set up for ourselves. But again, we don't lose sleep over that. I think we've grown well. It is -- what is happening to see is our ability to generate new business. And that's what we have done over the first 9 months. And in the last quarter, we will continue to do that. The kind of strong pipeline that we have in the last quarter is going to allow us to do 2 things: one, grow as well as meet some additional repayments that we know are going to happen. Additional prepayments that are going to happen in the last quarter. So I think in order to make sure that the portfolio does not come down, we've got to ensure that there is a strong pipeline, and that's what we are going to be doing in the last quarter. So first 3 quarters, great gross financing. Last quarter, we again anticipate that we'll have a an excellent quarter in terms of gross financing. You may not see that reflect in the total portfolio number at the end of the year. That's once again because we are anticipating and expecting that with this macroeconomic recovery, there are going to be some significant repayments, but we are not going to be bleeding our portfolio. We'll make sure that our portfolio is intact, which means that we'll have to ensure that both gross financing on the consumer side as well as on the wholesale banking side is just like what we've done in the first 9 months. So we are expecting an excellent quarter 4 in terms of gross financing.

Thank you, doctor. Brief pause, ladies and gentlemen. We will look at the next set of questions.

[Operator Instructions]

Yes. I was looking at set of questions from Rahul. Rahul, I think we've answered all the questions, but is there anything else which you want specific, you can always get back as well. So a quick -- a question from Edmond from Bloomberg on the overall loan exposure in the debt portfolio, and the quality of that and what's new on that?

Yes. I think, Edmond, you're right. The deferred loan exposure has remained stable at around 17% and that is despite the repayment of the corporate loan book. We do not anticipate any more extension from existing customers. As you know, the test program terms of extensions are going to -- is going to be expiring in a phased manner by the end of this year. And not just DIB, but all banks put together are not anticipating requiring a deferral program because customers are literally moving out of the test program and most of them are already out. And that is also reflected in DIB's own best numbers. Quarter-on-quarter, you can see these numbers have been declining. Our test balance at the beginning of the year used to be at AED 3.6 billion, and it stands at around AED 3 billion now. So clearly, I think you are right in saying that it has stabilized, and we do not see any more -- and we do not anticipate any more extension of the test programs, definitely not for our customers for that matter.

Another question from Edmond from Bloomberg is on the competitive nature of the environment we have either current account deficit and low cost involvement, so how do we see us progressing in fourth quarter and going forward vis-a-vis the cost of funds?

Edmond, thank you for your question. Now in terms of our decline in current accounts, we've got to look at CASA together. So if you actually look at CASA together, yes, whilst the current account balances in absolute number have declined, the savings account balances have increased. And so have the balances in fixed deposits. So as a whole, we've made sure that in terms of our composition -- our CASA composition, we stand at around 39%. Whether it moves between current and savings account to us is, we are very indifferent because we hardly pay rates on saving accounts. So generally, a good CASA mix allows us to maintain a very healthy cost of funds. And that's how we've been able to maintain our net interest margins, which I've mentioned in the -- in my presentation. So I think in terms of our total CASA book, it stands at where it is. And in terms of our source of funding, you will see -- and you witnessed that our sources have increased. In fact, today, we've seen an increase of close to around 4% in this year, in the first 9 months. So I think -- and the fact that our ADR ratio stands at around 90%, our LCR ratio stands at around 160%. This just shows you the ability of the bank to mobilize deposits at will, and that has always been a strong point. So something that we have never been worried about, and we continue to do so even in the latter part of this year going into Q4.

So last couple of questions from Bloomberg, Edmond, again. We're looking at what are the drivers of growth for the next year, whether it's retail or public sector or corporate and what would be expected in terms of the growth rate is coming from. And finally, and the last question is on the efficiencies, perhaps the technology spending and how we are looking at that in terms of cost base?

Thank you, Edmond. Even though I would, at the beginning of next year, give you guidance on what these numbers would actually reflect in 2022 from a growth perspective. I think it is important to paint some color to this. In terms of our drivers, we are going to continue doing everything that we have done in 2021 this far, even when we go in the last quarter of 2021 as well as moving into 2020. By that, I mean that if you look at the gross financing that we've underwritten, across all our businesses. This is something -- it is the ability of the bank to generate this kind of business volumes, and that is by following a very prudent strategy across our wholesale group as well as a very prudent strategy across our consumer book in terms of underwriting or financing. This is something that we will continue to do even in Q4 of this year as well as going to 2022. So to answer your question, yes, you will see us underwriting the same kind of volumes in 2022 within the consumer book as well as within the wholesale book. And should we do that? And if we do not see any extraordinary settlement that we have witnessed in this year, and I anticipate no extraordinary settlements in 2022, I think the result of that with this kind of gross financing underwriting and no extraordinary settlement, you will see the bank growing its financing portfolio to the levels of what we've been growing in the prior years. 2021 has been an exceptional year for us, not in terms of underwriting. But in terms of where our financing portfolio sits, given the early settlements that we've spoken about. Your last question in terms of cost savings and if the cost base at an optimal level? We will always try to maintain the cost-to-income ratio at the current levels, if not better. And I think maintaining a cost-to-income ratio at levels of around 26%. And we've seen that in the last couple of years with the exception of the acquisition year of Noor Bank where I mentioned that it would just temporarily go up and then we will work towards bringing it down. We've done that. To operate at these levels at around 26%, 27% is an achievement. So -- and we've done that by managing our costs well and does not mean that we've not done investments in technology. I've already mentioned that we are looking at our digital aspirations in a manner that we've not done before. We've done that in 2020. We've done that in 2021. So we continue to invest where required. It's just that we are managing our costs well, managing our incomes and the synergies from our business avenues well. and that allows us to maintain a healthy cost-to-income ratio standing at around 26.2% today. We will end the year with a good cost income ratio. And I don't see a reason why 2022 also cost-to-income ratios cannot be maintained at this level or better.

Thank you, Doctor.

[Operator Instructions]

We had a few questions from Alok. I think the first set that I've seen, we've already answered those questions, so we will move on from there. Thank you. A couple of questions from Varuna from People Bank. The first question is around the repayment being more pronounced in retail banking segments, then corporate sustained duration and what is the reason for that. And the second question as well, as for corporate, it seems that the repayments are normal considering the duration of these loans, and the issue is not only financing, any sorts of this.

Varuna, I think you've -- you possibly got it wrong. And let me try and emphasize here that in -- first, the retail -- repayment, they are not more pronounced than corporate repayments given the duration, which is what you're mentioning in your question, it's because as you would appreciate that the retail book largely setting aside Home Finance, which is a slightly longer average duration. If you look at the retail book, which comprises of personal financing, auto financing, small and medium enterprise financing, these are generally shorter tenors. Now that means that the book would naturally attrite within 42 to 48 months, right, 3.5 years to 4 years. Now when that happens, the normal repayment on retail banking would be faster than the corporate banking. Clearly, because you would have to underwrite more gross financing on the retail side, given that the book is attracting faster. So that's just a normal way the retail financing book is structured, not just for Dubai Islamic Bank, but for all the banks given that the regulator has capped the tenors that you can lend within the retail segment. You said that the corporate banking repayments are normal. No, let me correct you by saying that we are not only referring to the normal repayments which follow an amortizing structure in the corporate bank, but also, we have witnessed some extraordinary prepayments, close to around AED 10 billion in this year. Now when you add up all the numbers, you will reach to the conclusion that the repayments, the normal repayments in the consumer bank as well as the corporate bank adding to its extraordinary prepayments or presettlements in the corporate bank, not in the consumer bank, in the Corporate Bank, have been more than the normal underwriting that we've been doing across these 2 businesses. So I think you've just got it a little wrong in probably sequencing your questions or maybe just -- there are some typos in it. But it's important to note and I'm once again reiterating that we have seen extraordinary prepayments in our wholesale bank, corporate banking specifically, that is resulting in our portfolios been seemingly stagnated and not increasing. And our retail book has just behaved as expected, which is shorter tenures and normal repayments would mean portfolio attrites a little quickly.

So there are part of few actually questions that have come through. So we would -- we have around 5 more minutes to answer those, and then we will obviously take them offline with all of you, so you can get in touch with the IR team. Thank you.

[Operator Instructions]

Okay. So a question we've got a question from Waleed from Goldman Sachs. Where do we see the normalized cost-to-income ratio for the bank and having seen strong growth between customer and transaction has continued through the quarter, how much is your total investment outlaid edited and how much has this already been spent? [indiscernible] affordable.

Thank you, Waleed, for your question. Well, we are at cost-to-income levels, which in the cost also, I have said, these are normalized levels for the bank. As anything below 27% in our opinion are levels that we can manage. At 26.2%, I would say that these are normalized. As always, quarter-on-quarter, we'll try to enhance that further. But I think it will be fair to say that we have reached our normalized cost-to-income levels in terms of 2 things. One is cost. We managed costs very well, but I anticipate incomes to increase going forward. And that can bring the cost-to-income ratio down a little more. In terms of guidance for 2022, we should wait and that could throw some color. But I can tell you that going into quarter 4, we would be at these levels or even lower for that matter.

So a question from Chiro. On particular NMC that the exposure continues to decline, so how you manage it do that. And are you witnessing also strong competition in the retail space with NIMs et cetera.

Chiro, thank you for your question. In the past, I have already mentioned this, but I don't mind repeating. You can see quarter-on-quarter that our NMC exposure continues to come down. Now this actually takes you back way -- takes you way back in time when I said that the way we had underwritten the NMC exposure was on the back of cash flows that have been assigned to the bank. And we continue to ensure that legally, we have access to these cash flows. And this is how we have been able to recover and bring down the NMC exposure, which used to stand at close around AED 2 billion and it's public knowledge that it stands at around AED 1.6 billion. So month-on-month, we continue to enjoy the position that was the very basis of our credit underwriting. We had always -- and that should give analysts as well as investors enough comfort that in all the years that has gone by, the bank has been very prudent in its growth everything that we have done to grow the bank's financing book or the balance sheet has been without compromising on our risk management principles. And NMC is a classic example to do this kind of underwriting that we had done on NMC or the likes of NMC. And I'm not going to take any more names for that matter. The fact that we had followed a very prudent underwriting strategy is paying us rich dividends today. And of course, where we are vis-a-vis NMC is in the public domain, and we are happy to take further questions on that offline as well. But all things being equal, the bank continues to be strong and continues to protect its position as far as not just NMC, but any other financing facility is concerned. So that just gives you color on NMC. And in terms of strong competition in the retail space in terms of NIM. That has always been the case. Despite that, even in the years gone by, we have been witnessing strong challenge from competition, not just in the retail space, but also in the wholesale space. Having said that, the bank has grown the way, it has grown in the last few years. And the bank has also underwritten the kind of business in the first 9 months. So it just shows you the kind of franchise value that we have and the ability to generate and underwrite financing and the ability to mobilize deposit to support that kind of growth. 2021 has been a bounce-back year for us in terms of not just our profitability, but also in the ability to generate these gross financing. With that, I'm coming to the end of my question-and-answer session. And it is very important that I just use the next 5 minutes to summarize everything that we have seen so far in the first 9 months for the bank. Let me just say that the last few months have produced another solid performance from the bank. And this is something that we have seen and I have articulated it over the last 1 hour or so. Our P&L quarter-on-quarter continues to show robust growth with our sequential net profits, they are up by 18% and 19%, respectively, in the last 2 quarters. In terms of numbers, we are witnessing our numbers build-up, and that is on the back of improving economic conditions, expo as well that is going on right now, oil and where the oil levels are as well as lower impairments and cost synergies. So clearly, our P&L is showing healthy signs. We have done exceptionally well on our net operating revenues, as you saw in Slide 8 as well as on Slide 9. And in particular, profits prior to impairment, which is an important line, right? Net profits prior to inpayments is up by 10% for the year. So for the 9 months period to period, you might see that we are playing catch up with the first 9 months of 2020, and we are almost there breaking even. And the last quarter, we expect it to be better than the first 3 quarters. So you can extrapolate your own net profit numbers. Coming specifically to guidances, despite a recovery through still a challenging environment, the bank has performed more or less in line with guidance. And in fact, across a lot of metrics, we better the guidance. But lastly, I would like to talk about 3 guidances that we have missed, and I'm going to cash the bull by its own. When we talk about earning assets, we had guided for around 5% growth. I have already explained that from the beginning of the year, our pipeline has always been there, and it has been healthy. That's exactly what we've done in the first 9 months. Our underwriting has been close to around AED 30 billion across our consumer business and across our wholesale business. And that just shows you the reflection of a strong first 9 months or the first 3 quarters. Unfortunately, there have been some extraordinary unanticipated prepayment and that has resulted in our growth guidance being missed in terms of our portfolio number. However, we are extremely comfortable that these early repayments are a sign of fast-improving market condition. And that just means that we would go into 2022 on a strong footing. The second guidance that we have missed is asset quality. Now we were targeting 5.5% towards the end of the year excluding NMC and POCI, if we were excluding NMC and POCI, we would be very comfortably sitting at that guidance. Having said that, we have to take those 2 items in our stride and we are standing at around 6.7%, missed our guidance of 5.5%, but even at 6.7%, we are lower than the industry and where the industry is. Lastly, in terms of coverage, again, somewhat lower than targeted. And again, it's a reflection of when you classify accounts and those accounts slow in your numerator, they don't come in with 100% provisioning, and that just means that your cash coverage is going to look like -- look lower, at least in the interim. But over time, we would build provisions on those and the cash coverage would improve from where we are at this point in time. So I've used the last part of my hour or so to summarize. Once again, thank you for listening in. Look forward to speaking to you again, and we would definitely meet again in -- at the beginning of next year to look at 2 things: one, how we stand out in the full year 2021 as well as what would be the guidance that we've set for ourselves for 2022. Thank you.

Thank you, Dr. Adnan, and thank you, everybody, for joining us on this call, and we look forward to welcoming you again in the next month. Thank you, and goodbye.