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

Good morning or good afternoon all, and welcome to the Dubai Islamic Bank Full Year '22 Earnings Call. My name is Adam, and I'll be your operator today. If you'd like to ask a question on today's call, please submit it via e-mail to webcast@dib.ae. I will now hand over to our host, Janany Vamadeva, to begin. Please go ahead when you are ready.

Thank you, Adam. Good morning, 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 Full Year 2022 Earnings Conference Call. I have with me here today from DIB management, Dr. Adnan Chilwan, the Group Chief Executive Officer; 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.

Thank you, Janany, and welcome, everyone, to the full year 2022 results webcast of Dubai Islamic Bank. The session is led by our Group CEO, Dr. Adnan Chilwan, accompanied by John Macedo, the Chief Financial Officer, and myself. Request everyone to keep the questions coming in through the e-mail provided, which is webcast@dib.ae, and they will be then addressed by Dr. Adnan at the end of the presentation. So with that, let us start. Moving to -- on Slide 4. As you can see, inflation has certainly been the key economic theme in 2022 with price growth breaking decades long records in several major economies. And this has led to policymakers across the group to brace against the phenomenon of the hiking industries. Accordingly, a combined maybe 1,000 basis points have been raised across the U.S., Eurozone and U.K. Now despite easing of inflation in a few economies by year-end, price growth remains above target in all markets calling for slower pace tightening. Looking at global demand, expectations that the reopening of China's economy should provide a demand boost and see inflation tick up in 2023 despite reported rise in COVID-19 cases. And closer to home, the GCC region continues to remain a bright spot amidst the global events, mainly supported by hydrocarbon prices and production. Having said that, the outlook for GCC in 2023 remains constructive with non-oil GDP growing in the region expected to remain around robust as governments continue to invest in the strategic sectors and projects to diversify economies. On the back of the cyclical rise in revenues and on the -- and the ongoing fiscal reform efforts, most budget balances for the region are projected to continue to report surpluses during the year. We move on to Slide 5. The UAE economy has been, as you can see, in the limelight this year and joined a healthy recovery by exhibiting a strong post-pandemic revival. GDP figures published so far is a testament of such recovery, with capital of Abu Dhabi recording real GDP growth of about 11.2% in the first half of 2022 and going to about AED 543 billion; and Dubai, expanding 4.6% year-on-year in the 9 months 2022 to about AED 308 billion. Overall, the business activity has picked up and consumer spending grew 20% year-on-year in the 9 months despite the inflation concerns. During the year, a number of strategic and legislative changes have been announced, adding to the competitiveness of the nation, including the UAE 2031 [ Wellbeing ] Strategy and others such as the unemployment insurance, more stringent, emiratisation targets and family business laws and civil personal laws status. And coming to Dubai now, the tourism sector maintained its strong performance in 2022 and has picked up pace in the last quarter of the year with about 11 million tourists visiting the Emirate over the 10-month period, meeting -- marking a 134% increase compared to 5 million last year. The residential real estate market of Dubai also saw a significant recovery in 2021 and 2022 after being in a sort of a slowdown pace since 2016. And this strong comeback was due to higher end user demand, increased interest from international buyers and favorable government reforms. GCC equity markets also outperformed global and emerging market peers during 2022. With IPO activity in GCC markets being very strong with 48 issuances in 2022 compared to 20 issuances in 2021. So the issuers continue to remain confident of the business fundamentals and as well as investor appetite. Locally, Dubai financial markets added 4.4% while the ADA ended the year at up 20%, with both indices benefiting from a number of prominent IPOs this year. Bulk operations which came from government's mandate to bring select state-owned enterprises into the UAE Stock Exchange. Now with that, preamble, I will now hand over to Dr. Adnan Chilwan, Group Chief Executive, to take you through the full year financial results. Dr. Adnan, please.

Thank you, Kashif. Good afternoon, everyone. As always, I will quickly do a page turn of the presentation and then open the call for questions. I'll also take the last 5 minutes of this hour to summarize the key achievements of the bank and everything that we've discussed on this call. I draw your attention to Slide 7. An overall robust set of results across the bank around both profitability and balance sheet can be witnessed on this slide. Improving business sentiment along with the bank's agile strategy were driving forces behind this solid performance, an example of agility and tactical moves that we've done in 2020, where the bank's focus on quality and structural sourcing rather than growth only. Now we seize the opportunity of ample market liquidity to deepen the relationship that we have with our clientele in both the corporate and public sector areas getting solid grounds for growth in 2023. Now in line with the region's operating environment, our core assets, mainly financing and Sukuk Investments, grew by a net of 5% year-on-year. If we zoom into these earning assets, you will witness that our gross new underwriting during the year equated to nearly AED 63 billion, which was up 36% year-on-year. This, however, was offset by the normal repayments, which were to the tune of around AED 32 billion. But more importantly, they were [ dropped ] by early settlements of around AED 21 billion, resulting in an overall net growth of close to around AED 10 billion in our financing and sukuk book. In terms of net profit, the bank has delivered around AED 5.6 billion, which is 26% year-on-year, a record-breaking figure and obviously the highest in the DIB's history. This is a true testament to the bank's strategies, i.e., managing efficient P&L, a robust financial position as well as bank's franchise strength. The cost-to-income ratio improved from where we were at the beginning of the year and came down by around 70 basis points year-on-year to land at 26.1%, which you will agree is one of the strongest in the market. So overall, a positive set of results, which obviously I'll expand on subsequent slides. I draw your attention to Slide 8, where you can see 2022 has been a very strong year across all fronts. We've delivered a strong financial performance with total assets increasing by 3.3% year-on-year, coupled with profitability that has risen by 26% year-on-year. That said, I've already alluded to the fact that our net financing and Sukuk Investments have increased by 5% year-on-year despite higher-than-expected repayments, which I have mentioned within my opening remarks. The slight decline in deposits year-on-year can be attributed to the competitive environment that we are seeing given the rising rates globally, and we've seen that for a large part of 2022. As I've mentioned in my previous calls, we manage our liquidity very closely and keep a strong balance between, one, the required liquidity; and two, the impact of that liquidity on the margins. On the P&L side, the picture has been nothing but outstanding. Our persistent efforts to focus on improving our financial performance has kept the bank strong as well as profitable. Now margins, as you can see, are on an upward trajectory exceeding guidance. Now thanks to our assets and liability composition. Also, impairments continue to scale lower, and we expect this to further improve within the early half of 2023. While monitoring our OpEx very closely, we keep good control while also keeping a balance between growth as well as strengthening the group, and this we will continue to do so over the next few years. In this regard, the bank has also been investing and strengthening some key functions such as risk, information technology, infrastructure, compliance and the various other support functions that would mean nothing but a solid foundation, allowing the bank to grow from here on. Accordingly, profitability has been rising with an impressive 26% growth year-on-year within 2022. On the right-hand side of the page, you can see that all our core ratios remain robust with most key metrics meeting our year-end guidance and in certain cases, also exceeding that guidance, which we will dwell further in slides to come. On Slide 9, a look on the operating performance of the bank. Net profit margin continues to be on an upward trajectory. And this, you can see, has exceeded our guidance at the beginning of the year. A slight increase in OpEx is part of a deliberate strategy that I've alluded to in the years gone by, specifically in the last 4 quarters, and that was predominantly to strengthen and enhance the key functions within the bank. However, if you compare the cost-to-income ratio, which has continued to remain a focus area for us, we are well within the guidance and potentially the best in the market. Return ratios, and by that I mean the return on assets and return on tangible equity, has met the year-end guidance. In fact, return on tangible equity has outperformed our year-end guidance, which we had, if you recall, revised in the first half of 2022. Now with both these ratios, we remain comfortably positioned to our commitment that we made to our shareholders. On Slide 10, which is an overview of deployment of our financing. Our assets, like I said, have expanded by 3.3% to reach to AED 288 billion, majority of which is coming from sukuk as well as our interbank balances. Our new gross financing, the new underwriting that we've done in the entire 2023, and this is across all our businesses put together, Corporate Banking, Investment Banking, wherever applicable Consumer Banking as well as our fixed income book. the new gross financing or new gross underwriting has reached to around AED 63 billion in 2022. Now on the pie chart towards the bottom half of the page, you will see that we have successfully met our real estate concentration guidance. And this is real estate concentration within the loan book of the bank, and we've reached that and ended the year at around 20%, which was in line with the guidance. On Slide 11, which is a look at our Consumer Banking business. This portfolio now stands at AED 52 billion, and it's up by 5% year-on-year, constituting 27% of the total financing book of the bank. So clearly, a growing business, clearly a business that we are focusing on. And the increase in this consumer book is largely attributable to the growing mortgage book that we have, and that has grown by roughly around 10% year-on-year. On this portfolio, we booked new gross business, and this is new underwriting. I alluded to the fact that we've done AED 63 billion bank wide in terms of new gross underwriting. But when you look at the consumer business, we've underwritten about AED 18 billion in 2022 versus AED 14 billion in 2021. Now despite the routine repayments that we have seen in this portfolio to the tune of around AED 15 billion, the consumer portfolio exhibited positive growth overall, growing by roughly around AED 2.5 billion, AED 2.6 billion. Revenues within the consumer bank has been up by around 1%. And obviously, with rising interest rates and the new bookings coming at better profit rates, the yields have expanded by roughly around 36 basis points to almost 6%, underpinning strong profitability. The current and savings account deposits on the consumer side were overall very stable. Now this is seemingly agnostic to the current rate environment. Now you will obviously realize that in a rising interest rate environment, consumers should be looking at fixed deposits, but we've been able to manage our current and savings account on our consumer side, thereby bringing our cost of funding down just for -- not only for the consumer bank but also overall for the bank. Slide 12 looks at our Corporate Banking business. This portfolio stands at around AED 134 billion. And it remains very well diversified. You can see that when you look at the color of the pie in the middle of the slide, a very well-diversified portfolio with growing share of government disbursements, indicating our focus on quality, low-risk assets and deepening relationships with the government entities. This is a strategy, if you remember, we have articulated very well at the beginning of 2022, rather towards the end of 2021, saying that in 2022, we will be looking at growing our low-risk segments. And by that, we did mention that we'll be focusing on government sovereign -- quasi-sovereign entities, as long as we do not breach any of the prudential regulations in terms of limits, which we have not done. Gross corporate financing has reached around AED 31 billion during the year. And again, that's an indicator of our growing business volume and a focus in this area. However, this has been offset by routine repayments of around AED 14 billion and the unexpected early settlement that I spoke about, which was to the tune of around AED 21 billion. So overall, when you look at the corporate book, it might seem that this is a business we're not focused on. But in reality, the business grew more than it grew ever before in the year that's gone by but they were dropped by significant repayment and extraordinary early settlements that we were not anticipating at the beginning of the year. The revenue trends within the corporate bank continue to be on an upward trajectory given the floating nature of our book, and you know that roughly around 65%, 70% of that book is floating in nature. So with that, we have captured most of the Fed rate hikes and passed them on to the corporates, reaching roughly around AED 3.7 billion in revenues during the year. The government sector continues to contribute strongly, now representing 17%, and you can see that within the pie chart of the corporate book. And that used to be 12% in 2021. Now this is a deliberate strategy that I've already mentioned, to grow within the low-risk asset base. And that's exactly what we'll be doing in 2023 as well. On the deposit side within corporate bank, the corporate current and savings account balances have increased quarter-on-quarter by 38%, efficiently increasing the bank's funding base and also contributing to bringing the cost of funding down. Slide 13 looks at our treasury business, a very important business since the last so many years, but more so important in 2022. The treasury portfolio, primarily the fixed income book, stands at roughly around AED 52 billion. And that is up from around AED 42 billion at the end of 2021, so an increase of net AED 10 billion within that book. Predominantly, 84% of the treasury book is concentrated within the government bonds as well as financial institution bonds, and that's just a reflection of the frequent issuers in the market. Yields have expanded within treasury book by around 43 basis points, and that's predominantly based on the new bookings that we are doing, which is factoring the new issue premium or the new rates that we are booking these new issuances on. So the yields have expanded by around 43 basis points year-on-year, of course, due to the portfolio mix. Yet revenues last year were higher primarily due to the sale of certain parts of the fixed income book within 2021. Now you can appreciate that when interest rates go up, the bond prices come down, and then that inhibits our ability to probably divest a certain part of our bond book because we will have to crystalize losses. In 2021, when interest rates were low, the bond prices were high. We took that opportunity in order to exit certain investments, which was again a very deliberate strategy because we knew that there would be anticipated interest rates hike, and we will get an opportunity to reinvest in some of those issuances once they come to the market at higher premiums, which is exactly what we did. So in 2021, we exited a certain portion of that fixed income book, realized capital gains and then again reentered those positions in 2022 when the prices were better. But that also then meant that we did not get an opportunity to sell or divest the book and make capital gains. On Slide 14, a look at asset quality. Nonperforming financing ratio is on a continuous downtrend. And you can see that we've ended the year at 6.5%, down by 30 basis points year-on-year. A strong macroeconomic backdrop across the GCC has led to the sharp decline in provisioning expenses in 2022 as well as obviously low nonperforming loan formation in general. For us, in absolute amounts, our NPF has dropped to under AED 13 billion, and that is down by around 6% year-on-year or 2% quarter-on-quarter. Due to recoveries, both within the core DIB book as well as in certain cases like NMC or the Noor Bank POCI, demonstrating improving business sentiment all around us. Our provision coverage has improved significantly, and that has improved by around 600 basis points or by 6%. We have ended the year at 78%, in line with our overall risk strategy. You can recollect that we started the year at 72% cash coverage, that is at around 78% by the end of the year. In terms of total collateral coverage, obviously, we are sitting very comfortably at around 110%. You can see that the impairment charges have declined 14% year-on-year. And more importantly, the cost of risk is down by 15 basis points. We've ended the year at around 84 bps when compared to 99 in 2021. And if you recollect the numerous calls that we've had together or the webcasts that we've done in the past, we've always mentioned about our normalized cost of risk between 80 to 85 basis points. That is exactly what 2022 has ended at, around 84 basis points, which is our normalized cost of risk. On Slide 15, a detailed look at asset quality. We have shown this pie for a reason because we wanted to also strip out DIB's core nonperforming loans versus some of the other colors in that pie that usually skew the pie if looked together. DIB's core nonperforming financing portfolio has improved by around 4% year-on-year. It stands at around AED 10.7 billion. So out of AED 13 billion, AED 10.7 billion is a core nonperforming loan, which then leaves us with new medical center. It's something that we've been throwing and shedding light on over the large part of 2021 and 2022. So when you look at new medical center as well as the Noor POCI, which we took over after acquiring Noor Bank, that constitutes around 17% of the total nonperforming loans. Both of these have also seen improvement, and they have declined by around 14% year-on-year to reach to AED 2.2 billion between them. Now new Medical Center, as you recollect, at around AED 2.1 billion when we classified that account as nonperforming loans. That stands today at around AED 1.2 billion. Roughly around AED 800 million of recoveries have already been made on that portfolio. On Slide 16, look at asset quality by stages. Happy to report that Stage 2 loans have dropped by notable 21% to reach to AED 15.6 billion, and that is down from AED 19.8 billion at the end of 2021. So that's a significant improvement in our quality. The Stage 2, when you look at quarter-on-quarter, has declined by around 6%. Stage 2 coverage, on the other hand, also continues to go in the right direction. It has increased to 7.5% from 2021, and that's up by close to around 2%, right, 190 basis points to be precise. As mentioned earlier, our Stage 3 loans have witnessed an improvement and our coverage is still strong at around 61%. In terms of funding sources on Slide 17. Liquidity of the bank has improved and it continues to remain strong. That can be witnessed with the LCR ratio standing at around 150% at the end of the year. And that allows the bank to meet all its short-term obligations as well as its medium-term obligations. During Q4 of 2022, DIB further had enhanced its funding base. You can recollect that we've done an issuance of our own, the first sustainable issuance that we did to the tune of $750 million. And that was the first from any financial institution within the UAE. Of course, it has been the largest issuance, sustainable issuance coming out of the region since March 2022. A look at our liabilities, our CASA mix, which stands at AED 87 billion accounts for around 44%, a very healthy 44% of the total liability book. Which is good. And it has come up from the 40% that we had witnessed during the year to end at around 44%. Slide 18, a look at our capitalization. Our capitalization levels remain very robust with common equity Tier 1 standing at around 12.9%, and that's still 50 basis points up from the beginning of the year. And make no mistake, this AED 12.9 million is net of the dividend that the Board is proposing to the shareholders within the general SMB. So this is net of all of that. This is net of any coupons that we will be paying on year 1, net of the dividend that we have recommended to the general assembly for payments. So 12.9%, healthy 290 basis points above the minimum requirement for a domestically systemic important bank, which is 10%. Our total CAR has also gone up by 50 basis points to end at 17.6%. Both are above the minimum regulatory requirements. And you can see that our total equity position stands at around AED 44 billion. Given the bank's delivery of superior profitability, obviously, the Board is recommending a dividend of 30 fils per share, and that is subject to shareholders' approval within the general assembly. That in essence is 20% more than what was paid out, what was recommended last year. Last year, I think the dividend was 25%, and this year, it's 20% increase at around 30% dividend per share. Slide 19 is digital strategy, and that continues to support DIB's growth. Won't spend much time on this, except to say that we've seen a 15% year-on-year growth in terms of number of users as well as a 24% year-on-year growth in sheer number of transactions. Some of the initiatives that have helped us to achieve this strong growth would be our introduction of the WhatsApp services. Certain of our banking services are on WhatsApp now. We've been partnering with government ministries such as Ministry of Interior as well as, obviously, redefining our new-to-bank customer onboarding journey, allow us to improve our turnaround time and thus onboard more customers digitally. Slide 20 is a landmark -- looks at our strategy on ESG. 2022 has been a landmark year as far as we are concerned from an ESG perspective. The year saw some significant progress in terms of our ESG ambitions. Some of the achievements that we can be proud of are introducing our sustainable finance framework as well as within that framework, tapping the international capital markets and launching our own inaugurate sustainable sukuk in 2022. There is every endeavor on the bank that we will continue to grow this. And everything that we do within, let's say, our capital market activities for our own issuances would be sustainable in nature. Permitting, of course, that needs to be permitted by the assets. But that also then means that we are going to focus on growing that asset base. And we've come up with sustainable framework, which we are, as we speak, looking to revisit in order to make sure that we also factor in the fast-moving market dynamics as well as the country's domestic national agenda. So what we are going to be doing is we are revisiting the overall sustainable finance framework that we've already put in place, trying to make sure it is tweaked well to capture the country's national agenda towards sustainability. But this is a key area for us. And you will also recollect that in the overall strategy that we have articulated for us, for the medium term of the bank, which is a 5-year strategy, this plays a very important part of that overall 5-year plan that we've already put for ourselves in 2022, and that we are midway in that strategy. We are, in fact, in flight as far as that strategy is concerned. On Slide 22. Overall, DIB has witnessed, obviously I've mentioned, highest profitability ever. And that is due to core revenues increasing, a healthy increase in our core revenues, our spreads widening, our ongoing cost efficiencies as well as lower impairments, all of this boosting our profitability, increasing by around 26% year-on-year. Balance sheet looks strong and robust. Our financing to deposit ratio is at 93.7%, and that means we have more room to grow. Our LCR and our other liquidity ratios, in fact, our NSFR is also sitting healthy at close to around 105%. Our LCR is at 150%. So that shows you -- demonstrate the strong liquidity position of the bank. Asset quality has remained resilient. Total coverage is strong. Cash coverage continues to increase. Overall, shareholders' return have surpassed the guidance, and we are amongst the strongest in the market. Now when you look at the 8 key metrics that we set for ourselves at the beginning of the year, you can look at each of these guidances. I start by the table on the right, which looks at our net growth. You can recall that we were -- we gave to the market an initial guidance of 5%. First half was exceptional for us. We had already achieved 6% year-to-date growth in the first 6 months. We revised that guidance upwards to 7.5%, knowing very little the kind of early settlements that we would be witnessing in the latter half of the year, which then resulted in us to reach at 5% year-on-year growth, still in line with the initial guidance. So I don't want to take that away from the great achievement that the bank has witnessed in 2022. Overall, if you compare our loan growth to the guidance that we gave at the beginning of the year, I think we've done very well in achieving 5% despite being dropped by the extraordinary early settlements to the tune of AED 21 billion. Our nonperforming financing is in line with our guidance of 6.5%, of course, 30 basis points down from where we started the year. Our real estate concentration is in line with our guidance of 20%. If you recollect, we were at 21%, 22% during the year. So we brought that down. Our net profit margin, our initial guidance was 2.9%. We have exceeded that guidance and ended at 3%. Needless to say, it's 40 basis points from where we started the year. Our total coverage is at 110%, sitting very comfortably at total coverage while our cash coverage continues to improve. And at the back of a very stable macroeconomic backdrop, our asset quality is very strong. We continue to make recoveries on some of the problematic accounts that we have talked about in the past. So overall, total coverage is strong. Asset quality is strong. Our cost-to-income ratio had seen improvement. Of course, our guidance of 28% was -- also, if we had achieved that guidance, that would have been one of the most strongest in the market. But we've outdone ourselves, and that's on account of maintaining good cost strategies as well as extraordinary revenues. So we've ended cost-to-income ratio better than our guidance at 26.1%. And our return on tangible equity, last but not least, is at 17%, better than our guidance of 16%. Remember, we started the year at 13%. So that's around 400 basis points. So overall, I think there's no -- not even an area where we feel that we have missed our targets. 2022 has been a great year for us. We worked extremely hard to achieve these results and deliver these results, this superior performance for the benefit of our investors as well as our shareholders. With that, I have completed my page turn. But before I open the floor to Q&A, as always, since this is the first call of the year, we will also look at progressive outlook on 2023. And I'm putting forward in front of you the strategy -- the theme of the strategy, and it's a continuation of our 5-year strategy that we already articulated in 2022. So we are going to continue driving the organization forward. That's the theme which was unveiled in 2022. So this is a theme that you will see continuing for 5 years, where we will focus on our digital transformation, our robust foundation to continue to invest in our infrastructure, in our technology, in our risk systems, in our compliance areas. We will make sure we increase our value, and that is unlocking value from our current operations both domestically as well as internationally. Versatile operation is something that we'll continue to do, and that is bringing about efficiencies in everything that we do. And last but not least, focusing on our wow customer experience. That's an area that we have continue to focus on, and we will continue to do so. Now how does this translate -- how does 2023 translate into guidance? In the first call every year over the last 9 years, I've been putting guidance for the bank year-on-year. And in 2023, you can see that we want to outdo ourselves. We want to continue growing by around 5%. Mind you that this is not a small feat given the kind of early settlements that we have been witnessing in the last couple of years. We anticipate there will be early settlements in 2023 also. It's just a reflection of the macroeconomic backdrop. So despite that, we want to grow our overall book by 5%, so not just the extraordinary early settlement that would be -- that would have to be countered within this year, but also the fact that it's a bigger base. So over a bigger base, a 5% increase year-on-year is going to be substantial. We want our nonperforming loans to come down to 6.25%, and we'll try to better that if possible. Our real estate concentration, and this is just the concentration of our real estate loans to our total loan book, that should be within the 20% mark. Our return on assets should be at 2%. And mind you, again, one might say that you're already at 2% so why not try and better yourself? There's a forecast of interest rates coming down, which means that the earning assets will probably in the -- sometime in the latter half start earning lesser than what we've been witnessing in 2022. So that challenge remains. Overall, if we kind of deliver those results, our return on tangible equity, mind you, the base is also going up, and that would still be at 17%, which would be a key takeaway any day from any set of investors or shareholders. If we are able to deliver 17% year-on-year, over the last so many years, in fact, gone to these levels post the pandemic. So we are now at pre-pandemic levels. I think anybody would take the return on tangible equity at any given day. The cost-to-income ratio should be at 28%. Now while we have seen 26.1%, two things here: one is, obviously, revenues will be under stress given the macroeconomic interest rate environment forecast; but also, we will continue to make our investments on the infrastructure side or rather robust foundation so that we see some costs increase. Our total coverage should go up from where we are at 150 -- 112.5%. And our net profit margin should remain at around 3%, if not more. We definitely want to retain it at 3% given where the interest rate forecasts are. Of course, if the interest rate remain to go up in 2023, which is not anticipated for the entire year, you will see us revising these numbers, appropriate numbers. And that would -- that revision will only happen in the second half, which is exactly what we do every year. With that, I've made a very detailed presentation, spent a lot of time on a page turn because I believe that, that should be able to address most of your questions. If you've already written the questions before my page turn, we will review them and we are going to take a slight momentary pause and then come back to answer your questions in detail.

Thank you, Dr. Ladies And gentlemen, we'll just take a pause as Dr. said and we will come back to you as we'll go through those questions and answers. Thank you.

All right. So we start with the first web questions from Chiro from SICO Bank. The first question is around the yield expansion, which we saw that in fourth quarter '22. How should we see it going forward in 2023? And what should be -- what should we model in if NIM went back, if for the 25 basis points rise or 25 basis points decline?

Okay. I think I can take question 1 and 2 together, and question 2 also Chiro talks about assuming a 50 to 75 basis points rise. So the asset yield expansion has been solid in Q4. In fact, it has been solid across the large part of 2022. But definitely, in Q4, we see some good results. Going forward, we anticipate that we will continue to be in a high interest rate environment. Even though interest rates are anticipated to come down sometime in Q3, Q4 2023, overall, it's going to be, in my opinion, a high interest rate environment, right? So based on that, we feel that the asset yields will be, if not anything, either at the same level or should see a gradual improvement in asset yields. We're not talking about net interest margins here. We're talking about asset yields. The net interest margin impact, which is the latter part of your question, and what's the impact of a 25 bps rise or a 25 bps decline. We disclosed that in the financial statement, but I can tell you that a 25% rise or decline has roughly around AED 100 million impact on net income. So from that perspective, you can do your math. Of course, needless to say, there will always be a lag impact whenever rates move up or down on both sides of our balance sheet. So we've got to factor that. But overall, what we disclosed is that a 25 bps end up -- ends with AED 100 million impact. Now the second part, which -- the second question which talked about CASA remains very resilient, rightly pointed out by you. And we expect this trend to continue. If not at 44%, at least between 40% to 44% is what we endeavor. And if we achieve anything between 40% to 44%, I think that's a great achievement because you are assuming a 50 to 75 basis points rise from here on. Again, that's anybody's guess, right? We are hearing everything -- all different narratives within the headlines. But with the 50 to 75 basis point increase, obviously, it would mean that people would pressurize moving from current and savings account to fixed deposits. And that's what we factored. So anyway, maintaining CASA between 40% to 44% will be a good achievement. And even if people move on the fixed deposit side, you can validate that we have not been the highest payers as far as rates are concerned on the fixed deposit side. And that is just validated by the fact that our cost of funding is probably very low, if not the lowest, when compared to the large peers in the market. Question 3 from Chiro so is on cost-to-income ratio, and that has improved favorably. I've mentioned in my year-end guidance for 2023 that we are looking at an overall cost-to-income ratio of 28%. Even if we achieve that, that is going to be predominantly one of the lowest in the markets, right? And we are anticipating a slight increase in our costs given that we are in this transformation journey and investing heavily on our technology, our digital front, our compliance areas, our risk management areas. And that's not just investments in technology in each of these areas, but also in terms of personnel and people and bringing the right -- a number of people as well as the right quality of people within the organization. So that's why we are anticipating a slight increase in our cost-to-income ratio. And in terms of your last question on improvement in cash coverage, do we anticipate an improvement? Of course. We anticipate that year-on-year, and last few years, we have made good progress. This year in fact, in 2022, we made good progress, up by around 600 basis points, 6%. And we will continue to do that, use the strength of our P&L to enhance our coverage ratios. And if you look at our coverage ratios, our ECL ratios, we are sitting comfortably. So we will continue to maintain our cash coverage and in fact, improve it wherever possible.

[Operator Instructions]