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

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 Q1 2023 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; 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 good morning, good afternoon, everybody, and welcome to DIB's first quarter results webcast. The session is led by our Group CEO, Dr. Adnan Chilwan, accompanied by John Macedo, the CFO, and myself. Request everyone to keep their questions coming through the email provided, [email protected], and we will -- and these will then be addressed at the end of the presentation. So with that, let's start and move on to Slide 4. As you can see on this slide, the U.S. Fed continued its rate hike trend during the first quarter, raising rates by an aggregate of about 50 basis points. And the Fed has also pointed to the recent banking turmoil, which may tighten credit conditions and potentially may weight on further economic activities. The IMF recently projected world GDP growth at around 2.8% and [ 2.2 ] -- in -- at 2.8% in 2023, while the Middle East and Central Asian region is expected to grow by a slightly higher rate of around 2.9%. And they also stated that the emerging market economies will be impacted by lower demand for exports, currency depreciation and inflationary pressures. However, closer to home, in the GCC region, the inflation is expected to average around 2.7% for the region in this year. And the region is as -- I mean, the region is expected to gain more on financial stability, supported by higher oil prices. Moreover, all GCC countries are expected to deliver budget surpluses for 2023 of around 2% of GDP, despite the recent OPEC [ plus tax -- supply tax ]. We move on to Slide 5. The UAE's economy continues to exhibit strong current and future economic indicators, and the 2022 GDP growth was stellar, up 7.6%, driven primarily by the oil sector, while the government policies have helped support the non-oil sector as well, which was up 6.6% due to sectors like tourism and real estate, which were booming. It is worth noting that UAE's first quarter PMI results have continued to show an ongoing expansion, with again, these 3 sectors holding up well demonstrating support of the Central Bank of UAE GDP forecast of 3.9% for the country. Overall, business activity has picked up and consumer spending ended the year at 19% up year-on-year and consisted of 29% spend growth in the non-retail economy, like government services, airlines, petrol and gas, education, et cetera, and 13% growth in retail economies like hypermarkets and supermarkets, retail, general, leisure and entertainment, fashion, et cetera. Moving on to Dubai now, the tourism sector, which has been booming significantly since '20 -- since coming out of COVID, again, showed a very strong performance in 2022 and picked up pace, particularly during the last quarter of the year with 14 million tourists visiting the Emirates, 97% up year-on-year compared to 7.3 million last year for the same period. It's also worth noting that the first 2 months of the year followed suit with Dubai, receiving about 3.1 million visitors in January and February of 2023, which is about 42% up compared to the same period last year. Finally, moving on to the banking sector itself, the profitability of the 4 largest banks in the UAE, which account for nearly 80% of the banking assets in the country, increased to USD9 billion in 2022 compared to USD8 billion in 2021, exceeding the pre-pandemic levels. And capital ratio for the bank rose as well, and strong profit generation combined with stable payout ratios is seemingly sufficient to fund the expected credit growth for the year 2023. On the financial market front, again, a very active pipeline of IPOs in GCC regions, particularly UAE and Saudi is anticipated in 2023, owing to the government's enhanced effort to expand the nation's capital markets. So with that, 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 morning, ladies and gentlemen. As always, I'm going to do a page turn and take you through key highlights within our presentation. The last 5 minutes of the hour will be something I'll use to summarize our key messages. Would like to draw your attention on Page 7. You can see that an overall robust set of results across the bank around both profitability and balance sheet metrics, improving business sentiment along with the bank's agile strategy were the key driving forces behind this solid performance. Aligned with the regions' operating environment, our core assets, as you can see, mainly financing and sukuk have increased by around 1% on a year-to-date basis. If you zoom in further into our earning assets, it's important to acknowledge that our gross new underwriting during the year has equaled to around AED 21 billion, and this is significantly up year-on-year by close to around 40%. However, this was offset by repayment to the tune of AED 15 billion in the quarter. And in addition to that, early settlements to the extent of AED 4 billion, resulting in a net positive movement of around AED 2 billion within the financing portfolio. Now while this seems to be a bit muted on a net portfolio level, it's important to acknowledge what I've just mentioned in terms of the core engine of the bank, as in gross underwriting across our key businesses, corporate, consumer, as well as treasury has been higher in Q1 of 2023 when compared to Q1 of 2022. In terms of our net profit, we have reported a net profit of about AED 1.5 billion, and that is up 12% year-on-year. This is a true testament to the bank's efficiency P&L, robust financial position, and the bank's own franchise strength. Our cost-to-income ratio has further improved by around 140 basis points year-on-year. We stand at 26.9%, and this is among the lowest in the market when compared to our peers. On Slide 8, a quick look in brief, our financial performance. You can see that we've delivered a resilient set of results. Our balance sheet has grown by about 1.3% year-to-date, and our profitability has risen by around 12% year-on-year. That said, I've already mentioned that our next financing and sukuk investment book has increased by about 1% year-to-date, and clearly the reason for that has been the extraordinary repayments, as well as the routine repayments that we have witnessed in the first quarter of 2023. On the P&L side, the future is quite strong. Persistent efforts to focus on improving our financial performance has kept the bank profitable. Margins are on an upward trajectory. These are exceeding guidance, and thanks to our asset and liability composition. We closely monitored and continue to monitor our OpEx, ensuring optimal spend, while looking to grow and strengthen the Group over the next few years. This is in line with our strategy. We did mention that we are going through a transformation phase, and we are investing in our control functions as well. So understandably, there is a rise in OpEx, but more importantly, our cost-to-income ratio is in line with our guidance for the full year, in fact, lower than our full year guidance. Core ratios remain robust with most key metrics meeting our 2023 guidance, which we will obviously dwell a little further in -- within the coming slides. On Slide 9, a look at our operating performance. Our net profit margin continues to be on an upward trajectory, and this is exceeding our guidance. Growth in OpEx is a part of our deliberate strategy to strengthen and enhance the key functions in the bank like I have mentioned, but the cost-to-income ratio, which always continues to be a focus area for us is well within guidance and potentially best when compared to our peers in the market. ROA and ROTE, return on assets and return on tangible equity have outperformed our year-end guidance, and we remain comfortably positioned to our commitment that we made to our shareholders at the beginning of the year. Slide 10, a look at our deployment of our funds. Our assets have expanded by 1.3%, and we ended the quarter 1 at AED 292 billion, majority of which is coming from our disbursements in our financing and sukuk investment portfolio. I've already mentioned that our new gross financing underwriting has been to the extent of AED 21 billion in the first quarter. When compared to the first quarter of 2022, that stood at around AED 15 billion. So that's an increase of around 40% in the first quarter when compared to the same time last year. Our real estate concentration in the pie graph -- pie chart stands at around 20%, and that is in line with the guidance. Slide 11, let's dwell a little further into our consumer business. The portfolio now stands at AED 53 billion, which is up by 2% year-to-date, and that constitutes around 28% of our total financing book within the bank. This is led by growth in personal finance and home finance business in the first quarter. Across all products, we've booked gross new business within the consumer bank of close to around AED 5 billion in the first quarter. When compared to 2022 first quarter, that was around AED 4 billion. And despite the routine repayments of close to AED 4 billion, the overall consumer portfolio has exhibited positive growth for the year. In the first quarter, we witnessed a growth of about AED 1 billion in our portfolio -- the total portfolio within our consumer bank. Revenues in the consumer bank are up by around 19% and yields have expanded by 77 basis points to around 6.5%, underpinning very strong profitability. Now CASA deposits on the consumer side remained very sticky, and we've got very good vintage, as far as our CASA deposits are concerned on the consumer side, and this had been seemingly agnostic to the current rate environment. Slide 12 looks at our corporate banking business. Our corporate portfolio sands at around AED 132 billion and the colors in that pie chart show you that, that portfolio is very well diversified. On a year-to-date basis, the new growth on a net basis has come primarily within the utilities and financial institutional sectors. Gross corporate new financing in the first quarter, and I've mentioned this, I said on a bank-wide basis, we've seen AED 21 billion of new gross underwriting in the first quarter. If you take a look within our corporate bank, that new financing equates to around AED 11 billion in the first quarter. This, again, is an indicator of our growing business volumes. But like I've mentioned before, they've been offset by routine repayments of about [ AED 9 billion ] and extraordinary settlement of about AED 4 billion. So while the gross underwriting on the corporate banking has been close to about AED 11 billion, the normal repayments and extraordinary repayments have been to the extent of around AED 13 billion. And hence, we see that the corporate portfolio has shrunk a bit when compared to year-end 2022. Revenues, however, continued to be on an upward trajectory and that is given the floating nature of our book, which has captured most of the Fed rate hikes reaching to about AED 1.1 billion in revenues during the first quarter of 2023, and that's up by around 47% when compared to the same period last year. Our corporate CASA stand at around AED 29 billion, very well diversified across our corporate banking base. Slide 13, a look at our treasury business. Our treasury portfolio stands at around AED 55 billion, and that is up from AED 52 billion at the end of 2022, a growth of around 5.6% year-to-date. Now 83% of our treasury book is constituted within government and fixed income space. The yields have expanded by 650 bps year-on-year to around 4.5%, in fact by [ 65 ] bps year-on-year to reach around 4.5% due to incremental sukuk to that we have carried. Obviously, these incremental sukuks are at higher coupons over the last 12 months, yet revenues were impacted due to the higher cost of funding and the fixed nature of our sukuk investment book. On Slide 14, a look at our asset quality. Our non-performing financing ratio is stable at around 6.5%, which is down by 20 basis points compared to our Q1, 2022 ratio. We've seen recoveries within our exposures both -- we've shown you our recoveries within our NMC exposure, as well as our NOOR POCI. The ratio remains unchanged due to, obviously, the denominator of our asset book remaining flat. For Q1 2020, our NPF has dropped by around 1.2% year-to-date in terms of absolute amount. We stand at around AED 12.8 billion, and that was around AED 13 billion at the end of last year. Now this is due to recoveries both within the core DIB book, as well as the NMC and NOOR POCI book demonstrating improving business sentiment. Our cash coverage ratio has improved by around 200 basis points. We've reached to around 80%, in line with our overall risk strategy. Quarter-on-quarter, we've seen a drop of around 24% in our impairment charges. Our cost of risk, again, is down by around 4 bps, and on an annualized basis, we are roughly in line with our guidance around 80 basis points. This is obviously down from around 84 basis points in December 2022. Slide 15, asset quality in detail. The pie charts speak for themselves. Our core NPF ratio remains at around AED 10.7 billion in absolute amount. Our total NPL is about AED 12.8 billion. Ratio stand at around 6.5% and 5.4%, when you look at from a core DIB NPL ratio. On Slide 16, we've got asset quality by stages. Our Stage 2 financing has dropped by about 1%, ending at around AED 15.4 billion versus AED 15.6 billion at the end of 2022. Stage 2 coverage ratio is on a sustainable upward trajectory, reaching around 7.7%, which is up by around 20 basis points. Stage 3 loans have also witnessed an improvement. Our coverage ratio for Stage 3 remains robust at around 63%, and that continues to improve. Slide 17, we're looking at our liability sources and our liquidity position. Liquidity of the bank has improved and that can be validated through a strong LCR ratio, which stood at around 156% from -- up by around 600 basis points or 6% from the ending of 2022. During Q1 2023, our funding base has been enhanced further by our own sustainable sukuk, where we issued around AED 1 billion of sustainable sukuk in the first quarter of 2022 and that was followed from our Q4 issuance of around [ 750 ]. So in the last 2 quarters, Q4, 2022 and Q1, 2023, we've tapped the markets close to around [ 1.7 billion ], and both these sukuks were in sustainable format. Our CASA book stands at around AED 80 billion, accounting to about 40% of our overall deposit. Clearly, there's a migration from CASA to wakala, and that's just apparent in this quarter. It's in line with the way the interest rate environments are, but our wakala book has increased by about 6% year-to-date. That comprises about 60% of our total deposits. So we've seen a slide decrease in our CASA and that is understandable because in a rising interest rate environment, consumers and corporates want to keep money in high interest-bearing accounts as opposed to the CASA balances. Slide 18 looks at our capitalization levels. We are robust with CET1 at around 13.3%, that's 40 basis points up from where we ended the year. Our total capital adequacy ratio stands at around 17.9%, again, 30 basis points from where we closed the year. Both are well above the minimum regulatory requirement. Our total equity position stands at about AED 43 billion. We have also approved within our General Assembly on the 15th of March, a cash dividend [ of about ] 30%, and within April, we've already paid that cash dividend, which is obviously not reflected in these ratios, that will reflect in the next quarter. Slide 19, our digital strategy continues to support the DIB's growth. Now this slide illustrates increased digital momentum represented through various digital metrics. And you can see that more than half of the retail banking customers are now digitally active, as they continue to enjoy competitive products, reduced turnaround time, as well as fast services. Slide 20 looks at our sustainability ambitions. This is a slide that we'll keep including within our presentations going forward. I'd like to bring to your attention that this has now become a key focus area for the bank. And over the past year, we have evaluated our longstanding business practices, tested them stakeholder expectations and began developing and implementing a holistic 2030 ESG strategy, which support us in creating long-term value for our shareholders, customers, employees, as well as [ wider ] stakeholders. Now in line with this, we've established our forward-looking ESG strategy, and that's our 2030 ESG strategy, it's a 7-year strategy from here on, which outlines our ambition and approach to a more sustainable future and support UAE's own sustainability agenda. Our ambition is to own the pace and it is built on the framework of 2 main strategic pillars, as a part of our 2030 ESG strategy, where we want to focus on our main efforts to meet our vision. Those 2 pillars are predominantly one, lead by example and two, finance a sustainable future. While the first pillar of focus is more on optimizing the bank's internal operations, the second pillar strives to enhance external impact of our ESG agenda. Now, a recent achievement in this space revolve around establishment of a Sustainable Finance Framework. I've alluded to this in Q3 of 2022, where we set up the Sustainable Finance Framework, and within that, we've already done 2 issuances within the capital markets space to the tune of [ AED 1.75 billion ]. We are also exploring avenues of utilizing renewable energy to potentially support areas and services like data centers and other platforms. So you will hear from me more on this going forward within each of our webcast because this is a key area for us, and the way you can see -- the way we have articulated our strategy in a nutshell, the vision of owning the space and then that has been cascaded down into 2 pillars, lead by sample and finance a sustainable future. And then we've got 8 priority areas, and then [ key ] KPIs within each of these areas. So going forward, you will hear from us more on this, as we kind of explore how do we meet our ambition of owning this space. On Slide 22, again, this is a strategic theme that we have articulated at the beginning of 2022, and again, this was a 5-year strategy. We continue to be driven by this strategy. And the theme for the next 5 years is going to be around drive, which predominantly is digital transformation, robust foundation, increased value, versatile operation and engaging experience. Slide 23 is nothing, but the summary highlights, and that is in line with everything that I have mentioned so far. We can also kind of compare our actual performance in 2023 first quarter against the overall guidance, and that's in front of you. I will pause here. I will open the floor to take questions, but then the last 5 minutes of the hour is something that I will use to summarize everything that has been mentioned, and again, draw your attention towards the key achievements of the bank in the first quarter of 2023. So we'll just pause here for a minute and scroll through the questions and then come back to you to answer them in greater detail.

Thank you, [ Doctor ]. Ladies and gentlemen, give us a few minutes, and we'll come back to you, as the questions start pouring in and we'll answer them in the same order, as they come in. Thank you. And we'll repeat the same question, just to let you know. So in case, if you have -- yours hasn't been answered with your name, it's probably answered elsewhere. Thank you.

And as a reminder, if you would like to ask your question today, please send them via e-mail to [email protected]. Thank you for holding until we have our first question.

So starting with 2 questions from Janany from Arqaam. One is on the cost of fund, which has shown an increase to 2.9% in quarter 1 versus the 1.4% in the full year 2022. What is driving this increase? And how does it compare with the increase in the asset yields, and how does it affect the outlook for NIM in the coming quarters? And number two is around the OpEx trend in the coming quarters, as there's been a small pickup, are there any one-offs?

Thank you, Janany for asking this question because I'm sure most people on this call will ask similar related questions, so it gives me an opportunity to set the context at the beginning of this Q&A session. The cost of fund has increased, like you say, in Q1 to around 2.9% from 1.4%, and that's just a reflection of the interest rate environment. We had anticipated this if you recollect on prior calls, we have mentioned that we would see cost of funding rising, clearly it's a reflection of where the interest rates are. But what we've also done very well is that we passed on this on the asset side. Our asset yields continue to improve. Majority of our portfolio, as you know, is variable in nature. So that allows us to reprice. And the fixed rate nature of our portfolio on the consumer banking side or on, let's say, our fixed income book also is in a way being repriced because the consumer book attrites quickly, and all new bookings are made on new rates. As far as our fixed income book is concerned, our new bookings within our sukuk space are happening at new rates. So overall, our net interest margins, like you've seen, have increased by around 20 basis points. There is an uptick of about 20 basis points from year end 2022. So while the cost of funding has increased, one should put in context that we've managed to enhance our net interest margin by increasing our asset yields, as well as by maintaining a good check on our cost of funding. So while the deposit rates have gone up, the interest rate environment is not the same when compared to the first quarter of 2022 versus the first quarter of 2023, there is an increase by close to around 450 basis points in overall interest rate. But our cost of funding is still at around 2.9%. We anticipate that we should be able to maintain this net interest margins, which are, again, better than our year-end guidance. As long as, we will be able to maintain these net interest margins by managing both sides of our balance sheet both asset yields, as well as our cost of funding, we are pretty confident that the remaining part of the year would be positive from a net interest margin perspective. In terms of OpEx [ strength ], there is a small pickup. Again, this is something that we had anticipated. As you know, we have embarked on a transformational journey across our systems, our technology, making sure that we also strengthen our support functions. Now all of that would necessitate a change in our cost structures. There is an enhancement albeit slightly when compared to where we were at the end of the year. But on an overall cost-to-income ratio basis, we are well within the guidance. And we had -- we had alluded this at the beginning of the year when we mentioned that we will see costs rise a little, but as long as we deliver a very good cost-to-income ratio, I think we will keep all our stakeholders happy.

Okay. So question from Adnan from Jadwa. First question is on the local liquidity environment and highlight any reasons behind the decline of NIM Q-on-Q? And the second one is on the extraordinary corporate repayments and how -- what kind of visibility does the management have in this regard? And thirdly is around any one-off expenses around in the general and administrative line during the quarter?

Thank you, Adnan, for your question. Let me start by quickly giving you a color on the liquidity environment. Of course, the liquidity environment within the region, as well as the UAE continues to be strong. DIB, again, you've seen some strong liquidity ratios being posted by us. Our LCR ratio stands at around 157%. Our NSFR stands at around 107%. Both of these ratios are up from where we ended the year. So clearly, we are seeing a strong liquidity environment. But within the same stage, I think it is also important to acknowledge that there will be pressure on cost of funding going forward because, obviously, as interest rates are continuing to rise, we will have to also change the rates on our liability side, on our deposits, and that would just reflect within our cost of funding, which is something that I've alluded to in the previous question. You also highlight if there are any reasons behind decline in net interest margin quarter-on-quarter. I think the net interest margins have not declined, in fact, maybe that's a mistake that you probably have picked-up. The net interest margin, in fact, has increased quarter-on-quarter. We ended our net interest margins at around 3% in 2022 -- end of 2022, and those have gone up to around 3.2%. So I'm not very sure that's correct, where you say that net interest margins have declined quarter-on-quarter. Management -- your question around management's expectations for corporate repayments -- extraordinary corporate repayments, I think, Adnan, that's why they are called extraordinary because we don't have any expectations around what those repayments would be. These are not normal repayments. These are early settlements, prepayments and hence extraordinary. Hopefully, they would not be as high as what we've seen in the first quarter. In the second quarter, this far, we are not expecting any extraordinary early settlement. So -- but one should understand the reason why extraordinary repayment happened. In a high -- rising interest rate environment, when corporates are flushed with liquidity, they want to kind of use that liquidity and prepay their loans because they want to also manage their own P&Ls. And if they have excess liquidity, they might as well prepay and not pay high interest rates on their loan. Any one-off expenses in G&A during the quarter? No. There were no one-off expenses. These were expenses that we had anticipated given our transformation strategy, as well as our -- strengthening our control function.

Sorry, guys. So again, we're going to [ skip through ] questions because some of them are repetitive. So we've come to 2 questions that -- from Shabbir, which are new. One is on the global -- globally, there's asset quality concerns around commercial real estate segment and since we are exposed to that segment, what are our thoughts on the performance of the offices, mall, hotels, [ whether in the ] commercial real estate? And the second is on the corporate tax rate and the impact that would come in given the rate environment on the DIB financials in [ 2024 ]?

Thank you, Shabbir, for your questions. Asset quality, predominantly commercial real estate, yes, we've got close to around 20% of our loan book is within real estate. We basically do not worry about where the asset quality out of this portfolio will emanate because this is a performing portfolio. This is different from what we have seen in 2008 because our FTVs or our LTVs, as you may -- are at a different level now. If you look at our total LTV for this entire book, it's at a coverage of around [ 67% ] in terms of new underwriting in this, we are very selective. We look at properties that are constructed as opposed to constructing of [ planned ] properties. The LTVs for constructed properties are different than LTVs for properties under construction. So we are not too worried about the asset quality and that has been seen since 2013. It's a very strong book. It continues to give us. It's a book that we manage well within 20%. So this is something that does not worry us. In terms of 2 questions, one on corporate tax and potentially low interest rate environment, low interest environment possibly in 2024, we want to make sure that we maintain a good net interest margin guidance. Again, 2024 too early to even comment on that. We first need to end 2023. Corporate tax, what is available information is that it is going to be 9% and it's going to be a level playing field for everyone, right? So in 2024, when the corporate tax is going to be implemented, it will be implemented for everyone. We will then give guidance around what the profitability ROEs of the banks would be, ROAs of the bank would be. It's too early even to talk about our 2024 numbers from now on. Let's just focus on Q1, 2023 result, as well as the remaining part of 2023.

Okay. Three questions from Rahul. Again, we are looking at the ones that we haven't answered. Rahul from Citi. Have you seen any notable impact in the bank due to growth in expat population? And are you seeing any customers coming into restructured loans due to high interest rates?

See, generally, if you look at our consumer banking trend, we have continued to grow quarter-on-quarter. Our Q1, 2023 consumer banking numbers are much better than Q4 of 2022. So one can say that this can be correlated with the expat population. But also, that's a focus area for the bank and not just in the first quarter, you can see that we've been growing our consumer book year-on-year. So 2022 was a good year for the consumer bank, and the first quarter of 2023 has been a very good start for our consumer business. So this is a focus area for the bank, and we will continue to grow this. And clearly, we continue to open new accounts. We continue to do new gross underwritings across our consumer business. Increase -- are we see any increase in customers coming to restructured loans? Not really. There might be one-off cases of customers that might be coming to look at restructuring, but that's not a general trend. Some of them might be facing interest rate -- high interest rate pressures. And these are very few, nothing notable for us to report.

Okay. Question from Nikita from Emirates NBD Asset Management. Can you comment on the lower CASA levels in the first quarter and cost of deposits going forward? And how quickly do you expect the loans to reprice and how you see the NIMs looking forward?

So our CASA levels like you've mentioned, have gone down a bit by around 4%. We ended 2022 around 44%, and we are at about 40% in the first quarter. And that's just a reflection of high interest rate environment, where people would want consumers and corporates alike would want to move there funds from low profit-bearing accounts to higher profit-bearing accounts. So we've actually seen a reduction in our CASA book and an increase in our wakala book or our fixed deposit book. That is understandable given the interest rate environment. Our cost of deposits going forward, obviously, we have done better than where the overall cost of deposits should be because our cost of funding has not grown in the same line, as where the interest rate environments are, which means, we've managed our overall cost of deposits quite well by focusing on our current and savings account and having a good mix. So going forward, obviously, in a high interest rate environment, cost of deposits will be under pressure. But as long as we can continue to maintain our net interest margins, I think we would have done wonderfully well. Our net interest margin is at 3.2% today. We are continuing to hold our guidance across all our key metrics. It doesn't mean a set of good results in Q1 means that we revised it, all our guidance upwards. So the guidance that we've given for the market across our key metrics at the beginning of the year will continue to remain at least until the first half of 2022 -- 2023. We will look at this guidance once we look at our first half results and then decide whether we want to move the guidance upwards or downwards. But for now, I think we had a very strong quarter in terms of net interest margins, and we'll be hopeful that we'll be able to maintain this, even though it's going to be challenging, but we'll be hopeful that we'll kind of maintain this into Q2, 2023.

All right. So a couple of questions from Nikita from Emirates NBD. NPLs, which remain sort of higher, do you expect these to increase given the high rate environment? And the RWAs have increased, while loans have reduced. Can any comment on this, please?

Thank you, Nikita, for your question. Our NPL absolute amounts have gone down by close to around [ AED 200 million ]. The NPL ratio remains stagnant when compared to 2022. And even though the absolute amounts have gone down, and that's the result of our denominator, our overall loan portfolio going down because of the prepayments and the early settlements that I have mentioned. Despite the good gross underwriting that we have done across all our businesses, our total portfolio seems to be muted, and that's on account of our normal repayments, as well as our extraordinary settlement. Our RWAs have increased, while loans have reduced, well observed there is because the repayments, the extraordinary repayments and normal repayments that have happened are on account of some zero risk-weighted assets being paid-off. So those zero risk-weighted assets have been paid-off and just the general book that remains, as well as the new book that we have underwritten has contributed to an RWA increase, whereas the total loans have reduced. So that's the reason why that has happened.

Okay. [indiscernible] we will go into the last 5 odd minutes, Mr. -- Dr. Adnan for a quick summary of the results and then we'll take it from there. Thank you.

Thank you, Kashif. I just wanted to use these last 5 or so minutes to kind of summarize and draw everybody's attention to the exceptional start to the year that we have had. Q1 has been a good start, it's been a start that is in line with the overall guidance that we have given to the market. On a quarter-on-quarter basis, clearly, when we compare this quarter result with all the quarters that have gone by, this clearly is the highest profit that we have witnessed so far within the history of the bank. But more importantly, I want to highlight that in the first quarter, we've seen our core business engine actually worked the way we have anticipated. Our gross underwriting, like I've mentioned to you has been to the extent of around AED 21 billion. When you compare this to the first quarter of 2022, clearly it is higher than where we had seen this in the first quarter of 2022, where our gross underwriting used to be AED 15 billion when compared to what we see across all our businesses consolidated, it's about AED 21 billion. Now clearly, I think that is not reflecting in the overall portfolio, which has only grown by about 1%, and that has been picked up by a few of you on this call, and I've explained that had these extraordinary repayments not happened, our financing book would have increased by close to around 2.5%, which would be in line with our overall guidance of 5% for the year. But again, that does not really bother us because it was important for us to make sure that our engine is firing well, and that's exactly what it has done, had it not been dwarfed by the early settlements. Within the high interest rate environment, we've got to manage both sides of our balance sheet. Our financing book is being repriced, 60%, 65% of our book is valuable in nature. So that allows us to reprice that book. So even the recent interest rate hike that we've seen, one in February, another in March, we'll see an impact of that on our book going forward on our asset side, so that would help us positively. Having said that also, we are still within our high interest rate environment, which means that there would be pressure on our cost of deposits and our cost of funding, even though we manage our cost of funding quite well, and it's a -- through a mix of composition of our liability book, better CASA, as well as lower than market rates on our deposits, all of that puts a good cost of funding lower than where it should be. And the result of that can be seen with an uptick in our net interest margin, which stands at around 3.2%. We continue to use the strength of our P&L and make more provisions, wherever required, enhance our coverage ratios, and that has gone up. Our cash coverage is at around 80%. But more importantly, our total coverage is at around [ 113% ]. So one should look at it in that context. Our efficiency ratios continue to improve, and they are in line with our guidance. So overall, if you just look at where our actual results are versus our full year guidance, our loan book has increased by about 1% year-to-date when compared to 5%. And again, we spent time explaining that. And we are confident that we will be able to maintain or achieve this guidance that we are maintaining for 2023. Our non-performing loans are at around 6.5%. Our full year guidance is around 6.25%. So we're confident that we will meet that. Real estate concentration continues to be in line with our guidance. We have done well on our ROAs and our ROEs. Our return on assets has gone up to reach 2.1% versus 2% and our return on tangible equity is at around 17.5% versus 17%. Total coverage is at 113%, and this is better than guidance. Net profit margin, 3.2% versus 3%. And more importantly, our cost-to-income ratio is well within our guidance. So overall, I think what we would want to -- the key message that we want to leave towards the end of this call is a good start to 2023, and we put a more positive foot within the remaining part of the year, and we are very confident that we will be able to achieve all our key metrics and the guidance that we've given for our key metrics for 2023, and, in fact, try and better this wherever possible.

Thank you, Dr. Adnan. And with that, ladies and gentlemen, we will close the call for today. If any questions remain unanswered, we will -- the IR team will definitely get in touch and make sure that you get the relevant responses. Have a great holiday, and see you next time. Thank you. Bye-bye.