Emirates NBD Bank PJSC (EMIRATESNBD) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Emirates NBD Results Call and Webcast for the First Half of 2021 for Analysts and Investors. Today's call is being recorded. Please note that this call is open to analysts and investors only. Any media personnel should disconnect immediately. I will now pass the call over to our host, Mr. Shayne Nelson, Group CEO of Emirates NBD.

Thank you, operator, and welcome to this briefing call for Emirates NBD first half results. Joining me as per usual are Patrick, the group's CFO; and Paddy, our Head of Investor Relations. I know you all have a very busy agenda today, given how many banks have all gone on the same day, so we'll try to rattle through this as quickly as we can because I know you have lots of work and spreadsheets to do as we go through the day. Today, we announced a 17% increase in profit to AED 4.8 billion. This improvement is driven by stable margins, disciplined cost management and a significant improvement in cost of risk. There are many pleasing components in these results. Retail lending reported its best-ever quarter, including record disburses for credit cards, personal loans and home loans. Corporate lending started to grow again in the second quarter despite significant repayments of support funding. International locations contributed over 1/3 of group income, with DenizBank representing over 1/4 of group income and 1/5 of group profit. Margin compression from lower interest rate is now factored in, and we expect stable margins for the rest of the year. Expenses continue to be managed effectively. Provisions reduced 38% year-on-year, with cost of risk substantially improving to 114 basis points, the lowest since 2019 pre-pandemic, whilst we still maintained best-in-class coverage ratios. Despite the challenges of the last 18 months, NPLs have only marginally increased, illustrating the success of the bank's deferral support. These results demonstrate the group's financial resiliency -- try that again -- and the success of our diversified business model. As the economy expands, we will keep supporting our customers and enable them to take advantage of new opportunity as export approaches. We will continue to invest in digital and in our international network to support future growth. UAE economy has remained open, thanks to the speed and success of the UAE vaccination program. With 70% of the population fully vaccinated, the world's highest and with one of the highest testing rates globally, UAE continues to be a safe place for residents and visitors. Indeed, we have been back in the office for over a year now and have gradually increased attendance to about 50%. Hotel occupancy rates have recovered from last year's low, helped by an increase in staycations, and the UAE looks forward to welcoming more international tourists when they resume traveling. We expect the non-oil sector to grow by 3.5% this year. This optimism is reflected in the recent rise in residential real estate prices. The UAE has also benefited from a sharp rebound in global trade in recent months back to pre-pandemic levels. As well as these strong results and optimistic economic outlook, we have delivered a number of strategic achievements. Underlying our commitment to ESG, we are the first bank in the UAE to launch an eco-friendly debit card made from recycled plastic. EmCap. Our investment bank, has led 68 bond and loan transactions in the first half, raising $50 billion for sovereigns, quasi-sovereigns, corporates and financial institutions in multiple currencies. EmCap also led 12 ESG transactions. DenizBank became the first Turkish bank to include a renminbi-denominated tranche in its multicurrency syndicated loan, reflecting its appeal among international investors. Liv. grew its UAE base to more than 470,000, with the customer base in KSA now growing to 75,000. We expanded our branch network in Saudi to 7, with the opening of the third branch in Riyadh, which is on top of the ones we opened last quarter of Mecca and Medina. In summary, Emirates NBD has delivered a strong operating performance in the first half and made progress on many strategic fronts. We continue to support our customers with our strong balance sheet, enabling the benefit from expanding economy. I'll now hand over to Patrick to go through the results in more detail. Patrick?

Thank you, Shayne, and a very good afternoon to all of you. I'll start on Page 4 with the usual financial snapshot for the first half of 2021, and we will then turn to the component part in more detail shortly. Just starting at the top of the table, the results table there. Total income of AED 11.5 billion is down 9% year-on-year, but it is up 9% on H2 last year. While interest income is down 12% year-on-year for the first half, it is in line with the rate cuts in Q1 2020. It is flat to H2 last year. And as we'll see shortly, margins have stabilized. And we have had a very strong start to the year in nonfunded income, resulting in H1 being up 2% on last year and up 41% on H2 last year. Costs tracking well, 6% year-on-year, benefiting from the actions we took last year. We continue to maintain our track record of discipline, but we also have the capacity for investments in our international and digital strategy. Impairment of AED 2.6 billion was down 38% year-on-year and down 30% on H2 as we have seen credit migration moderate. This equates to a cost of risk of 114 basis points for the first half, continuing the improving trend. Of course, we remain cautious and continue our leading coverage level. So overall, net profit for the first half of AED 4.8 billion, up 17% on H1 2020. Touching on a few of the key balance sheet metrics there. Loans and deposits both down 1% on year-end, mainly from the impact of a weaker Turkish lira, while translating to AED. But as we'll see later, we do have underlying loan growth in Q2 after seeing strong levels of deferral repayments. And we have a strong deposit mix, which keeps costs of funding optimized in this low rate environment and positions us very well for future interest rate rises. Liquidity remained strong with an LCR 159%, well above the 100% minimum level. The NPL ratio has increased 10 basis points since our 2020 year-end to 6.3%. And capital remains very strong, with a CET1 ratio of 15.6%. Now just a few overall comments on Q2 versus Q1 2021 on Page 5. For the more of observations here are, firstly, the lower Q2 income; and secondly, the significantly lower impairment. We did note at the Q1 results presentation that it was a particularly strong quarter, especially for DenizBank, which had strong mark-to-market gains made on interest rate hedges during the market dislocation experienced in March, with an expectation that these would reverse or at least not recur as the market settled. And the additional impact of the 200 basis point policy interest rate rise in Turkey now flowing into Q2. Now on impairment. We have the benefit of almost a halving of the quarterly net charges after a very strong Q1 provisioning and then stronger recoveries in Q2. So let's look at these components in a bit more detail, firstly, turning to Page 6. The bottom right chart shows that margins declined 2 basis points in Q2. Loan yields declined 4 basis points, reflecting a modest drop in EIBOR rates during the quarter. Funding costs improved 9 basis points on higher CASA balances, and treasury yields declined 6 basis points as liquid assets were deployed at lower yields. DenizBank margins declined just 1 basis point as earlier rate rises have now largely flowed through to the loan book. On the bottom left-hand chart, we see that year-on-year, lower interest rates impacted loan spreads by 108 basis points, this combined with lower margins from DenizBank more than offset the 75 basis point improvement in deposits and funding costs. We have revised our full year net interest margin guidance up by 5 basis points to 2.40% to 2.50% as we expect stable margins with the remainder of the year, albeit Turkey's monetary policy may be a factor in the final outcome of 2021. Slide 7 shows that the group continues to operate with strong liquidity. We have AED 82.6 billion of liquid assets, which covers 14% of liabilities and 18% of deposits. The healthy LCR and ADR ratios are reflective of strong sector liquidity. TEF has helped ensure good liquidity in the banking system. Following the UAE Central Bank's decision to extend the zero cost funding until the end of December 2021 and until June 2022 for new loans to customers affected by COVID, Emirates NBD will continue to actively support customers. We have taken advantage of favorable conditions in the first half to raise AED 20.3 billion of term funding, which covers this year's maturity and 1/3 of next year's maturities. DenizBank's recent multicurrency syndicated loan, as Shayne mentioned, is the first from a Turkish bank to include a renminbi tranche, demonstrates its appeal amongst the international investors. On the bottom right of Slide 8, we see that deposits have been broadly stable during the second quarter and down 1% during the year due to Turkish lira depreciation. DenizBank grew its deposits by 8% in local currency terms. But when translated into dirhams, this represents a 7% decline. Emirates NBD deposit mix continued to improve in the second quarter, with CASA growing by a further AED 9 billion, enabling the group to replace AED 9 billion of more expensive fixed deposits. At the group level, CASA represents 58% of total deposits, with domestic up at 67%, the highest ever level. Gross lending grew 1% during the second quarter, with growth across all segments. Gross lending declined 1% during this year due to currency translation, repayments of deferral support funding and EmCap's success in helping corporates to access the capital market. Retail lending grew a very strong 6% in the first half on higher demand for personal loans, auto loans and mortgages. Islamic financing increased 2%, and corporate lending declined 1% due to stronger deferral support repayments. DenizBank's gross loans grew by 9% in local currency, but then declined 7% in dirham terms after translation. Turning to credit quality. Slide 9 shows, as mentioned earlier, that the NPL ratio increased slightly, 5.1% to 6.3% during the first half due to stage migration. We have updated our full year guidance, and we currently expect NPLs to finish the year in the mid-6% area. Despite the reduction in the annualized cost of risk to 114 basis points, for the first half, the coverage has risen by 5.2% to 122.5% in 2021. This improvement in the cost of risk is across the group with DenizBank's 206 basis point cost of risk for H1 2021, improving significantly from the 374 basis points a year ago. Emirates NBD's cost of risk improved to 95 basis points from 126 basis points for the first half of last year. Let's -- turning to page, Slide 10, provides more detail on staging. Chart at the top right shows that Stage 1, 2 and 3 impairment allowances have grown by AED 1.4 billion during the first half to AED 36.4 billion. Within that, Stage 1 coverage has reduced to 0.9% with AED 3.8 billion of impairment allowances due to a combination of improved macroeconomic variables and stage migration. Stage 2 ECL allowances increased by AED 1.2 billion to AED 6.9 billion, increasing Stage 2 coverage to 21.9 billion -- 21.9%, while Stage 2 loans increased by 1% to 7% of total gross loans. Stage 3 ECL allowances increased by AED 1 billion, increasing the Stage 3 coverage to 88.4%. Impaired loans declined slightly on FX translation compared to the 2020 year-end. Just on the bottom left chart, it shows that we have given deferral support on AED 10.7 billion of repayments to over 120,000 customers since Q2 last year. And of that, AED 6.8 billion has been repaid. Further information on staging and grouping is contained in Note 25 of the financials. Just finally, at the end of the first half, we were holding AED 2.7 billion in [ total ] gross funding from the Central Bank and will continue to pass the benefit from such funding on to customers. I'll now hand you over to Paddy to take you through the remaining slides.

Thanks, Patrick. Slide 11 shows that core gross income is up 6% year-on-year on higher transaction volumes and higher income from trade finance brokerage and asset management. Fee income improved due to investment banking activity and retail volumes recovering to pre-COVID levels. In Q2, core gross income declined 28% on lower foreign exchange and derivative income from hedging and swaps relating to DenizBank. Investment securities income improved year-on-year and declined quarter-on-quarter due to the nonrecurrence of disposals in the first quarter. On Slide 12, we see that costs for the second quarter increased 2% over the previous quarter on incentives relating to strong retail growth and higher costs from DenizBank. Costs improved 3% year-on-year following the earlier cost-management exercises. Cost-to-income ratio for Q2 increased to 35.3% on lower nonfunded income, particularly from DenizBank. Cost-to-income ratio was 32.6% for the first half, and we do expect it to increase towards the 35% level in the second half. Slide 13 shows that the common equity Tier 1 ratio improved 0.6% in the first half as AED 4.8 billion of retained earnings more than offset a AED 7 billion increase in risk-weighted assets. AED 1.7 billion of the increase in risk-weighted assets related to the recent change in CBUAE regulations on foreign currency government debt, increased retail lending consumes much of the remaining increase. The group issued $750 of Basel III compliant additional Tier 1 notes and retired AED 4 billion of legacy Tier 1 notes. Reported capital ratios include an accumulated total ECL add-back of AED 2.4 billion as permitted by the Central Bank. Excluding the ECL add-back, the common equity Tier 1 ratio would be 0.5% lower at 15.1%. Moving to divisional performance on Slide 14, we see that RBWM revenue improved 3% quarter-on-quarter and 9% year-on-year due to higher transaction volumes. Loans grew 7% with increased volumes across all retail products. Q2 was the busiest ever quarter for credit cards, personal loans and mortgages. Deposits grew 3%, helped by successful domestic usage campaign. Emirates Islamic's total income improved 5% quarter-on-quarter on account of lower cost of funds and higher foreign exchange revenue. Total income improved 21% year-on-year due to higher transaction volumes. Financing and investment receivables grew 2%, whilst customer accounts grew 4%. EI has helped by 78% of customer deposits coming from CASA. On Slide 15, we see that corporate and institutional banking income declined 2% quarter-on-quarter and 3% year-on-year as improved nonfunded income due to higher business volumes was more than offset by lower interest rates. Loans declined 1% due to repayments, including loans receiving support. Deposits declined 5% as CIB grew CASA whilst retiring more expensive fixed deposits. Global Markets & Treasury revenue declined quarter-on-quarter and year-on-year due to a decline in nonfunded income. Net interest income improved following more stable interest rates. Slide 16 shows that during the first half DenizBank contributed over AED 3.3 billion in revenue and AED 1 billion of net profit to the group's performance. This represents 29% of income and 22% of profits for the first half. Quarterly income declined 37% in Q2 due to normal occurrence of Q1 mark-to-market gains and increased funding costs following earlier rate rises. Total income was down 27% year-on-year on both lower net interest income and nonfunded income. DenizBank's cost of risk improved to 125 basis points in the second quarter compared to 320 basis points in Q2 of last year, reflecting the strong coverage and improved economic outlook. Margins declined by 1 basis points during the second quarter to 4.12% as the impact from earlier rate rises has largely flowed through. With that, I'll pass it back to Shayne for his closing remarks.

Thanks, Paddy. And so to summarize, the 17% increase in profit is driven by stable margins, disciplined cost control and a significant improvement in the cost of risk. Margin compression from low interest rates is now factored in, and we expect stable margins in the coming quarters. Retail lending recorded its best ever quarter, including record disbursals for credit cards, personal loans and home loans. Corporate lending has started to grow again despite significant repayments. Our international locations contributed over 1/3 of group income, with DenizBank representing over 1/4 of total income. Provisions reduced 38% on improving economic conditions. Despite the challenging last 18 months, NPLs have only marginally increased, and coverage ratios remain very strong. These results demonstrate the group's financial resiliency and the success of our diversified business model. We remain well placed to enable customers to take advantage of new opportunities. We will continue to invest in our digital and in our international network to support future growth. With that, I'd like to open the call to questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from Naresh Bilandani of JPMorgan.

It's Naresh Bilandani from JPMorgan. A few questions from my side, please. One is -- sorry to come back again on the noninterest income in DenizBank. I know you did mention it a few times in the presentation, and you alluded to FX and derivative losses. I would much appreciate if you could please offer some more color on what exactly caused the weakness. Should I be just looking at the cross-currency swaps and try to form a trend of how your FX and derivatives income should trend in the DenizBank franchise? Because it seems to be generally going opposite in the direction of the cross-currency swaps. So any further detail that you can provide there, that would be extremely helpful. And also some outlook on how should we see this trend into the third quarter. That's the first thing. The second is, it would also be very helpful to understand the reasons for a limited volume growth despite recovery trends in Dubai. I know your retail division has been extremely busy and that you've had repayments on the corporate side. So my question is more on the lines of how should we think about the potential trend going into the second half of the year. That would be helpful. And the third question is, I would much appreciate if you could share the numbers that Shayne highlighted with regards to Liv. I'll take this opportunity to check if you can provide some further metrics on the Liv. franchise like deposits or loans or revenues. How should we think of this beyond the subscriber numbers? And since you are expanding further into Saudi Arabia, it would be very helpful if you can throw some light on the competitive trends that you're seeing in the digital banking space in Saudi Arabia amidst Liv.'s expansion there.

Yes. Naresh, it's Patrick here. I'll maybe have a go at the first 2 questions, and then I'll hand over to Shayne on the -- so just in respect to DenizBank NFI, I appreciate it, it's a little bit hard for you to pin that down. It is mainly a factor of the market dislocation that they had in March when there was the replacement of the central bank governor. So that the management team there is very adept at their risk management. They had some hedges in place on the lira interest rate. And because the longer end of the curve rose quite sharply, normally at the shorter end in Turkey, that created the gains that gave us the very strong Q1 for DenizBank. Moving into Q2, that is not repeated happily, and some of that has reversed. There's also the element of the 200 basis point cost of risk that comes through in nonfunded income because it's through the cross-currency swaps. And the third element in there that sort of continues because of the ongoing depreciation of Turkish lira, when they're translating their foreign currency liabilities into Turkish lira, there is an element, a component in that NFI of the sort of the lira depreciation loss on that. So there was 11% depreciation in Q1, 5%, 6% in Q2. So we saw that still coming through. Having said all of that, DenizBank does have a really strong underlying fees and commission business. And that was particularly strong in Q1 with some of the foreign currency payments as well. And as the economy sort of opens and closes a bit with pandemic that can move around a bit, and Deniz has been substantially the main variable in the nonfunded income between our Q1 and Q2. So it's been quite positive in the UAE other line. So looking forward on that line, it is perhaps more a function of continuing the strong underlying fee income, but how much there will be of currency depreciation, gross management team then looks to mitigate as much of that as possible, plus loan repricing for the 200 basis points should start coming through as well to offset part of that. That will be -- that would be in the interest income line. So that's just your first question on volume growth in Dubai. I think you met sort of...

UAE.

Yes, UAE, yes. So it has really been a story of 2 halves in a way where retail, which through last year with personal consumption and individuals and consumers being hit hard by the pandemic, that has recovered significantly into this half across all the business lines in retail in both ENBD and EI in the UAE. We've seen very strong volume growth. And so that's been really positive, is a comeback from last year. And I think we're -- on the CIB side of things and the wholesale lent borrowing, I think we have indicated through the last quarters that it has remained relatively muted for the time being and is perhaps more dependent on the wider global reopening before corporate invest more in working capital and their investment and also some of the constraints around supply chain as well as holding that a little bit as well. Now the flip side of that is the corporates have a lot more cash at the moment, and we have benefited from that. And that is part of our increase in our funding, which has also helped our cost of funding profile as well. So maybe for the third one, hand over to Shayne.

Sure. I think, just on the loan growth, we are seeing working capital facilities to clients, the usage is quite low. I think a lot of that is clients aren't restocking at the pace they would probably like themselves because of supply chain blockages. So I think the logistical side of the supply chain is causing some impact. And I'm sure, if you live here, you've heard, trying to buy car is pretty difficult, et cetera, et cetera. So there's a lot of supply chain issues at the moment flowing in, and I think that certainly affects some of our growth. However, if you look at the system growth itself, it's very muted, right? So the whole loan -- the loan system growth is very low. And it's certainly evident from the retail side when we're writing our best ever quarter that we're taking market share from other banks in the retail space. In the corporate space, the whole market is pretty flat, and we're pretty flat. We see growth opportunities in Turkey. We see growth opportunities in Saudi, especially in the corporate space, and we're starting to ramp that up quite aggressively. On Liv., as I said earlier, we're over 500,000 clients now. We also launched Liv. Prime, which is a fee-based with more benefits to improve the base there. We don't disclose deposits or loans in there, but what I would say to you is it's a profitable stand-alone entity, which is pretty rare in this world in digital-only banks. So we make money out of it. It is a huge amount of money, not at this stage, but it is profitable. But when I look at Liv., I'd say, strategically, we have a lot of neobanks coming against us in the UAE and also in Saudi -- and banks in Saudi. I think, just to give you an update of where we are on technology, we're about 90% cloud native now. So I think what a start-up would normally have the benefit of is that technology advantage. I think, from our perspective, that's not there anymore. We've got one major project left to do in our technology space, and that's Egypt. And we'd expect to complete basically the whole transformation by the first quarter of next year. But what that means as we go into the second quarter is, being cloud native, now we have the capacity to really ramp up our digital offering. And I think Liv. is one that we will do a complete rebuild on. It was built on our platform, so there's a lot of work to do for us to ramp that up even further and give far better benefits and functionality than it currently has. And we have been doing a lot of work in the space of straight-through processing, online credit cards, personal loans, account opening. So watch that space. You'll see us not just in Liv. but across the board in the next 6 to 12 months really ramping up our straight-through online platforms for both deposits and lending and the wealth space. So that's really our next drive strategically when it comes to technology. I don't think there's much more I can say about that.

Yes. We have a couple -- Naresh, is that okay for you? Any more questions?

Yes, indeed. No, not at all.

Thanks ever so much, Naresh. A few questions queuing on the webcast, so we'll just pause from the telephone. And I'll just read out a few of the questions. There's a question from Alok at Ghobash in terms of what the cost of risk evolution expected in the second half of this year and in terms of deferral requests, we've seen some increase in that. We've seen some repayments. And from what sectors are those originating? And Patrick, would you?

Yes, I'll take that one, Paddy. Look, just on the cost of risk evolution for the second half, well, the first half at 114 basis points is now back at the pre-COVID levels of -- that we saw of about between 100 and 125 basis points. And we would expect a similar cost of risk for the remainder of the year. And that's with the background of a robust provisioning through last year. So we'll see that as being more consistent through the rest of the year. What -- and then just the part about loan deferrals. Loan deferrals, you can see that out of our 10.7 of deferrals, 76.8 is already being repaid, which is a good indicator from a credit risk point of view. The extension of the test scheme and deferral does not at all affect our judgments around credit staging and the migration and our impairments at all. So what we know today is based into the impairment that we have that the overall test scheme, deferrals and the other components of it continues to provide good support to liquidity within the banking system, which is good as we recover from the pandemic.

Just to reiterate, just on that test support, we do stage our accounts according to their risk profiles and not on whether or not test support. So our lines are all directly stayed when it comes to risk management.

Okay. Thank you very much. Question -- let me -- there's a few more questions. I'll just take those. There was a question from Vijay from Al Tayer regarding the AED 1.7 billion increase in credit risk-weighted assets. What's the motivation from the Central Bank on this new requirement? Does this include Tier 1 perpetual securities? Certainly, from our point of view, we typically would not hold perpetual Tier 1 securities. So there will be no impact from that. Regarding the motivation, I'd really just refer you back to the Central Bank on that question.

Paddy, I can just elaborate. So the AED 1.7 billion is the change in the rules that have come in, in the first half, which has been long expected and as part of an overall part of the implementation of Basel III. And that relates to sovereign debt in foreign currency that now gets risk-weighted, when before it was 0% risk-weighted. So that was anticipated. There will be more changes coming later through the rest of the year as well, particularly in market risk. And that, again, will increase some of the risk-weighted assets. And look, just while I met the other drivers of the risk-weighted assets...

Our market risk is minuscule. That won't affect us very much.

Yes. And the other drivers of the increase in risk-weighted assets with a strong loan growth in retail, in ENBD and EI and also some of the off-balance sheet letters of credit, et cetera, on the CIB side has added to the RWA and an increase in the pipeline of committed lending as well.

Thanks, Patrick. Before we go back to the questions on the line, one more question we'll deal with on the web. Cost-to-income ratio is below 33% for the half year, but our guidance is still 35%. Should we expect some abnormal costs in H2?

I don't know about abnormal costs that you can see through the quarters while we were at 30% at Q1. We're at 35% in Q2. So that rounded us on average was that the 32.6% for the half. Costs, there are some costs that we would expect to come through in the second half. We have had very strong growth on the retail side with that growth comes from our incentive payments as well. So when we grow any costs in the second half, I'd classify them as good costs, if you like. The guidance of 35% was sort of top end of the range. So it sort of up to 35%. Of course, it's more sensitive to, in this environment, to income as well. So that's just how we are thinking about the cost-income ratio. Not saying that we'll be exactly 35%. We will look to see if we can bring it in slightly under.

Thanks, Patrick. Keith and Daniel, can we open up the lines again, please?

Our next question comes from Hootan Yazhari of Bank of America Merrill Lynch.

A few things that I wanted to check up on. First of all, on the broader -- you're alluding to 30% of the business now residing outside of the UAE, with some of the dynamics there. I wanted to really get a feeling for some of the corporate loan growth dynamics that you see outside of the UAE, which could present some opportunities for you in the second half. The second question I had was with regards to NIM dynamics. Obviously, you've been talking about a very strong retail growth book. And you're talking about a slight pickup in the second half for loan growth if you were to end the year at low single digits. And maybe if you can discuss around what are some of the dynamics on NIMs we should be watching out for in the second half that could cause NIMs to veer away from the expectation that they're going to remain flat in the second half.

Apologies. I don't know what happened with the technology, but I think it's happened last time we call about this time as well. You said 45 minutes -- something that cut us off. You haven't paid the bills? So I was just talking about loan growth. I think there's more loan growth in Saudi that we can get, but we're also very prudent on our risk management. So getting the right growth for us there is important. Egypt, I think there's growth. But frankly, there's not many large corporates in Egypt. The retail space there, we continue to grow quite well. Retail space in Saudi, we continue to grow quite well. But I think there was a question around, okay, so where are you -- is your growth going to come from? I think maybe there's a capital question in there as well. To me, it's like we are very well capitalized at the moment. We've made no secret that a bolt-on in Saudi or Turkey or Egypt would play into our hands. We'd like -- if we look at the banking market of both Turkey and Egypt, they're both very fractured markets. We've looked, I think, 4 times now in Egypt at different acquisitions, but also very price sensitive when it comes to acquisitions. And we have walked away from 4 transactions in Egypt because it didn't meet our pricing requirements. And I think -- if you look at Turkey, banks are priced below book there substantially, and there's some opportunity in the consolidation of that market as we go forward, in my opinion. And to me, it's about -- in any market that we want to make a significant market, we need market share. We need volume. And certainly, as we go forward, those 3 offshore markets are something that we want to grow and want to get bigger. And the reality in a market like we're here in the UAE, it's now a pretty mature market. We're not going to get those huge GDP growth and loan growth that we've got historically. And our capital is better diverted into better opportunities in larger populations with the right demographics. Do we want to be an international bank going all over the world? No, we don't. We're sticking to our core main markets. We'll expand slightly in India. But again, India, for us, it's just trade and capital flows that comes into our core markets. So I think there's opportunities there, but the growth in their home market is slow. And I don't anticipate we're going to ramp up loan growth in the corporate space very much in the second half, a bit more. But retail is continuing to fire on all engines. We're really very happy both in -- from Turkey to Egypt to Emirates Islamic to the main bank here, we're really flying very well on all 8 cylinders on the retail space, and we would expect that the momentum we've got at the moment to continue to grow in that space.

And Hootan, you had a third point there on margins for the second half and any risks around that, if I'm correct. Look, I think you've seen for the last 2 quarters the margins are relatively stable. We've updated the guidance to reflect that. You can see what the midpoint of that is. Some of the risks to that, I think, probably more around Turkish monetary policy may be a variable if interest rates went up further, that would compress margins in the short term, but I am not sure there's much appetite, therefore, increasing interest rates. If they were able to tame inflation with the current levels of interest rates, then they could bring them down. They may just bring them down anyway. Inflation is certainly still high in Turkey.

But if rates do come down in Turkey, that does -- it's the opposite to the UAE, provides a NIM picker in Turkey.

Our next question comes from Kate Carpenter of Morgan Stanley.

Just a quick follow-up question on NIM and competition. And just given what you said about the UAE market becoming more mature and the fact that loan growth is slowing down, I'm just wondering if you could give any color on what you're seeing from the competitive side of things on new lending, whether you're seeing any asset compression and whether that's factored into your NIM guidance and to what extent you expect that asset yield compression to be offset by lower funding costs from CASA balances. And then my other question is on the retail segment. I was wondering if you can give any color around which kind of customer groups have been driving the rebound, whether it's more in the high net worth, ultra-high net worth segment or if you're just seeing the rebound kind of across the board across all income segments. That's it.

Let's start with the retail segment first. I think I'd say we're seeing it across the board from private bank right down to normal customers. It's pretty much across the board. I mean, card spends, debit, credit are back to and above historical levels. Obviously, international spend still aren't what they were. But localized spendings, it's bounced back really strongly. Housing loans have been extremely strong, and I think most of you live here, and you've seen the jump in property prices and property demand there. Lending for builders, not for partners, but there's a lot of demand out there at the moment. But it's really across the board from its personal lines. I think car loans are a bit more problematic because there's not enough cars. People are struggling to get stock. But personal loans, credit cards, housing loans, extremely strong. CASA momentum in retail in the first half of the main bank was huge. It was over AED $10 billion, if I remember it.

Yes.

Over AED 10 billion growth in CASA in retail. So the retail engine is really firing well. And it's not just ENBD. EI is doing a fantastic job as well. Very much the exact same growth patterns that we're seeing in ENBD. So I think from a retail segment's basis, pretty much across the board, and it's better than we've ever had, better than prepandemic levels. On NIM competition, I think in any market where there's low growth and lots of liquidity, you're going to get some pricing pressure at the top end of the market where people try to buy growth. From our perspective, we'd be very defensive on any lower pricing. Because one thing that we do remember is, because of our deposit mix, when rates increase, those slimmer margins will actually expand out given our deposit mix. So we also do not want to lose any clients to just pure pricing pressure. But it's certainly, from our perspective, pricing for risk is important, but also making sure we don't lose our good customers because of low growth is also an important part of it. Because risk -- pricing the risk is not just about what do you charge the loan. It's also the ancillary business that we build off the back of that loan is very important to us.

Thanks very much. I'm very conscious of time. We want to get wrapped up in the next 5 minutes. A lot of you have another call to jump on. Let me just finish wrap up the questions on the web. And Patrick, let me put this one to you. Positive changes in ECL models because of the improvement in the economic situation. Before you answer that, I'll just finish with question. We've covered your points about borrowing demand, the Turkish operating environment. You had one question on provisioning related to MMC. We don't disclose individual provisioning for any individual customer, but we have disclosed our total exposure covering both Emirates NBD and Emirates Islamic was $206 million. And I would point you to the 122.5% coverage for NPLs. Patrick, in terms of the ECL?

Yes, just on the ECL and the modeled inputs, we have seen an improvement across, I think, almost all the major macroeconomic variables, particularly on the downside risk components. So there are 3 components: the base; upside; downside. So even oil, GDP, consumption, hotel occupancy, real estate. We saw an uptick in all of those for the moderate input for this quarter. So that's really what's driving that. And we know that with IFRS 9 and the modeled approach, it is typically more volatile, the good with the bad. So last year, you saw we very quickly at H1 last year went back to a modeled approach at the negative inputs in that. And now as the economies -- global economies are coming back, we're seeing the positive side of that. Having said that, we are mindful that the global economies are not out of the woods yet. And so that could still bounce around a little bit towards the rest of the year.

Thanks, Patrick. We've got a couple of minutes. I think we have one more question on the line, so Keith, Daniel, if you can just go ahead, please, and open the line.

We'll now take our final question. It comes from Shabbir Malik of EFG Hermes.

Just one question from me. Was there any financial impact from the buyback sale this quarter? Or can we expect this in the third quarter?

Shabbir, no, there was no financial impact in Q2. We do expect that to close in H2 and more likely in Q3. So we'll update you at this time in the next quarter. Okay.

Okay, Shabbir?

Yes, absolutely.

Thanks very much. Keith, Daniel, is there any more questions queued?

We have no further questions on the line.

Okay. Thank you. So there's no further questions on the line. I'd like to thank you all for joining us for the call. And I'll hand you back to the operator to provide details. If you have any further follow-up questions and to conclude the call. Thank you very much.

For any further questions, please contact our Investor Relations department, whose contact details can be found on the Emirates NBD website and the results press release. A replay of this call and webcast will also be available on the Emirates NBD website next week. Ladies and gentlemen, that concludes today's conference. Thank you for your participation.