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

Ladies and gentlemen, welcome to the Emirates NBD Results Call and Webcast for Q3 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 your host, Mr. Shayne Nelson, Group CEO of Emirates NBD.

Thank you, and welcome to the briefing call for Emirates NBD results. With me as usual are Patrick, our Group CFO; and 4:35 Paddy, our Head of Investor Relations. For those of you who are based in Dubai, I'm sure you've noticed the increase in traffic and activity as the city has returned to business as usual. There's a real buzz around Dubai and the Expo as it opens its doors. The theme of Expo is connecting minds, creating the future. This aligns with the group's values of collaboration, ownership drive and enterprising. It's appropriate, therefore that Emirates NBD Group is the official banking partner of Expo 2020, and we're excited to showcase our pioneering vision for the future of global banking. Turning to economic sentiment. The outlook for the economies in which we operate is positive. UAE economy got off to a bright start in Q4 with Expo predicted to boost domestic demand. The easing of travel restrictions in key markets with the full recovery in tourism and hospitality sectors. We expect the non-oil economy to grow by 3.5% this year, and there's optimism has pre-meditated through the real estate sector with biller prices rising substantially and apartment prices also noticing some bright spirit recently. I will talk in more detail about our international strategy later, but looking at the economic performance of the other main areas where we have a presence, where Kingdom of Saudi Arabia, the economy expected to benefit from increased oil output in the coming months and GDP is forecast to grow by 2.5% this year. But the Egyptian and Turkish economies were two of the few countries in the world to register positive GDP growth last year. Both countries are expected to deliver mid-to-high single-digit growth this year. Now turning to results. Today, we announced a 29% jump in profit to AED 7.3 billion. These strong results demonstrate the financial resilience and success of our diversified business model. Despite interest rates remaining at record lows, underlying business momentum is strong and Q3 saw record demand for retail financing. The group's balance sheet strengthened with further improvements in deposit mix, credit quality, capital, and liquidity. We continue to support businesses and customers recovering from the global pandemic. And the strong results enable us to keep investing in our digital platform and our international network which will drive further growth. Although Patrick goes through the drivers that prevent performances, I wanted to outline the progress we have made on our IT and international strategic initiatives. For IT, we'll close out our IT transformation very shortly and have one single upgraded core system across the bank. We are currently 92%, and we'll soon be 100% cloud-native. We have the largest private cloud in the Middle East. We have a big data platform, which captures 16 million customer data points each day. We now move to the next phase of leveraging this infrastructure and we have established a state-of-the-art advanced analytics center of excellence. This will increase our sophistication in understanding customer behavior, enhanced customer engagement and deliver operational efficiencies. In terms of international, 36% of this year's income now comes from international operations. We received approval to expand our presence in India with two further branches if i can pronounce it, [indiscernible] Despite a challenging operating environment, DenizBank's management team are experienced in navigating through and they have managed impressive results. We have successfully expanded our branch presence in both KSA and Egypt. There are other initiatives ongoing within the group. ESG continues to gain increasing importance. Last month, we were certified with the ISO 26,000 international standards on social responsibility. We will align our ESG framework with the UAE net zero by 2050 strategic initiative. In summary, Emirates NBD has delivered strong operating performance for the first 9 months and continues to make good progress on many strategic fronts. We support our customers with our strong balance sheet, enabling them to benefit from an expanding economy. I will now hand over to Patrick to run through the results into more detail. Patrick?

Thank you, Shayne, and a very good afternoon to all of you. I will start on Page 4 with the usual financial summary for the first 9 months of 2021, and we'll then return to the component parts in more detail shortly. Just starting at the top of the results table. Total income of AED 17.3 billion is down 5% year-on-year. The main impact, of course, is coming from lower net interest income in line with the interest rate cuts last year. Margins have been stable since Q4 last year. And in Q3, we have seen an increase, mainly from loan mix, with record demand for retail financing, lower cost of funding, and leaseback. On nonfunded income, the strong momentum in transaction volume growth has continued in Q3, although this was offset by lower FX and derivative income, resulting in nonfunded income being 3% lower year-on-year. Costs continue to track well, down 2%. We are within cost income guidance for this year. We are allowing for some costs to increase related to driving growth and some costs from a wider return to normal business activity as well as maintaining capacity for investments in our international and digital strategy. Impairments of AED 3.7 billion is down 42% year-on-year, resulting in a cost of risk of 106 basis points for the first 9 months of 2021, which is at the lower end of the pre-pandemic range of 100 to 125 basis points. We expect the full year cost of risk to finish around the midpoint of that range. So overall, the net profit for the first 9 months is AED 7.3 billion, a strong 29% increase over last year. Now looking at a view of the key balance sheet metrics. Loans are down 1% and deposits broadly flat to last year-end, mainly from the impact of a weaker Turkish lira, while translating to AED. As we'll see later, we do have underlying loan growth, particularly in Deniz and retail financing, and after allowing for healthy levels of deferral repayments. The profile of our deposit base keeps cost of funding optimized in the slow rate environment and positions us well for future interest rate rises. Liquidity remained strong with the LCR at 157.2%. The NPL ratio at 6.2% has been stable since 2020 year-end, and capital remains strong with the CET1 ratio of 100 -- sorry, of 16.1%, which has increased on the back of strong earnings year-to-date. A few overall comments on the quarterly results set out on Page 5. Total income increased against both last year and Q2 this year from strong interest income with the step-up in margins and the lease bank, which we'll look at shortly. Expenses are well controlled with increased -- with the increase from Q2, mainly from staff costs, which included incentives related to strong retail growth. The cost of risk of 91 basis points for the Q3 reflects some good recoveries and no significant new nonperforming loans. But as I noted a moment ago, we expect the full year number to be closer to the midpoint of the pre-pandemic range. And finally, net profit of AED 2.5 billion, similar to Q2 and up 61% on Q3 last year. So let's look at these components in a bit more detail. Firstly, turning to Page 6. The bottom right chart shows that margins stepped up 21 basis points in Q3. Loan yields are up 10 basis points, reflecting an improved loan book mix. And funding costs improved 5 basis points on record cash balances and efficient deployment of liquidity. And the DenizBank management team did an excellent job of managing the cost of funding despite the Q1 200 basis point rate hike and repricing the loan book. On the bottom left-hand chart, we see that year-on-year, 2020 interest rate cuts impacted loan spreads by 75 basis points. This, combined with slightly lower margins from DenizBank, more than offset 57 basis points improvement in deposit and funding costs. In view of our progress on our funding profile and the September rate cut in Turkey, we have revised our full year guidance up by 5 basis points to 2.45% to 2.55%. And as I noted at half year, Turkey will be the main variable as to the full year outcome. Slide 7 shows that the group continues to operate with strong liquidity. We had nearly AED 72 billion of liquid assets, which covers 12% of liabilities and 15% of deposits. The Central Bank is winding down at zero cost funding program, but we don't see this as having a material impact on sector liquidity. That part of the test program has met its objectives of providing market liquidity. The banks could, in turn, provide customer loan repayment support. We have taken advantage of historically low rates to raise AED 21.9 billion of term funding this year. The debt maturity profile, as shown on the bottom right there, is comfortably within the group's refinancing capabilities. Turning to Slide 8. we see that gross lending is flat to Q2 and down 1% on 2020, and that's despite AED 4 billion of corporate customer deferral support repayments this year and the FX impact from DenizBank transition to AED. Gross retail loans are up 11% this year, and DenizBank loans grew 10% in local currency terms due to currency translation is down AED 6 billion year-to-date. The deposit mix has improved during 2021 with the AED 30 billion addition of CASA, moving the overall CASA percentage to 58%. In Q3, we also grew fixed deposits by AED 4 billion, prudently maintaining access to all sorts of the funding. The bottom right-hand chart shows the progress we are making on improving the diversification on the loan book across both product and geography. Slide 9 now that shows, as mentioned earlier, that the NPL ratio remained stable at 6.2% during the year and improved 0.1% during the quarter, mainly due to recoveries and write-offs and no significant new NPL. Despite the reduction in the annualized cost of risk to 106 basis points for the 9-month period, coverage has risen by 9.4% to 126.7% in 2021. This improvement in the cost of risk is across the DenizBank's 203 basis point cost of risk for 2021 and is a significant improvement on the 408 basis points from a year ago, and Emirates NBD cost of risk improved to 86 basis points from 125 basis points for the same period last year. The chart at the bottom left shows that impairment allowances has grown by AED 2.1 billion across all stages during the year to AED 37.1 billion. Stage 1 and 2 ECL allowances increased, while coverage remained stable despite Stage migrations earlier in 2021. Stage 2 loans increased by 1% to 7% of gross loans as shown in the center circle chart. Stage 3 ECL allowances increased by AED 1.3 billion, increasing the Stage 3 coverage to 90.7% as the NPL ratio remained stable. And finally, the bottom right chart shows that we have provided deferral support on AED 10.7 billion of repayments to over 127,000 customers. 75% or AED 8 billion of this support has now been repaid, a further information on the staging and grouping then set out on -- in Note 25 of the financial statement. I'll now hand you over to Paddy to take you through the rest of the slides.

Thanks very much, Patrick. And Slide 10 shows that fee and commission income for the third quarter was up 11% year-on-year on higher transaction volumes and higher brokerage and asset management fees. Foreign exchange and derivative income is up quarter-on-quarter, but declined year-on-year due to hedging and swaps relating to DenizBank. Investment securities income improved both year-on-year and quarter-on-quarter due to gains on the sale of securities as part of liquidity management. On Slide 11, we see that costs for the third quarter increased 3% over the previous quarter and 8% year-on-year. This increase includes higher staff incentive costs relating to strong retail growth. It also reflects higher operating expenses as activity increased as well as continued investment in our digital platform. The cost-to-income ratio for Q3 improved to 34% due to higher income. This brought the year-to-date cost-to-income ratio to 33.1%, and we expect to finish the year within the 35% guidance. Slide 12 shows the Common Equity Tier 1 ratio improved by 1.1% in 2021 as the AED 7.3 billion of retained earnings more than offset a 1% increase in risk-weighted assets. The group's Tier 1 and Capital Adequacy Ratio has also strengthened considerably. And all capital ratios remain comfortably above the UAE Central Bank minimum requirements. Reported capital ratios include a total ECL add-back of AED 2.8 billion for incremental Stage 1 and 2 ECL alliances, and ratios would be about 0.6% lower if we exclude the ECL add back. Turning to divisional performance on Slide 13. We see that RBWM revenue improved 2% year-on-year, helped by record growth in retail financing, CASA growth and higher fee income. The increase in expenses is partly related to staff incentives and campaigns to help drive growth, as can be seen with a strong 12% increase in retail lending and deposits of 7%. CIB income declined 5% year-on-year due to the impact from last year's fall in interest rates. This has partly been offset with growth in nonfunded income with EmCap being very prominent in a number of high-profile debt, equity and ESG transactions. Expenses improved by 7% year-on-year as CIB tightly managed its cost base. Loans declined by 2% due to deferral support repayments, whilst deposits were 3% lower as CIB grew its CASA base whilst retiring more expensive fixed deposits. Emirates Islamic income grew by 14% year-on-year on higher fee income. This more than offset a modest 1% increase in expenses, both financing and investable receivables, and deposits grew by 4% during the year, as EI maintained a healthy ADR of 87% whilst further growing the CASA base. Global markets and treasury income was 61% higher than last year, as net interest income improved following greater stability in interest rates. The ALM Desk have efficiently managed the excess liquidity. And given the strength of the group's funding position, they were able to retire some expensive fixed deposits. The fund in that took advantage of the low rate environment to achieve a significant amount of [indiscernible] Tier 1 notes at attractive levels. For DenizBank, the 17% drop in income in dirham terms is reflective of the 19.5% depreciation in Turkish lira during the first 9 months of 2021. Both loan and deposits grew by approximately 10% in local currency terms. Slide 14 shows a big improvement in DenizBank's cost of risk. In the third quarter, the cost of risk dropped below 200 basis points compared with over 450 basis points for the same period last year. DenizBank contributed nearly AED 5 billion in income and over AED 1.5 billion in profit to the group during the first 9 months. This represents a significant 21% contribution of total group profit. As with the group, DenizBank were also able to deliver higher margins in the third quarter. And with that, I'll pass you back to Shayne for his closing remarks.

Thanks Paddy. So to summarize, the 29% increase in profit is driven by improved loan mix, a more efficient funding base, and a substantially lower cost of risk. Total income was up 7% on previous quarter as margins improved. Q3 was a record quarter for retail financing. Corporate lending was able to offset significant repayments of deferral support. Emirates Islamic has delivered a big improvement in profitability. We have nearly completed our IT transformation as we're prepared to leverage this through the use of advanced analytics. Our international locations contributed over 1/3 of group income, and we received approval to have further branches in India. These results demonstrate the good financial resiliency and success of our diversified business model. With that, I'd like to open the call to questions. Operator, please go ahead.

[Operator Instructions] We will now take our first question from Mr. Chiro Ghosh from SICO.

This is Chiro Ghosh from SICO Bahrain. I have a couple of questions. The first one is, I want to get a sense of what is the corporate borrowing appetite in the ...

Apologies. We can't hear you. We can't hear you.

Should I be -- should I be a little louder? Or -- it's better or no?

No.

Are we a little louder? And second, I have to type in my question. Can you hear me? Or...

Could you type it into us. Is that possible?

Yes, yes. Yes. I'll drop out, and I'll just type in.

We will now move on to our next question from Mr. Naresh Bilandani from JPMorgan.

It's Naresh Bilandani from JPMorgan. So congrats on the continuing good delivery. Just a few quick questions from my side, please. First, would you currently update us on Liv. What are the current sort of like metrics? And how is the international expansion of that app going? That's one. Second is, could you please give us an idea of how should we think of the NIM going into the next year? And it would be very helpful if you could just give us some color on what the interest rate sensitivity looks like currently, as of the balance sheet structure as of 9 months '21? That's the second question. And third, more for Shayne. It would be -- Shayne, it would be very helpful if you can please just give us an idea on -- to what extent do you think the current economic trends in Dubai and UA can be sustained, when the Fed starts tapering and eventually hikes rates going into the next year. My question is more on whether the current sort of like ongoing strength in the property prices and consumer demand, to what extent do you think that would be sustainable going into the next 12 to 24 months?

Okay. I'll go first. On Liv., as an update, we've cracked the 500,000 customers in the UAE. So that's a good thing. And it's 85,000

80,000 [ Liv. ]

So we're still in the sandbox. We are trying to get it out of there. But at the moment, it's still in the sandbox. It's making good progress in Saudi as well. As I said many times, it's a profitable business for us. But I suppose the big difference we have with Liv. is it's a self-contained unit within the organization itself and therefore, it leverages our capital, it leverages our architecture. So it has some advantages and challenge in digital banks because it doesn't actually have to have a higher allocation of capital or costs. So we can leverage to the group -- so it's doing very well. We certainly do plan now to -- revitalize it now that we've got our new architecture in place. The point being we didn't want to really do a major upgrade on Liv. on the old architecture. So we're waiting for the transformation to be nearly complete. And this won't be the only thing you'll see us rolling out quickly. We talked about advanced analytics, obviously. New apps, new functionality, new update on Liv. That's all in the pipeline. And we also realize we do need to update it and get it into a fixed state to compete against the challenger banks. But it certainly got a big head start on the challenges as they come in now. And I certainly think from a capital liquidity area, it's economically beneficial for us rather than a stand-alone license bank in its own right. On economic trends, on Fed traffic. Well, I think Fed tapering interest rate increases will firstly for us, as a bank, it's a pretty good thing because we're so CASA-heavy that the positive for us is that, that would increase our profitability significantly. And I think if I remember correctly, Patrick, it's about AED 300 million per 25 bps, so it's the sensitivity. So it's a big number for us. On the economy, it's still -- we're tapering and interest rate increases. I think I read a report on Bloomberg today now, maybe you shouldn't believe anything to read on -- or in the press, but UBS was saying that Dubai is the only major city in the world where they think property is undervalued, using a range of metrics. And it has been down in the dog house for a long time in Dubai, and I think it's coming back quite strongly. But having said that, it's not strong across the board. It's -- with the Dubai recovery, it's developed as an economy and a more mature as an economy now where location is important far more than history where everything went up. But I think what we're seeing now is if you -- if it's a villa in a good location, it's increased quite significantly. If it is in a palm and front of water, it's increased quite significantly. But you go back from that and apartment prices really haven't moved much. So I think it's still very affordable. And I think it will depend on how much U.S. rates jump as to how much of that affordability will affect. We are seeing population growth in the UAE at the moment. I certainly -- I've been down to [ DIWA ] seeing the Chairman there, and they're talking about how many new electricity accounts have opened up. So we are seeing positive population growth, which is a great thing for the country. But I think -- UAE, I think, 1% increase in -- with the Fed that then translates to here. I don't think that's going to make a lot of difference to the economic recovery nor property demand because it's still, I think, very affordable.

Yes, Naresh, I'll pick up on the NIM point you had and you asked specifically about some view on next year. Look, of course, we'll update guidance in January when we come back with the full-year results. But you can see, for Q3, we have reaped the benefit of the lower cost of funding and the increase in our CASA, et cetera, and updated the guidance. I think you can then do the math where it might close out for the full year. Now we don't expect interest rates to rise any time soon, whether it's the end of next year or into the following year, so -- other than continued funding... [Audio Gap]

The webcast has dropped as well. .

Perfect. Please go ahead.

Sorry, everyone. I think that was -- the line had disconnected. I believe that we're now back up and running. So I'll shortly pass you back to Patrick. We are just checking as well whether the webcast is operating. But I'll pass you back to Patrick now for his comments.

Apologies for that. So I'm not quite sure how far to rewind back on the NIM's question there. Just I'll paraphase what I had said earlier that we'll update the guidance for NIM in January when we come back. There's pretty good guidance on how the rest of the year will form. Essentials rates remain at record low levels where we've made good progress through this year with lowering our cost of funding, et cetera. The only main variable that's in there really is the Turkish monetary policy and interest rates. It was a 100 basis point cut late September. There may be more rate cuts to come. In fact, there's an MPC meeting tomorrow. Turkey typically has, in the near term improvement in its margins when rates come down because the cost of funding falls faster than the asset repricing, albeit that is more a temporary adjustment in that. And I also was mentioning previously that if we look back to Q4 2019, you were asking about the interest rate sensitivity where rates go up, when LIBOR was 150 basis points higher, we had net interest income, that included consolidation of the leaseback in Q4 of about AED 5.0 billion. We're currently running at about AED 4.4 billion. So AED 600 million per quarter, AED 2.4 million per annum. So that's on an equivalent just for reference, the 150 basis point cut that's come through, whether it will take quite some time before rates go up to that extent. And we'll update the guidance on NIM when we come back in January.

Cecelia, are there any further calls in the line?

[Operator Instructions]

I believe the webcast is up and running. We've got a few questions come in on the webcast. So I'll just read those out and pass them on to Shayne and Patrick. First one comes from Shabbir. The fee income looks shy of expectations. Can you provide some visibility on fee and noninterest income, and also just repeat your thoughts on provisions? I believe that the line has gone a bit thin, Patrick. So if you can just cover your thoughts on provisions and noninterest income.

Okay. Okay. Thanks for those, Shabbir. Look, I mean, look, I think the best illustration of what's going on with nonfunded income is on Page 10 of the deck, the fee income -- the underlying fee income part of nonfunded income is -- remains very strong. We did AED 1.56 billion of gross fee income for Q3, which is up 11% year-on-year. And that's even after some strong activity this time last year in financial markets, the global markets during periods of market volatility as well. So what we've done is also then break out the other part of the nonfunded income. Just show some of the variability of income that's really being driven by different events in Turkey. So the AED 379 million of other operating income does have an element of FX dragging and also the higher swap funding cost in Turkey, where there are derivatives that swap foreign currency liabilities into Turkish lira to lend on that. And the interest component of that really stays within nonfunded income under the accounting requirements. So through the last year, with the significant rate rises that Turkey saw, what was it, up 9% last year to 100 basis points this year, that also -- that cost of funding is coming through in the nonfunded income there within the derivatives. And we also reviewed in Q1, the increase or the spike in nonfunded income with the mark-to-market gains on hedging Turkish lira interest expense on deposits as well. So the point is, the actual fee income element of nonfunded income remains strong and recovering from lows last year. The other part just on provisions. Was there a specific aspect about provisions?

I think it was, the line gone thin. So if you can just repeat what your comments about being at the lower end of the...

Right, right. Yes. So the cost of risk is 106 bps year-to-date, and that's at the lower end of what we have as a pre-pandemic range of 100 to 125 basis points. We did 91 basis points in Q3, so we are guiding more to the mid of that. So in Q4, you don't always have repeating of recoveries that we may have experienced. And also we then complete the full year cycle of credit reviews, et cetera. And that's why we guide broadly to the middle of that range. But the good news is that impairment and the charges have come back broadly to the sort of prepandemic level.

Thanks very much, Patrick. We've got a couple of more questions come in. Shayne, if you could -- the question on what's our -- in terms of economic diversification, particularly from the loans [indiscernible]deal what we target. And Patrick, in terms of -- sorry, let me just see here, in terms of corporate lending. Why has corporate loan growth been muted? If you can also just talk about the DenizBank performance in terms of trends and outlook for that. And then finally, given the higher income that we are seeing, is there room for a potentially lower cost income ratio?

Sorry, who's that from?

That's from Waleed and Ayisha.

[indiscernible] I just wondered what mix?

Yes, the loan mix, the economic mix that we...

I think at this moment our revenue is about 36%. So -- on revenue. So I think we actually had a strategic agenda to try to get it above 20% a few years ago, and we're up to 36% at the moment. I think we would love to see a 50-50 balance between offshore, onshore. But doing that organically would be very difficult. It would take some inorganic acquisitions to get us to that sort of ratio. So I think from our perspective, we've got -- with our CET1 at 16.1, we've obviously got a war chest there that we've built back pretty quickly, given our profitability. And obviously, that capital can be used. We certainly have the capacity to pay higher dividends, but that's not my decision. That's a Board decision. And we certainly have the capacity to do some in-market backfilling in our key markets. And I'll just reiterate what I've said before. We're interested in Turkey, we're interested in Saudi, we're interested in Egypt. We keep looking. We have nothing on the deck at the moment, but we keep looking. We certainly have the capacity to -- especially in Turkey and Egypt, where they're very fractioned markets with lots of potential to be a consolidator there. And I think certainly, the pricing in Turkey, the bank is pretty reasonable at the moment. Conversely, the price for the Egypt is pretty expensive. But we certainly keep continuing to look for inorganic opportunities there. On corporate loans declining, we have had some quite large repayments that have come back after the test. But if you look at the market in the UA, in particular, there is no loan growth in corporate. I mean, the whole market is flat at the pancake. Slightly declined, in fact. So there is no market right now. What I would say to that, I think I read somewhere that supply chain was the most commonly used phrase in CEO calls around the universe at the moment. And so now I'll offer [ has been ]twice. So I think supply chain is becoming an issue here. Also, if you look at the CASA's engine that we've developed, frankly, it was -- it's great for the bank. I think it's also the reality that our clients can't get the stock they want. So they're generating cash out of their stock turn and not replacing where they should be. So working capital facilities are quite low. Trade volumes are quite low because people can't get in the goods and services that they want. Container cost, I was talking to one of our customers, that container which was $600 [ for land ] in China is now $6,000. So I think there's certainly some bottlenecks in the system that are affecting the growth in that corporate and even SME sector where getting the stock is an issue. And that then reflects into corporate loan demand and stock levels. Do I see a big recovery in the corporate loan market? At the moment, I don't see it. We also have a much more robust capital markets here. So a lot more clients are going to the Sukuk and bond markets here. So at the moment, I don't see that -- the big loan recovery in corporate coming in through our pipeline. I just don't see that in a moment. I think we're going to be pretty flat in UAE. But having said that, I think we can push much harder in Saudi to get loan growth than we probably can in the UAE.

And there's the -- I got the question on cost income.

Yes.

Cost income and -- yes, higher income.

Yes.

So we are within the guidance of 35% for this year, particularly at the beginning of the year where we did see that step-up incumbent, that's just simple math and you can see sort of the trajectory of the cost as well, where we are -- as volumes -- business volumes improve, we do see directly related costs, whether it's incentives or human-related op costs, et cetera. So that's good costs as part of the wider reopening and the underlying business that we are doing. So the cost income for the rest of the year, you may have seen in some previous years within our costs for the fourth quarter. We also make sure that we are continuing the investments in marketing to make sure we're ready for some of the campaigns in the year ahead as well. So the cost income pressure, we would focus under 35%. Whether that's 1% or 2%, we'll see how we land at the full year.

Just to the analysts -- just going back into the corporate memory. Just remember, the fourth quarter, traditionally, we do have quite a lot of marketing costs that we've hit in that quarter. And if you look at that year-on-year, that fourth quarter is one where we have substantial amount of increasing costs around our marketing. It's things like to buy gold from stuff that we paid in the last quarter, for the January event next year. So there's quite a bit that we do hit in that marketing budget in the last quarter, for example. So it is a quarter where traditionally we have a higher cost-income ratio than the other quarters of the year.

And just also, I mean, the 35% was guidance or to indicate that we would expect to go above our long-term guidance of 33% because of the significant drop off in income. But having said that, when we had our long-term guidance of 33%, it doesn't mean we are going to operate at 33%. Quite often, we're at 28%, 29%, or 30%. So it is more consecutive rather than a hard number.

Patrick, there was a question from Waleed as well on the outlook for the Turkish business.

Okay. The outlook on Turkey, so I mean, you can see that obviously, there are some macro aspects around monetary policy, et cetera. There's over the last 2 years, through all the changes that have been made, the management team there is very effective, navigating a lot of that change. And when there are some of the drops to the systems, whether it's changes in Central Bank governance or Monetary Policy Committee, et cetera, the business is always well positioned. Interest rate cuts actually leave some increase there. Having said that, we would much rather, at a macro level, that the inventory policy was obviously directed towards taming inflation and stabilizing the Turkish lira because, yes, the Turkish lira is weakening therefore, they'll have a translation impact coming through, particularly when you can see what happens to the balance sheet there, underlying their growth is strong but the translation into AED means it's down. Also, I should just note that the impact on our overall capital base from the FX and beneath is really negligible as well. So it's a long-term view we're taking on Turkey. We know we can weather some of the events that are going on at the moment, that would obviously be better if it's stabilized.

And the other thing to mention this on Turkey, Patrick, is when we acquired Turkey, I think we had sort of mid-50s Stage 3 coverage and we're up to 75% now. So one of the reasons we've been able to dial back the provision levels, I think there was a question of a couple of quarters ago, when we start seeing a decline in cost of risk. And I think you're seeing that come through now because we were very aggressive from day 1 of acquisitions to build those reserves and be in line with the group.

Thanks, Shayne. Thanks, Patrick. A couple of final questions. I'll take most of them, Patrick, if I can just ask you to see this one. It's on cost of risk, what the main areas that can surprise negatively? But -- that's from Valentina. Valentina has also asked about any update on the guidance metrics and thoughts about guidance for 2022? Of course, we'll give guidance for 2022 at the next quarterly call. For 2021, we have revised our NIM guidance by 5 basis points. Loan growth, we talked about low single digit, given where we are, we do expect that to be at the lower end of low. And then cost-to-income ratio, we did say that we expect to be below the 35% guidance. And Valentina, you also asked about the internal buffer offers for common equity that we have. We don't disclose. As you know, we are well above the minimum capital requirement. We don't disclose any level of buffer that we, as the management team, would operate towards.

And question from Aybek. What was the cost of risk like...

If you could answer the cost of risk.

Look, the NPL ratio at the moment has been quite stable at that 6.2, 6.3. Q2, we gave some clarification that we don't really expect it to be higher than the mid-6s. I hope it stays stable at the current level. You know our form from strong provisioning and maintaining strong coverage. So really well covered from that perspective. And you can't really guess the future if the new credit event had already happened. You have to book the NPLs and the losses on those today. So I can't really guess or speculate against the future. Just remembering also, last year, it was one of the biggest shocks ever to the global financial system. We came out of the blocks very hard with our provisioning last year. I don't think we were overprovisioned. I don't think we were under provisioned. I think we've got it about right. And therefore, as we are coming out of that period, as the cost of risk has been coming down, I really can't speculate against future surprises on the NPL side.

There is a question from Aybek at HSBC around retail growth. Are we taking market share, et cetera? I think the answer at the moment is September was the best month we ever had. August, the next big, August which was the best month we've ever had. So I think August and September were 2 record months for us. So very -- the retail engine, and it's not just Emirates NBD, Emirates Islamic is doing very well. Saudi's doing well. Egypt's doing well. Turkey's doing very well, except getting loss in translation, so to speak. So I think the retail engine is performing really strongly. Are we taking market share? Absolutely. We're taking market share across cards, personal loans, car loans. So I think we're in a good spot with our retail franchise. It's really firing on all cylinders at the moment. So I am happy with that. And our cost of risk in there is -- has been far better than we would have thought at this time last year. And you're now seeing the airlines are rehiring a lot of people, lot of pilots, lot of ground crew, et cetera. So we're starting to see some quite very positive movements in a lot of our major client base, which is very beneficial for us. But I think you're going to see a continuing trend where the small banks are going to lose market share and the larger banks that are investing in digital capabilities, et cetera, are going to gain over the small [indiscernible].

One final question coming in. It's about our issuance plans. I'll take that, and also about our ESG framework and initiative. In terms of issuance plans, we have about $3.25 billion of debt maturing next year, we are comfortable with that level. Typically, we'll issue $3 billion to $4 billion in private placements a year. So private placements alone would typically cover that amount of maturity next year. We always look at opportunities to do public issues. We know it's important to have liquid benchmark pricing points out there. And we -- as you know, historically, we've issued in a range of currencies, be it euros, Aussie dollars, U.S. dollars. We issued some Swiss francs. So there are opportunities for us. And we will look at the market, but the maturity profile that we have for next year is well within our capabilities. In terms of ESG framework and initiatives, Shayne?

I mentioned the ISO 26,000 earlier on sustainability. So -- and that's a good move on it. But I think my personal view is we've still got quite a bit of work to do and that effects the government's commitment to a zero carbon by 2050 is going to refocus -- because the reality is, for the UAE as a country to achieve that, that means we are the bank and our clients need to achieve that. So we'll have even greater focus on getting that right. But there's quite a lot of work to do around that not just within our bank, but also environmental controls, measurements, et cetera. So I think there's quite a bit of work to do for us to -- for me to be able to sit here and say, yes, we're still on track [indiscernible] this country and ourselves are at the beginning of journey to get to that 2050 target.

Thanks, Shayne. Cecelia, are there any more questions on the line?

[Operator Instructions] There are no further questions, sir, at this time.

Thank you. Well, with no further questions, I'd like to thank you all for participating in today's call. And I'll now hand you back to the operator to provide details if you have any further follow-up questions and to conclude the call. Thank you all.

Thank you. For any further questions, please contact our Investor Relations department, whose contact details can be found on the Emirates NBD website and on 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 call. Thank you for your participation.