Mashreq posts 4% rise in operating profit

Dubai / Emirates Business

Mashreq, one of the leading financial institutions in the UAE, on Sunday reported its financial results for the first quarter ending March 31.
Mashreq’s CEO, AbdulAziz Al Ghurair, said: “Given the challenging
market conditions, Mashreq has approached the 2016 fiscal year with a pragmatic outlook. We responded quickly to the early signs of the market softening by deciding to moderate our growth strategy accordingly. This has resulted in a baseline performance of 4.1% increase in Operating Profit to AED 923mn for the first quarter. This result is driven by strong growth in net fee and commission income which is up by 4.6%, taking our best-in-class net fee, commission and other income to operating income ratio to 42.1%. Our loans and advances increased by 1.6% to AED61.1bn and customer deposits increased by 2.7% to reach AED75.6bn as compared to December 2015, leading to a Loan-to-Deposit ratio which remained robust at 80.8% by the end of March 2016.”
“We continue to benefit from an ongoing strong balance sheet and healthy liquidity: our capital adequacy ratio and Tier 1 capital ratio continue to be significantly higher than the regulatory limit and stood at 16.8% and 15.8% respectively, at the end of March, 2016. The importance of these fundamentals cannot be overstated. They give Mashreq its strong, beating heart and enable us to put substantial resources into innovating and perfecting the market-leading products which our name is now synonymous with.”
He added: “The bank will continue to focus on its policy of placing its customers at the forefront of all its decisions, and we will proceed with determination to make banking easy and efficient for all our clients and customers. The most recent launch of the path breaking Happiness Salary Transfer account has energized the retail banking segment and we are seeing a very enthusiastic customer response to it.”

Real Estate Finance & Advisory
Real Estate Finance & Advisory successfully deployed over AED2.5bn of the bank’s capital across the commercial, industrial, hospitality and residential sectors during the final four months of last year, and originated deal flow of more than AED3bn heading into 2Q 2016. In addition, the division has also signed a sell side mandate for a real estate asset in Abu Dhabi. The team has also been successful in obtaining approvals from the DIFC to launch UAE’s first DIFC-based real estate Qualified Investor Fund (“QIF”) in partnership with a prominent real estate private equity firm in Abu Dhabi. The QIF will have an equity size of $300mn and will also raise debt for Shariah-compliant investments in high-yielding assets.
Assets and Asset quality
Mashreq’s Total Assets decreased by 1.2% to reach AED 113.7bn in 1Q 2016, compared to AED 115.2bn at the end of 2015. Loans and Advances increased by 1.6% in the quarter to end at AED61.1bn. On a year-on-year basis, Loans and Advances grew by 7.9% driven by 32.9% growth in Islamic finance. Liquidity continues to remain healthy with a high liquid asset to total assets ratio of 27.7%. Loan-to-Total Assets Ratio at 53.8% increased slightly as compared to 53.0% at the end of March 2015 (52.2% in December 2015).
Customer Deposits at AED75.6bn, increased by 2.7% as compared to December 2015, driven by 2.7% growth in conventional deposits and 2.4% growth in Islamic deposits. Loan-to-Deposit ratio stood at 80.8% vs 81.7% in December 2015.
Non-Performing Loans stood at AED 2.3bn in March 2016 leading to a Non-Performing Loans to Gross Loans ratio of 3.2% at the end of March 2016 (2.8% in Dec 2015). Net Allowances for impairment for 1Q 2016 were AED366mn compared to AED 196mn in 1Q 2015. Total Provisions for Loans and advances reached AED 3.0bn, constituting 135.8% coverage for Non-Performing Loans as of March 2016.

Capital and Liquidity
Mashreq’s Capital adequacy ratio stood at 16.8% (regulatory minimum of 12%) as of March 31, compared to 16.9% as of December 31, 2015. Tier 1 capital ratio at 15.8% continues to be significantly higher than 8% regulatory minimum stipulated by the UAE Central Bank (15.9% as of 31 December 2015).