UAE Banking Market Update
Credit Quality
Key Messages
• Q3 2011 YTD impairment charge of AED 3.9 billion impacted by:
Specific provision of AED 950 million made in relation to the
AED 4.8 billion exposure to a Dubai GRE
.
Build-up of portfolio impairment allowances of AED 1.5 billion
taking total PIP to AED 3.7 billion or 2.45% of credit Risk Weighted
Assets
Strategic management decision to target higher overall impaired
loan coverage ratio
Management targets for impaired loan coverage ratios:
80%-85% on underlying NPL portfolio
55%-60% on overall impaired loans to be achieved by 2013
Target coverage ratios to be achieved through:
More conservative provisioning for and recognition of impaired
loans
Continued build-up of portfolio impairment allowances
Assessment of underlying credit risk across the overall portfolio
remains unchanged:
2011 NPL ratio expected to reach 13%-14% as per previous
guidance, but
2013 NPL ratios could reach 15%-16% due to more conservative
recognition of impaired loans and lower than previously expected
future loan growth
101%
Impaired Loans & Coverage Ratios (%)
102%
94%
82%
Target underlying coverage ratio of 80-85%
99%
90%
80%
Target overall coverage ratio of 55-60%
55%
48%
45%
45%
40%
Target 2013 NPL ratio of 15-16%
Target 2012 NPL ratio of 14-15%
Target 2011 NPL ratio of 13-14%
12.9%
3
3
exposure;
10.0% 10.4%
2
9.3%
6.7%
8.1%
2
AED 745m
provision)
5.6%
5.7%
2
4.5%
4.3%
D1 impaired
(AED 9.0b
Emirates NBD
Q3 11
D2B impaired
(AED 4.8b
exposure; AED
950m provision)
D2A impaired in Q4 10
and de-recognised in
Q2 11 (AED 2.5b
exposure; AED 167m
provision)
Q4 11 Q4 12 Q4 13
Impact of IIRL* %
6.2%
3.8%
4.4%
4.8%
4.8%
2.6%
1.6%
Q4 08 Q4 09 Q3 10 Q4 10 Q111 Q211
INPL ratio, excl. IIRL*
Coverage ratio, incl. IIRL* %
Coverage ratio, excl. IIRL* %
*IIRL Interest Impaired Renegotiated Loans; Specific entities are referenced by number with the prefix "D"
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