Investor Presentaiton
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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USE OF JUDGEMENTS AND ESTIMATES (CONTINUED)
(i) Financial Instruments (continued)
Inputs, assumptions and techniques used for ECL calculation (continued)
Assessment of Significant Increase in Credit Risk (Covid-19) (continued)
(Group 1 and Group 2). Customers not expected to face substantial changes in their credit worthiness,
beyond liquidity issues caused by Covid-19 crisis, are categorised in Group 1. Customers expected to
face substantial changes in their credit worthiness, in addition to liquidity issues that will be addressed by
payment deferrals are categorized in Group 2.
Customers expected to be significantly impacted by Covid-19 in the long term and that are expected to
face substantial deterioration in their credit worthiness have been migrated to Stage 2 and categorised in
Group 2. In exceptional circumstances, Stage 3 migration may have also been triggered where a customer's
business, income streams and interest servicing capacity were expected to be permanently impaired. Such
customers have also been categorised in Group 2.
The accounting impact of the extension/restructuring of credit facilities due to Covid-19 has been assessed
and has been treated as per the requirements of IFRS 9 for modification of terms of arrangement.
Macroeconomic Factors, Forward Looking Information (FLI) and Multiple Scenarios
The measurement of ECL for each stage and the assessment of significant increases in credit risk considers
information about past events and current conditions as well as reasonable and supportable forecasts of
future events and economic conditions.
The estimation and application of forward-looking information requires significant judgment based on the
macroeconomic variables (or changes in macroeconomic variables) such as occupancy rates, oil prices,
housing price index and GDP (where applicable), that are closely correlated with credit losses in the relevant
portfolio and represent the underlying causal effects of changes in these economic conditions. Each
macroeconomic scenario used in the Group's ECL calculation will have projected forecasts of the relevant
macroeconomic variables.
The Group estimation of ECL in Stage 1 and Stage 2 is a discounted probability-weighted estimate
that considers a minimum of three future macroeconomic scenarios. These scenarios are based on
macroeconomic forecasts published by external experts. If conditions warrant additional downside
scenarios may also be considered.
Probability weights attached to these scenarios are updated on a quarterly basis (if required). All scenarios
considered are applied to all portfolios subject to ECL with the same probabilities. In some instances the
inputs and models used for calculating ECLS may not always capture all characteristics of the market at
the date of the consolidated financial statements. To reflect this, qualitative adjustments or overlays are
occasionally made as temporary adjustments when such differences are significantly material. Such cases
are subjected to the Group's governance process for oversight.
Sensitivity assessment due to movement in each macroeconomic variable and the respective weights under
the three scenarios is periodically assessed by the Group.
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USE OF JUDGEMENTS AND ESTIMATES (CONTINUED)
(i) Financial Instruments (continued)
Inputs, assumptions and techniques used for ECL calculation (continued)
Macroeconomic Factors, Forward Looking Information (FLI) and Multiple Scenarios (continued)
The table below summarises key macroeconomic indicators included in the economic scenarios for
respective operating regions relevant to their markets on 31 December 2021 for the years ending 2021 to
2025:
UAE
Base Scenario
Upside Scenario
2021
2022 2023 2024 2025
2021
2022 2023 2024 2025 2021
Downside Scenario
2022 2023 2024 2025
Oil Price USD
70
70
64
GDP - Change %
Imports - AED
2.1
3.3
2.5
64 66
2.6 2.7
70
2.1
73
69
70
7.9
5.1
2.4
72
2.2
70
44
46
53
56
1135
1231 1285 1348 1415
1135 1314
1434 1521 1601
1135 1077
2.1 (6.5) (2.0) 4.2 5.3
1061 1121 1208
in Bn
KSA
Oil GDP- SAR in
Trn
1.00
Unemployment - %
1.05 1.07 1.09
12.1 12.8 12.7 12.6
1.11
1.00 1.09
1.10 1.13 1.16
12.6
12.1 12.6 12.4 12.4 12.4
Turkey
1.00 0.96 0.93 0.96 1.01
12.1 13.8 13.9 13.6 13.4
Real GDP -
Growth %
Unemployment -%
6.3 0.9 (1.6) 4.6
12.0 12.5 14.0 12.8
6.7 (1.3) 5.4 4.8
11.8 13.0 12.5 11.5
5.8 (0.6) (4.7) 4.0
12.1 13.2 15.8 14.0
Macroeconomic Factors, Forward Looking Information (FLI) and Multiple Scenarios (Covid-19)
In light of the current uncertain economic environment, the Group continued to assess a range of possible
macro-economic scenarios and associated weights, and analysed their impact on ECL estimates for the
year 2021 using baseline, upside and downside scenarios with 40%-30%-30% weightings respectively with
the exception of Turkey that uses 50%-25% -25%. The Group also applied portfolio-level ECL adjustments
to corporate exposures based upon affected sectors, as well as to retail customers availing deferrals based
upon employment status and level of salary inflows. The Group continues to assess individually significant
exposures for any adverse movements due to Covid-19.
As with any economic forecasts, the projections and likelihoods of the occurrence are subject to inherent
uncertainty and therefore the actual outcomes may be significantly different to those projected.
Definition of default
The definition of default used in the measurement of ECL and the assessment to determine movement
between stages is consistent with the definition of default used for internal credit risk management
purposes. IFRS 9 does not define default, but contains a rebuttable presumption that default has occurred
when an exposure is greater than 90 days past due.
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EMIRATES NBD BANK PJSC - GROUP CONSOLIDATED FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2021
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