Emirates NBD. 2 more transitional years. Neutral. 18 December We cut our forecasts 20% 30% due to increased loan loss charges

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1 Company note Emirates NBD Financials UAE 2 more transitional years MENA research Neutral We cut our forecasts 20% 30% due to increased loan loss charges We incorporate the acquisition of Dubai Bank and include the potential negative effects of an Amlak acquisition We believe the current share price offers decent value and reflects revised guidance but do not see room for the stock to outperform Substantially reduced forecasts: We reduce our forecasts 30.4% for 2011e, 25.5% for 2012e, 20.7% for 2013e, and 8.5% for 2014e, due mostly to increased impairments. Our forecasts are now below consensus by 50% for 2012e and 38% for 2013e. It should take until 2014e for the bank to cover its cost of capital as provisions eat away 53% 76% of its operating profit. We increase our loan loss provisions to AED5.1bn from AED4.1bn for 2011e, to AED4.1bn from AED3.5bn for 2012e, and to AED3.4bn from AED3.1bn for 2013e. This takes cumulative impairments (4Q e) to AED8.8bn and brings NPL coverage to 59%. Acquisition risk: The acquisition of Dubai Bank lowers shareholder value slightly and has a negative impact of 1 pp on Tier 1. We believe ENBD may buy Amlak and factor the value loss into our new TP. Tight capital base: We expect ENBD s common equity Tier 1 to fall to 10.4% from 10.7% by the end of the year. Additionally, the bank has large associate interests (real estate and financial services) that are not deducted. We estimate its capital deficit at AED3.6bn AED5.5bn. Liquidity will need further bolstering: ENBD improved its liquidity in 2010, but this was reversed in 3Q11 due to deposit outflows. We expect the bank to offer better deposit rates to capture higher outstanding deposits and to issue medium term debt as well. We reduce our TP to AED3.9/share from AED4.9/share to reflect the bank s relatively poor earnings outlook, a potential increase in the concentration risk of its loan portfolios, the negative impact of the Dubai Bank acquisition, and a potential acquisition of Amlak. We downgrade ENBD to Neutral from Overweight. Key indicators e 2012e 2013e Net profit (AEDm) 2,340 2,776 2,205 2,983 EPS (AED) EPS growth 30% 19% 21% 35% P/E 7.5x 6.3x 8.0x 5.9x P/tNAV 0.8x 0.7x 0.7x 0.6x Source: Company data, HC Target price (AED) 3.9 Current price (AED) 3.2 Potential return 20% Listed on Bloomberg Reuters DFM EMIRATES UH ENBD.DU Mcap (AEDbn) 18.3 Mcap (USDbn) 5.0 Number of shares (m) 5,558 Daily volume (AEDm) 1.6 Daily volume (USDm) 0.4 Foreign own. limit 5% Foreign ownership 4% Shareholder structure Investment Corp of Dubai 56% Jumma Al Majed Abdullah 5% Public 39% Note: All prices as of 14 December 2011 Price performance D J F M A M J J A S O N D ENBD DFM Jaap Meijer, MBA, CFA Head of Financials Team jaap.meijer@hc si.com Kareem Ghaly Analyst kareem.ghaly@hc si.com Please refer to important disclosures and analyst certifications on pages of this report.

2 Higher loan losses due to loan book deterioration but also increased conservatism ENBD is targeting NPLs of 13% 14% by the end of the year and expects this to increase 1% per annum to 15% 16% by YE2013e, driven by lower loan growth and a more conservative approach regarding impaired loans. This is below the 21.4% cumulative probability of default that we use in our asset quality screen, but it surprised the market, which expected NPLs to peak in 2012e. The impaired loan guidance includes the renegotiation of all loans to Dubai Holding (for which ENBD provided in 3Q11), the terms of which have not yet been finalized and could therefore differ slightly from ENBD s expectations, however. The increase in NPLs also includes some loans to smaller entities within Dubai World (e.g. Dubai Drydocks World) that are still being renegotiated separately, and the expected outcome of these negotiations is factored into the bank s current NPL guidance. ENBD also plans to increase its NPL coverage to 55% 60%, which is ahead of our estimated average loss given default of 38%, and targets 80% 85% coverage of impaired loans excluding restructured Dubai World and Dubai Holding loans. However, even if we were to increase ENBD s provisioning needs to 20% of its restructured loans (such as ENBD did for some of its Dubai Holding exposure), we believe it would still end up with close to 100% coverage of underlying impaired loans, well above the expected losses given default. In our view, ENBD could experience higher than forecast NPL formation, but it has built some buffer into its coverage ratio. Increased concentration risk With the acquisition of Dubai Bank, ENBD has increased its concentration risk somewhat despite the fact that Dubai Bank s full capital base was used to take provisions before the acquisition, allowing NPLs to remain unaffected by being brought off balance sheet. ENBD had a total exposure of AED16.5bn to Dubai Holding and Dubai World; with the acquisition of Dubai Bank, its exposure to Dubai Holding is set to increase at least AED4.1bn, but it has received a guarantee ring fencing certain exposures. It has also lent close to AED57bn to the Dubai government. We think an ENBD acquisition of Amlak has become more likely and believe ENBD may also have to absorb some of the refinancing needs of government owned entities in 2012e, particularly if European and US banks reduce their exposure to the region. This may impact asset yields (c4 bps) and potentially provisioning needs as well. Capital base weakened ENBD said its Tier 1 dropped 1% as a result of the Dubai Bank acquisition which implies that all of Dubai Bank s shareholder equity, which stood at AED1.7bn, is being used to strengthen provisions while its risk weighted assets rose c6%. The negative impact is offset by reduced market risk and strong containment of risk weighted assets y t d. We therefore expect ENBD s common equity Tier 1 to drop to 10.4% from 10.7% for 2011e and to 10.6% from 10.9% for 2012e, well below the 12% minimum threshold that we apply to our MENA universe. This amounts to a capital deficit of AED3.6bn. 2

3 Moreover, ENBD has substantial associates that are not deducted from its Tier 1 such as AED2.4bn in associate investments, including a 51% stake in Network International, a payment solution provider while capital gains are fully added to its capital base. In the calculations we use for our valuation approach, we arrive at a much larger deficit of AED5.5bn. 3

4 Evolution of core equity Tier 1: e CET1 2010e Income before impairments Equity raisings/buybacks Asset sales/acquisitions Taxes Impairments Dividends Increase in RWA Residual CET1 2011e ADCB 6.28% 2.33% 1.00% 3.63% 0.17% 1.45% 0.13% 0.21% 0.35% 9.63% ADIB 7.18% 3.09% 0.00% 0.18% 1.50% 0.00% 0.56% 0.05% 7.98% NBAD 12.06% 3.29% 0.00% 0.19% 0.99% 0.00% 2.02% 0.03% 12.12% FGB 14.36% 3.87% 0.00% 0.18% 1.37% 0.59% 1.57% 0.04% 14.57% UNB 11.57% 2.67% 0.00% 0.17% 1.20% 0.32% 0.10% 0.00% 12.44% ENBD 9.92% 3.76% 0.17% (1) 0.11% 2.35% 0.28% 0.34% (2) 0.01% 10.42% DIB 11.17% 2.52% 0.00% 0.01% 1.49% 0.32% 0.94% 0.01% 10.95% CBD 14.28% 3.30% 0.00% 0.00% 1.37% 0.58% 0.19% 0.00% 15.45% Note: (1) The Dubai Bank acquisition should have a small negative impact on CET1 capital (2) Includes the acquisition of Dubai Bank Evolution of core equity Tier 1: e CET1 2011e Income before impairments Equity raisings/buybacks Asset sales/acquisitions Impairments Taxes Dividends Increase in RWA Residual CET1 2012e ADCB 9.63% 2.26% 1.40% 0.01% 0.17% 0.66% 0.14% 9.51% ADIB 7.98% 2.92% 0.00% 1.31% 0.17% 0.36% 0.38% 0.05% 8.73% NBAD 12.12% 3.10% 0.00% 0.85% 0.17% 0.42% 1.00% 0.00% 12.78% FGB 14.57% 3.65% 0.00% 1.26% 0.16% 0.56% 1.23% 0.05% 15.06% UNB 12.44% 2.73% 0.00% 1.10% 0.17% 0.36% 0.25% 0.03% 13.33% ENBD 10.42% 2.72% 0.00% 1.70% 0.11% 0.28% 0.35% 0.08% 10.61% DIB 10.95% 2.49% 0.00% 1.50% 0.01% 0.32% 0.82% 0.11% 10.91% CBD 15.45% 3.18% 0.00% 1.24% 0.00% 0.58% 0.10% 0.00% 16.71% 4

5 Impact of Dubai Bank acquisition ENBD acquired Dubai Bank after the unlisted bank, which lent mainly to government institutions and government owned institutions, was taken over by the Dubai government. Its existing shareholders (70% Dubai Holding and 30% Emaar Properties) have been fully diluted to protect deposit holders. We believe ENBD paid virtually nil for the acquisition. ENBD estimates a negative impact of 1 pp on its Tier 1. This allows for a write off of c15% of Dubai Bank s loan book, enough to provide for substantial recognition of impaired and restructured loans. We calculate a negative impact of 0.98% on ENBD s BIS ratio, 0.96% on its Tier 1, and 0.78% on its common equity Tier 1 under Basel III. Impact of Dubai Bank acquisition on ENBD s capital ratios (AEDm) BIS Tier 1 CET1 ENBD s capital base 44,431 29,461 24,868 Increase in value from acquisition 2,655 1,757 1,721 Capital base after consolidation 47,086 31,218 26,589 ENBD s RWA 217, , ,092 Dubai Bank s RWA 13,700 13,700 13,700 Combined RWA 231, , ,792 Dubai Bank s loan portfolio write off: 15% 2,123 2,123 2,123 Adjusted capital 44,963 29,095 24,466 Adjusted capital adequacy ratio (new) 19.46% 12.59% 10.42% ENBD s stand alone capital adequacy ratio (old) 20.44% 13.56% 11.25% Impact 0.98% 0.96% 0.83% Acquisition of Amlak in the pipeline? The government committee for Amlak s affairs continues to espouse balance sheet restructuring or a merger. We therefore expect a government solution for Amlak, which, due to its very sizable property investment portfolio, is in an even worse position than Dubai Bank was. However, even if ENBD were to acquire Amlak at the same terms as Dubai Bank (i.e. for virtually nothing), its capital ratios would suffer a substantial negative impact (1.08% on BIS ratio, 0.75% on Tier 1 under Basel II, and 0.65% on common equity Tier 1 under Basel III). Impact of an Amlak acquisition (AEDm) Total Tier 1 CET1 ENBD s capital base 44,963 29,095 24,466 Increase in value from acquisition 1,623 1,623 1,509 Capital base after consolidation 46,586 30,718 25,975 ENBD s RWA 231, , ,792 Amlak s RWA 11,584 11,584 11,584 Combined RWA 242, , ,376 Amlak s loan portfolio write off: 10% Amlak s investment portfolio write off: 50% 1,985 1,985 1,985 Adjusted capital 44,602 28,733 23,991 Adjusted capital adequacy ratio (new) 18.38% 11.84% 9.74% ENBD s stand alone capital adequacy ratio (old) 19.46% 12.59% 10.42% Impact 1.08% 0.75% 0.68% 5

6 Deteriorating liquidity ENBD s headline loan/deposit ratio increased substantially to 107% in 3Q11 from 96% in 2Q11 and 101% in 3Q10 as outstanding deposits fell 8% in a single quarter as the bank lowered its deposit rates. However, we believe ENBD has the capacity to increase its outstanding deposits, though this would come at the expense of its net interest margins, which is among the key reasons why the bank expects its net interest margin to fall to 2.5% from a record 2.9%. It also needs to refinance wholesale debt worth AED8bn almost half of its outstanding debt in 2012e. In a reversal of the progress ENBD made on its liquidity position last year, its cash and net interbank position fell to AED14bn in 3Q11 from AED33bn as of YE2010. We estimate a liquidity coverage ratio of 49%, down from 72% as of YE2010. We calculate a liquidity gap of AED41bn, up from AED24bn at the end of last year. The bank s liquidity remains reasonable nevertheless as, at AED14bn, its cash position is strong enough to fully absorb the redemptions in wholesale debt. Liquidity (AEDm) Q11 Net cash and interbank ,688 14,294 Net interbank 19,948 5,006 6,686 Net cash and interbank/total assets 0.1% 11.4% 5.3% Net interbank/total assets 7.1% 1.7% 2.5% Liquidity coverage ratio 49% 70% 49% Net stable funding ratio 114% 147% 130% Loans/deposits 118% 99% 107% Short term liquidity coverage ratio 800% 753% 700% 600% 500% 400% 300% 200% 100% 32% 61% 65% 67% 72% 81% 89% 93% 98% 98% 100% 108% 111% 143% 148% 155% 184% 188% 199% 216% 233% 271% 291% 315% 363% 452% 478% 509% 0% Tamweel NBAD NBK FGB ENBD ADIB ADCB CBD Doha QIB DIB UNB MARK NSGB (1) Samba CAE (1) CIB (1) SABB QNB Riyad CBQ ANB Al Rajhi Byblos BKMB BLOM Audi BSFR HDB (1), YE2010 data Note: (1) Uses 2009 numbers as breakdown is not available in 2010 financial statements 6

7 3Q11 results ENBD reported a 3Q11 net profit of only AED175m, 72% below our forecast and down 59% y o y and 77% q o q, driven by substantially higher than expected additions to loan loss reserves. Net interest income, on the other hand, surprised positively (up 13% q o q and y o y) despite sluggish loan growth. The bank cut its average deposit remuneration to 1.92% in 3Q11 from 2.38% in 2Q11. However, this came at the expense of outstanding deposits, which declined 8% sequentially, and net cash and interbank, which deteriorated to AED14bn in 3Q11 from AED34bn in 2Q11. Additions to loan loss reserves spiked in 3Q11, increasing 27% y o y and 60% q o q, coming in 69% above our forecast. The annualized loan loss charge stood at a whopping 315 bps, which is well ahead of our asset quality screen s suggested level of 199 bps. Loan loss provisions now stand at 5.77% of gross loans versus 5.18% in 2Q11, but coverage dropped to 45% from 55% in 2Q11. It is worth highlighting that Dubai Holding and Dubai World exposures require provisioning of only 10% 15%, and the underlying coverage ratio for other exposures is therefore much stronger. Impaired loans moved to 12.7% in 3Q11 from 9.3% in 2Q11 as ENBD included the full estimated impact of the Dubai Holdings restructurings in its impaired loans and impairment allowances, while the impact of the Dubai World restructuring was already accounted for in A charge of AED504m (about a third of the total 3Q11 impairment charge) relates to portfolio impairments, which now stand at 2.45% of credit weighted assets. The bank s total capital adequacy ratio slipped in 3Q11 to 21.1% from 21.2%, while its Tier 1 remained unchanged at 13.4%. 3Q11 results (AEDm) 3Q11a 3Q11e % dev 3Q10a % y o y 2Q11a % q o q Net interest income 1,950 1,729 13% % 1,731 13% Noninterest income % % % Total income 2,605 2,386 9% % 2,574 1% Operating expenses % % 826 3% Operating profit 1,755 1,560 13% % 1,748 0% Provisions 1, % % % Loan loss 1, % % % Other % 76 65% 61 56% Net income % % % Costs/income 33% 37% 29% 33% Loans/deposits 114% 94% 96% 102% Gross loans (AEDbn) % 190 1% % Deposits (AEDbn) % 198 8% % 7

8 Asset quality screen Currency Loans EL from gov EL from banks & FI EL from EL from non EL from SME EL from mortg EL from other retail Total EL e Total EL e (bps) Average EL e (bps) Stock of provisioning as of YE2009 Remaining NPL provisioning (after deducting EL for existing NPLs) EL to be covered in e Provisioning forecast for 2010 Remaining provisioning for e Provisioning forecast for e Add to/deduct from valuation UAE ADCB AEDm 129, ,985 1,907 1, ,104 12, ,296 2,096 10,550 3,287 7,263 5,919 1,343 ADIB AEDm 50, ,398 3, , , ,201 2, CBD AEDm 28, , , , , ,892 1, DIB AEDm 60, , , ,395 1, , , ,779 3,890 1,890 ENBD AEDm 205, ,287 6, ,565 16, , ,771 2,926 12,845 12, FGB AEDm 98, ,969 1, ,652 7, ,295 1,350 6,246 1,639 4,606 5, NBAD AEDm 140, ,062 2,067 1, ,706 8, ,075 2,526 5,708 1,114 4,595 4, UNB AEDm 57, , , , , ,627 2, Tamweel AEDm 9, Total 61, Qatar QNB QARm 133, , ,572 1,008 1, ,029 2,456 QIB QARm 29, Doha Bank QARm 27, , CBQ QARm 34, MARK QARm 25, Total 5, Egypt CIB EGPm 36, , , , NSGB EGPm 32, , , , CAE EGPm 11, HDB EGPm 6, EFG Hermes/CL EGPm 7, Total 3, Lebanon Bank Audi LBPbn 12, ,611 10, BLOM Bank LBPbn 8, , Byblos Bank LBPbn 5, , Total 1,

9 Asset quality screen (continued) 9 Currency Loans EL from gov EL from banks & FI EL from EL from non EL from SME EL from mortg EL from other retail Total EL e Total EL e (bps) Average EL e (bps) Stock of provisioning as of YE2009 Remaining NPL provisioning (after deducting EL for existing NPLs) EL to be covered in e Provisioning forecast for 2010 Remaining provisioning for e Provisioning forecast for e Add to/deduct from valuation KSA Samba SARm 83, , , ,707 2, ,975 2,262 Riyad Bank SARm 108, , , ,288 1,403 1, ,414 1,599 Al Rajhi Bank SARm 123, , ,273 4, ,616 2,104 2,765 1,754 1,012 4,451 3,439 BSFR SARm 82, , , ,493 1,013 1, ,040 1, SABB SARm 76, , , ,614 1, , ,977 2,223 ANB SARm 68, , , ,194 1,135 1, ,982 1,868 Total 19, Oman Bank Muscat OMRm 4, Total Kuwait NBK KWDm 8, Total

10 Probability of default and loss given default Gov Banks & FI % of loan book Probability of default (%) Loss given default (%) Expected loss (bps) Non SME Mortg Other retail Gov Banks & FI Non SME Mortg Other retail Gov UAE ADCB , ADIB , CBD , DIB , ENBD , , FGB , NBAD , UNB , Tamweel , Qatar QNB QIB Doha Bank CBQ MARK Egypt CIB NSGB CAE HDB EFG/CL Lebanon Bank Audi BLOM Bank Byblos Bank KSA Samba Riyad Bank Al Rajhi Bank BSFR SABB ANB Oman Bank Muscat Kuwait NBK MENA Banks & FI Weighted Non SME Mortg Other retail Gov Banks & FI Weighted Non SME Mortg Other retail Total Annual 10

11 Emirates NBD valuation (AEDm) e 2012e 2013e 2014e Perp. Subtotal % total 1. DCF Net profit 2,340 2,776 2,205 2,983 4,680 4,680 Other adj (comprehensive inc and GW amrt) Less: Excess return on surplus capital Risk free rate 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Tax shelter 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Adjusted net profit 2,294 2,736 2,151 2,922 4,581 4,581 Capital requirements 28,110 30,233 31,252 32,934 34,954 34,954 Return on economic capital 8.2% 9.0% 6.9% 8.9% 13.1% 13.1% Cost of capital 12.4% 12.4% 12.4% 12.4% 12.4% 12.4% Capital charge 3,486 3,749 3,875 4,084 4,334 4,334 Economic profit 1,192 1,013 1,724 1, Discount factor NPV of economic profit 0 0 1, DCF EVA forecast period 2, % Perpetual growth rate (nominal GDP) 3.0% Terminal value 1,956 Discounted terminal value 1, % Required capital 30, % Value of bank operations 29, % 2. Capital surplus/deficit Available capital Shareholder equity ,750 31,157 32,475 34,523 37,996 Less: Goodwill and intangibles 5,925 5,831 5,736 5,640 5,545 Less: Dividends (if included in equity) 1, ,546 Tangible equity 22,713 24,697 26,059 27,930 30,905 Capital needs RWA (Basel I in 2011, Basel II/III starting 2012) 217, , , , ,553 RWA (Basel III) 227, , , , ,553 Equity as a percentage of RWA 12% 12% 12% 12% 12% All stakes after write off of Union Properties 807 2,058 2,153 2,303 2,487 Capital requirements 28,110 30,233 31,252 32,934 34,954 Surplus capital 5,396 5,535 5,193 5,004 4,049 5, % 3. Other adjustments Real estate losses (Union Properties FV loss) % Real estate investment fair value loss (50%) % Under/overprov not covered in forecast period % Level 3 assets Acquisition risk (Amlak) % Total adjustments 2, % 4. Dividends % Total fair value 21,639 Number of shares (m) 5,558 Fair value/share (AED) 3.9 Current share price (AED) 3.2 Potential return 20% P/E 8.6x 11.1x P/tNAV 0.9x 0.8x Source: Company data, HC 11

12 Emirates NBD financial statements (AEDm) e 2012e 2013e 2014e Income statement Interest income 12,336 13,324 12,667 12,039 12,155 12,632 13,475 Interest expense 6,502 5,912 5,872 4,656 4,986 5,319 5,717 Net interest income 5,834 7,412 6,795 7,382 7,169 7,313 7,757 Fees and commissions 2,246 1,911 1,839 1,674 1,774 1,863 1,974 Forex income 1, Investment income Other income (1,075) Noninterest income 2,613 3,381 2,927 2,715 2,895 3,039 3,215 Total income 8,447 10,794 9,721 10,097 10,064 10,352 10,973 Total operating expenses 3,452 3,645 3,147 3,380 3,739 3,937 4,167 Income before provisions 4,995 7,149 6,574 6,717 6,325 6,415 6,806 Loan loss provision charges 1,653 3,635 3,550 5,345 4,119 3,432 2,197 Associate and other income 339 (162) (664) 1, Pretax income 3,681 3,352 2,360 2,776 2,205 2,984 4,681 Income tax Net income after tax 3,681 3,343 2,339 2,776 2,205 2,984 4,681 Minority interest 1 (3) (0) Reported net income 3,681 3,346 2,340 2,776 2,205 2,983 4,680 Interest on capital notes Adjusted net income 3,681 3,213 2,078 2,514 1,943 2,721 4,419 Balance sheet Assets Cash and due from CB 16,707 19,671 37,683 30,544 38,688 45,157 51,374 Due from banks 8,128 10,047 13,850 13,459 13,998 14,838 15,876 Investments 19,635 16,764 14,961 19,441 20,219 21,432 22,932 Gross loans 212, , , , , , ,401 Provisions 3,112 5,409 8,322 12,697 16,462 19,538 21,379 Net loans 208, , , , , , ,022 Other assets 26,220 18,180 20,289 22,144 22,626 23,427 24,439 Net fixed assets 2,793 2,301 2,337 3,103 3,423 3,774 4,161 Total assets 282, , , , , , ,804 Liabilities Total deposits 162, , , , , , ,401 Due to banks 51,686 29,995 18,857 30,387 34,849 39,384 46,047 Borrowings 30,070 25,339 20,683 17,267 11,883 10,806 9,729 Other liabilities 12,581 17,109 16,955 17,402 17,934 18,765 19,746 Total liabilities 256, , , , , , ,923 Shareholder equity 25,762 27,971 29,750 31,157 32,475 34,523 37,996 Source: Company data, HC 12

13 Emirates NBD financial ratios e 2012e 2013e 2014e Profitability ratios Net interest margin 2.4% 2.9% 2.6% 2.7% 2.6% 2.5% 2.5% Costs/income 1.1% 1.3% 1.1% 1.0% 1.0% 1.0% 1.0% Net interest income/average earning assets 69.1% 68.7% 69.9% 73.1% 71.2% 70.6% 70.7% Noninterest income/average earning assets 30.9% 31.3% 30.1% 26.9% 28.8% 29.4% 29.3% Net interest income/total income 26.6% 17.7% 18.9% 16.6% 17.6% 18.0% 18.0% Noninterest income/total income 5.5% 4.3% 4.2% 2.8% 3.3% 3.4% 3.4% Fees and commissions/total operating income 3.5% 4.2% 3.7% 3.8% 3.6% 3.5% 3.5% Trading gains/total operating income 40.9% 33.8% 32.4% 33.5% 37.2% 38.0% 38.0% Total income/average earning assets 1.37% 1.14% 0.73% 0.86% 0.64% 0.85% 1.29% Noninterest expenses/total operating income 14.48% 12.00% 7.22% 8.28% 6.13% 8.15% 12.22% ROA 3.29% 4.82% 4.48% 4.37% 4.15% 4.06% 4.06% ROE 1.35% 1.63% 1.45% 1.46% 1.54% 1.54% 1.54% Revenue/RWA 1.95% 3.19% 3.03% 2.91% 2.61% 2.51% 2.52% Costs/RWA 0.64% 1.62% 1.63% 2.31% 1.70% 1.34% 0.81% PPP/RWA 1.43% 1.44% 0.96% 1.09% 0.80% 1.07% 1.63% Cost of risk/rwa 1.26% 1.26% 0.88% 0.96% 0.71% 0.94% 1.44% RORWA 2.4% 2.9% 2.6% 2.7% 2.6% 2.5% 2.5% RORWA adjusted for gross up of associates 1.1% 1.3% 1.1% 1.0% 1.0% 1.0% 1.0% Asset quality ratios Nonperforming loans/total loans 1.1% 2.4% 10.0% 14.0% 15.0% 16.0% 16.0% Loan loss provisions/total loans 1.6% 2.7% 4.1% 5.7% 7.2% 8.1% 8.4% Coverage 156% 90% 37% 48% 56% 59% 61% Loan loss provision charge/total loans 0.73% 1.42% 1.38% 2.70% 2.10% 1.65% 1.00% Loan loss provision charge/operating income 28.0% 42.8% 44.5% 76.5% 65.0% 53.4% 32.2% Funding and liquidity ratios Cash and interbank/assets 10% 0% 11% 5% 6% 6% 6% Deposits/liabilities 63% 71% 78% 76% 77% 77% 76% Core deposits/loans 77% 82% 98% 91% 94% 94% 94% Loans/deposits 131% 121% 102% 110% 107% 106% 107% Capital and leverage ratios Tier 1 ratio 7.9% 11.9% 12.8% 12.6% 12.5% 12.7% 13.3% Core Tier 1 (Basel III) ratio 9.9% 10.1% 10.6% 10.8% 11.2% Total capital ratio 9.6% 18.7% 20.1% 19.5% 19.1% 18.9% 19.1% Tangible equity/assets 6.9% 7.8% 8.3% 8.5% 8.6% 8.8% 9.2% Total equity/total liabilities 10.0% 11.0% 11.6% 11.6% 11.7% 11.7% 12.1% RWA/assets 91% 80% 76% 77% 78% 77% 77% Growth Asset growth 4% 8% 0% 2% 6% 11% 12% Earning asset growth 3% 6% 1% 2% 6% 11% 12% Net loan asset growth 17% 12% 0% 2% 7% 11% 12% Deposit growth 1% 19% 3% 0% 11% 16% 12% Net income growth 7% 9% 30% 19% 21% 35% 57% Source: Company data, HC 13

14 Disclaimer HC Brokerage, which is an affiliate of HC Securities & Investment (referred to herein as HC ) a full fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services is exclusively responsible for the content of this report. The information used to produce this document is based on sources that HC believes to be reliable and accurate. This information has not been independently verified and may be condensed or incomplete. HC does not make any guarantee, representation, or warranty and accepts no responsibility or liability for the accuracy and completeness of such information. Expression of opinion contained herein is based on certain assumptions and the use of specific financial techniques that reflect the personal opinion of the authors of the commentary and is subject to change without notice. The information in these materials reflects HC s equity rating on a particular stock. HC, its affiliates, and/or their employees may publish or otherwise express other viewpoints or trading strategies that may conflict with the views included in this report. Please be aware that HC and/or its affiliates, and the investment funds and managed accounts they manage, may take positions contrary to the included equity rating. This material is for informational purposes only and is not an offer to sell or the solicitation of an offer to buy. Ratings and general guidance are not personal recommendations for any particular investor or client and do not take into account the financial, investment, or other objectives or needs of, and may not be suitable for, any particular investor or client. Investors and clients should consider this only a single factor in making their investment decision, while taking into account the current market environment. Foreign currency denominated securities are subject to fluctuations in exchange rates, which could have an adverse effect on the value or price of, or income derived from, the investment. Investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. Neither HC nor any officer or employee of HC accepts liability for any direct, indirect, or consequential damages or losses arising from any use of this report or its contents. Copyright No part or excerpt of this research report s content may be redistributed, reproduced, or conveyed in any form, written or oral, to any third party without prior written consent of the firm. The information within this research report must not be disclosed to any other person until HC has made its information publicly available. Issuer of report: HC Brokerage Building F15 B224, Smart Village KM28 Cairo Alexandria Desert Road 6 October 12577, Egypt Telephone: Fax: Website: si.com IMPORTANT DISCLOSURES Analyst certification: We, Jaap Meijer and Kareem Ghaly, certify that the views expressed in this document accurately reflect our personal views about the subject securities and companies. We also certify that we do not hold a beneficial interest in the securities traded. Analyst disclosures: The analyst or a member of the analyst s household does not have a financial interest in the securities of the subject company (including, without limitation, any option, right, warrant, future, long or short position). The analyst or a member of the analyst s household does not serve as an officer, director, or advisory board member of the subject company. The analyst s compensation is not based upon HC s investment banking revenue and is also not from the subject company in the past 12 months. HC disclosures: Company name: Emirates NBD Bank Disclosure: None 1. HC or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company. 2. HC or its affiliates have managed or co managed a public offering of securities for the subject company in the past 12 months. 3. HC or its affiliates have received compensation for investment banking services from the subject company in the past 12 months. 4. HC or its affiliates expect to receive or intend to seek compensation for investment banking services from the subject company in the next 3 months. 5. HC has received compensation for products or services other than investment banking services from the subject company in the past 12 months. 6. The subject company currently is, or during the 12 month period preceding the date of distribution of this research report was, a client of HC. 7. HC makes a market in the subject company s securities at the time this report was published. 14

15 The HC rating system consists of 3 separate ratings: Overweight, Neutral, and Underweight. The appropriate rating is determined based on the estimated total return of the stock over a forward 12 month period, including both share appreciation and anticipated dividends. Overweight rated stocks include a published 12 month target price. The target price represents the analysts best estimate of the market price in a 12 month period. HC cautions that target prices are based on assumptions related to the company, industry, and investor climate. As such, target prices remain highly subjective. The definition of each rating is as follows: Overweight (OW): Estimated total potential return greater than or equal to 20% Neutral (N): Estimated total potential return greater than or equal to 0% and less than 20% Underweight (UW): Estimated total potential return less than 0% NR: Not Rated SP: Suspended Stocks rated Overweight are required to have a published 12 month target price, while it is not required on stocks rated Neutral and Underweight. Distribution of HC ratings Rating Count Percent Percent provided investment banking services in past 12 months Overweight (OW) Neutral (N) Underweight (UW) Emirates NBD Bank as of 14/12/ Date Recommendation Target price 29/10/2009 Overweight AED6.1 14/02/2010 Overweight AED5.2 17/03/2011 Overweight AED4.0 06/10/2011 Overweight AED4.9 18/12/2011 Neutral AED3.9 All HC employees and its associate persons, including the analyst(s) responsible for preparing this research report, may be eligible to receive non product or service specific monetary bonus compensation that is based upon various factors, including total revenues of HC and its affiliates, as well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by directors, analysts, or employees and may affect transactions in and have long or short positions in the securities (options or warrants with respect thereto) mentioned herein. Although the statements of fact in this report have been obtained from and are based upon recognized statistical services, issuer reports or communications, or other sources that HC believes to be reliable, we cannot guarantee their accuracy. All opinions and estimates included constitute the analysts judgment as of the date of this report and are subject to change without notice. HC may affect transactions as agent in the securities mentioned herein. This report is offered for information purposes only and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such would be prohibited. Additional information available upon request. 15