Investor Presentation MARCH 2014
Contents I. UNB Introduction 1 II. UAE Banking Industry 3 III. UNB Business Overview 5 IV. UNB Strategy 10 V. Risk Management 11 VI. Financial Highlights and Performance 13 VII. Awards and Certifications 20
I. UNB Introduction
UNB Key Highlights Majority ownership (50%) and strong support from the Government of Abu Dhabi Stable and conservative management Demonstrated consistent performance of a time tested strategy, even in a challenging environment Reaffirmed strong ratings with stable outlook Diversified loan book and adequate provisioning High capitalization Strong CAR and Tier I ratio of 19.6% and 18.4% respectively Strong fundamentals, consistent strategy and management track record supporting sustainable growth 1
Overview of UNB Overview Established in 1982 and headquartered in Abu Dhabi Joint Abu Dhabi and Dubai Government ownership Listed on the Abu Dhabi Securities Exchange (ADX) Provides a full array of wholesale and retail banking services through a network of 67 branches in UAE 6 th largest local commercial bank in the UAE in terms of loans and advances International footprint in China,Egypt, Kuwait and Qatar Over 2,400 employees as at 31 March 2014 Market capitalization of AED 18.3 Billion (USD 5.0 Billion) as at 31 March 2014 Strong Ratings Constantly Maintained (1) Ownership Structure Group Operating Structure (1) Reaffirmed throughout the financial markets turmoil A1 99.0% 80.0% 94.9% A+ 2002 2006 2006 2009 2010 2011 2012 2013 Rep office in China Branch in Qatar Financial Center Branch in Kuwait 2008 2009 2012 Note: (1) ADIC: Abu Dhabi Investment Council. ICD: Investment Corporation of Dubai. 2
II. UAE Banking Industry
UAE Banking Sector Snapshot Market Structure Loans and Deposits Growth AED billion Loans: +4% Deposits: +7% 1,018 1,031 983 1,050 CAGR 1,071 1,070 1,168 1,099 1,177 1,279 Largest Bank (20.2% of Total Loans) 2009 2010 2011 2012 2013 Nine Following Banks (Additional 61.4% of Total Loans) Loans & Advances Deposits Market Developments As at 31 Dec 2013 Remaining 41 Banks: 18.4% of Total Loans Regulated by Central Bank of UAE 51 Banks (928 branches) 23 National Banks with 841 Branches 28 Licensed Foreign Banks with 87 Branches Improving financial position Loans / Deposits ratio strengthened from 103.5% in 2009 to 92.0% as at 31 December 2013 Moody s banking sectors outlook for UAE is stable Source: UAE Central Bank as at 31 December 2013 3
UNB Positioning within its main UAE peer group Asset Quality Non Performing Loans / Gross Loans As at 31 March 2014 As at 31 March 2014 Operating Efficiency Cost / Income ratio 13.8% 3.3% 3.4% 3.8% 4.1% 5.8% 10.3% 21.1% 28.3% 30.9% 31.5% 31.6% 32.9% 37.9% NBAD FGB ADCB UNB MB CBD ENBD FGB UNB CBD ENBD NBAD ADCB MB As at 31 March 2014 Liquidity Loan / Deposit Ratio As at 31 March 2014 Profitability 75.9% 86.0% 92.5% 95.2% 95.3% 98.1% 114.3% 17.5% 17.0% 16.8% 16.2% 16.0% 15.1% 14.9% 2.7% 1.8% 2.6% 1.6% 2.6% 2.3% 1.2% NBAD MB UNB FGB ENBD CBD ADCB Source: Financial Statements as at 31 Mar 2014 FGB ADCB CBD NBAD MB UNB ENBD ROAE ROAA 4
III. UNB Business Overview
Business Lines AED million, as at 31 March 2014, unless otherwise stated Corporate Banking Retail and SME Banking International & Investment Banking Islamic Banking Assets (AED billion) Share of total (%) 35.3 39% (1) 13.9 16% (1) 29.3 33% (1) 6.7 8% (1) Operating Income Share of total (%) 248 32% (1) 300 38% (1) 135 17% (1) 55 7% (1) Net Income Share of total (%) 211 41% (1) 127 25% (1) 117 23% (1) 41 8% (1) Key Highlights Cross sell towards extended array of products and services Source of large and stable deposits Long term relationships High potential for SME business Core source of inexpensive deposits Very profitable sector for growth 6 th largest local commercial bank in the UAE in terms of branch Network with 67 branches. (2) Widespread and well established financial institutions relationships Growing focus on advisory and structured finance Group treasury (foreign exchange, money markets) Growing product offering Responding to increasing demand for financing and savings products Source: Financial Statements as at 31 March 2014. Note: (1) As at 31 March 2014, % of total including UNB-Egypt and unallocated items. (2) UAE Central Bank as at 31 Dec 2013 5
Business Lines Corporate Banking Comments Full suite of corporate banking products market specific teams providing industry and market expertise across UAE Strong access to Abu Dhabi Government and Government Related Entities ( GRE ) related business Over 2,500 customers as at 31 March 2014 Prudent growth in loan book and focus on cross sell to top tier local and regional clients Assets (AED Billion) CAGR:+3% 33.3 32.5 34.9 35.3 2011 2012 2013 Q1 2014 Operating Income (AED Million) CAGR:-1% CAGR:+11% Net Income (AED million) 898 1,145 1,129 1,125-8% 728 660-12% 269 248 240 211 2011 2012 2013 Q1 2013 Q1 2014 2011 2012 2013 Q1 2013 Q1 2014 Source: Financial Statements as at 31 December 2011, 2012 and 2013 and Q1 2013 and 2014. 6
Business Lines Retail Banking Comments Assets (AED Billion) Full range of retail banking products including multicurrency accounts, loans, credit cards and banc assurance products Limited exposure to real estate Modest mortgage portfolio, mostly to UAE nationals 67 branches and over 200 ATMs in UAE Over 238,000 customers as at 31 March 2014, predominantly UAE nationals 2013 Banker Middle East Best Premium Credit Card for its Platinum Credit Card and Best SME Card Award for the UNB Business Credit Card. CAGR:+6% 12.1 12.5 13.3 13.9 2011 2012 2013 Q1 2014 Operating Income (AED million) Net Income (AED million) CAGR: +2% 1,104 1,116 1,154 +7% 487 CAGR: -31% 399 230 +38% 280 300 92 127 2011 2012 2013 Q1 2013 Q1 2014 2011 2012 2013 Q1 2013 Q1 2014 Source: Financial Statements as at 31 December 2011, 2012 and 2013 and Q1 2013 and Q1 2014. 7
Business Lines International and Investment Banking Comments Comprises of: Treasury - Money Market Operations, Foreign Exchange Investments - Investment portfolio of AED 9.6 billion as at 31 March 2014 mostly comprising of Investment grade liquid instruments - Limited propriety trading Financial institutions - Relationship with over 250 Financial Institutions Structured Finance - Syndication, Project Financing and Debt Advisory services Private Banking and Wealth Management Services Operating Income (AED million) CAGR: +41% Assets (AED Billion) CAGR: +20% 29.3 26.3 24.4 19.4 2011 2012 2013 Q1 2014 Net Income (AED million) CAGR: +61% 425 463 345 393 +44% +48% 232 94 135 151 79 117 2011 2012 2013 Q1 2013 Q1 2014 2011 2012 2013 Q1 2013 Q1 2014 Source: Financial Statements as at 31 December 2011, 2012 and 2013 and Q1 2013 and Q1 2014 8
Business Lines Islamic Banking Comments Shari a compliant products and services Assets (AED Billion) CAGR:-29% Offering to retail and corporate clients lending and deposit taking solutions Broad range of products such as Wakala, Murabaha, Ijara and Istissna Services offered through UNB s Islamic Banking window (ISB) and Al Wifaq Finance Company 14.4 11.9 10.7 6.7 Focus on widening product offering capabilities 2011 2012 2013 Q1 2014 Operating Income (AED million) Net Income (AED million) CAGR: +27% 209 253 CAGR: +21% 158 122-55% 100 138 147-36% 55 64 41 2011 2012 2013 Q1 2013 Q1 2014 2011 2012 2013 Q1 2013 Q1 2014 Source: Financial Statements as at 31 December 2011, 2012 and 2013 and Q1 2013 and Q1 2014 9
IV. UNB Strategy
UNB Strategy Key Pillars Core Values Consistency Focus on core banking Activities supporting risk management for UNB and customer needs Sustainability 2001-Q1 2014 net profit CAGR of 18.0% Management and employees stability Business Objectives Customer Partnership Products cross-sell Follow the customers Lead by Example Operational efficiency Business mix diversification Business Achievements Customer Loyalty Longstanding relationships with borrowers and depositors Industry Recognition Product and market segment awards ISO Certification Financial Outcome Diversification Asset Quality Adequate Provisioning Strong Financial Condition High capitalisation Active liquidity management Vision 2010 2018: To be the best in class for the banking industry in the UAE 10
UNB Strategy Tested Over Time 5 4 2013 2015 1 2000 2002 Mission: By identifying and satisfying the needs of all customers, staff and shareholders we aim to be regarded as one of the market leaders in the UAE banking industry as measured by growth in our return on equity Sheikh Khalifa Excellence Award (based on EFQM model) ROAE increased from 9.7% to 18.9% - one of the highest among peer group 2 2003 2005 Mission: To be a top quality bank and the best service provider in the UAE banking industry First bank of its size in the Middle East to achieve full ISO certification across all branches and operations Dubai Quality Award (based on EFQM model) Sheikh Khalifa Excellence Award Gold Category (based on EFQM model) 3 2006 2008 Mission: To be the best partner for the UAE banking customer and a key player in the region Acquisition of UNB Egypt (ACMB) Representative office in China Al Wifaq Islamic Finance Company Forbes recognition The Best Performing Bank in the UAE 2010 2012 Mission: To deliver superior customer service, grow market share and shareholder value and establish UNB as the employer of choice in the UAE Opened a branch in the state of Kuwait. The first ever bank to receive Sheikh Khalifa Excellence Award Diamond Category 2012. Inaugural UNB Sustainability Report rated level A+ by Global Reporting Initiative. The first commercial bank in the world to be certified by M/s :Lloyd s Register Quality Assurance Ltd. to Integrated Management System (IMS) Mission: Through innovation, staff well-being and outstanding customer service, we will grow shareholder value and maintain our financial stability. Financial Solidity Shareholder Value Customer Service Best Employer Innovation Value Preservation and Enhancement for Customers, Employees and Shareholders 11
V. Risk Management
Robust Risk Management Framework Board Remedial Asset Committee Chairman & Board of Directors Chief Executive Officer Audit Committee Executive Committees Head Office Credit Committee (HOCC) High level decisions with regards to credit and lending activities, including sector focus / limits Asset Liability Committee (ALCO) Ensure UNB s liquidity, interest rate / foreign exchange and capitalization levels are adequate Risk Management Committee (RMC) Ensure appropriate and prudent policies procedures and practices are implemented and abided by Investment Committee (ICO) Develop UNB s trading and investment strategy Remedial Assets Committee (RAC) Monitor UNB s non performing loan portfolio and make decisions on impairment policies, legal actions Management Credit Management Develop lending policies and customer classification parameters Risk Management Division Enterprise risk management framework and continuous monitoring of the risk environment and integrated evaluation of risks and their interaction 12
VI. Financial Highlights and Performance
Financial Highlights Comments Stable funding base and consistent adequate liquidity Average total deposits/total assets at 73% over the past 5 years Healthy assets composition General provisions constitute 1.4% of the credit risk weighted assets NPLs reflect prevailing market conditions Consistent Growth (AED Billion) 71% 73% 73% 74% 74% 81.8 82.5 87.1 87.5 89.6 57.9 60.3 63.4 65.1 66.7 Strong capitalisation providing room for further growth 2010 2011 2012 2013 Q1 2014 Total Assets Total Deposits Total Deposits / Total Assets Impairment (AED Billion) Strong Capitalization 2.5 4.3% 1.2 2.2 3.7% 1.6 4.7% 4.3% 4.1% 2.8 2.7 2.6 2.5 2.4 2.2 (1) 20.1% 21.9% 23.2% 19.9% 19.6% 4.7% 5.3% 1.2% 4.9% 1.2% 15.2% 16.7% 18.5% 18.7% 18.4% 2010 2011 2012 2013 Q1 2014 NPL Provisions NPL / Gross Loans 2010 2011 2012 2013 Q1 2014 Tier 1 Tier 2 Total CAR Source: Financial Statements as at 31 December 2010, 2011, 2012, 2013 and Q1 2014 13
Sustained Positive Performance Comments Operating Income (AED million) UNB s operating income has proven resilient amidst the financial and economic crisis Continuous growth in top line income 2,555 2,838 3,091 3,212 Although net interest income remains the driving force, other sources of income (including fees and commissions) constitute an integral part of the revenue mix The bank continues to see relatively even contributions from its core businesses (retail and corporate) to the growth in its operating income 818 784 2010 2011 2012 2013 Q1 2013 Q1 2014 Operating Income Breakdown (AED million) Operating Income Contribution 552 609 448 604 1,951 2,389 2,539 2,603 176 166 642 618 2010 2011 2012 2013 Q1 2013 Q1 2014 Net Interest Income & Net Income from Islamic Financing Non Interest Income As at 31 March 2014 Retail Banking 25% Islamic Banking 8% Others 3% International & Investment Banking 23% Corporate Banking 41% Source: Financial Statements as at 31 December 2010, 2011, 2012 2013 and Q1 2013,2014. 14
Sustained Positive Performance (cont d) Comments Net Profit (AED million) Consistent profitability throughout the financial crisis Access to most sought after GRE projects yet dealt with on a commercial basis 1,350 1,500 1,602 1,748 Robust efficiency 2 nd best efficiency ratio in UAE Low by international standards, despite continuous investment in systems, competencies and talent 495 512 2010 2011 2012 2013 Q1 2013 Q1 2014 Cost to Income Ratio (%) RoAA / RoAE 28.0% 25.7% 25.5% 26.6% 23.3% 28.3% 14.9% 14.6% 14.0% 13.9% 15.1% 1.7% 1.8% 1.9% 2.0% 2.3% 2010 2011 2012 2013 Q1 2013 Q1 2014 2010 2011 2012 2013 Q1 2014 Source: Financial Statements as at 31 December 2010, 2011, 2012, 2013 and Q1 2013, 2014. * Annualized RoAE excluding Tier I Capital Notes RoAE RoAA 15
Cautious Lending Approach Highlights Measured Loan Growth (AED Billion) Sustainable loan growth CAGR:+5% Selective lending with focus on long-term relationships Selective real estate corporate financing 56.6 57.6 57.3 60.0 61.7 2010 2011 2012 2013 Q1 2014 Impaired Assets and Provisioning (%) Diversified Loan Book 4.3% 3.7% 4.7% 4.3% 4.1% As at 31 March 2014 Energy 4% Others 8% 47.5% 74.7% 78.6% 90.7% 90.1% Manufacturing 8% Trade 8% Consumer 21% 2010 2011 2012 2013 Q1 2014 Construction 6% Real estate 17% Impairement Provisions / Non Performing Loans (%) Non Performing Loans / Gross Loans (%) Source: Financial Statements as at 31 December 2010, 2011, 2012, 2013 and Q1 2013, Q1 2014 Services 5% Sovereign 12% Fin Inst. 11% 16
Funding Structure Comments 1 st access to the international bond markets in 2005 Accessed the Syndicated Loan Market in 2003 with a 3-year facility for USD 275 million and in 2005 5-Year facility for USD 1 billion Funding Mix (AED Billion) 81.8 82.5 87.1 87.5 89.6 6% 6% 6% 2% 2% 15% 16% 16% 18% 18% 8% 5% 5% 6% 5% Total outstanding amount under EMTN program of US$ 3 billion was US$ 0.8 billion as at 31 March 2014. In February 2009, the Bank issued Tier 1 capital notes to the Department of Finance, Government of Abu Dhabi, with a principal amount of AED 2 billion. Product-wise Deposit break-down (AED Billion) 71% 73% 73% 74% 74% 2010 2011 2012 2013 Q1 2014 Deposits Borrowings Equity Others Total Funding Sector-wise Deposit Break-down (AED Billion) 57.9 60.3 63.4 65.1 66.7 3% 4% 3% 3% 3% 8% 5% 2% 1% 3% 11% 11% 12% 16% 16% 78% 80% 83% 79% 78% 2010 2011 2012 2013 Q1 2014 Time Current Islamic Other Total Deposits 57.9 60.3 63.4 65.1 66.7 15% 14% 15% 14% 14% 12% 16% 14% 16% 19% 35% 30% 35% 34% 36% 38% 40% 36% 36% 31% 2010 2011 2012 2013 Q1 2014 Corporate Sovereign Public Sector Retail Total Deposits Source: Financial Statements as at 31 December 2010, 2011, 2012, 2013 and Q1 2014. 17
Adequate Liquidity Position Comments Loans / Deposits (%) Net lender in the interbank market 98.2% 100.1% 94.1% 92.2% 91.9% Liquid investment portfolio c.70% representing investment grade assets 97.6% 95.5% 90.4% 92.3% 92.5% Prudent management avoiding expensive deposits growth while maintain more then adequate liquidity at all times given the current market conditions in the last 5 years Liquid Assets (AED Billion) 2010 2011 2012 2013 Q1 2014 UNB Loans / Deposits Total Sector Source UAE Banking indicator as of Feb 2014 Investment Portfolio As at 31 March 2014 TOTAL : AED 9.6 Bn 81.8 11.4 82.5 14.5 87.1 14.1 87.5 89.6 12.0 9.4 By Rating CCC+ and below 15% Unrated 12% AAA to AA- 20% Treasury Bills 12% By Security Type Equity 2% 6.0 6.0 1.8 3.7 5.0 2010 2011 2012 2013 Q1 2014 BB+ to BB- 3% A+ to A- 30% Cash Due from Banks Total Assets Source: UNB prospectus. Financial Statements as at 31 December 2010, 2011,2012 and 2013 and Q1 2013, Q1 2014 BBB+ to BBB- 20% Debt 86% 18
Awards and Certifications First Organization in the country to win the top Quality Award in Abu Dhabi (Sheikh Khalifa Excellence Award Diamond Category) and win the top Quality Award in Dubai - Dubai Quality Award (DQA) Gold category for 2012 UNB was awarded 2013 United Europe Award Socrates Committee, Europe Business Assembly UNB CEO was conferred with the CEO of the Year, Banking category award at the 2013 CEO Middle East Awards UNB CEO was awarded the prestigious international award Queen Victoria Commemorative Medal from the European Business Assembly at an award Ceremony held at Montreux, Switzerland UNB CEO was awarded the International Millennium Award at the 2013 Europe Business Assembly Awards Presentation held in Malta European Award for Best Practices (Diamond Category) presented by ESQR The Majestic Five Continents Award for Quality and Excellence by Otherways Management & Consulting Association, Geneva, Switzerland The 2013 United Europe Award was awarded by Socrates Committee, Europe Business Assembly at an award ceremony held in United Kingdom. UNB was recognized as a Superbrand for 2013 by the UAE Superbrand Council International Socrates Award in the Economics and Business category nomination for the second year and Best Enterprise Award from the Europe Business Assembly in United Kingdom 2013 Platinum Technology Award for Quality & Best Trade Name by Otherways International Research & Consultants at an award ceremony held in Berlin, Germany Golden Award for Excellence and Quality from the Arab Organization for social responsibility and Tatweej Academy for Excellence and Quality in the Arab World The Best Premium Credit Card for its "Platinum Credit Card" and Best SME Card Award for the "UNB Business Credit Card at the 2013 Banker Middle East Product Awards. Golden award for Quality and Business Prestige presented by Otherways International Research and Consultants at an award ceremony held in Rome, Italy Most Admired Service Provider in Financial Sector Award" at the Asian BFSI Leadership Awards Ceremony held in Dubai Two prestigious awards at the 2013 World Finance Banking Awards - Best Commercial Bank in UAE and Banker of the Year Middle East for UNB CEO First Bank in the region to be verified for adopting the guidelines of ISO 10002 (handling of customer complaints) by Lloyd s Register Quality Assurance One of the first banks to establish, implement and verify enterprise wide risk management based on the guidelines of ISO 31000:2009 UNB s Performance Has Been Recognized by the Community Having Accomplished Several Prestigious Awards and Certifications 19