Condensed consolidated interim statement of cash flows (unaudited)

for the three month period ended March 31, 2013

 

			3 month period ended March 31
			2013	2012(*)
			AED'000	AED'000
OPERATING ACTIVITIES
Profit before taxation and non-controlling interests			905,014	862,382
Adjustments for:
Depreciation			31,959	32,787
Amortisation of intangible assets			7,882	7,882
Dividends received  (Note 23)			(11,958)	(7,767)
Impairment allowance on loans and advances, net (Note 8)			389,377	348,582
Recovery of doubtful loans and advances (Note 8)			(59,610)	(61,146)
Discount unwind (Note 8)			(34,141)	(31,937)
Impairment recoveries on investment securities (Note 25)			(8,088)	(735)
Net gains from trading securities (Note 22)			(76,036)	(69,869)
Ineffective portion of hedges - losses/(gain) (Note 6)			1,894	(35,603)
Employees' incentive plan benefit expense (Note 17)			9,935	10,628
Operating profit before changes in operating assets and liabilities			1,156,228	1,055,204
Increase in balance with Central Bank			(750,755)	-
(Increase)/decrease in due from banks			(5,802,597)	1,836,229
Decrease in net trading derivative financial instruments			75,553	55,528
(Increase)/ decrease in loans and advances			(1,478,544)	637,769
Increase in other assets			(266,288)	(155,332)
Increase in due to banks			86,540	320
Increase  in deposits from customers			1,864,372	3,635,806
Increase/(decrease) in other liabilities			51,358	(837,882)
Cash (used in)/from operations			(5,064,133)	6,227,642
Overseas tax paid			(2,707)	-
Net cash (used in)/ from operations			(5,066,840)	6,227,642
INVESTING ACTIVITIES
Dividends received (Note 23)			11,958	7,767
Impairment recoveries on investment securities (Note 25)			8,088	735
Overseas tax paid, net			(8,929)	-
Net purchase of trading securities			(26,973)	(64,281)
Net proceeds from disposal of available for sale investment securities			425,768	168,404
Net purchase of available for sale securities			(1,209,070)	(1,747,907)
Additions to investment properties			(16,659)	(38,492)
Purchase of property and equipment, net			(16,911)	(15,658)
Net cash used in investing activities			(832,728)	(1,689,432)
FINANCING ACTIVITIES
Increase in Euro commercial paper			192,613	915,824
Net repayment of borrowings			(1,050,331)	(6,183,416)
Net proceeds from sale/ (purchase) of treasury shares by Funds subsidiaries (Note 2.1)			11,015	(1,068)
Shares buy back (Note 16)			(4,276)	-
Net movement in non-controlling interests			(40,715)	(15,888)
Capital notes coupon paid			(120,000)	(120,000)
Net cash used in financing activities			(1,011,694)	(5,404,548)
Net decrease in cash and cash equivalents			(6,911,262)	(866,338)
Cash and cash equivalents at the beginning of the period			19,180,314	19,261,633
Cash and cash equivalents at the end of the period			12,269,052	18,395,295

 

 

(*) Amounts have been restated as explained in Note 2.1

The accompanying notes form an integral part of this condensed consolidated interim financial information.

 

 

 

 

 

 

Condensed consolidated interim statement of cash flows (unaudited)

for the three month period ended March 31, 2013 (continued)

 

Cash and cash equivalents

 

Cash and cash equivalents included in the condensed consolidated interim statement of cash flows comprise the following statement of financial position amounts:

 

 

	As at	As at
	March 31 2013	December 31 2012
	(unaudited)	(audited)
	AED'000	AED'000
Cash and balances with Central Banks	10,797,425	9,337,874
Deposits and balances due from banks	14,873,916	16,517,118
Due to banks	(4,664,632)	(4,411,271)
	21,006,709	21,443,721
Less:  Deposits and balances due from banks and cash and balances with Central Banks  - original maturity more than  3 months	(9,131,943)	(2,571,339)
Add:  Due to banks - original maturity more than 3 months	394,286	307,932
	12,269,052	19,180,314

 

 

The accompanying notes form an integral part of this condensed consolidated interim financial information.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013

 

1             Activities and areas of operations

 

Abu Dhabi Commercial Bank P.J.S.C. ("ADCB" or the "Bank") is a public joint stock company with limited liability incorporated in the Emirate of Abu Dhabi, United Arab Emirates (U.A.E.). ADCB is principally engaged in the business of retail banking, commercial banking and Islamic banking and provision of other financial services through its network of fifty branches and three pay offices in the U.A.E., two branches in India, one offshore branch in Jersey and its subsidiaries and associates.

 

The registered head office of ADCB is at Abu Dhabi Commercial Bank Head Office Building, Salam Street, plot C- 33, Sector E-11, P. O. Box 939, Abu Dhabi, U.A.E.

 

ADCB is registered as a public joint stock company in accordance with the U.A.E. Federal Commercial Companies Law No. (8) of 1984 (as amended).

 

2             Summary of significant accounting policies

 

2.1         Basis of preparation 

 

This condensed consolidated interim financial information has been prepared in accordance with IAS 34 "Interim Financial Reporting".  It does not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Bank for the year ended December 31, 2012, which were prepared in accordance with International Financial Reporting Standards (IFRS) and  International Financial Reporting Interpretation Committee (IFRIC) Interpretations.

 

The same accounting policies, presentation and methods of computation have been followed in this condensed consolidated interim financial information as were applied in the preparation and presentation of the Bank's consolidated financial statements for the year ended December 31, 2012.

 

For details of related party balances and transactions, refer to Note 36 in the consolidated financial statements for the year ended December 31, 2012. The related party balances and transactions for the quarter ended March 31, 2013 are similar in nature and magnitude. Note 8 provide the details of lending exposure to Government entities.

 

The results for the three month period ended March 31, 2013 are not necessary indicative of the results that may be expected for the financial year ending December 31, 2013.

 

This condensed consolidated interim financial information is prepared and presented in United Arab Emirates Dirhams (AED) which is the Bank's functional and presentation currency and are rounded off to the nearest thousand ("000") unless otherwise indicated.

 

As required by the Securities and Commodities Authority of the U.A.E. ("SCA") Notification No. 2624/2008 dated October 12, 2008, accounting policies relating to investment securities and investment properties have been disclosed in the condensed consolidated interim financial information.

 

The preparation of the condensed consolidated interim financial information in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The main areas of judgments, estimates and assumptions applied in the condensed consolidated interim financial information, including the key sources of estimation uncertainty were the same as those applied in the Bank's consolidated financial statements for the year ended December 31, 2012.

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.1         Basis of preparation (continued)

 

Change in accounting policy

As stated in note 3.1 to the consolidated financial statements for the year ended December 31, 2012, the Bank early adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, as well as the consequential amendments to IAS 28 Investments in Associates and to IAS 31 Joint Ventures (2011), with a date of initial application of January 1, 2012.  Accordingly, the comparative information for the quarter ended March 31, 2012 has been restated in these condensed interim financial information - see below.

Subsidiaries

As a result of the adoption of IFRS 10, the Bank has changed its accounting policy with respect to determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that is applicable to all investees; among other things, it requires the consolidation of an investee if the Bank controls the investee on the basis of de facto circumstances.

In accordance with the transitional provisions of IFRS 10, the Bank re-assessed the control conclusion for its investees at 1 January 2012. As a consequence, the Bank has changed its control conclusion in respect of its investments in Al Nokhitha Fund, ADCB MSCI UAE Index Fund and Arabian Index Fund (the "Funds").

 

Although the Bank owns less than half of the units of these Funds, the management has determined that the Bank has de facto control over the Funds because it is exposed to significant variable returns from its involvement with the Funds and has power and rights given by the prospectus of the Funds to affect the amount of its returns. Accordingly, the Bank applied acquisition accounting to the investment at 1 January 2012, as if the investee had been consolidated from that date. Previously, two of the investments in the Funds were accounted for as associates using the equity method and one of the investments was accounted for as an available for sale investment using fair value accounting.

 

The following table summarises the adjustments made to the relevant line items of the Bank's condensed consolidated interim statement of financial position as at March 31, 2012 and its condensed consolidated interim statements of income and cash flows and earnings per share for the three month period ended March 31, 2012 as a result of the consolidation of the Funds.

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.1         Basis of preparation (continued)

 

Change in accounting policy (continued)

 

Condensed consolidated interim statement of financial position (extract)

 

			March 31, 2012
			As previously stated	Adjustments	As restated
			AED'000	AED'000	AED'000
Assets
Trading securities			86,864	536,978	623,842
Investment securities			16,948,168	(40,099)	16,908,069
Loans and advances, net			123,865,936	(12,936)	123,853,000
Other assets			10,667,447	5,275	10,672,722
Investment in associates			93,914	(93,914)	-
Overall impact on total assets				395,304
Liabilities
Deposits from customers			114,461,916	(6,592)	114,455,324
Other liabilities			11,548,449	(1,035)	11,547,414
Overall impact on total liabilities				(7,627)
Equity
Cumulative changes in fair value			(128,178)	(689)	(128,867)
Retained earnings			4,388,457	(3,244)	4,385,213
Treasury shares			-	(40,103)	(40,103)
Non-controlling interests			7,285	446,967	454,252
Overall impact on equity				402,931

 

Condensed consolidated interim income statement (extract)

 

	Three month period ended March 31, 2012 (unaudited)
	As previously stated (*)	Adjustments for Funds consolidation	As restated
	AED'000	AED'000	AED'000
Net interest and Islamic financing income	1,230,755	(58)	1,230,697
Net fees and commission income	249,059	(2,265)	246,794
Net trading income	66,434	65,527	131,961
Other operating income	37,548	7,757	45,305
Overall impact on operating income		70,961
Operating expenses	(505,570)	(104)	(505,674)
Share of profit of associates	12,097	(12,097)	-
Overall impact on net profit		58,760
Overall impact on net profit attributable to non-controlling interests		62,006

 

(* )Adjusted for net hedge ineffectiveness reclassification from net trading income to net interest and Islamic

   financing income to match current period presentation.

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.1         Basis of preparation (continued)

 

Change in accounting policy (continued)

 

Condensed consolidated interim statement of cash flows (extract)

 

	Three month period ended March 31, 2012 (unaudited)
	As previously stated(*)	Adjustments for Funds consolidation	As restated
	AED'000	AED'000	AED'000
Net cash from operations	6,225,655	1,987	6,227,642
Net cash used in investing activity	(1,704,401)	14,969	(1,689,432)
Net cash used in financing activity	(5,387,592)	(16,956)	(5,404,548)
Overall impact on cash and cash equivalents		-

 

(*) Adjusted for Euro commercial paper reclassification (refer to note 18 to the consolidated financial statements for the year ended December 31, 2012) from operating activity to financing activity to match current period presentation.

 

Impact on Earnings per share (EPS)

 

The Funds consolidation had an immaterial impact on EPS for the three month period ended March 31, 2012.

 

2.2         Application of new and revised International Financial Reporting Standards (IFRSs)

 

2.2.1      New and revised IFRSs effective for accounting periods beginning January 1, 2013

 

There are no IFRSs or IFRIC interpretations that were effective for the first time for the financial year beginning January 1, 2013 that have had a material impact on Bank's condensed consolidated interim financial information.

 

2.2.2     Standards and Interpretations in issue not yet effective

The Bank has not early adopted new and revised IFRSs that have been issued but are not yet effective.

New Standards and amendments to Standards:

Effective for annual periods beginning on or after

Amendments to IAS 32 Financial Instruments requires presentation to clarify certain aspects because of diversity in application of the requirements on offsetting, focused on four main areas: ·      the meaning of 'currently has a legally enforceable right of set-off' ·      the application of simultaneous realisation and settlement ·      the offsetting of collateral amounts ·      the unit of account for applying the offsetting requirements   These amendments will not have a material impact on the Bank's condensed consolidated interim financial information.

January 1, 2014

                          

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.2         Application of new and revised International Financial Reporting Standards (IFRSs)

(continued)

 

2.2.2     Standards and Interpretations in issue not yet effective (continued)

 

New Standards and amendments to Standards:	Effective for annual periods beginning on or after
Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements relate only to investment entities, therefore will not apply to the Bank.	January 1, 2014
IFRS 9, Financial Instruments: Classification and Measurement (intended as complete replacement for IAS 39).	January 1, 2015

Key requirements of IFRS 9 are described as follows:

IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.

 

Management anticipates that these IFRSs and amendments will be adopted in the consolidated financial statements in the initial period when they become mandatorily effective.  The Bank is yet to assess IFRS 9's full impact, particularly as the hedging and impairment aspects of IFRS 9 are still outstanding, and intends to adopt IFRS 9 in the initial period when it becomes mandatorily effective.

 

2.3         Basis of consolidation

 

This condensed consolidated interim financial information incorporates the financial statements of Abu Dhabi Commercial Bank P.J.S.C. and its subsidiaries (collectively referred to as "ADCB" or the "Bank").

 

Subsidiaries

 

Subsidiaries are entities controlled by the Bank. The Bank controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the condensed consolidated interim financial information from the date that control commences until the date that control ceases.

 

Special Purpose Entities

 

Special purpose entities (SPEs) are entities that are created to accomplish a narrow and well-defined objective such as the securitisation of particular assets, or the execution of a specific borrowing or lending transaction. An SPE is consolidated if, based on an evaluation of the substance of its relationship with the Bank, the Bank's power over the SPE, exposures or rights to variable returns from its involvement with the SPE and its ability to use its power over the SPE at inception and subsequently to affect the amount of its return, the Bank concludes that it controls the SPE.

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.3         Basis of consolidation (continued)

 

Special Purpose Entities (continued)

 

The assessment of whether the Bank has control over an SPE is carried out at inception and normally no further reassessment of control is carried out in the absence of changes in the structure or terms of the SPE, or additional transactions between the Bank and the SPE except whenever there is a change in the substance of the relationship between the Bank and an SPE.

 

Funds under management

 

The Bank manages and administers assets held in unit trusts on behalf of investors. The financial statements of these entities are not included in the condensed consolidated interim financial information except when the Bank controls the entity, as referred to above, or is the principal investor.

 

Loss of control

 

Upon the loss of control, the Bank derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Bank retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or in accordance with the Bank's accounting policy for financial instruments depending on the level of influence retained.

 

Transactions eliminated on consolidation

 

Intra-group balances, and income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the condensed consolidated interim financial information. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

Joint arrangements

Joint arrangements are arrangements of which the Bank has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements' returns. They are classified and accounted for as follows:

 

Joint operation - when the Bank has rights to the assets, and obligations for the liabilities, relating to an arrangement, it accounts for each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation.

Joint venture - when the Bank has rights only to the net assets of the arrangements, it accounts for its interest using the equity method, as for associates.

 

2.4         Investment securities

 

Investment securities are initially measured at fair value plus, in the case of investment securities not at fair value through profit or loss, incremental direct transaction costs, and subsequently accounted for depending on their classification as either held to maturity, fair value through profit or loss or available for sale.

 

Investment securities are classified into the following categories depending on the nature and purpose of the investment:

 

i)             Investments at fair value through profit or loss;

ii)            Available for sale and

iii)          Held-to-maturity investments.

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.4         Investment securities (continued)

 

Financial assets and liabilities designated at fair value through profit or loss (FVTPL)

 

Financial assets and liabilities are classified as at FVTPL when either held for trading or when designated as at FVTPL.

 

A financial asset or liability is classified as held for trading if:

 

§ It has been acquired principally for the purpose of selling it in the near term; or

§ On initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or

§ It is a derivative that is not designated and effective as a hedging instrument.

 

A financial asset or liability other than held for trading may be designated as at FVTPL upon initial recognition if:

 

§ Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise for measuring assets or liabilities on a different basis; or

§ It  forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

§ It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

 

Financial assets and liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in condensed consolidated interim income statement. 

 

Held-to-maturity

 

Investments which have fixed or determinable payments with fixed maturities which the Bank has the positive intention and ability to hold to maturity, are classified as held to maturity investments.

 

Held-to-maturity investments are initially recognised at fair value plus any directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses, with revenue recognised on an effective yield basis. 

 

Amortised cost is calculated by taking into account any discount or premium on acquisition using an effective interest rate method.

 

If there is objective evidence that an impairment on held to maturity investments carried at amortised cost has been incurred, the amount of impairment loss recognised in the condensed consolidated interim income statement is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the investments' original effective interest rate.

 

Investments classified as held to maturity and not close to their maturity, cannot ordinarily be sold or reclassified without impacting the Bank's ability to use this classification and cannot be designated as a hedged item with respect to interest rate or prepayment risk, reflecting the longer-term nature of these investments.

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.4         Investment securities (continued)

 

Available for sale

 

Investments not classified as either "fair value through profit or loss" or "held to maturity" are classified as "available for sale". Available for sale assets are intended to be held for an indefinite period of time and may be sold in response to liquidity requirements or changes in interest rates, commodity prices or equity prices.

 

Available for sale investments are initially recognised at fair value plus any directly attributable transaction costs and are subsequently measured at fair value. The fair values of quoted financial assets in active markets are based on current prices. If the market for a financial asset is not active, and for unquoted securities, the Bank establishes fair value by using valuation techniques (e.g. recent arms length transactions, discounted cash flow analysis and other valuation techniques). Only in very rare cases where fair value cannot be measured reliably, investments are carried at cost and tested for impairment, if any.

 

Gains and losses arising from changes in fair value are recognised in the condensed consolidated interim statement of comprehensive income and recorded in cumulative changes in fair value with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in the condensed consolidated interim income statement. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in equity in the cumulative changes in fair value is included in the condensed consolidated interim income statement for the period.

 

If an available for sale investment is impaired, the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any previous impairment loss recognised in the condensed consolidated interim income statement is removed from equity and recognised in the condensed consolidated interim income statement. Once an impairment loss has been recognised on an available-for-sale financial asset, the subsequent accounting treatment for changes in the fair value of that asset differs depending on the nature of the available-for-sale financial asset concerned:

 

For an available-for-sale debt security, a subsequent decline in the fair value of the instrument is recognised in the condensed consolidated interim income statement when there is further objective evidence of impairment as a result of further decreases in the estimated future cash flows of the financial asset.

 

For an available-for-sale equity security, a subsequent decline in the fair value of the instrument is recognised in the condensed consolidated interim income statement, to the extent that further cumulative impairment losses have been incurred in relation to the acquisition cost of the equity security.

 

Where there is no further objective evidence of impairment, the decline in the fair value of the financial asset is recognised in the condensed consolidated interim statement of comprehensive income.

 

§ If the fair value of a debt security increases in a subsequent period, and the increase can be objectively related to an event occurring after the impairment loss was recognised in the condensed consolidated interim income statement, the impairment loss is reversed through the condensed consolidated interim income statement to the extent of the increase in fair value;

 

§ For an available-for-sale equity security, all subsequent increases in the fair value of the instrument are treated as a revaluation and are recognised in condensed consolidated interim statement of comprehensive income, accumulating in equity.

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

2             Summary of significant accounting policies (continued)

 

2.5         Investment properties

 

Investment property is property held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is reflected at valuation based on fair value at the statement of financial position date. The fair values are the estimated amounts for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction. The fair value is determined on periodic basis by independent professional valuers. Fair value adjustments on investment property are included in the condensed consolidated interim income statement in the period in which these gains or losses arise.

 

Investment properties under development that are being constructed or developed for future use as investment property are measured initially at cost including all direct costs attributable to the design and construction of the property including related staff costs. Subsequent to initial recognition, investment properties under development are measured at fair value. Gains and losses arising from changes in the fair value of investment properties under development are included in the condensed consolidated interim income statement in the period in which they arise. Upon completion of construction or development, such properties are transferred to investment properties.

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

3             Cash and balances with Central Banks

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Cash on hand	414,967	552,773
Balances with Central Banks	1,008,419	666,128
Reserves maintained with Central Banks	6,123,284	5,618,973
Certificate of deposits with U.A.E. Central Bank	3,200,000	2,500,000
Reverse repo placements	50,755	-
	10,797,425	9,337,874

 

 

The geographical concentration is as follows:

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Within the U.A.E.	10,724,579	9,278,553
Outside the U.A.E.	72,846	59,321
	10,797,425	9,337,874

 

4         Deposits and balances due from banks

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Nostro balances	161,215	243,079
Margin deposits	318,111	480,291
Time deposits	11,407,140	12,757,803
Reverse repo placements	2,387,450	1,830,945
Murabaha placements	600,000	1,095,000
Wakala placements	-	110,000
	14,873,916	16,517,118

 

 

 

 

 

 

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

4         Deposits and balances due from banks (continued)

 

The geographical concentration is as follows:

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Within the U.A.E.	6,016,255	7,496,926
Outside the U.A.E.	8,857,661	9,020,192
	14,873,916	16,517,118

 

The Bank hedges its foreign currency Reverse repo placements for foreign currency exchange rate risk using foreign exchange forward contracts and designates these instruments as cash flow hedges. The fair value of these swaps at March 31, 2013 was AED Nil (December 31, 2012 - positive fair value AED 7,252 thousand).

 

5             Trading securities

 

Quoted:	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Bonds	169,334	117,070
Equity instruments	575,552	524,807
	744,886	641,877

 

Bonds represent investments in Government and public sector bonds. Equity instruments are equities held by the funds accounted for as subsidiaries and are invested in U.A.E. and G.C.C. securities.

 

The fair value of trading investments is based on quoted market prices.

 

 

The geographical concentration is as follows:

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Within the U.A.E.	521,311	454,690
Outside the U.A.E.	223,575	187,187
	744,886	641,877

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

6             Derivative financial instruments

 

The fair values of derivative financial instruments held are set out below:

	Fair values
	Assets	Liabilities
As at March 31, 2013 (unaudited)	AED'000	AED'000
Derivatives held for trading:
Foreign exchange contracts	145,425	133,290
Interest rate and cross currency swaps	3,678,891	3,774,616
Options	183,909	150,145
Futures	1,315	-
Commodity and energy swaps	2,791	2,723
Swaptions	9,619	9,619
	4,021,950	4,070,393
Derivatives held as fair value hedges:
Interest rate and cross currency swaps	312,542	463,429
Derivatives held as cash flow hedges:
Interest rate swaps	20,642	-
Forward foreign exchange contracts	12,496	48,795
	4,367,630	4,582,617

 

	Fair values
	Assets	Liabilities
As at December 31, 2012 (audited)	AED'000	AED'000
Derivatives held for trading:
Foreign exchange contracts	182,709	178,041
Interest rate and cross currency swaps	3,990,096	4,000,297
Options	193,652	162,315
Futures	1,262	-
Commodity and energy swaps	191	147
Swaptions	8,964	8,964
	4,376,874	4,349,764
Derivatives held as fair value hedges:
Interest rate and cross currency swaps	458,069	406,575
Derivatives held as cash flow hedges:
Interest rate swaps	27,752	-
Forward foreign exchange contracts	130,531	11,999
	4,993,226	4,768,338

 

The net hedge ineffectiveness losses relating to the fair value and cash flow hedges amounting to AED 1,894 thousand (March 31, 2012 - gains of AED 35,603 thousand) have been recognised in the condensed consolidated interim income statement.

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

7             Investment securities

	As at March 31, 2013 (unaudited)
	U.A.E.	Other G.C.C. countries	Rest of the world	Total
	AED'000	AED'000	AED'000	AED'000
Available for sale investments
Quoted:
Bonds - Government	2,712,909	1,168,675	235,735	4,117,319
Bonds - Public sector	5,337,709	454,578	918,844	6,711,131
Bonds - Banks and financial institutions	922,212	446,918	6,942,899	8,312,029
Bonds - Corporate	42,564	-	1,110	43,674
Equity instruments	429	-	-	429
Total quoted	9,015,823	2,070,171	8,098,588	19,184,582
Unquoted:
Bonds - Banks and financial institutions	-	2,057	-	2,057
Equity instruments	204,912	-	682	205,594
Mutual funds	70,757	-	-	70,757
Total unquoted	275,669	2,057	682	278,408
Total available for sale investments	9,291,492	2,072,228	8,099,270	19,462,990

 

 

	As at December 31, 2012 (audited)
	U.A.E.	Other G.C.C. countries	Rest of the world	Total
	AED'000	AED'000	AED'000	AED'000
Available for sale investments
Quoted:
Bonds - Government	2,604,477	1,236,175	246,697	4,087,349
Bonds - Public sector	5,082,037	453,951	923,606	6,459,594
Bonds - Banks and financial institutions	798,663	481,091	6,606,270	7,886,024
Bonds - Corporate	-	-	1,089	1,089
Equity instruments	424	-	-	424
Total quoted	8,485,601	2,171,217	7,777,662	18,434,480
Unquoted:
Bonds - Banks and financial institutions	-	2,057	-	2,057
Equity instruments	204,921	-	701	205,622
Mutual funds	70,757	-	-	70,757
Total unquoted	275,678	2,057	701	278,436
Total available for sale investments	8,761,279	2,173,274	7,778,363	18,712,916

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

7             Investment securities (continued)

 

The Bank hedges interest rate risk on certain fixed rate/ floating rate investments through interest rate swaps and designates these as fair value and cash flow hedges, respectively. The net negative fair value of these interest rate swaps at March 31, 2013 was AED 324,080 thousand (December 31, 2012 - net negative fair value AED 384,649 thousand). The hedge ineffectiveness gains and losses relating to these hedges were included in the condensed consolidated interim income statement.

 

The Bank entered into repurchase agreements and total return swap agreements whereby bonds were pledged and held by counterparties as collateral. The risks and rewards relating to the investments pledged remain with the Bank. The following table reflects the carrying value of these bonds and the associated financial liabilities:

 

	As at March 31, 2013 (unaudited)		As at December 31, 2012 (audited)
	Fair value of pledged assets	Carrying  value of associated liabilities	Fair value of pledged assets	Carrying  value of associated liabilities
	AED'000	AED'000	AED'000	AED'000
Repurchase financing	1,008,570	855,271	1,220,647	1,063,133

Further, the Bank pledged investment securities with fair value amounting to AED 1,906,263 thousand (December 31, 2012 - AED 1,651,988 thousand) as collateral against margin calls. The risks and rewards relating to the investments pledged remain with the Bank.

 

8             Loans and advances, net

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Overdrafts (Retail and Corporate)	5,657,507	5,775,020
Corporate loans	100,125,381	101,206,881
Retail loans	12,629,273	12,563,043
Credit cards	2,081,421	2,076,531
Islamic financing	9,064,877	6,600,046
Other facilities	1,515,818	1,437,494
	131,074,277	129,659,015
Less: Allowance for impairment	(6,696,064)	(6,463,720)
	124,378,213	123,195,295

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

8             Loans and advances, net (continued)

 

Islamic financing assets

 

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Murabaha	776,200	720,544
Ijara financing	4,887,642	2,622,091
Mudaraba	493,863	471,696
Salam	2,817,430	2,720,103
Others	89,742	65,612
	9,064,877	6,600,046
Less: Allowance for impairment	(28,193)	(29,247)
	9,036,684	6,570,799

 

The Bank hedges certain variable rate loans and advances for interest rate risk using interest rate swaps and designates these instruments as cash flow hedges. The positive fair value of these swaps at March 31, 2013 was AED 18,258 thousand (December 31, 2012 - positive fair value of AED 13,499 thousand).

 

Movement of the individual and collective impairment allowance on loans and advances 

 

	March 31, 2013 (unaudited)				December 31, 2012 (audited)
	Individual impairment	Collective impairment	Total		Individual Impairment	Collective impairment	Total
	AED'000	AED'000	AED'000		AED'000	AED'000	AED'000
At January 1,	4,207,137	2,256,583	6,463,720		3,652,804	2,059,072	5,711,876
Charge for the period/year	137,234	252,143	389,377		1,676,510	197,613	1,874,123
Recoveries during the period/year	(59,610)	-	(59,610)		(183,015)	-	(183,015)
Net charge for the period/year	77,624	252,143	329,767		1,493,495	197,613	1,691,108
Discount unwind	(34,141)	-	(34,141)		(129,920)	-	(129,920)
Net amounts written-off	(63,309)	-	(63,309)		(809,111)	-	(809,111)
Currency translation	-	27	27		(131)	(102)	(233)
Balance as at	4,187,311	2,508,753	6,696,064		4,207,137	2,256,583	6,463,720

 

 

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

8             Loans and advances, net (continued)

The economic activity sector composition of the loans and advances portfolio is as follows:
	As at March 31, 2013 (unaudited)				As at December 31, 2012 (audited)
	Within the U.A.E.	Outside the U.A.E.	Total		Within the U.A.E.	Outside the U.A.E.	Total
	AED'000	AED'000	AED'000		AED'000	AED'000	AED'000
Economic  sector
Agriculture	9,231	-	9,231		10,803	-	10,803
Energy	9,691,833	440,989	10,132,822		9,863,141	423,428	10,286,569
Trading	1,118,095	112,212	1,230,307		983,414	39,633	1,023,047
Development  & construction	20,182,496	239,816	20,422,312		20,005,790	267,207	20,272,997
Real estate investment	33,402,540	67,980	33,470,520		30,526,476	61,144	30,587,620
Transport	1,231,839	493,594	1,725,433		1,275,907	479,606	1,755,513
Personal - retail	18,036,578	10,043	18,046,621		17,622,127	10,245	17,632,372
Personal - collateralised	10,745,363	275,805	11,021,168		11,914,549	281,010	12,195,559
Government	2,595,283	-	2,595,283		3,149,773	-	3,149,773
Financial institutions (*)	8,097,098	1,699,801	9,796,899		8,113,300	1,583,274	9,696,574
Manufacturing	1,510,570	104,517	1,615,087		1,408,454	103,717	1,512,171
Services	19,083,775	1,924,819	21,008,594		19,834,167	1,701,850	21,536,017
	125,704,701	5,369,576	131,074,277		124,707,901	4,951,114	129,659,015
Less: Allowance for impairment			(6,696,064)				(6,463,720)
Total			124,378,213				123,195,295

 

(*) includes investment companies.

 

The Bank entered into repurchase agreements whereby loans are pledged and held by counter parties as collateral. The risks and rewards relating to the loans pledged will remain with the Bank. The following table reflects the carrying value of these loans and the associated financial liabilities:

 

 

	As at March 31, 2013 (unaudited)		As at December 31, 2012 (audited)
	Carrying value of pledged assets	Carrying  value of associated liabilities	Carrying value of pledged assets	Carrying  value of associated liabilities
	AED'000	AED'000	AED'000	AED'000
Repurchase agreements	4,756,807	2,358,230	4,756,807	2,358,230

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

9             Investment properties

 

	Completed and in use	Under development	Total
	AED'000	AED'000	AED'000
At January 1, 2012	207,811	189,101	396,912
Additions during the year	-	85,625	85,625
Transfer from property and equipment, net	182,530	-	182,530
Transfer to property and equipment, net	(106,836)	-	(106,836)
Decrease in fair value	(18,810)	(10,026)	(28,836)
At January 1, 2013 (audited)	264,695	264,700	529,395
Additions during the period	-	16,659	16,659
At March 31, 2013 (unaudited)	264,695	281,359	546,054

 

The fair value of the Bank's investment properties are estimated by reference to current market prices for similar properties, adjusted as necessary for condition and location, or by reference to recent transactions updated to reflect current economic conditions. Valuations are carried out by registered independent appraisers having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Discounted cash flow techniques may be used to calculate fair value in certain situations where there have been no recent transactions using current external market inputs such as market rents and interest rates. The date of valuation is December 31, 2012.

 

The valuation methodologies considered by external valuers include

 

a)    Direct Comparable method: This method seeks to determine the value of the property from transactions of comparable properties.

b)    Residual method: This method is used to assess the value of the property with a development potential where there is inadequate comparable evidence. This method is commonly used in the valuation of the site under development in the local market.

 

All investment properties of the Bank are located within the U.A.E.

 

10          Other assets

 

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Interest receivable	954,074	845,442
Withholding tax	57,516	45,880
Prepayments	74,576	59,766
Clearing receivables	958	1,148
Acceptances	2,438,689	4,738,044
Others	376,688	235,682
	3,902,501	5,925,962

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

10          Other assets (continued)

 

Acceptances arise when the Bank is under an obligation to make payments against documents drawn under letters of credit. Acceptances specify the amount of money, the date, and the person to which the payment is due. After acceptance, the instrument becomes an unconditional liability (time draft) of the bank and is therefore recognised as a financial liability (Note 15) in the consolidated statement of financial position with a corresponding contractual right of reimbursement from the customer recognised as a financial asset. The Bank generally receives cash collateral against these acceptances.

 

 

11          Due to banks

 

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Vostro balances	245,235	120,504
Margin deposits	168,303	351,054
Time deposits	4,251,094	3,939,713
	4,664,632	4,411,271

 

The Bank hedges certain time deposits for interest rate and foreign currency exchange risk using cross currency swaps and designate these as fair value hedges. The fair value of these swaps at March 31, 2013 was AED Nil (December 31, 2012 - positive fair value of AED 186 thousand).

 

12          Deposits from customers

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
By category
Current account deposits	32,041,093	29,330,632
Margin deposits	566,394	345,079
Savings deposits	3,153,332	2,826,423
Time deposits	55,300,569	61,420,946
Murabaha deposits	9,927,052	6,578,970
Long term government deposits	436,008	449,569
Other Islamic deposits	9,631,540	8,265,306
	111,055,988	109,216,925

 

 

 

 

 

 

 

 

 

Notes to the condensed consolidated interim financial information

for the three month period ended March 31, 2013 (continued)

 

12          Deposits from customers (continued)

 

Other Islamic deposits include the following:

 

	As at	As at
	March 31	December 31
	2013	2012
	(unaudited)	(audited)
	AED'000	AED'000
Wadiah - demand deposits	434,770	332,735
Mudaraba savings and term deposits	5,465,457	4,950,458
Wakala deposits	3,731,313	2,982,113
	9,631,540	8,265,306

 

The Bank hedges certain foreign currency time deposits foreign currency exchange risk using foreign exchange forward contracts and designates these as cash flow hedges. The net negative fair value of these swaps at March 31, 2013 was AED 12,052 thousand (December 31, 2012 - net positive fair value of AED 13,257 thousand).

 

13          Euro commercial paper

 

The Bank established a USD 4 billion Euro commercial paper programme (the ECP Programme) for the issuance of Euro commercial paper under the agreement dated June 5, 2007 with Banc of America Securities Limited.

 

The Bank hedges ECP for foreign currency exchange risk through foreign exchange forward contracts and designates these instruments as cash flow hedges. The net negative fair value of these hedge contracts at March 31, 2013 was AED 24,247 thousand (December 31, 2012: net positive fair value of AED 98,024 thousand).