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Tuesday 21 April, 2015

Abu Dhabi Comm Bnk

1st Quarter Results

RNS Number : 8358K
Abu Dhabi Commercial Bank PJSC
21 April 2015
 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                                                                                                                                                                                                                                      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Abu Dhabi Commercial Bank PJSC
Review report and condensed consolidated interim financial 
information for the three month period ended March 31, 2015


 

 


Table of contents

Report on review of condensed consolidated interim financial information........................................................................................................................................................ 3

Condensed consolidated interim statement of financial position.................................................................................................................................................................................... 4

Condensed consolidated interim income statement (unaudited).................................................................................................................................................................................. 5

Condensed consolidated interim statement of comprehensive income (unaudited)................................................................................................................................... 6

Condensed consolidated interim statement of changes in equity (unaudited)................................................................................................................................................. 7

Condensed consolidated interim statement of cash flows (unaudited).................................................................................................................................................................... 8

Notes to the condensed consolidated interim financial information

1.     Activities and areas of operations.................................................................................................................................................................................................................................................. 10

2.     Summary of significant accounting policies.......................................................................................................................................................................................................................... 10

2.1... Basis of preparation............................................................................................................................................................................................................................................................................ 10

2.2... Application of new and revised International Financial Reporting Standards (IFRSs)........................................................................................................ 11

2.3... Basis of consolidation......................................................................................................................................................................................................................................................................... 12

2.4... Investment securities........................................................................................................................................................................................................................................................................ 14

2.5... Investment properties...................................................................................................................................................................................................................................................................... 16

3.     Cash and balances with central banks...................................................................................................................................................................................................................................... 16

4.     Deposits and balances due from banks................................................................................................................................................................................................................................... 17

5.     Trading securities......................................................................................................................................................................................................................................................................................... 17

6.     Derivative financial instruments.................................................................................................................................................................................................................................................... 18

7.     Investment securities................................................................................................................................................................................................................................................................................ 19

8.     Loans and advances, net........................................................................................................................................................................................................................................................................ 20

9.     Investment properties............................................................................................................................................................................................................................................................................. 21

10.   Other assets....................................................................................................................................................................................................................................................................................................... 22

11.   Due to banks..................................................................................................................................................................................................................................................................................................... 22

12.   Deposits from customers....................................................................................................................................................................................................................................................................... 23

13.   Euro commercial paper........................................................................................................................................................................................................................................................................... 23

14.   Borrowings.......................................................................................................................................................................................................................................................................................................... 24

15.   Other liabilities................................................................................................................................................................................................................................................................................................ 27

16.   Share capital...................................................................................................................................................................................................................................................................................................... 27

17.   Other reserves, net of treasury shares (unaudited).................................................................................................................................................................................................... 28

18.   Capital notes...................................................................................................................................................................................................................................................................................................... 29

19.   Interest income (unaudited)............................................................................................................................................................................................................................................................. 29

20.   Interest expense (unaudited).......................................................................................................................................................................................................................................................... 29

21.   Net fees and commission income (unaudited).................................................................................................................................................................................................................. 29

22.   Net trading income (unaudited).................................................................................................................................................................................................................................................... 30

23.   Other operating income (unaudited)........................................................................................................................................................................................................................................ 30

24.   Operating expenses (unaudited).................................................................................................................................................................................................................................................. 30

25.   Impairment allowances (unaudited)......................................................................................................................................................................................................................................... 30

26.   Earnings per share (unaudited).................................................................................................................................................................................................................................................... 30

27.   Commitments and contingent liabilities.................................................................................................................................................................................................................................. 31

28.   Operating segments................................................................................................................................................................................................................................................................................... 31

29.   Capital adequacy ratio............................................................................................................................................................................................................................................................................. 34

30.   Fair value hierarchy................................................................................................................................................................................................................................................................................... 35

31.   Legal proceedings......................................................................................................................................................................................................................................................................................... 37

 



 

 

 

 

 

 

 

Report on review of condensed consolidated interim financial information 

 

The Shareholder

Abu Dhabi Commercial Bank PJSC

Abu Dhabi

United Arab Emirates

 

Introduction

 

We have reviewed the accompanying condensed consolidated interim statement of financial position of  Abu Dhabi Commercial Bank PJSC (the "Company") and its subsidiaries (together, the "Group") as at March 31, 2015 and the related condensed consolidated interim income statement and statements of comprehensive income, changes in equity and cash flows for the three-month period then ended. Management is responsible for the preparation and presentation of this interim financial information in accordance with IAS 34, "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with IAS 34, "Interim Financial Reporting".

 

Other matter

 

The comparative amounts in the condensed consolidated interim statement of financial position at                 December 31, 2014 and related explanatory information were audited by another auditor whose report dated January 25, 2015 expressed an unmodified opinion thereon. The prior period comparative amounts in the condensed consolidated interim income statement and statements of comprehensive income, changes in equity and cash flows and related explanatory information for the three month period ended March 31, 2014, were reviewed by another auditor who issued an unmodified conclusion dated April 22, 2014.

 

 

Deloitte & Touche (M.E.)

 

 

 

 

Partner's Name

Registration No. XX

April 21, 2015


Condensed consolidated interim statement of financial position

As at March 31, 2015

 




As at


As at




March 31


December 31




2015


2014




unaudited


audited


Notes


 AED'000


AED'000

Assets






Cash and balances with central banks

3


12,996,905


15,092,192

Deposits and balances due from banks

4


18,707,716


16,019,461

Trading securities

5


272,254


199,599

Derivative financial instruments

6


5,224,661


4,288,506

Investment securities

7


21,678,495


21,651,838

Loans and advances, net

8


141,094,734


140,562,498

Investment in associate



195,854


195,854

Investment properties

9


615,778


615,778

Other assets

10


5,269,224


4,551,844

Property and equipment, net



800,483


806,188

Intangible assets



30,070


35,705

Total assets



206,886,174


204,019,463

Liabilities






Due to banks

11


3,470,933


4,089,019

Derivative financial instruments

6


6,062,440


5,000,067

Deposits from customers

12


128,470,526


126,011,227

Euro commercial paper

13


5,593,227


6,375,284

Borrowings

14


30,889,842


30,320,121

Other liabilities

15


6,920,341


5,804,912

Total liabilities



181,407,309


177,600,630

Equity






Share capital

16


5,595,597


5,595,597

Share premium



3,848,286


3,848,286

Other reserves, net of treasury shares

17


5,743,593


5,791,798

Retained earnings



6,279,896


7,172,755

Capital notes

18


4,000,000


4,000,000

Equity attributable to equity holders of the Bank



25,467,372


26,408,436

Non-controlling interests



11,493


10,397

Total equity



25,478,865


26,418,833







Total liabilities and equity



206,886,174


204,019,463

 

This condensed consolidated interim financial information was approved by the Board of Directors and authorised for issue on April 21, 2015 and signed on its behalf by:

 

 

 

 

                                                                                                                                                                                                                  

Eissa Al Suwaidi                                          Ala'a Eraiqat                                                  Deepak Khullar

Chairman                                                         Chief Executive Officer                            Chief Financial Officer

 

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

Condensed consolidated interim income statement (unaudited)

For the three month period ended March 31, 2015

 




3 months ended March 31


Notes


2015

AED'000


2014

AED'000







Interest income

19


1,834,354


1,589,144

Interest expense

20


(324,209)


(333,096)

Net interest income



1,510,145


1,256,048

Income from Islamic financing



157,198


151,377

Islamic profit distribution



(26,567)


(27,179)

Net income from Islamic financing



130,631


124,198







Total net interest and Islamic financing income



1,640,776


1,380,246

Net fees and commission income

21


375,002


284,750

Net trading income

22


122,859


174,569

Other operating income

23


53,560


61,083

Operating income



2,192,197


1,900,648

Operating expenses

24


(700,131)


(624,909)

Operating profit before impairment allowances



1,492,066


1,275,739

Impairment allowances

25


(241,268)


(173,566)

Profit before taxation



1,250,798


1,102,173

Overseas income tax (expense)/credit



(1,796)


1,106

Net profit for the period



1,249,002


1,103,279







Attributed to:






Equity holders of the Bank



1,247,906


953,172

Non-controlling interests



1,096


150,107

Net profit for the period



1,249,002


1,103,279







Basic and diluted earnings per share (AED)

26


0.23


0.16







 

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

 

 

 



 

Condensed consolidated interim statement of comprehensive income (unaudited)

For the three month period ended March 31, 2015

 

 


3 months ended March 31


2015

AED'000


2014

AED'000





Net profit for the period

1,249,002


1,103,279





Items that may be re-classified subsequently to the condensed consolidated interim income statement








Exchange difference arising on translation of foreign operations

1,738


6,581

Fair value changes on cash flow hedges

16,352


(396)

Fair value changes on available-for-sale investments

(47,386)


60,603

Other comprehensive (loss)/income for the period

(29,296)


66,788

Total comprehensive income for the period

1,219,706


1,170,067





Attributed to:




Equity holders of the Bank

1,218,610


1,019,960

Non-controlling interests

1,096


150,107

Total comprehensive income for the period

1,219,706


1,170,067

 

 

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

 

 

 

 

 

 

 

 

 


Condensed consolidated interim statement of changes in equity (unaudited) 

For the three month period ended March 31, 2015

 


 

 

Share capital


 

 

Share premium

 

Other reserves, net of treasury shares

 

 

Retained earnings

 

 

 

Capital notes

Equity attributable to equity holders of the Bank

 

   Non-controlling interests

 

 

 

Total equity


AED'000


AED'000


AED'000


AED'000


AED'000


AED'000


 AED'000


AED'000

















Balance at January 1, 2015

5,595,597


3,848,286


5,791,798


7,172,755


4,000,000


26,408,436


10,397


26,418,833

Net profit for the period

-


-


-


1,247,906


-


1,247,906


1,096


1,249,002

Other comprehensive loss for the period

-


-


(29,296)


-


-


(29,296)


-


(29,296)

Other movements (Note 17)

-


-


(18,909)


4,037


-


(14,872)


-


(14,872)

Dividends to equity holders of the parent

-


-


-


(2,079,292)


-


(2,079,292)


-


(2,079,292)

Capital notes coupon paid (Note 18)

-


-


-


(65,510)


-


(65,510)


-


(65,510)

















Balance at March 31, 2015

5,595,597


3,848,286


5,743,593


6,279,896


4,000,000


25,467,372


11,493


25,478,865

















Balance at January 1, 2014

5,595,597


3,848,286


5,135,440


5,597,275


4,000,000


24,176,598


644,712


24,821,310

Net profit for the period

-


-


-


953,172


-


953,172


150,107


1,103,279

Other comprehensive income for the period

-


-


66,788


-


-


66,788


-


66,788

Other movements (Note 17)

-


-


17,227


11,545


-


28,772


-


28,772

Dividends to equity holders of the parent

-


-


-


(1,560,857)


-


(1,560,857)


-


(1,560,857)

Net increase in non-controlling interests

-


-


-


-


-


-


50,527


50,527

Disposal of  fund subsidiaries

-


-


-


-


-


-


(836,495)


(836,495)

Net gains on treasury shares arising on disposal of fund subsidiaries

-


-


-


91,521


-


91,521


-


91,521

Capital notes coupon paid (Note 18)

-


-


-


(120,000)


-


(120,000)


-


(120,000)

















Balance at March 31, 2014

5,595,597


3,848,286


5,219,455


4,972,656


4,000,000


23,635,994


8,851


23,644,845

 

Following the Annual General Meeting held on March 3, 2015, the shareholders approved the distribution of proposed cash dividends of AED 2,079,292 thousand, being AED 0.40 dividends per share and representing 40% of the paid up share capital net of shares bought back (For the year 2013 - AED 1,560,857 thousand, being AED 0.30 dividends per share and representing 30% of the paid up share capital net of shares bought back). 

 

 

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, 2015

 


3 months ended March 31


2015

AED'000

2014

AED'000

OPERATING ACTIVITIES



Profit before taxation

1,250,798

1,102,173

Adjustments for:



Depreciation on property and equipment, net (Note 24)

32,495

30,494

Amortisation of intangible assets (Note 24)

5,635

6,785

Impairment allowance on loans and advances, net (Note 8)

305,032

288,633

Discount unwind (Note 8)

(77,798)

(39,208)

Impairment recoveries on available-for-sale investments (Note 25)

(35)

(14,126)

Net losses/(gains) from trading securities (Note 22)

492

(95,783)

Ineffective portion of hedges - losses/(gains) (Note 6)

5,994

(732)

Employees' incentive plan benefit expense (Note 17)

6,458

6,760

Cash flow from operating activities before changes in operating assets and liabilities

1,529,071

 

1,284,996

Decrease in balances with central banks

750,000

-

(Increase)/decrease in due from banks

(1,862,647)

875,955

Decrease in net trading derivative financial instruments

138,970

85,406

Net (purchases)/proceeds from disposal of trading securities

(73,147)

161,294

Increase in loans and advances, net

(763,044)

(797,138)

Increase in other assets

(174,739)

(107,347)

Increase in due to banks

233,276

350,839

Increase in deposits from customers

2,433,829

182,752

Increase in other liabilities

412,400

22,163

Cash from operating activities

2,623,969

2,058,920

Overseas tax paid

(1,263)

-

Net cash from operating activities

2,622,706

2,058,920

INVESTING ACTIVITIES



Recoveries on written off available-for-sale investments (Note 25)

35

14,126

Proceeds from redemption/disposal of available-for-sale investments

2,231,269

750,688

Purchase of available-for-sale investments

(2,259,111)

(1,534,736)

Additions to investment properties

-

(252)

Cash received on disposal of fund subsidiaries

-

95,112

Net purchase of property and equipment, net

(26,790)

(33,586)

Net cash used in investing activities

(54,597)

(708,648)

FINANCING ACTIVITIES



Net decrease in euro commercial paper

(683,142)

(512,973)

Net proceeds from borrowings

5,121,183

9,592,753

Repayment of borrowings

(4,513,147)

(8,448,794)

Net proceeds from sale of treasury shares by fund subsidiaries

-

1,751

Dividends paid to equity holders of the parent

(2,079,292)

(1,020,752)

Share buyback (Note 16)

(17,005)

-

Purchase of employees' incentive plan shares (Note 17)

(4,325)

-

Net movement in non-controlling interests

-

50,527

Capital notes coupon paid (Note 18)

(65,510)

(120,000)

Net cash used in financing activities

(2,241,238)

(457,488)




Net increase in cash and cash equivalents

326,871

892,784




Cash and cash equivalents at the beginning of the period

15,020,506

9,797,941

Cash and cash equivalents at the end of the period 

15,347,377

10,690,725

 

Operating activities include dividend income and interest income on available-for-sale investments.

 

The accompanying notes are 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, 2015 (continued)

 

Cash and cash equivalents

 

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

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



 AED'000


AED'000

Cash and balances with central banks


12,996,905


15,092,192

Deposits and balances due from banks


18,707,716


16,019,461

Due to banks


(3,470,933)


(4,089,019)



28,233,688


27,022,634

Less:  Cash and balances with central banks and deposits and balances due from banks  - with original maturity of more than 3 months


(13,213,421)


(12,095,955)

Add:  Due to banks - with original maturity of more than 3 months


327,110


93,827

Total cash and cash equivalents


15,347,377


15,020,506

 

 

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


1.    Activities and areas of operations

 

Abu Dhabi Commercial Bank PJSC ("ADCB" or the "Bank") is a public joint stock company with limited liability incorporated in the emirate of Abu Dhabi, United Arab Emirates (UAE). ADCB is principally engaged in the business of retail, commercial and Islamic banking and provision of other financial services through its network of forty eight branches and four pay offices in the UAE, two branches in India, one offshore branch in Jersey, its subsidiaries and one representative office located in London.

 

The registered head office of ADCB is at Abu Dhabi Commercial Bank Head Office Building, Sheikh Zayed Bin Sultan Street, Plot C- 33, Sector E-11, P. O. Box 939, Abu Dhabi, UAE.

 

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

 

2.    Summary of significant accounting policies

 

2.1      Basis of preparation

 

The condensed consolidated interim financial information has been prepared on a going concern basis and 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, 2014, 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, 2014 except for Note 8 and Note 20 which has been reclassified to conform to current period presentation.

 

For details of related party balances and transactions, refer to Note 35 in the consolidated financial statements for the year ended December 31, 2014. The related party balances and transactions for the three month period ended March 31, 2015 are similar in nature and magnitude. Note 8 of this condensed consolidated interim financial information provide details of lending exposure to government entities.

 

The results for the three month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the financial year ending December 31, 2015.

 

The 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 unless otherwise indicated.

 

As required by the Securities and Commodities Authority of the UAE (SCA) Notification No. 2624/2008 dated October 12, 2008, accounting policies relating to investment securities and investment properties have been disclosed in this 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 this 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, 2014.



 

2.    Summary of significant accounting policies (continued)

 

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

 

2.2.1      New and revised IFRSs effective for accounting periods beginning on or after January 1, 2015

 

In the current period, the Bank has applied a number of new and revised IFRSs issued by the International Accounting Standards Board ("IASB") that are mandatorily effective for an accounting period that begins on or after 1 January 2015. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior periods but may affect the accounting for the Bank's future transactions or arrangements.

 

§ Annual Improvements to IFRSs 2010 - 2012 Cycle that includes amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 38 and IAS 24.

§ Annual Improvements to IFRSs 2011 - 2013 Cycle that includes amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40.

§ Amendments to IAS 19 Employee Benefits clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service.

 

Other than the above, there are no other significant IFRSs and amendments that were effective for the first time for the financial year beginning on or after January 1, 2015.

 

2.2.2     Standards and Interpretations in issue but 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 significant amendments to standards applicable to the Bank:

Effective for annual periods beginning on or after

Amendments to IFRS 7 - Financial Instruments: Disclosures relating to disclosures about the initial application of IFRS 9.

When IFRS 9 is first applied

IFRS 7 - Financial Instruments: Disclosures additional hedge accounting disclosures (and consequential amendments) resulting from the introduction of the hedge accounting chapter in IFRS 9.

 

When IFRS 9 is first applied

IFRS 9 - Financial Instruments (2009) issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 Financial Instruments (2010) revised in October 2010 includes the requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement.

 

IFRS 9 - Financial Instruments (2013) was revised in November 2013 to incorporate a hedge accounting chapter and permit the early application of the requirements for presenting in other comprehensive income the own credit gains or losses on financial liabilities designated under the fair value option without early applying the other requirements of IFRS 9.

 

Finalised version of IFRS 9 (IFRS 9 Financial Instruments (2014)) was issued in July 2014 incorporating requirements for classification and measurement, impairment, general hedge accounting and derecognition.

 

IFRS 9 (2009) and IFRS 9 (2010) were superseded by IFRS 9 (2013) and IFRS 9 (2010) also superseded IFRS 9 (2009). IFRS 9 (2014) supersedes all previous versions of the standard. The various standards also permit various transitional options. Accordingly, entities can effectively choose which parts of IFRS 9 they apply, meaning they can choose to apply: (1) the classification and measurement requirements for financial assets (2) the classification and measurement requirements for both financial assets and financial liabilities (3) the classification and measurement requirements and the hedge accounting requirements provided that the relevant date of the initial application is before 1 February 2015.

January 1, 2018



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 but not yet effective (continued)

 

 

 

New standards and significant amendments to standards applicable to the Bank:

Effective for annual periods beginning on or after

IFRS 15 Revenue from Contracts with Customers provides a single, principles based five-step model to be applied to all contracts with customers.

 

January 1, 2017

Annual Improvements to IFRSs 2012 - 2014 Cycle that include amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34.

 

January 1, 2016

Amendments to IAS 16 and IAS 38 to clarify the acceptable methods of depreciation and amortization.

 

January 1, 2016

Amendments to IFRS 11 to clarify accounting for acquisitions of Interests in Joint Operations.

 

January 1, 2016

Amendments to IAS 16 and IAS 41 require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16.

 

January 1, 2016

Amendments to IFRS 10 and IAS 28 clarify that the recognition of the gain or loss on the sale or contribution of assets between an investor and its associate or joint venture depends on whether the assets sold or contributed constitute a business.

 

January 1, 2016

Amendments to IAS 27 allow an entity to account for investments in subsidiaries, joint ventures and associates either at cost, in accordance with IAS 39/IFRS 9 or using the equity method in an entity's separate financial statements.

 

January 1, 2016

Amendments to IFRS 10, IFRS 12 and IAS 28 clarifying certain aspects of applying the consolidation exception for investment entities. 

 

January 1, 2016

Amendments to IAS 1 to address perceived impediments to preparers exercising their judgment in presenting their financial reports.

 

January 1, 2016

 

Management anticipates that these new standards, interpretations and amendments will be adopted in the Bank's condensed consolidated interim financial statements for the period of initial application and adoption of these new standards, interpretations and amendments, except for IFRS 9, may have no material impact on the condensed consolidated interim financial statements of the Group in the period of initial application.

 

The application of the finalised version of IFRS 9 may have significant impact on amounts reported and disclosures made in the Bank's condensed consolidated interim financial statements in respect of the Bank's financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of effects of the application until the Bank performs a detailed review.

 

2.3      Basis of consolidation

 

The condensed consolidated interim financial information incorporates the financial statements of
Abu Dhabi Commercial Bank PJSC 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.

2.   Summary of significant accounting policies (continued)

 

2.3   Basis of consolidation (continued) 

 

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.

 

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 the SPE.

 

Funds 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

 

All intragroup balances and income, expenses and cash flows resulting from intragroup transactions are eliminated in full on consolidation.

 

Investment in associate

Associates are those entities in which the Bank has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Bank holds directly or indirectly 20% or more of the voting power of the investee, unless it can be clearly demonstrated that this is not the case.

 

Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investments includes transaction costs.

 

The condensed consolidated interim financial information includes the Bank's share of the profit or loss and other comprehensive income of equity‐accounted investees, after adjustments to align the accounting policies with those of the Bank, from the date that significant influence commences until the date that significant influence ceases.

 

When the Bank's share of losses exceeds its interest in an equity‐accounted investee, the carrying amount of the investment, including any long‐term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Bank has an obligation or has made payments on behalf of the investee.

 



 

2.   Summary of significant accounting policies (continued)

 

2.3   Basis of consolidation (continued) 

 

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:

 

§ Investments at fair value through profit or loss;

§ Held-to-maturity investments and

§ Available-for-sale.

 

Investments at fair value through profit or loss (FVTPL)

 

Investment securities are classified as at FVTPL when either held for trading or when designated as at FVTPL.

 

Investment securities are 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.

 

Investment securities 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 such securities on a different basis; or

§ it forms part of a group of financial assets, 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.

 

Investment securities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in the condensed consolidated interim income statement. 



 

2.   Summary of significant accounting policies (continued)

 

2.4   Investment securities (continued)

 

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 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.

 

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 under other operating income.

 

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.



 

2.   Summary of significant accounting policies (continued)

 

2.4   Investment securities (continued)

 

Available-for-sale (continued)

 

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. Where there is no further objective evidence of impairment, the decline in the fair value of the financial asset is recognised directly in equity. 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 other comprehensive income, accumulating in equity. 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. Impairment losses recognised on the equity security are not reversed through the condensed consolidated interim income statement.

 

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 value is determined on a periodic basis by independent professional valuers.

 

Investment property under development that is being constructed or developed for future use as investment property is 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 are included in the condensed consolidated interim income statement in the period in which they arise.

 

3.    Cash and balances with central banks

 


As at


As at


March 31


December 31


2015


2014


unaudited


audited


 AED'000


AED'000

Cash on hand

690,940


786,474

Balances with central banks

553,135


1,359,247

Reserves maintained with central banks

8,977,830


9,401,659

Certificate of deposits with UAE Central Bank

2,775,000


3,525,000

Reverse repo with Central Bank

-


19,812

Total cash and balances with central banks

12,996,905


15,092,192

 



 

3.   Cash and balances with central banks (continued)

 


As at


As at


March 31


December 31


2015


2014


unaudited


audited


 AED'000


AED'000

The geographical concentration is as follows:




Within the UAE

12,960,062


15,048,413

Outside the UAE

36,843


43,779


12,996,905


15,092,192

 

Reserves maintained with central banks represent deposits with the central banks at stipulated percentages of its demand, savings, time and other deposits. These are only available for day-to-day operations under certain specified conditions.

 

4.    Deposits and balances due from banks

 


As at


As at


March 31


December 31


2015


2014


unaudited


audited


 AED'000


AED'000

Nostro balances

1,242,319


769,268

Margin deposits

264,787


179,426

Time deposits

13,295,212


10,681,616

Reverse-repo placements

2,363,335


2,830,049

Wakala placements

1,357,990


1,375,546

Certificate of deposits

184,073


183,556

Total deposits and balances due from banks

18,707,716


16,019,461

The geographical concentration is as follows:




Within the UAE

6,967,646


7,179,030

Outside the UAE

11,740,070


8,840,431


18,707,716


16,019,461

 

The Bank entered into collateral swap agreements under which bonds with fair value of AED 2,361,698 thousand (December 31, 2014 - AED 2,814,042 thousand) were received as collateral against reverse-repo placements. The risk and rewards relating to these bonds remain with the counterparties. 

 

The Bank hedges its foreign currency time deposit placements for foreign currency exchange rate risk using foreign exchange swap contracts and designates these instruments as cash flow hedges. The net negative fair value of these swaps was AED 5,972 thousand as at March 31, 2015 (December 31, 2014 - negative fair value of AED 1,153 thousand).

 

5.    Trading securities

 


As at


As at


March 31


December 31


2015


2014


unaudited


audited


 AED'000


AED'000





Bonds

272,254


199,599





The geographical concentration is as follows:




Within the UAE

227,973


176,540

Outside the UAE

44,281


23,059


272,254


199,599

 



 

5.   Trading securities (continued)

 

Bonds represent investments mainly in public sector and banking institution bonds. The fair value of trading securities is based on quoted market prices.

 

6.    Derivative financial instruments

 

The table below shows the positive (assets) and negative (liabilities) fair values of derivative financial instruments.

 



Fair values



Assets


Liabilities

As at March 31, 2015 (unaudited)


AED'000


AED'000






Derivatives held or issued for trading





Foreign exchange derivatives


1,261,318


1,427,296

Interest rate and cross-currency swaps


2,993,032


3,019,284

Options


98,819


135,352

Futures (exchange-traded)


720


-

Commodity and energy swaps


272,389


267,851

Swaptions


120,847


32,928

Total derivatives held or issued for trading


4,747,125


4,882,711

Derivatives held as fair value hedges





Interest rate and cross-currency swaps


444,132


856,039

Derivatives held as cash flow hedges





Interest rate and cross-currency swaps


27,755


22,735

Forward foreign exchange contracts


5,649


300,955

Total derivatives held as cashflow hedges


33,404


323,690






Total derivative financial instruments


5,224,661


6,062,440






As at December 31, 2014 (audited)





Derivatives held or issued for trading





Foreign exchange derivatives


824,724


846,365

Interest rate and cross-currency swaps


2,713,510


2,713,377

Options


117,054


170,155

Futures (exchange-traded)


2,536


146

Commodity and energy swaps


295,998


295,557

Swaptions


91,383


16,221

Total derivatives held or issued for trading


4,045,205


4,041,821

Derivatives held as fair value hedges





Interest rate and cross-currency swaps


220,978


708,262

Derivatives held as cash flow hedges





Interest rate and cross-currency swaps


19,109


29,722

Forward foreign exchange contracts


3,214


220,262

Total derivatives held as cashflow hedges


22,323


249,984






Total derivative financial instruments


4,288,506


5,000,067

 

The net hedge ineffectiveness losses relating to the fair value and cash flow hedges amounting to AED 5,994 thousand (March 31, 2014 - gains of  AED 732 thousand) has been recognised in the condensed consolidated interim income statement.

 

As at March 31, 2015, the Bank received cash collateral of AED 305,907 thousand (December 31, 2014 - AED 262,370 thousand) against derivative assets from certain counterparties.

 

As at March 31, 2015, the Bank placed cash collateral of AED 569,609 thousand (December 31, 2014 - AED 552,202 thousand) and investment securities of AED 1,813,016 thousand (December 31, 2014 - AED 1,787,944 thousand) against the negative fair value of derivative liabilities. 

 

 



 

7.    Investment securities

 



Other





GCC(*)

Rest of



UAE

Countries

the world

Total

As at March 31, 2015 (unaudited)

AED'000

AED'000

AED'000

AED'000

Available-for-sale investments





Quoted





 Government securities

1,633,204

1,048,510

1,924,369

4,606,083

 Bonds - Public sector

4,480,988

45,422

535,618

5,062,028

 Bonds - Banks and financial institutions

2,880,573

737,411

6,754,519

10,372,503

 Bonds - Corporate

115,286

-

81,436

196,722

 Equity instruments

629

-

-

629

 Mutual funds

159,771

-

-

159,771

Total quoted

9,270,451

1,831,343

9,295,942

20,397,736

Unquoted





 Government securities

-

848,312

-

848,312

 Bonds - Public sector

54,305

-

-

54,305

 Bonds - Corporate

-

-

678

678

 Equity instruments

314,115

-

13,269

327,384

 Mutual funds

50,080

-

-

50,080

 Total unquoted

418,500

848,312

13,947

1,280,759

Total available-for-sale investments

9,688,951

2,679,655

9,309,889

21,678,495

 

As at December 31, 2014 (audited)





Available-for-sale investments





Quoted





 Government securities

1,528,323

1,678,831

1,523,242

4,730,396

 Bonds - Public sector

4,407,000

45,090

286,869

4,738,959

 Bonds - Banks and financial institutions

2,740,513

757,993

7,026,279

10,524,785

 Bonds - Corporate

116,358

-

42,292

158,650

 Equity instruments

824

-

-

824

 Mutual funds

165,835

-

-

165,835

Total quoted

8,958,853

2,481,914

8,878,682

20,319,449

Unquoted





 Government securities

-

895,713

-

895,713

 Bonds - Public sector

57,699

-

-

57,699

 Bonds - Corporate

-

-

761

761

 Equity instruments

314,855

-

13,281

328,136

 Mutual funds

50,080

-

-

50,080

 Total unquoted

422,634

895,713

14,042

1,332,389

Total available-for-sale investments

9,381,487

3,377,627

8,892,724

21,651,838

 

(*) Gulf Cooperation Council

 

The Bank hedges interest rate and foreign currency risks on certain fixed rate and floating rate investments through interest rate and cross-currency swaps and designates these as fair value and cash flow hedges, respectively. The net positive fair value of these interest rate swaps as at March 31, 2015 was AED 104,962 thousand (December 31, 2014 - net negative fair value AED 18,271 thousand). The hedge ineffectiveness gains and losses relating to these hedges were included in the condensed consolidated interim income statement.

 

 



 

7.    Investment securities (continued)

 

The Bank entered into repurchase 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, 2015 (unaudited)


As at December 31, 2014 (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 financing

3,388,917


3,248,575


4,765,545


4,589,111









 

Further, the Bank pledged investment securities with fair value amounting to AED 1,828,031 thousand (December 31, 2014 - AED 1,802,584 thousand) as collateral against margin calls. The risks and rewards on these pledged investments remained with the Bank.

 

8.    Loans and advances, net

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000






Overdrafts (retail and corporate)


3,680,922


3,691,843

Retail loans


25,440,357


23,638,657

Corporate loans


106,937,257


107,223,733

Credit cards


3,004,812


2,865,852

Other facilities


8,778,680


9,920,156

Gross loans and advances


147,842,028


147,340,241

Less: Allowance for impairment


(6,747,294)


(6,777,743)

Total loans and advances, net


141,094,734


140,562,498

 

Islamic financing assets included in the above table are as follows:

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000

Murabaha


2,375,442


2,299,930

Ijara financing


4,643,012


4,170,654

Mudaraba


127,923


138,534

Salam


4,675,578


4,420,019

Others


134,355


126,776

Gross Islamic financing assets


11,956,310


11,155,913

Less: Allowance for impairment


(152,356)


(143,219)

Net Islamic financing assets


11,803,954


11,012,694

 

The Bank hedges certain fixed rate and floating rate loans and advances for interest rate risk using interest rate swaps and designates these instruments as fair value and cash flow hedges, respectively. The net positive fair value of these swaps as at March 31, 2015 was AED 2,579 thousand (December 31, 2014 - net positive fair value of AED 4,152 thousand).

 



 

8.    Loans and advances, net (continued)

 

The movement in individual and collective impairment allowance on loans and advances is as follows:

 


As at March 31, 2015 (unaudited)


As at December 31, 2014 (audited)


Individual impairment


Collective impairment


 

Total


Individual impairment


Collective impairment


 

Total


AED'000


AED'000


AED'000


AED'000


AED'000


AED'000













Opening balance

3,856,796


2,920,947


6,777,743


4,250,195


2,639,752


6,889,947













Charge for the period/year

191,578


113,454


305,032


714,991


325,560


1,040,551

Recoveries during the period/year

(63,729)


-


(63,729)


(229,352)


-


(229,352)

Net charge for the period/year

127,849


113,454


241,303


485,639


325,560


811,199

Discount unwind/others

(77,798)


-


(77,798)


(160,011)


(44,245)


(204,256)

Net amounts written-off

(194,098)


-


(194,098)


(718,638)


-


(718,638)

Currency translation

107


37


144


(389)


(120)


(509)

Closing balance

3,712,856


3,034,438


6,747,294


3,856,796


2,920,947


6,777,743

 

The economic activity sector composition of the loans and advances portfolio is as follows:

 


As at March 31, 2015 (unaudited)


As at December 31, 2014 (audited)


Total


Within the UAE

Total


AED'000

AED'000

AED'000


AED'000

AED'000

AED'000

Economic activity sector








Agriculture

207,209

-

207,209


208,394

-

208,394

Energy

1,198,779

1,942,560

3,141,339


1,470,512

1,910,712

3,381,224

Trading

3,584,312

269,872

3,854,184


3,142,931

332,680

3,475,611

Real estate investment & hospitality

49,432,111

587,083

50,019,194


48,234,134

594,872

48,829,006

Transport

1,462,555

817,481

2,280,036


1,373,193

815,998

2,189,191

Personal

35,284,909

297,911

35,582,820


33,951,440

269,626

34,221,066

Government & public sector entities

28,696,115

241,041

28,937,156


30,468,754

241,041

30,709,795

Financial institutions (*)

10,331,894

8,943,099

19,274,993


10,212,055

9,873,561

20,085,616

Manufacturing

1,445,979

1,179,326

2,625,305


1,466,266

1,007,843

2,474,109

Services

1,088,967

177,101

1,266,068


1,090,550

130,530

1,221,080

Others

431,877

221,847

653,724


323,302

221,847

545,149


133,164,707

14,677,321

147,842,028


131,941,531

15,398,710

147,340,241

Less: Allowance for impairment



(6,747,294)




(6,777,743)

Total loans and advances, net



141,094,734




140,562,498

 (*) includes investment companies

 

9.    Investment properties

 


AED'000



January 1, 2014

560,690

Additions during the year

32,758

Revaluation of investment properties

22,330

January 1, 2015 (audited)

615,778



March 31, 2015 (unaudited)

615,778

 

Fair valuations

 

Valuations are carried out by registered independent valuers having an appropriate recognised professional qualification and experience in the location and category of the property being valued. The properties were valued during the last quarter of the year 2014.



 

9.   Investment properties (continued)

 

Fair valuations (continued)

 

The valuation methodologies considered by external valuers include:

 

§ Direct Comparable method: This method seeks to determine the value of the property from transactions of comparable properties in the vicinity applying adjustments to reflect differences to the subject property.

 

§ Investment method: This method is used to assess the value of the property by capitalising the net operating income of the property at an appropriate yield an investor would expect for an investment of the duration of the interest being valued.

 

All investment properties of the Bank are located within the UAE.

 

10.   Other assets

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000

Interest receivable


1,183,724


1,017,819

Advance tax


21,541


21,959

Clearing receivables


3,013


368

Prepayments


79,661


65,830

Acceptances


3,449,594


2,906,420

Others


531,691


539,448

Total other assets


5,269,224


4,551,844

 

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 condensed consolidated interim statement of financial position with a corresponding contractual right of reimbursement from the customer recognised as a financial asset.

 

11.  Due to banks

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000

Vostro balances


249,752


578,213

Margin deposits


196,064


96,200

Time deposits


3,025,117


3,414,606

Total due to banks


3,470,933


4,089,019

 

The Bank hedges certain time deposits for foreign currency exchange risk using foreign exchange swap contracts and designates these as cash flow hedges. The net positive fair value of these swaps as at March 31, 2015 was AED 6 thousand (December 31, 2014 - AED Nil).


12.   Deposits from customers

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000

Time deposits


51,001,304


57,075,373

Current account deposits


48,178,573


46,823,595

Savings deposits


9,679,045


8,895,672

Murabaha deposits


18,533,149


12,114,262

Long term government deposits


418,907


425,898

Margin deposits


659,548


676,427

Total deposits from customers


128,470,526


126,011,227






 

Islamic deposits (excluding Murabaha deposits) included in the above table are as follows:

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000

Current account deposits


2,604,692


2,543,875

Margin deposits


9,842


13,281

Mudaraba savings deposits


4,511,769


4,198,219

Mudaraba term deposits


1,342,612


1,374,575

Wakala deposits


1,114,989


1,249,479

Total Islamic deposits


9,583,904


9,379,429

 

The Bank hedges certain foreign currency time deposits for foreign currency and floating interest rate risks using foreign exchange and interest rate swaps and designates these as cash flow hedges. The net negative fair value of these swaps as at March 31, 2015 was AED 22,444 thousand (December 31, 2014 - net negative fair value of AED 47,920 thousand).

 

13.   Euro commercial paper

 

The details of euro commercial paper (ECP) issuances under Bank's ECP programme are as follows:

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited

Currency


AED'000


AED'000

Swiss franc (CHF)


509,654


619,295

Euro (EUR)


998,607


1,082,659

GB pound (GBP)


1,709,899


1,441,410

US dollar (USD)


2,375,067


3,231,920

Total euro commercial paper


5,593,227


6,375,284

 

The Bank hedges certain ECP for foreign currency exchange risk through foreign exchange swap contracts and designates these instruments as cash flow hedges. The net negative fair value of these hedge contracts as at March 31, 2015 was AED 265,798 thousand (December 31, 2014 - net negative fair value of AED 166,883 thousand).

 

ECP are issued at a discount and the discount rate ranges between 0.06% to 0.77% (December 31, 2014 - 0.08% to 0.77%).

 


14.   Borrowings

 

The details of borrowings as at March 31, 2015 (unaudited) are as follows:

 





Within 1 year


1-3 years


3-5 years


Over 5 years


Total

Instrument


Currency


AED'000


AED'000


AED'000


AED'000


AED'000

Global medium-term notes


Australian dollar (AUD)


                     -  


                -  


840,687


                   -  


840,687



Chinese renminbi (CNH)


                     -  


173,580


-


                   -  


173,580



Euro (EUR)


                     -  


                -  


52,988


                   -  


52,988



Malaysian ringgit (MYR)


871,045


847,028


-


                   -  


1,718,073



Swiss franc (CHF)


575,705


388,677


-


                   -  


964,382



Turkish lira (TRY)


                     -  


94,003


-


                   -  


94,003



UAE dirham (AED)


                     -  


500,000


-


                   -  


500,000



Japanese yen (JPY)


54,367


146,247


54,254


                   -  


254,868



Hongkong Dollar (HKD)


                     -  


                -  


75,751


                   -  


75,751



US dollar (USD)


-


4,633,154


8,005,623


1,486,535


14,125,312


















1,501,117


6,782,689


9,029,303


1,486,535


18,799,644














Islamic sukuk notes


US dollar (USD)


                     -  


1,833,017


-


                   -  


1,833,017

Bilateral loans - floating rate


US dollar (USD)


1,469,200


1,831,531


-


                   -  


3,300,731

Subordinated notes - fixed rate


US dollar (USD)


                     -  


                -  


-


3,819,769


3,819,769



Swiss franc (CHF)


                     -  


                -  


-


380,130


380,130

Borrowings through repurchase agreements


US dollar (USD)


3,248,575


                -  


-


                   -  


3,248,575


















6,218,892


10,447,237


9,029,303


5,686,434


31,381,866














Fair value adjustment on borrowings hedged










(492,024)


























30,889,842

 

Included in borrowings is AED 22,431,801 thousand which have been hedged using interest rate and cross currency swaps. These swaps are designated as either fair value or cash flow hedges. The net negative fair value of these swaps as at March 31, 2015 was AED 515,526 thousand.


14.  Borrowings (continued)

 

The details of borrowings as at December 31, 2014 (audited) are as follows:

 





Within 1 year


1-3 years


3-5 years


Over 5 years


Total

Instrument


Currency


AED'000


AED'000


AED'000


AED'000


AED'000

Global medium-term notes


Australian dollar (AUD)


                     -  


                -  


   839,792


                   -  


       839,792



Chinese renminbi (CNH)


                     -  


     173,580


              -  


                   -  


       173,580



Euro (EUR)


                     -  


                -  


              -  


          55,463


          55,463



Malaysian ringgit (MYR)


         871,058


     847,028


              -  


                   -  


    1,718,086



Swiss franc (CHF)


         575,705


     388,677


              -  


                   -  


       964,382



Turkish lira (TRY)


                     -  


       94,003


              -  


                   -  


          94,003



UAE dirham (AED)


                     -  


     500,000


              -  


                   -  


       500,000



Japanese yen (JPY)


                     -  


     200,609


     54,254


                   -  


       254,863



US dollar (USD)


-


1,889,547


7,681,016


1,622,610


  11,193,173


















1,446,763


4,093,444


8,575,062


1,678,073


15,793,342














Islamic sukuk notes


US dollar (USD)


                     -  


 1,832,850


              -  


                   -  


    1,832,850

Bilateral loans - floating rate


US dollar (USD)


      1,469,200


 1,831,011


              -  


                   -  


    3,300,211

Subordinated notes - floating rate


US dollar (USD)


1,058,855


                -


              -  


                   -  


    1,058,855

                                       - fixed rate


US dollar (USD)


                     -  


                -  


              -  


    3,819,331


    3,819,331



Swiss franc (CHF)


                     -  


                -  


              -  


       380,130


       380,130

Borrowings through repurchase agreements


US dollar (USD)


      4,589,111


                -  


-


                   -  


    4,589,111


















8,563,929


7,757,305


8,575,062


5,877,534


30,773,830














Fair value adjustment on borrowings hedged










(453,709)


























30,320,121

 

Included in borrowings is AED 19,425,136 thousand which have been hedged using interest rate and cross currency swaps. These swaps are designated as either fair value or cash flow hedges. The net negative fair value of these swaps as at December 31, 2014 was AED 484,870 thousand.

 


14.  Borrowings (continued)

 

Global medium-term notes

 

Interest on global medium-term notesis payable quarterly, semi-annually and annually in arrears and the contractual coupon rates as at March 31, 2015 (unaudited) are as follows: 

 

Currency

Within 1 year


1-3 years


3-5 years


Over 5 years

AUD

-


-


Fixed rate of 4.75% p.a.


-

CNH

-


Fixed rate of 3.7% p.a. to 4.125% p.a.


-


-

EUR

-


-


Quarterly coupons with 59 basis points over EURIBOR


-

MYR

Fixed rate of 5.2% p.a.


Fixed rate of 4.30% p.a. to 5.35% p.a.


-


-

CHF

Fixed rate of 3.01% p.a.


Quarterly coupons with 110 basis points over CHF LIBOR


-


-

TRY

-


Fixed rate of 12.75% p.a.


-


-

AED

-


Fixed rate of 6.00% p.a.


-


-

JPY

Fixed rate of 0.41% p.a.


Fixed rate of 0.48% p.a. and 0.81% p.a.


Fixed rate of 0.68% p.a.


-

HKD

-


-


Fixed rate of 2.46% p.a.


-

USD

-


Fixed rate of  2.50% p.a. & quarterly coupons with 108 to 130 basis points over LIBOR


Fixed rate between 2.625 p.a.%  and 3% p.a. & quarterly  coupons with 73 basis points over LIBOR


Fixed rate of 4.70% p.a. to 5.12% p.a. (*)

 

(*) include AED 862,428 thousand 30 year accreting notes with yield ranging from 4.52% p.a. to 5.12% p.a. and are callable at the end of every 5th  year from issue date.

 

Sukuk financing notes

 

The Sukuk carries an expected profit rate of 4.07% p.a. payable semi-annually.

 

Bilateral loans

 

Monthly coupons with 60 to 85 basis points over LIBOR.

 

Subordinated fixed rate notes:

 

Interest on the subordinated fixed rate notes is payable semi-annually and annually in arrears and the contractual coupon rates as at March 31, 2015 (unaudited) are as follows:

 

Currency           Over 5 years

USD                       Fixed rate 3.125% p.a. to 4.5% p.a.

CHF                       Fixed rate 1.885% p.a.

 

The subordinated fixed rate notes fully qualifies as Tier 2 subordinated loan capital for the first 5 year period till 2018 and thereafter are amortised at the rate of 20% per annum until 2023 for capital adequacy calculation (Note 29). This has been approved by the Central Bank of the UAE. Subordinated notes of AED 1,477,448 thousand mature in 2023 but are callable after 5 years from the issuance date at the option of the Bank.

---

Borrowings through repurchase agreements

 

Fixed rate ranging from 0.33% p.a. to 0.65% p.a.

15.   Other liabilities

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000

Interest payable


414,829


368,254

Recognised liability for defined benefit obligations


342,066


334,872

Accounts payable and other creditors


248,482


248,441

Clearing payables


5,003


2,288

Deferred income


556,694


566,150

Acceptances (Note 10)


3,449,594


2,906,420

Others


1,903,673


1,378,487

Total other liabilities


6,920,341


5,804,912

 

16.    Share capital

 


Authorised

Issued and fully paid



As at

As at



March 31

December 31



2015

2014



unaudited

audited


AED'000

AED'000

AED'000

 

Ordinary shares of AED 1 each

5,595,597

5,595,597

5,595,597


                      

                      

                      

 

As at March 31, 2015, Abu Dhabi Investment Council held 58.083% (December 31, 2014 - 58.083%) of the Bank's issued and fully paid up share capital.

 

Treasury shares                                  

 

During the period, the Bank bought back from certain shareholders 2,613,353 (March 31, 2014 - Nil) ordinary shares at a total cash consideration of AED 17,005 thousand - these shares are held as treasury shares (Note 17) and are expected to be cancelled eventually. This buyback programme of up to 10% of the Bank's shares was approved by the Securities & Commodities Authority, Central Bank of the UAE and the Bank's shareholders.

 


17.   Other reserves, net of treasury shares (unaudited)

 

Reserves movement for the three month period ended March 31, 2015:

 



Employees'





Foreign






incentive





currency


Cumulative



Treasury

 plan

Statutory

Legal

General

Contingency

translation

Hedge

changes in



shares

shares, net

reserve

reserve

reserve

reserve

reserve

reserve

fair values

Total


AED'000

AED'000

AED'000

AED'000

AED'000

AED'000

AED'000

AED'000

AED'000

AED'000












Balance at January 1, 2015

(1,808,648)

(66,099)

2,692,154

2,647,367

2,000,000

150,000

(63,385)

(11,283)

251,692

5,791,798

Exchange difference arising on translation of foreign

operations

-

-

-

-

-

-

1,738

-

-

1,738

Fair value changes on cash flow hedges

-

-

-

-

-

-

-

16,352

-

16,352

Fair value changes on available-for-sale investments

-

-

-

-

-

-

-

-

(47,386)

(47,386)

Total other comprehensive income/(loss) for the period

-

-

-

-

-

-

1,738

16,352

(47,386)

(29,296)

Fair value adjustments

-

(4,037)

-

-

-

-

-

-

-

(4,037)

Shares - vested portion 

-

6,458

-

-

-

-

-

-

-

6,458

Share buyback (Note 16)

(17,005)

-

-

-

-

-

-

-

-

(17,005)

Shares purchased

-

(4,325)

-

-

-

-

-

-

-

(4,325)

Balance at March 31, 2015

(1,825,653)

(68,003)

2,692,154

2,647,367

2,000,000

150,000

(61,647)

5,069

204,306

5,743,593












Balance at January 1, 2014

(1,818,969)

(57,438)

2,287,181

2,242,394

2,000,000

150,000

(59,686)

40,800

351,158

5,135,440

Exchange difference arising on translation of foreign

operations

-

-

-

-

-

-

6,581

-

-

6,581

Fair value changes on cash flow hedges

-

-

-

-

-

-

-

(396)

-

(396)

Fair value changes on available-for-sale investments

-

-

-

-

-

-

-

-

60,603

60,603

Total other comprehensive income/(loss) for the period

-

-

-

-

-

-

6,581

(396)

60,603

66,788

Fair value adjustments

-

(11,545)

-

-

-

-

-

-

-

(11,545)

Shares - vested portion 

-

6,760

-

-

-

-

-

-

-

6,760

Net movement in treasury shares on disposal of fund subsidiaries

22,012

-

-

-

-

-

-

-

-

22,012

Balance at March 31, 2014

(1,796,957)

(62,223)

2,287,181

2,242,394

2,000,000

150,000

(53,105)

40,404

411,761

5,219,455

 


18.   Capital notes

 

In February 2009, the Department of Finance, Government of Abu Dhabi subscribed to ADCB's Tier I regulatory capital notes with a principal amount of AED 4,000,000 thousand (the "Notes").

 

The Notes are non-voting, non-cumulative perpetual securities for which there is no fixed redemption date. Redemption is only at the option of the Bank. The Notes are direct, unsecured, subordinated obligations of the Bank and rank pari passu without any preference among themselves and the rights and claims of the Note holders will be subordinated to the claims of Senior Creditors. The Notes bore interest at the rate of 6% per annum payable semi-annually until February 2014, and bear a floating interest rate of 6 month EIBOR plus 2.3% per annum thereafter. However, the Bank may at its sole discretion elect not to make a coupon payment. The Note holders do not have a right to claim the coupon and an election by the Bank not to service the coupon is not considered an event of default. In addition, there are certain circumstances ("non-payment event") under which the Bank is prohibited from making a coupon payment on a relevant coupon payment date. 

 

If the Bank makes a non-payment election or a non-payment event occurs, then the Bank will not (a) declare or pay any distribution or dividend or (b) redeem, purchase, cancel, reduce or otherwise acquire any of the share capital or any securities of the Bank ranking pari passu with or junior to the Notes except securities, the term of which stipulate a mandatory redemption or conversion into equity, in each case unless or until two consecutive coupon payments have been paid in full.

 

19.   Interest income (unaudited)

 


3 months ended March 31


2015

AED'000


2014

AED'000

Loans and advances to banks

48,788


47,334

Loans and advances to customers

1,678,561


1,410,594

Investment securities

107,005


131,216

Total  interest income

1,834,354


1,589,144

 

20.   Interest expense (unaudited)

 


3 months ended March 31


2015

AED'000


2014

AED'000

Deposits from banks

1,775


2,072

Deposits from customers

205,359


203,601

Euro commercial paper

7,081


6,644

Borrowings

109,994


120,779

Total  interest expense

324,209


333,096

 

21.   Net fees and commission income (unaudited)

 


3 months ended March 31


2015

AED'000


2014

AED'000

Fees and commission income




Retail banking fees

220,125


194,366

Corporate banking fees

156,704


107,235

Brokerage fees

2,999


12,114

Fees from trust and other fiduciary activities

67,968


25,889

Other fees

10,301


18,856

Total fees and commission income

458,097


358,460

Fees and commission expenses

(83,095)


(73,710)

Net fees and commission income

375,002


284,750

 

22.   Net trading income (unaudited)

 


3 months ended March 31


2015

AED'000


2014

AED'000

Net gains on dealing in derivatives

17,685


15,946

Net gains from dealing in foreign currencies

105,666


62,840

Net (losses)/gains from trading securities

(492)


95,783

Net trading income

122,859


174,569

 

 

23.   Other operating income (unaudited)

 


3 months ended March 31


2015

AED'000


2014

AED'000

Net losses from available-for-sale investments

-


(59)

Property management income

36,193


31,431

Rental income

13,517


10,596

Dividend income

-


14,348

Others

3,850


4,767

Total other operating income

53,560


61,083

 

24.   Operating expenses (unaudited)

 


3 months ended March 31


2015

AED'000


2014

AED'000

Staff expenses

443,013


365,762

Depreciation

32,495


30,494

Amortisation of intangible assets

5,635


6,785

Others

218,988


221,868

Total operating expenses

700,131


624,909

 

25.   Impairment allowances (unaudited)

 


3 months ended March 31


2015

AED'000


2014

AED'000





Charge for the period

305,032


288,633

Recoveries during the period

(63,729)


(100,941)

Impairment allowance on loans and advances, net (Note 8)

241,303


187,692

Recoveries on written off available-for-sale investments

(35)


(14,126)

Total impairment allowances

241,268


173,566

 

26.   Earnings per share (unaudited)

 

Basic and diluted earnings per share

 

The calculation of basic earnings per share is based on the net profit attributable to equity holders of the Bank and the weighted average number of equity shares outstanding. Diluted earnings per share is calculated by adjusting the weighted average number of equity  shares outstanding for the dilutive effects of potential equity shares held on account of employees' incentive plan and treasury shares arising on consolidation of fund subsidiaries.



 

26.   Earnings per share (unaudited) (continued)

 



3 months ended March 31



2015

AED'000


2014

AED'000

Net profit for the period attributable to the equity holders of the Bank


1,247,906


953,172

Less: Coupons paid on capital notes


(65,510)


(120,000)

Net adjusted profit for the period attributable to the equity holders of the Bank (a)


1,182,396


833,172








Number of shares in thousands

Weighted average number of shares in issue throughout the period


5,595,597


5,595,597

Less: Weighted average number of treasury shares arising on buy back


(397,221)


(392,742)

Less: Weighted average number of treasury shares arising on consolidation of funds


-


(7,503)

Less: Weighted average number of shares resulting from Employees' incentive

plan shares


(12,200)


(15,445)

Weighted average number of equity shares in issue during the period for basic earnings per share (b)


5,186,176


5,179,907






Add: Weighted average number of treasury shares arising on consolidation of funds


-


7,503

Add: Weighted average number of shares  resulting from Employees' incentive  plan

shares


12,200


15,445

Weighted average number of equity shares in issue during the period for diluted  earnings per share (c)


5,198,376


5,202,855






Basic earnings per share (AED) (a)/(b)


0.23


0.16






Diluted earnings per share (AED) (a)/(c)


0.23


0.16

 

27.   Commitments and contingent liabilities

 

The Bank has the following commitments and contingent liabilities:

 



As at


As at



March 31


December 31



2015


2014



unaudited


audited



AED'000


AED'000






Letters of credit


5,333,111


6,411,361

Guarantees


18,013,778


17,418,872

Commitments to extend credit - revocable (*)


11,516,458


10,809,547

Commitments to extend credit - irrevocable


13,941,164


12,687,831

Total commitments on behalf of customers


48,804,511


47,327,611

Commitments for future capital expenditure


132,797


137,736

Commitments to invest in investment securities


80,118


71,750

Total commitments and contingent liabilities


49,017,426


47,537,097

(*) includes AED 6,420,537 thousand (December 31, 2014: AED 6,276,388 thousand) for undrawn credit card limits.

               

28.   Operating segments

 

The Bank has four reportable segments as described below. These segments offer different products and services and are managed separately based on the Bank's management and internal reporting structure. For each of the strategic divisions, the Bank's Performance Management Committee (a sub-committee of Management Executive Committee) reviews internal management reports on a regular basis.

 



 

28.   Operating segments (continued)

 

The following summary describes the operations in each of the Bank's reportable segments:

 

Consumer banking - comprises of retail, wealth management and Islamic financing. It includes loans, deposits and other transactions and balances with retail customers and corporate and private accounts of high net worth individuals and funds management activities.

 

Wholesale banking - comprises of business banking, cash management, trade finance, corporate finance, small and medium enterprise financing, investment banking, Indian operations, Islamic financing, infrastructure and asset finance, government and public enterprises. It includes loans, deposits and other transactions and balances with corporate customers.

 

Investments and treasury - comprises of central treasury operations, management of the Bank's investment portfolio and interest rate, currency and commodity derivative portfolio and Islamic financing.  Investments and treasury undertakes the Bank's funding and centralised risk management activities through borrowings, issue of debt securities and use of derivatives for risk management. It also undertakes trading and corporate finance activities and investing in liquid assets such as short-term placements, corporate and government debt securities.

 

Property management - comprises of real estate management and engineering service operations of subsidiaries - Abu Dhabi Commercial Properties LLC, Abu Dhabi Commercial Engineering Services LLC and rental income of ADCB.

 

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Performance Management Committee. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm's length basis.

 

The following is an analysis of the Bank's revenue and results by operating segment for the three month period ended March 31, 2015 (unaudited):

 


 

Consumer banking

 

Wholesale banking

Investments and

treasury

 

Property management

 

 

Total


AED'000

AED'000

AED'000

AED'000

AED'000

Net interest and Islamic financing income

632,736

590,488

391,033

26,519

1,640,776

Non-interest income

220,483

178,427

98,308

54,203

551,421

Operating expenses

(423,148)

(193,766)

(55,341)

(27,876)

(700,131)

Operating profit before impairment

allowances

430,071

575,149

434,000

52,846

1,492,066

Impairment (allowances)/recoveries

(277,343)

36,040

35

-

(241,268)

Profit before taxation

152,728

611,189

434,035

52,846

1,250,798

Overseas income tax expense

-

(1,796)

-

-

(1,796)

Net profit for the period

152,728

609,393

434,035

52,846

1,249,002







Capital expenditure





26,790






As at March 31, 2015 (unaudited)






Segment assets

64,844,256

83,387,838

58,030,966

623,114

206,886,174

Segment liabilities

40,189,763

52,291,129

88,913,295

13,122

181,407,309







       



 

28.   Operating segments (continued)

 

The following is an analysis of the Bank's revenue and results by operating segment for the three month period ended March 31, 2014 (unaudited):

 


 

Consumer banking

 

Wholesale banking

Investments and

treasury

 

Property management

 

 

Total


AED'000

AED'000

AED'000

AED'000

AED'000

Net interest and Islamic financing income

577,058

314,143

461,488

27,557

1,380,246

Non-interest income

340,996

128,359

4,995

46,052

520,402

Operating expenses

(387,674)

(173,344)

(38,276)

(25,615)

(624,909)

Operating profit before impairment

allowances

530,380

269,158

428,207

47,994

1,275,739

Impairment (allowances)/recoveries

(251,619)

63,927

14,126

-

(173,566)

Profit before taxation

278,761

333,085

442,333

47,994

1,102,173

Overseas income tax credit

-

1,106

-

-

1,106

Net profit for the period

278,761

334,191

442,333

47,994

1,103,279







Capital expenditure





33,838






As at December 31, 2014 (audited)






Segment assets

63,216,688

83,717,761

56,460,659

624,355

204,019,463

Segment liabilities

37,316,795

51,210,978

89,055,962

16,895

177,600,630







 

For the purpose of monitoring segment performance and allocating resources between segments, all assets and liabilities are allocated to reportable segments.

 

Other disclosures

 

The following is the analysis of the total operating income of each segment between income from external parties and inter-segment.

 


External (unaudited)


Inter-segment (unaudited)


3 months ended March 31


3 months ended March 31


2015

2014


2015

2014


AED'000

AED'000


AED'000

AED'000

Consumer banking

1,113,107

1,207,105


(259,888)

(289,051)

Wholesale banking

998,898

707,537


(229,983)

(265,035)

Investments and treasury

26,126

(60,046)


463,215

526,529

Property management

54,066

46,052


26,656

27,557

Total

2,192,197

1,900,648


-

-

 

Geographical information

 

The Bank operates in two principal geographic areas i.e. Domestic and International. The United Arab Emirates is designated as Domestic area which represents the operations of the Bank that originates from the UAE branches and subsidiaries. International area represents the operations of the Bank that originates from its branches in India, Jersey and through its subsidiaries outside UAE. The information regarding the Bank's revenue and non-current assets by geographical location are detailed as follows:



 

28.   Operating segments (continued)

 

Geographical information (continued)

 


Domestic (unaudited)


International (unaudited)


3 months ended March 31


3 months ended March 31


2015

2014


2015

2014


AED'000

AED'000


AED'000

AED'000

Income






Net interest and Islamic financing income

1,621,774

1,369,487


19,002

10,759

Non-interest income

532,755

518,976


18,666

1,426

 


Domestic


International


As at

 March 31

2015

unaudited

As at

December 31 2014

audited


As at

 March 31

2015

unaudited

As at

December 31 2014

audited


AED'000

AED'000


AED'000

AED'000

Non-current assets






Investment in associate

195,854

195,854


-

-

Investment properties

615,778

615,778


-

-

Property and equipment, net

795,576

801,746


4,907

4,442

Intangible assets

30,070

35,705


-

-

 

29.     Capital adequacy ratio

 

The ratio calculated in accordance with Basel II guidelines is as follows:

 


As at


As at


March 31


December 31


2015


2014


unaudited


audited


AED'000


AED'000

Tier 1 capital




Share capital (Note 16)

5,595,597


5,595,597

Share premium

3,848,286


3,848,286

Other reserves, net of treasury shares (Note 17)

5,539,287


5,540,106

Retained earnings

6,279,896


7,172,755

Non-controlling interests in equity of subsidiaries

11,493


10,397

Capital notes (Note 18)

4,000,000


4,000,000

Less: Intangible assets

(30,070)


(35,705)

Less: Investment in associate

(97,927)


(97,927)

Total tier 1 capital

25,146,562


26,033,509

Tier 2 capital




Collective impairment allowance on loans and advances

1,783,413


1,709,253

Cumulative changes in fair value (Note 17)

91,938


113,261

Subordinated notes (Note 14)

4,234,298


4,439,637

Less: Investment in associate

(97,927)


(97,927)

Total tier 2 capital

6,011,722


6,164,224





Total regulatory capital

31,158,284


32,197,733





Risk-weighted assets




Credit risk

142,673,062


136,740,240

Market risk

4,538,489


4,497,079

Operational risk

12,689,402


11,835,586

Total risk-weighted assets

159,900,953


153,072,905





Capital adequacy ratio

19.49%


21.03%

Tier 1 ratio

15.73%


17.01%

Tier 2 ratio

3.76%


4.02%

 

The capital adequacy ratio was above the minimum requirement of 12% for March 31, 2015 (December 31, 2014 - 12%) stipulated by the Central Bank of the UAE.



 

30.   Fair value hierarchy

 

The fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows: 

 

Quoted market prices - Level 1

 

Financial instruments are classified as Level 1 if their values are observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions.  

 

Valuation techniques using observable inputs - Level 2

 

Financial instruments and investment properties classified as Level 2 have been valued using models whose inputs are observable in an active market. Valuation based on observable inputs include financial instruments such as swaps and forwards which are valued using market standard pricing techniques and options that are commonly traded in markets where all the inputs to the market standard pricing models are observable.

 

The category includes derivative financial instruments such as certain OTC derivatives, commodity derivatives, foreign exchange spot and forward contracts, certain investment securities and non derivative financial instruments such as investment properties.

 

These instruments are valued using the inputs observable in an active market.  Valuation of the derivative financial instruments is made through discounted cash flow method using the applicable yield curve for the duration of the instruments for non optional derivatives and standard option pricing models such as Black-Scholes and other valuation models for optional derivatives. 

 

The investment securities reported under Level 2 are valued using discounted cash flow model.

 

Level 2 investment properties are buildings given on rent. Refer Note 9 in respect of the valuation techniques used.

 

Valuation techniques using significant unobservable inputs - Level 3

 

Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market.

 

Unobservable input levels are generally determined based on observable inputs of a similar nature, historical observations or other analytical techniques. 

 

This category mainly includes private equity instruments and private funds. The carrying values of these investments are adjusted as follows:

 

a)    Private equity instruments - using the latest available net book value; and

b)   Private funds - based on the net asset value provided by the fund manager.

 



 

30.   Fair value hierarchy (continued)

 

This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible. The table below analyses recurring fair value measurements for assets and liabilities.

 



Level 1

Level 2

Level 3



 

 

 

 

Quoted market prices

 

Observable inputs

Significant unobservable inputs

 

 

Total

As at March 31, 2015 (unaudited)

Notes

AED'000

AED'000

AED'000

AED'000

Assets at fair value 






Trading securities 

5

272,254

-

-

272,254

Derivative financial instruments

6

720

5,223,941

-

5,224,661

Investment securities 

7





     - Quoted 


19,406,588

991,148

-

20,397,736

     - Unquoted 


-

903,295

377,464

1,280,759

Investment properties 

9

-

615,778

-

615,778

Total assets at fair value 

19,679,562

7,734,162

377,464

27,791,188

Liabilities at fair value 






Derivative financial instruments

6

-

6,062,440

-

6,062,440

Total liabilities at fair value 

-

6,062,440

-

6,062,440







As at December 31, 2014 (audited)






Assets at fair value 






Trading securities 

5

199,599

-

-

199,599

Derivative financial instruments

6

2,536

4,285,970

-

4,288,506

Investment securities 

7





     - Quoted 


19,384,244

935,205

-

20,319,449

     - Unquoted 


-

954,173

378,216

1,332,389

Investment properties 

9

-

615,778

-

615,778

Total assets at fair value 

19,586,379

6,791,126

378,216

26,755,721

Liabilities at fair value 






Derivative financial instruments

6

146

4,999,921

-

5,000,067

Total liabilities at fair value 

146

4,999,921

-

5,000,067

 

The Bank's OTC derivatives in the Trading Book are classified as Level 2 as they are valued using inputs that can be observed in the market. 

 

Reconciliation showing the movement in fair values of Level 3 available-for-sale investments is as follows:

 


As at


As at


March 31


December 31


2015


2014


unaudited


audited


AED'000


AED'000

At January 1,

378,216               


316,588

Purchases, net during the period/ year

30


60,494

Disposals including capital refunds during the period/ year

(1,949)


(24,950)

Adjustment through other comprehensive income

1,167


26,845

Transfer out 

-


(761)

Balance at

377,464


378,216               

 

There were no transfers between Level 1 and Level 2 during the period.

 

There is no change in valuation techniques used during the period.

 



 

30.   Fair value hierarchy (continued)

 

Other assets and liabilities not measured at fair value

 

The majority of the Bank's assets and liabilities measured at amortised cost (including loans and advances, deposits from customers and certain borrowings) are Level 3 assets and liabilities, as there is no active market for such assets and liabilities. The Bank considers these to have a fair value approximately equivalent to their net carrying value, based on discounted cash flow calculations performed for a sample of loans, the majority of which carry variable interest rates, and given the relatively short tenor of most deposits from customers.

 

The fair value of the Bank's borrowings (Note 14) carried at amortised cost is as follows:

 



Level 1

Level 2

Level 3

Total



AED'000

AED'000

AED'000

AED'000







As at March 31, 2015 (unaudited)

21,063,134

3,674,749

6,549,306

31,287,189







As at December 31, 2014 (audited)

19,335,562

3,350,179

7,889,321

30,575,062







 

31.   Legal proceedings

 

The Bank is involved in various legal proceedings and claims arising in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, management does not believe that these matters will have a material adverse effect on the Bank's condensed consolidated interim financial information if disposed unfavourably.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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