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Wednesday 22 October, 2014

Abu Dhabi Comm Bnk

3rd Quarter Results

RNS Number : 9655U
Abu Dhabi Commercial Bank PJSC
22 October 2014
 



 

 

 

                   

 
Abu Dhabi Commercial Bank PJSC
Review report and condensed consolidated interim financial 
information for the nine month period ended September 30, 2014

                                                                                                                                                                                                                                                                                                                   

 

 

 

 

 

 


 

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........................................................................................................................................................................................................................................................................ 13

2.5... Investment properties...................................................................................................................................................................................................................................................................... 15

3.     Cash and balances with central banks...................................................................................................................................................................................................................................... 15

4.     Deposits and balances due from banks................................................................................................................................................................................................................................... 16

5.     Trading securities......................................................................................................................................................................................................................................................................................... 16

6.     Derivative financial instruments.................................................................................................................................................................................................................................................... 17

7.     Investment securities................................................................................................................................................................................................................................................................................ 18

8.     Loans and advances, net........................................................................................................................................................................................................................................................................ 19

9.     Investment properties............................................................................................................................................................................................................................................................................. 20

10.   Other assets....................................................................................................................................................................................................................................................................................................... 21

11.   Due to banks..................................................................................................................................................................................................................................................................................................... 21

12.   Deposits from customers....................................................................................................................................................................................................................................................................... 21

13.   Euro commercial paper........................................................................................................................................................................................................................................................................... 22

14.   Borrowings.......................................................................................................................................................................................................................................................................................................... 23

15.   Other liabilities................................................................................................................................................................................................................................................................................................ 26

16.   Share capital...................................................................................................................................................................................................................................................................................................... 26

17.   Other reserves, net of treasury shares (unaudited).................................................................................................................................................................................................... 27

18.   Capital notes...................................................................................................................................................................................................................................................................................................... 28

19.   Interest income (unaudited)............................................................................................................................................................................................................................................................. 28

20.   Interest expense (unaudited).......................................................................................................................................................................................................................................................... 28

21.   Net fees and commission income (unaudited).................................................................................................................................................................................................................. 28

22.   Net trading income (unaudited).................................................................................................................................................................................................................................................... 29

23.   Other operating income (unaudited)........................................................................................................................................................................................................................................ 29

24.   Operating expenses (unaudited).................................................................................................................................................................................................................................................. 29

25.   Impairment allowances (unaudited)......................................................................................................................................................................................................................................... 29

26.   Earnings per share (unaudited).................................................................................................................................................................................................................................................... 29

27.   Commitments and contingent liabilities.................................................................................................................................................................................................................................. 30

28.   Operating segments................................................................................................................................................................................................................................................................................... 30

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

30.   Disposal of fund subsidiaries (unaudited)........................................................................................................................................................................................................................... 35

31.   Fair value hierarchy................................................................................................................................................................................................................................................................................... 36

32.   Legal proceedings......................................................................................................................................................................................................................................................................................... 38

 



 

 

 

 

 

 

 

 

Report on review of condensed consolidated interim financial information 

 

To the Board of Directors of

Abu Dhabi Commercial Bank PJSC

Abu Dhabi, UAE.

 

Introduction

 

We have reviewed the accompanying condensed consolidated interim statement of financial position of Abu Dhabi Commercial Bank PJSC (the "Bank") and its subsidiaries (together referred to as the "Group") as at September 30, 2014 and the related condensed consolidated interim statements of income, comprehensive income, changes in equity and cash flows for the nine month period then ended and accompanying notes. Management is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with International Accounting Standard 34, "Interim Financial Reporting ("IAS 34")". Our responsibility is to express a conclusion on this condensed consolidated 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 condensed consolidated interim financial information of the Group is not prepared, in all material respects, in accordance with IAS 34.

 

 

 

PricewaterhouseCoopers

 

 

 

 

Jacques Fakhoury

Registration Auditor Number 379

October 22, 2014

 



 


Condensed consolidated interim statement of financial position

As at September 30, 2014

 




As at


As at




September 30


December 31




2014


2013




unaudited


audited


Notes


 AED'000


AED'000

Assets






Cash and balances with central banks

3


14,309,311


9,961,206

Deposits and balances due from banks

4


16,548,826


11,344,700

Trading securities

5


175,825


884,640

Derivative financial instruments

6


4,143,825


3,616,203

Investment securities

7


21,799,839


20,854,772

Loans and advances, net

8


135,887,283


131,648,670

Investment properties

9


593,307


560,690

Other assets

10


4,128,980


3,404,638

Property and equipment, net



796,656


805,322

Intangible assets



41,340


61,695

Total assets



198,425,192


183,142,536

Liabilities






Due to banks

11


3,747,076


4,291,011

Derivative financial instruments

6


4,683,568


3,965,587

Deposits from customers

12


121,516,219


115,427,708

Euro commercial paper

13


6,841,742


5,940,435

Borrowings

14


30,320,858


23,785,568

Other liabilities

15


5,699,186


4,910,917

Total liabilities



172,808,649


158,321,226

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


5,182,003


5,135,440

Retained earnings



6,980,751


5,597,275

Capital notes

18


4,000,000


4,000,000

Equity attributable to equity holders of the Bank



25,606,637


24,176,598

Non-controlling interests



9,906


644,712

Total equity



25,616,543


24,821,310







Total liabilities and equity



198,425,192


183,142,536

 

This condensed consolidated interim financial information was approved by the Board of Directors and authorised for issue on October 22, 2014 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 nine month period ended September 30, 2014

 




3 months ended September 30


9 months ended September 30


Notes


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000











Interest income

19


1,582,181


1,596,545


4,782,148


4,972,864

Interest expense

20


(309,052)


(352,180)


(971,063)


(1,215,857)

Net interest income



1,273,129


1,244,365


3,811,085


3,757,007

Income from Islamic financing



154,933


152,413


466,121


437,099

Islamic profit distribution



(28,099)


(30,432)


(84,654)


(108,064)

Net income from Islamic financing



126,834


121,981


381,467


329,035











Total net interest and Islamic financing income



1,399,963


1,366,346


4,192,552


4,086,042

Net fees and commission income

21


306,440


276,670


895,590


750,514

Net trading income

22


81,986


110,692


334,360


409,332

Other operating income

23


81,329


66,923


222,222


310,209

Operating income



1,869,718


1,820,631


5,644,724


5,556,097

Operating expenses

24


(648,238)


(590,902)


(1,854,045)


(1,673,786)

Operating profit before impairment allowances



1,221,480


1,229,729


3,790,679


3,882,311

Impairment allowances

25


(201,437)


(308,030)


(608,467)


(1,136,530)

Profit before taxation



1,020,043


921,699


3,182,212


2,745,781

Overseas income expense



(2,192)


(1,639)


(3,390)


(5,238)

Net profit for the period



1,017,851


920,060


3,178,822


2,740,543











Attributed to:










Equity holders of the Bank



1,017,372


874,187


3,027,660


2,572,211

Non-controlling interests



479


45,873


151,162


168,332

Net profit for the period



1,017,851


920,060


3,178,822


2,740,543











Basic and diluted earnings per share (AED)

26


0.18


0.14


0.55


0.43











 

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

 

 

 



 

Condensed consolidated interim statement of comprehensive income (unaudited)

For the nine month period ended September 30, 2014

 


3 months ended September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000









Net profit for the period

1,017,851


920,060


3,178,822


2,740,543









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
















Exchange difference arising on translation of foreign operations

(5,910)


(9,982)


130


(26,789)

Fair value changes on cash flow hedges

(31,766)


16,056


(37,592)


6,465

Fair value changes on available-for-sale investments

(11,745)


106,493


42,477


(90,390)

Other comprehensive (loss)/income for the period

(49,421)


112,567


5,015


(110,714)

Total comprehensive income for the period

968,430


1,032,627


3,183,837


2,629,829









Attributed to:








Equity holders of the Bank

967,951


986,754


3,032,675


2,461,497

Non-controlling interests

479


45,873


151,162


168,332

Total comprehensive income for the period

968,430


1,032,627


3,183,837


2,629,829

 

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 nine month period ended September 30, 2014

 


 

 

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, 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

-


-


-


3,027,660


-


3,027,660


151,162


3,178,822

Other comprehensive income for the period

-


-


5,015


-


-


5,015


-


5,015

Other movements (Note 17)

-


-


41,548


11,545


-


53,093


-


53,093

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 (Note 30)

-


-


-


-


-


-


(836,495)


(836,495)

Net gains on treasury shares arising on disposal of fund subsidiaries (Note 30)

-


-


-


91,521


-


91,521


-


91,521

Capital notes coupon paid (Note 18)

-


-


-


(186,393)


-


(186,393)


-


(186,393)

















Balance at September 30, 2014

5,595,597


3,848,286


5,182,003


6,980,751


4,000,000


25,606,637


9,906


25,616,543

 

Balance at January 1, 2013

  

  5,595,597


     3,848,286


 

   6,288,591


    

4,537,315


 

 4,000,000


 

     24,269,789


   

437,800


  

     24,707,589

Net profit for the period

               -   


               -   


       -


2,572,211


               -   


2,572,211


168,332


2,740,543

Other comprehensive income for the period

               -   


               -   


(110,714)


       -


               -   


(110,714)


       -


(110,714)

Other movements (Note 17)

 -


 -


(1,616,616)


       -


 -


(1,616,616)


       -


(1,616,616)

Dividends to equity holders of the parent, net

 -


 -


       -


(1,397,983)


 -


(1,397,983)


-


(1,397,983)

Net decrease in non-controlling interests

 -


 -


       -


       -


 -


-        


(37,696)


(37,696)

Net realised gain on treasury shares

 -


 -


       -


5,391


 -


5,391


       -


5,391

Capital notes coupon paid (Note 18)

 -


 -


       -


(240,000)


 -


(240,000)


       -


(240,000)

















Balance at September 30, 2013

5,595,597


3,848,286


4,561,261


5,476,934


4,000,000


23,482,078


568,436


24,050,514

 

Following the Annual General Meeting held on March 12, 2014, the shareholders approved the distribution of proposed cash dividends of 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 (For the year 2012 - AED 1,398,620 thousand, being AED 0.25 dividends per share and representing 25% 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 nine month period ended September 30, 2014

 


9 months ended September 30


2014

AED'000

2013

AED'000

OPERATING ACTIVITIES



Profit before taxation

3,182,212

2,745,781

Adjustments for:



Depreciation on property and equipment, net (Note 24)

97,227

95,454

Amortisation of intangible assets (Note 24)

20,355

23,645

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

813,040

1,308,967

Discount unwind (Note 8)

(119,213)

(106,149)

Net gains from disposal of available-for-sale investments (Note 23)

(22,201)

(34,526)

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

(15,758)

(27,450)

Net gains from trading securities (Note 22)

(98,908)

(210,838)

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

(535)

5,960

Employees' incentive plan benefit expense (Note 17)

20,281

30,051

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

3,876,500

 

3,830,895

(Increase)/decrease in balances with central banks

(2,050,000)

775,000

Increase in due from banks

(4,028,869)

(6,418,145)

(Increase)/decrease in net trading derivative financial instruments

(36,347)

16,772

Net proceeds from disposal of trading securities

40,075

180,546

(Increase)/decrease in loans and advances

(4,956,255)

1,778,230

Increase in other assets

(507,620)

(485,162)

Increase/(decrease) in due to banks

471,365

(237,746)

Increase in deposits from customers

6,080,006

2,617,140

Increase in other liabilities

396,546

503,815

Cash (used in)/from operating activities

(714,599)

2,561,345

Overseas tax paid

(5,827)

(7,379)

Net cash (used in)/from operating activities

(720,426)

2,553,966

INVESTING ACTIVITIES



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

15,758

27,450

Overseas tax refund/(paid), net

8,137

(33,262)

Net proceeds from disposal of available-for-sale investments

5,157,244

(3,225,227)

Net purchase of available-for-sale investments

(5,951,706)

2,067,926

Additions to investment properties

(11,950)

(17,148)

Cash received on disposal of fund subsidiaries (Note 30)

95,112

-  

Net purchase of property and equipment, net

(88,561)

(54,909)

Net cash used in investing activities

(775,966)

(1,235,170)

FINANCING ACTIVITIES



Net increase in euro commercial paper

1,124,964

1,711,059

Net proceeds from borrowings

21,898,819

9,164,958

Repayment of borrowings

(15,353,332)

(13,222,576)

Net proceeds from sale of treasury shares by fund subsidiaries

1,751

14,445

Dividends paid to equity holders of the parent

(1,560,857)

(1,397,983)

Buy back of own shares (Note 16)

-

(1,655,721)

Net movement in non-controlling interests

50,527

(37,696)

Capital notes coupon paid (Note 18)

(186,393)

(240,000)

Net cash from/(used in) financing activities

5,975,479

(5,663,514)




Net increase/(decrease) in cash and cash equivalents

4,479,087

(4,344,718)




Cash and cash equivalents at the beginning of the period

9,797,941

19,180,314

Cash and cash equivalents at the end of the period 

14,277,028

14,835,596

 

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 nine month period ended September 30, 2014 (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



September 30


December 31



2014


2013



unaudited


audited



 AED'000


AED'000

Cash and balances with central banks


14,309,311


9,961,206

Deposits and balances due from banks


16,548,826


11,344,700

Due to banks


(3,747,076)


(4,291,011)



27,111,061


17,014,895

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


(13,333,946)


 

(7,245,757)

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


499,913


28,803

Total cash and cash equivalents


14,277,028


9,797,941

 

 

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 fifty branches and three pay offices in the UAE, two branches in India, one offshore branch in Jersey and its subsidiaries and one representative office located in London.

 

The registered head office of the Bank is at Abu Dhabi Commercial Bank Head Office Building, Salam 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, 2013, 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, 2013. In March 2014, the Bank has deconsolidated its fund subsidiaries due to loss of control which is disclosed in Note 30.

 

For details of related party balances and transactions, refer to Note 35 in the consolidated financial statements for the year ended December 31, 2013. The related party balances and transactions for the nine month period ended September 30, 2014 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 nine month period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the financial year ending December 31, 2014.

 

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, 2013.



 

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, 2014

 

Amendments:

 

IAS 32 - Financial Instruments: Presentation requires presentation to clarify certain aspects because of diversity in application of the requirements on offsetting, focused on four main areas:

 

§ the meaning of 'currently has a legally enforceable right of set-off ',

§ the application of simultaneous realisation and settlement,

§ the offsetting of collateral amounts and

§ the unit of account for applying the offsetting requirements.

 

IAS 39 - Financial Instruments: Recognition and Measurement to make it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met.

 

IFRS 10 - Consolidated Financial Statements, IFRS 12 -Disclosure of Interests in Other Entities and IAS 27 - Separate Financial Statements relate only to investment entities, therefore will not apply to the Bank.

 

IFRS 13 - Fair Value Measurement (a) clarify that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted basis (amends basis for conclusions only) (b) clarify the scope of the portfolio exception in paragraph 52.

 

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, 2014.

 

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:


IAS 27 - Separate Financial Statements permits investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements.

 

January 1, 2016

IFRS 7 - Financial Instruments: Disclosures (with consequential amendments to IFRS 1) adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required and clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements.

 

January 1, 2016

IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) clarifies the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows:

-    require full recognition in the investor's financial statements of gains and losses arising on the sale or contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations)

-    require the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised only to the extent of the unrelated investors' interests in that associate or joint venture.

These requirements apply regardless of the legal form of the transaction, e.g. whether the sale or contribution of assets occurs by an investor transferring shares in an subsidiary that holds the assets (resulting in loss of control of the subsidiary), or by the direct sale of the assets themselves.

 

January 1, 2016



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 (continued):

Effective for annual periods beginning on or after

New Standards:


IFRS 15 - Revenue from Contracts with Customers provides a single, principles based five-step model to be applied to all contracts with customers. Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters.  New disclosures about revenue are also introduced.

 

January 1, 2017

IFRS 9 - Financial Instruments: Classification and Measurement - A finalised version has been issued which contains accounting requirements for financial instruments, replacing IAS 39 - Financial Instruments: Recognition and Measurement. The standard contains requirements in the following areas:

-    Classification and measurement - financial assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics. It introduces a 'fair value through other comprehensive income' category for certain debt instruments. Financial liabilities are classified in a similar manner to under IAS 39, however there are differences in the requirements applying to the measurement of an entity's own credit risk.

-    Impairment -  IFRS 9 introduces an 'expected credit loss' model for the measurement of the impairment of financial assets, so it is no longer necessary for a credit event to have occurred before a credit loss is recognised

-    Hedge accounting - introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures

-    Derecognition - The requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39.

January 1, 2018

 

Management anticipates that these IFRSs and their amendments will be adopted in the condensed consolidated interim financial statements in the initial period when they become mandatorily effective.

 

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.

 

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.



2.   Summary of significant accounting policies (continued)

 

2.3   Basis of consolidation (continued) 

 

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

 

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

 

Joint arrangements

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

 

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

 

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

 

2.4      Investment securities

 

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

 

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

 

§ 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.



 

2.   Summary of significant accounting policies (continued)

 

2.4   Investment securities (continued)

 

Investments at fair value through profit or loss (FVTPL) (continued)

 

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. 

 

Held-to-maturity

 

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

 

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

 

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

 

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

 

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

 

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.

2.   Summary of significant accounting policies (continued)

 

2.4   Investment securities (continued)

 

Available-for-sale (continued)

 

If an available-for-sale investment is impaired, the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any previous impairment loss recognised in the condensed consolidated interim income statement is removed from equity and recognised in the condensed consolidated interim income statement.

 

Once an impairment loss has been recognised on an available-for-sale financial asset, the subsequent accounting treatment for changes in the fair value of that asset differs depending on the nature of the available-for-sale financial asset concerned:

 

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


September 30


December 31


2014


2013


unaudited


audited


 AED'000


AED'000

Cash on hand

627,103


586,709

Balances with central banks

1,395,333


370,743

Reserves maintained with central banks

8,724,474


7,448,647

Certificate of deposits with UAE Central Bank

3,525,000


1,475,000

Reverse repo with Central Bank

37,401


80,107

Total cash and balances with central banks

14,309,311


9,961,206

 

3.   Cash and balances with central banks (continued)

 


As at


As at


September 30


December 31


2014


2013


unaudited


audited


 AED'000


AED'000

The geographical concentration is as follows:




Within the UAE

14,250,421


9,857,886

Outside the UAE

58,890


103,320


14,309,311


9,961,206

 

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


September 30


December 31


2014


2013


unaudited


audited


 AED'000


AED'000

Nostro balances

591,464


1,031,020

Margin deposits

203,961


232,021

Time deposits

11,673,471


8,061,659

Reverse repo placements

2,297,650


-

Murabaha placements

-


1,870,000

Wakala placements

1,597,346


150,000

Certificate of deposits

184,934


-

Total deposits and balances due from banks

16,548,826


11,344,700

The geographical concentration is as follows:




Within the UAE

7,481,688


4,614,768

Outside the UAE

9,067,138


6,729,932


16,548,826


11,344,700

 

The Bank entered into collateral swap agreements, under which bonds with fair value of AED 2,279,532 thousand, were received as collateral against reverse repo placements. The risk and rewards relating to these bonds received as collateral remain with the counterparty. 

 

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 as at September 30, 2014 was AED 9,320 thousand (December 31, 2013 - AED Nil).

 

5.    Trading securities

 


As at


As at


September 30


December 31


2014


2013


unaudited


audited


 AED'000


AED'000

Bonds

174,621


136,772

Equity instruments

1,204


747,868

Total trading securities

175,825


884,640

The geographical concentration is as follows:




Within the UAE

147,058


659,568

Outside the UAE

28,767


225,072


175,825


884,640

 

 

5.   Trading securities (continued)

 

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

 

The decline in trading securities is mainly because of the disposal of fund subsidiaries in March 2014 (Note 30).

 

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 September 30, 2014 (unaudited)


AED'000


AED'000






Derivatives held or issued for trading





 Foreign exchange derivatives


868,695


871,649

 Interest rate and cross currency swaps


2,782,646


2,742,001

 Options


92,377


166,896

 Futures (exchange traded)


1,833


2,436

 Commodity and energy swaps


43,996


43,571

 Swaptions


82,910


25,405

Total derivatives held or issued for trading


3,872,457


3,851,958

Derivatives held as fair value hedges





 Interest and cross currency swaps


252,093


608,550

Derivatives held as cash flow hedges





Interest and cross currency swaps


19,106


14,735

Forward foreign exchange contracts


169


208,325

Total derivatives held as cashflow hedges


19,275


223,060






Total derivative financial instruments


4,143,825


4,683,568






As at December 31, 2013 (audited)





Derivatives held or issued for trading





 Foreign exchange derivatives


104,597


87,341

 Interest rate and cross currency swaps


2,869,393


2,853,585

 Options


58,591


156,821

 Futures (exchange traded)


1,767


                   -  

 Commodity and energy swaps


36,767


36,385

 Swaptions


70,685


23,513

Total derivatives held or issued for trading


3,141,800


3,157,645

Derivatives held as fair value hedges





 Interest and cross currency swaps


295,327


807,917

Derivatives held as cash flow hedges





Interest and cross currency swaps


42,273


-

Forward foreign exchange contracts


136,803


25

Total derivatives held as cashflow hedges


179,076


25






Total derivative financial instruments


3,616,203


3,965,587

 

The net hedge ineffectiveness gains relating to the fair value and cash flow hedges amounting to AED 535 thousand (September 30, 2013 - losses of AED 5,960 thousand) have been recognised in the condensed consolidated interim income statement.

 

As at September 30, 2014, cash collateral of AED 550,275 thousand (December 31, 2013 - AED 341,993 thousand) was received against positive fair value of derivative assets from certain counterparties.

 

As at September 30, 2014, cash collateral of AED 504,574 thousand (December 31, 2013 - AED 280,378 thousand) and investment securities of AED 1,647,044 thousand (December 31, 2013 - AED 1,502,425 thousand) was placed against the negative fair value of derivative liabilities. 

 

7.    Investment securities

 



Other





GCC

Rest of



UAE

countries

the world

Total

As at September 30, 2014 (unaudited)

AED'000

AED'000

AED'000

AED'000

Available-for-sale investments





Quoted:





 Government securities

2,303,164

1,581,537

1,306,687

5,191,388

 Bonds - Public sector

4,654,196

45,141

1,246,590

  5,945,927  

 Bonds - Banks and financial institutions

 2,370,276

855,189

5,813,993

 9,039,458

 Bonds - Corporate

94,678

-

-

94,678

 Equity instruments

1,407

-

-

1,407

 Mutual funds

83,520

-

107,458

190,978

Total quoted

9,507,241

2,481,867

8,474,728

20,463,836

Unquoted:





 Government securities

66,039

845,699

-

911,738

 Bonds - Public sector

57,589

-

-

57,589

 Bonds - Banks and financial institutions

-

-

32

32

 Bonds - Corporate

-

-

840

840

 Equity instruments

258,463

-

13,186

271,649

 Mutual funds

94,155

-

-

94,155

 Total unquoted

 476,246

845,699

14,058

 1,336,003

Total available-for-sale investments

9,983,487

3,327,566

8,488,786

21,799,839

 

As at December 31, 2013 (audited)





Available-for-sale investments





Quoted:





 Government securities

2,675,550

1,294,248

487,908

4,457,706

 Bonds - Public sector

5,428,547

491,255

972,824

6,892,626

 Bonds - Banks and financial institutions

2,249,622

834,683

5,953,539

9,037,844

 Bonds - Corporate

90,833

-

-

90,833

 Equity instruments

1,028

-

-

1,028

Total quoted

10,445,580

2,620,186

7,414,271

20,480,037

Unquoted:





 Bonds - Public sector

58,147

-

-

58,147

 Bonds - Banks and financial institutions

-

-

32

32

 Bonds - Corporate

-

-

1,131

1,131

 Equity instruments

230,476

-

13,240

243,716

 Mutual funds

71,709

-

-

71,709

 Total unquoted

360,332

-

14,403

374,735

Total available-for-sale investments

10,805,912

2,620,186

7,428,674

20,854,772

 

The Bank hedges interest rate/foreign currency risks on certain fixed rate and floating rate investments through interest rate and cross currency interest rate swaps and designates these as fair value and cash flow hedges, respectively. The net negative fair value of these interest rate swaps as at September 30, 2014 was AED 38,967 thousand (December 31, 2013 - net negative fair value AED 210,427 thousand). The hedge ineffectiveness gains and losses relating to these hedges were included in the condensed consolidated interim income statement.

 

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

 


As at September 30, 2014 (unaudited)


As at December 31, 2013 (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

4,059,842


3,915,116


2,390,637 


          2,274,631 









 

Further, the Bank pledged investment securities with fair value amounting to AED 1,666,949 thousand (December 31, 2013 - AED 1,508,768 thousand) as collateral against margin calls. The risks and rewards relating to the investment securities pledged remain with the Bank.

8.    Loans and advances, net

 



As at


As at



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000






Overdrafts (retail and corporate)


4,038,486


4,396,183

Retail loans


17,045,247


14,957,734                            

Corporate loans


100,958,842


101,121,762

Credit cards


2,670,707


2,238,316

Islamic financing assets  (see below)


10,641,253


10,666,627

Other facilities


7,296,532


5,157,995

Gross loans and advances


142,651,067


138,538,617

Less: Allowance for impairment


(6,763,784)


(6,889,947)

Total loans and advances, net


135,887,283


131,648,670

 

Islamic financing assets

 



As at


As at



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000

Murabaha


2,181,490


1,038,429

Ijara financing


3,877,154


5,594,710

Mudaraba


210,098


463,049

Salam


4,247,773


3,476,441

Others


124,738


93,998

Gross Islamic financing assets


10,641,253


10,666,627

Less: Allowance for impairment


(140,932)


(102,384)

Net Islamic financing assets


10,500,321


10,564,243

 

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 September 30, 2014 was AED 4,115 thousand (December 31, 2013 - net positive fair value of AED 9,103 thousand).

 

Movements of the individual and collective impairment allowance on loans and advances:

 


As at September 30, 2014 (unaudited)


As at December 31, 2013 (audited)


Individual impairment


Collective impairment


 

Total


Individual impairment


Collective impairment


 

Total


AED'000


AED'000


AED'000


AED'000


AED'000


AED'000













At January 1,

4,250,195


2,639,752


6,889,947


4,207,137


2,256,583


6,463,720













Charge for the period/year

489,104


323,936


813,040


1,170,603


383,517


1,554,120

Recoveries during the period/year

(188,815)


-


(188,815)


(187,964)


-


(187,964)

Net charge for the period/year

300,289


323,936


624,225


982,639


383,517


1,366,156

Discount unwind/others

(119,213)


(44,245)


(163,458)


(144,016)


-


(144,016)

Net amounts written-off

(586,021)


-


(586,021)


(795,407)


-


(795,407)

Currency translation

(889)


(20)


(909)


(158)


(348)


(506)

Balance at

3,844,361


2,919,423


6,763,784


4,250,195


2,639,752


6,889,947

 



 

8.    Loans and advances, net (continued)

 

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

 


As at September 30, 2014 (unaudited)


As at December 31, 2013 (audited)


Within the UAE

Outside the UAE

Total


Within the UAE

Outside the UAE

Total


AED'000

AED'000

AED'000


AED'000

AED'000

AED'000

Economic sector








Agriculture

208,919

-

208,919


215,777

                  -  

215,777

Energy

860,432

1,924,880

2,785,312


527,279

183,377

710,656

Trading

2,707,934

378,703

3,086,637


2,172,597

155,286

2,327,883

Real estate investment & hospitality

49,972,226

629,038

50,601,264


51,704,059

733,630

52,437,689

Transport

925,064

567,735

1,492,799


558,357

673,627

1,231,984

Personal

33,602,930

292,469

33,895,399


29,901,512

389,073

30,290,585

Government & public sector entities

27,213,393

192,259

27,405,652


31,690,007

560,690

32,250,697

Financial institutions (*)

10,462,414

8,706,842

19,169,256


9,844,961

4,987,911

14,832,872

Manufacturing

1,114,407

726,257

1,840,664


944,955

364,810

1,309,765

Services

1,121,867

90,855

1,212,722


1,586,456

352,906

1,939,362

Others

730,596

221,847

952,443


769,479

221,868

991,347


128,920,182

13,730,885

142,651,067


129,915,439

8,623,178

138,538,617

Less: Allowance for impairment



(6,763,784)




(6,889,947)

Total loans and advances, net



135,887,283




131,648,670

 (*) includes investment companies.

 

Loans and advances include a loan to the Government of Abu Dhabi ("Government") of AED  425,898  thousand (December 31, 2013 - AED 436,008 thousand). This loan arose as a result of the Government acquiring certain non-performing loans in previous years against which the Bank was indemnified by the Government through a guarantee. The Bank has an equivalent amount of long term deposit against this loan (Note 12).

 

9.    Investment properties

 


     Completed and in use

Under development

 

Total


AED'000

AED'000

AED'000





As at January 1, 2013

               264,695

                 264,700

                 529,395

Additions during the year

14,147

17,148

31,295

Transfer on completion of construction

281,848

(281,848)

                              -  

As at January 1, 2014 (audited)

560,690

-

560,690

Additions during the period

32,617

-

32,617

As at September 30, 2014 (unaudited)

593,307

-

593,307

 

Valuations are carried out by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. The properties were valued during the last quarter of the year 2013.

 

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



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000

Interest receivable


1,108,104


911,968

Advance tax


22,711


79,603

Clearing receivables


519


404

Prepayments


65,712


38,985

Acceptances


2,418,973


2,140,725

Others


512,961


232,953

Total other assets


4,128,980


3,404,638

 

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



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000

Vostro balances


226,614


192,242

Margin deposits


158,201


255,097

Time deposits


3,362,261


3,843,672

Total due to banks


3,747,076


4,291,011

 

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 negative fair value of these swaps as at September 30, 2014 was AED 255 thousand (December 31, 2013 - AED Nil).

 

12.   Deposits from customers

 



As at


As at



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000

Category :





Time deposits


53,899,164


65,550,746

Current account deposits


47,623,267


37,131,506

Savings deposits


8,382,072


6,951,691

Murabaha deposits


10,346,436


4,974,515

Long term government deposits (Note 8)


425,898


436,008

Margin deposits


839,382


383,242

Total deposits from customers


121,516,219


115,427,708







12.  Deposits from customers (continued)

 

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

 



As at


As at



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000

Mudaraba savings deposits


4,018,881


3,270,613

Current account deposits


2,115,814


2,139,789

Wakala deposits


1,047,178


1,224,052

Mudaraba term deposits


1,415,573


1,528,311

Margin deposits


9,447


9,247

Total Islamic deposits


8,606,893


8,172,012

 

The Bank hedges certain foreign currency time deposits for foreign currency exchange risk using foreign exchange swap contracts and designates these as cash flow hedges. The net negative fair value of these swaps as at September 30, 2014 was AED 52,126 thousand (December 31, 2013 - net positive fair value of AED 59,578 thousand).

 

13.   Euro commercial paper

 

The Bank established a USD 4,000,000 thousand euro commercial paper programme for the issuance of euro commercial paper (ECP). The details of the ECP are as follows:

 



As at


As at



September 30


December 31



2014


2013



unaudited


audited

Currency


AED'000


AED'000

Swiss franc (CHF)


410,199


618,385

Euro (EUR)


1,167,985


1,568,178

GB pound (GBP)


892,317


1,329,692

US dollar (USD)


4,371,241


2,424,180

Total euro commercial paper


6,841,742


5,940,435

 

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 September 30, 2014 was AED 146,455 thousand (December 31, 2013 - net positive fair value of AED 77,202 thousand).

 

ECP are issued at a discount and the discount rate ranges between 0.08% to 0.74% (December 31, 2013 - 0.12% to 1.03%).

 


14.   Borrowings

 

The details of borrowings as at September 30, 2014 (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)



-


838,774


-


838,774



Chinese renminbi (CNH)



115,394


58,186


-


173,580



Malaysian ringgit (MYR)



373,321


473,707


-


1,718,149



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)



200,600


54,254


-


254,854



US dollar (USD)



1,889,298


7,678,843


1,102,852


14,343,864


















4,543,992


3,748,321


9,492,441


1,102,852


18,887,606













Islamic sukuk notes


US dollar (USD)



1,832,242


-


-


1,832,242

Bilateral loans - floating rate


US dollar (USD)



729,417


-


-


729,417

Subordinated notes - floating rate


US dollar (USD)



1,058,668


-


-


1,058,668

                                       - fixed rate


US dollar (USD)



-


-


3,818,148


3,818,148



Swiss franc (CHF)



-


-


380,130


380,130

Borrowings through repurchase agreements


US dollar (USD)



-


-


-


3,915,116


















8,459,108


7,368,648


9,492,441


5,301,130


30,621,327













Fair value adjustment on borrowings hedged









(300,469)

























30,320,858

 

Included in borrowings is AED 22,298,666 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 September 30, 2014 was AED 317,233 thousand.


14.  Borrowings (continued)

 

The details of borrowings as at December 31, 2013 (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


Chinese renminbi (CNH)



                    -  


173,580


                    -  


173,580



Malaysian ringgit (MYR)



871,027


847,028


                    -  


1,718,055



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)



92,046


-


-


92,046



US dollar (USD)



                    -  


4,627,500


624,410


9,470,551


















4,218,641


1,632,781


6,536,785


624,410


13,012,617













Islamic sukuk notes


US dollar (USD)



1,831,435


                    -  


                    -  


1,831,435

Bilateral loans - floating rate


US dollar (USD)



                    -  


                    -  


                    -  


1,652,261

Subordinated notes - floating rate


US dollar (USD)



1,058,152


                    -  


                    -  


1,058,152

                                       - fixed rate


US dollar (USD)



                    -  


                    -  


3,816,027


3,816,027



Swiss franc (CHF)



                    -  


                    -  


380,130


380,130

Borrowings through repurchase agreements


US dollar (USD)



                    -  


                    -  


                    -  


2,274,631

Certificate of deposits (CDs)


Euro (EUR)



-


-


-


50,587


















8,196,120


4,522,368


6,536,785


4,820,567


24,075,840













Fair value adjustment on borrowings hedged









(290,272)

























23,785,568

 

Included in borrowings is AED 17,567,911 thousand which have been hedged using interest rate, foreign exchange 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, 2013 was AED 268,993 thousand.


14.  Borrowings (continued)

 

Interest on global medium term notes is payable quarterly, semi-annually and annually in arrears and the contractual coupon rates as at September 30, 2014 (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.


Fixed rate of 4.125% p.a.


-

MYR

Fixed rate of 5.2% p.a.


Fixed rate of 4.30%


Fixed rate of 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. and 0.81% p.a.


Fixed rate of 0.68% p.a.


-

USD

Fixed rate of 4.75% p.a.


Quarterly coupons with 108 to 130 basis points over LIBOR


Fixed rate between 2.50% p.a. and 3% p.a.


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

 

(*) include AED 478,747 thousand 30 year accreting notes with yield ranging from 5.09% to 5.12% and are callable at the end of every 5 year from issue date.

 

Sukuk financing notes

 

The Sukuk carries an expected profit rate of 4.07% per annum payable semi-annually.

 

Bilateral loans

 

USD:                      Monthly coupons with 60 basis points plus LIBOR.

 

Subordinated notes:

 

Subordinated floating rate notes

 

Interest on the subordinated floating rate notes is payable quarterly in arrears at a coupon rate of 110 basis points over 3 months LIBOR. The subordinated floating rate notes fully qualified as Tier 2 subordinated loan capital for the first 5 year period till 2011 and thereafter are amortised at the rate of 20% per annum until 2016 for capital adequacy calculation (Note 29). This has been approved by the Central Bank of the UAE.

 

Subordinated fixed rate notes

 

Interest on the subordinated fixed rate notes is payable half yearly in arrears and the contractual coupon rates as at September 30, 2014 (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 1,477,272 thousand mature in 2023 but are callable after 5 years from the issuance date at the option of the Bank.



 

14.  Borrowings (continued)

 

Borrowings through repurchase agreements

 

USD:                      Fixed rate ranging from 0.27% p.a. to 0.65% p.a.

 

Further, the Bank has undrawn borrowing facilities of AED 1,469,200 thousand.

 

15.   Other liabilities

 



As at


As at



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000

Interest payable


439,995


398,931

Recognised liability for defined benefit obligations


302,283


256,102

Accounts payable and other creditors


264,247


189,724

Clearing payables


187


131

Deferred income


470,528


445,561

Acceptances (Note 10)


2,418,973


2,140,725

Others


1,802,973


1,479,743

Total other liabilities


5,699,186


4,910,917

 

16.    Share capital

 


Authorised

Issued and fully paid



As at

As at



September 30

December 31



2014

2013



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 September 30, 2014, Abu Dhabi Investment Council held 58.083% (December 31, 2013 - 58.083%) of the Bank's issued and fully paid up share capital.

 

Treasury shares                                  

 

In 2013, the Bank bought back ordinary shares from certain shareholders and these shares are held as treasury shares (Note 17) and are expected eventually to be cancelled. 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. The approval has been extended until January 2015. There was no buy back of shares during the period (December 31, 2013 - 392,741,711 shares).



 


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

 

Reserves movement for the nine month period ended September 30, 2014:

 



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, 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

-

-

-

-

-

-

130

-

-

130

Fair value changes on cash flow hedges

-

-

-

-

-

-

-

(37,592)

-

(37,592)

Fair value changes on available-for-sale investments

-

-

-

-

-

-

-

-

42,477

42,477

Total comprehensive profit/(loss) for the period

-

-

-

-

-

-

130

(37,592)

42,477

5,015

Fair value and other adjustments

-

(745)

-

-

-

-

-

-

-

(745)

Shares - vested portion 

-

20,281

-

-

-

-

-

-

-

20,281

Net movement in treasury shares on disposal of fund subsidiaries (Note 30)

22,012

-

-

-

-

-

-

-

-

22,012

Balance at September 30, 2014

(1,796,957)

(37,902)

2,287,181

2,242,394

2,000,000

150,000

(59,556)

3,208

393,635

5,182,003












Balance at January 1, 2013

(30,937)

(96,256)

1,950,650

1,905,863

2,000,000

 150,000

     (34,333)

    26,756

      416,848

6,288,591

Exchange difference arising on translation of foreign

operations

-

-

-

-

-

-

(26,789)

-

-

(26,789)

Fair value changes on cash flow hedges

-

-

-

-

-

-

-

6,465

-

6,465

Fair value changes on available-for-sale investments

-

-

-

-

-

-

-

-

(90,390)

(90,390)

Total comprehensive (loss)/income for the period

-

-

-

-

-

-

(26,789)

6,465

(90,390)

(110,714)

Shares - vested portion

-

30,051

-

-

-

-

-

-

-

30,051

Buy back of own shares (Note 16)

(1,655,721)

-

-

-

-

-

-

-

-

(1,655,721)

Net movement in treasury shares held by fund subsidiaries

9,054

-

-

-

-

-

-

-

-

9,054

Balance at September 30, 2013

(1,677,604)

(66,205)

1,950,650

1,905,863

2,000,000

150,000

(61,122)

33,221

326,458

4,561,261

 


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 under which the Bank is prohibited from making a coupon payment on a relevant coupon payment date (Non-Payment Event). 

 

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 September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

Loans and advances to banks

53,505


34,263


157,593


129,972

Loans and advances to customers

1,393,801


1,439,182


4,226,221


4,486,718

Investment securities

134,875


123,100


398,334


356,174

Total  interest income

1,582,181


1,596,545


4,782,148


4,972,864

 

20.   Interest expense (unaudited)

 


3 months ended September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

Deposits from banks

1,693


5,100


5,849


17,752

Deposits from customers and euro commercial paper

183,881


207,693


595,219


750,673

Borrowings

123,478


139,387


369,995


447,432

Total  interest expense

309,052


352,180


971,063


1,215,857

 

21.   Net fees and commission income (unaudited)

 


3 months ended September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

Fees and commission income








Retail banking fees

221,886


186,522


620,199


565,946

Corporate banking fees

123,942


122,251


346,163


273,907

Brokerage fees

7,504


4,790


33,856


11,194

Fees from trust and other fiduciary activities

31,691


27,840


95,267


82,351

Other fees

8,265


8,475


35,505


29,829

Total fees and commission income

393,288


349,878


1,130,990


963,227

Fees and commission expenses

(86,848)


(73,208)


(235,400)


(212,713)

Net fees and commission income

306,440


276,670


895,590


750,514

 

22.   Net trading income (unaudited)

 


3 months ended September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

Net gains on dealing in derivatives

40


4,304


33,439


42,294

Net gains from dealing in foreign currencies

81,838


47,869


202,013


156,200

Net gains from trading securities

108


58,519


98,908


210,838

Net trading income

81,986


110,692


334,360


409,332

 

23.   Other operating income (unaudited)

 


3 months ended September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

(Losses)/gains arising from retirement of hedges

-


(2,804)


-


100,284

Net gains from disposal of available-for-sale investments

14,599


 

-  


22,201


34,526

Property management income

34,913


30,990


101,583


88,900

Rental income

13,647


7,629


52,161


19,118

Income from retirement of long term debt

-


19,696


-


21,669

Dividends income

13,424


6,366


31,419


36,107

Others

4,746


5,046


14,858


9,605

Total other operating income

81,329


66,923


222,222


310,209

 

24.   Operating expenses (unaudited)

 


3 months ended September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

Staff expenses

373,232


331,920


1,056,252


950,882

Depreciation

32,626


30,519


97,227


95,454

Amortisation of intangible assets

6,785


7,881


20,355


23,645

Others

235,595


220,582


680,211


603,805

Total operating expenses

648,238


590,902


1,854,045


1,673,786

 

25.   Impairment allowances (unaudited)

 


3 months ended September 30


9 months ended September 30


2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

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

202,226


308,817


624,225


1,163,980

Recoveries on written off available-for-sale investments

(789)


(787)


(15,758)


(27,450)

Total impairment allowances

201,437


308,030


608,467


1,136,530

 

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 September 30


9 months ended September 30



2014

AED'000


2013

AED'000


2014

AED'000


2013

AED'000

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


1,017,372


874,187


3,027,660


2,572,211

Less: Coupons paid on capital notes


(66,393)


(120,000)


(186,393)


(240,000)

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


950,979


754,187


2,841,267


2,332,211












Number of shares in thousand

Weighted average number of shares in issue throughout the period


5,595,597


5,595,597


5,595,597


5,595,597

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


(392,742)


(335,795)


(392,742)


(169,917)

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


-


(7,285)


(2,473)


(8,090)

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


(13,206)


(25,883)


(14,691)


(28,832)

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


5,189,649


5,226,634


5,185,691


5,388,758










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


-


7,285


2,473


8,090

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


13,206


25,883


14,691


28,832

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


5,202,855


5,259,802


5,202,855


5,425,680










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


0.18


0.14


0.55


0.43










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


0.18


0.14


0.55


0.43

 

27.   Commitments and contingent liabilities

 

The Bank had the following commitments and contingent liabilities:

 



As at


As at



September 30


December 31



2014


2013



unaudited


audited



AED'000


AED'000






Letters of credit


8,303,750


8,677,520

Guarantees


16,045,999


14,249,313

Commitments to extend credit - Revocable


10,243,488


8,293,471

Commitments to extend credit - Irrevocable


11,647,958


3,262,963

Total commitments on behalf of customers


46,241,195


34,483,267

Commitments for future capital expenditure


171,841


189,007

Commitments to invest in investment securities


83,119


132,185

Total commitments and contingent liabilities


46,496,155


34,804,459

               

28.   Operating segments

 

The Bank has four reportable segments, as described below, which are the Bank's strategic divisions. The strategic divisions 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 reviews internal management reports on monthly 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 centralized 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 nine month period ended September 30, 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

1,711,729

1,021,467

1,377,498

81,858

4,192,552

Non-interest income

731,951

409,783

144,469

165,969

1,452,172

Operating expenses

(1,141,230)

(494,843)

(143,878)

(74,094)

(1,854,045)

Operating profit before impairment

allowances

1,302,450

936,407

1,378,089

173,733

3,790,679

Impairment (allowances)/recoveries

(571,901)

(52,324)

15,758

-

(608,467)

Profit before taxation

730,549

884,083

1,393,847

173,733

3,182,212

Overseas income tax expense

-

(3,390)

-

-

(3,390)

Net profit for the period

730,549

880,693

1,393,847

173,733

3,178,822







Capital expenditure





100,511







As at September 30, 2014 (unaudited)






Segment assets

62,638,841

78,878,978

56,307,515

599,858

198,425,192

Segment liabilities

36,037,736

48,272,632

88,482,746

15,535

172,808,649







       



 

28.   Operating segments (continued)

 

The following is an analysis of the Bank's revenue and results by operating segment for the nine month period ended September 30, 2013 (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

1,590,422

1,136,336

1,267,867

91,417

4,086,042

Non-interest income

683,324

326,005

339,499

121,227

1,470,055

Operating expenses

(1,013,380)

(447,190)

(141,623)

(71,593)

(1,673,786)

Operating profit before impairment

Allowances

1,260,366

1,015,151

1,465,743

141,051

3,882,311

Impairment (allowances)/recoveries

(1,000,025)

(163,955)

27,450

-  

(1,136,530)

Profit before taxation

260,341

851,196

1,493,193

141,051

2,745,781

Overseas income tax expense

-  

(5,238)

-  

-

(5,238)

Net profit for the period

260,341

845,958

1,493,193

141,051

2,740,543







Capital expenditure





72,057







As at December 31, 2013 (audited)






Segment assets

61,382,901

76,113,146

45,078,609

567,880

183,142,536

Segment liabilities

32,165,627

43,746,149

82,370,825

38,625

158,321,226

 

The following is an analysis of the Bank's revenue and results by operating segment for the three month period ended September 30, 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

576,684

344,872

451,261

27,146

1,399,963

Non-interest income

190,170

147,158

79,878

52,549

469,755

Operating expenses

(391,332)

(174,676)

(56,275)

(25,955)

(648,238)

Operating profit before impairment

allowances

375,522

317,354

474,864

53,740

1,221,480

Impairment (allowances)/recoveries

(154,498)

(47,728)

789

-

(201,437)

Profit before taxation

221,024

269,626

475,653

53,740

1,020,043

Overseas income tax expense

-

(2,192)

-

-

(2,192)

Net profit for the period

221,024

267,434

475,653

53,740

1,017,851







Capital expenditure





34,367

 

The following is an analysis of the Bank's revenue and results by operating segment for the three month period ended September 30, 2013 (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

533,888

359,871

442,838

29,749

1,366,346

Non-interest income

234,239

121,529

56,048

42,469

454,285

Operating expenses

(356,318)

(159,340)

(48,240)

(27,004)

(590,902)

Operating profit before impairment

allowances

411,809

322,060

450,646

45,214

1,229,729

Impairment (allowances)/recoveries

(198,123)

(110,694)

787

-  

(308,030)

Profit before taxation

213,686

211,366

451,433

45,214

921,699

Overseas income tax expense

-  

(1,639)

-

-

(1,639)

Net profit for the period

213,686

209,727

451,433

45,214

920,060







Capital expenditure





28,521

28.   Operating segments (continued)

 

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.

 



Inter-segment (unaudited)


9 months ended September 30


9 months ended September 30


2014

2013


2014

2013


AED'000

AED'000


AED'000

AED'000

Consumer banking

3,291,070

3,219,088


(847,390)

(945,342)

Wholesale banking

2,226,300

2,287,782


(795,050)

(825,441)

Investments and treasury

(38,615)

(72,001)


1,560,582

1,679,367

Property management

165,969

121,228


81,858

91,416

Total

5,644,724

5,556,097


-

                    -  

 

 



Inter-segment (unaudited)


3 months ended September 30


3 months ended September 30


2014

2013


2014

2013


AED'000

AED'000


AED'000

AED'000

Consumer banking

1,041,172

1,072,642


(274,318)

(304,515)

Wholesale banking

754,349

771,302


(262,319)

(289,902)

Investments and treasury

21,648

(65,783)


509,491

564,669

Property management

52,549

42,470


27,146

29,748

Total

1,869,718

1,820,631


-

                    -  

 

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:

 



International (unaudited)


9 months ended September 30


9 months ended September 30


2014

2013


2014

2013


AED'000

AED'000


AED'000

AED'000

Income






Net interest and Islamic financing income

4,165,474

4,066,450


27,078

19,592

Non-interest income

1,436,891

1,469,857


15,281

198

 



International (unaudited)


3 months ended September 30


3 months ended September 30


2014

2013


2014

2013


AED'000

AED'000


AED'000

AED'000

Income






Net interest and Islamic financing income

1,391,855

1,361,724


8,108

4,622

Non-interest income

457,084

458,847


12,671

(4,562)



 

28.   Operating segments (continued)

 

Geographical information (continued)

 


Domestic


International


As at

 September 30

2014

unaudited

As at

December 31 2013

audited


As at

 September 30

2014

unaudited

As at

December 31 2013

audited


AED'000

AED'000


AED'000

AED'000

Non-current assets






Investment properties

593,307

560,690


-

-  

Property and equipment, net

792,116

801,295


4,540

4,027

Intangible assets

41,340

61,695


-

-  

 

29.     Capital adequacy ratio

 

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

 


As at


As at


September 30


December 31


2014


2013


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)

4,788,368


4,784,282

Retained earnings

6,980,751


5,597,275

Non-controlling interests in equity of subsidiaries

9,906


644,712

Capital notes (Note 18)

4,000,000


4,000,000

Less: Intangible assets

(41,340)


              (61,695)

Total tier 1 capital

25,181,568


24,408,457

Tier 2 capital




Collective impairment allowance on loans and advances

1,651,740


1,684,495

Cumulative changes in fair value (Note 17)

177,136


158,021

Subordinated notes (Note 14)

4,664,193


4,904,727

Total tier 2 capital

6,493,069


6,747,243





Total regulatory capital

31,674,637


31,155,700





Risk-weighted assets




Credit risk

132,139,187


134,759,561

Market risk

5,068,924


4,890,071

Operational risk

11,835,586


7,216,753

Total risk-weighted assets

149,043,697


146,866,385





Capital adequacy ratio

21.25%


21.21%

Tier 1 ratio

16.90%


16.62%

Tier 2 ratio

4.36%


4.59%

 

The capital adequacy ratio was above the minimum requirement of 12% for September 30, 2014 (December 31, 2013 - 12%) stipulated by the Central Bank of the UAE.

 



 

30.    Disposal of fund subsidiaries (unaudited)

 

On March 31, 2014, the Bank redeemed substantial units in Al Nokhitha Investments Feeder Fund, MSCI UAE Index Feeder Fund and Arabian Index Feeder Fund which resulted in reduction of its indirect stake in Al Nokhitha Fund, ADCB MSCI UAE Index Fund and ADCB Arabian Index Fund (the "Funds") and consequently its exposure to variable returns from its involvement in these Funds reduced considerably to a level that led the Bank to conclude that there is a loss of control over these subsidiaries.  The residual interest in these funds is classified as available-for-sale investments as per IAS 39.

 

Analysis of net assets over which control was lost

 










AED'000






Bank balances




226,121

Trading securities




867,792

Other assets




11,888

Total assets




1,105,801











Other liabilities




4,218

Non-controlling interests




836,495

Total liabilities




840,713






Net assets over which control was lost




265,088

 

Sales consideration 

                                                                        










AED'000






Cash consideration received




95,112

Fair value of residual interest classified as available-for-sale investments




169,976

Total sales consideration




265,088






Less: Fair value of net assets over which control was lost




265,088






Gain on disposal of fund subsidiaries




-

 

Net cash inflow on disposal of fund subsidiaries

 










AED'000






Consideration received in cash and cash equivalents




95,112

 

Fair value of residual interest has been booked as transfer to available-for-sale investments and this being a non-cash transaction has not been reflected in the condensed consolidated interim statement of cash flows.

 

Net gains amounting to AED 91,521 thousand on treasury shares held by the fund subsidiaries pertaining to previous periods were recognised in retained earnings in March 2014. 

31.   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 as certain OTC derivatives, commodity derivatives, foreign exchange spot and forward contracts 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. 

 

Level 2 investment properties include buildings completed and under development. 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.

 

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 and deposits from customers, 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.



 

31.   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 September 30, 2014 (unaudited)

Notes

AED'000

AED'000

AED'000

AED'000

Assets at fair value 






Trading securities 

5

175,825

-

-

175,825

Derivative financial instruments

6

1,833

4,141,992

-

4,143,825

Investment securities 

7





     - Quoted 


20,463,836

-

-

20,463,836

     - Unquoted 


-

969,327

366,676

1,336,003

Investment properties 

9

-

593,307

-

593,307

Total assets at fair value 

20,641,494

5,704,626

366,676

26,712,796

Liabilities at fair value 






Derivative financial instruments

6

2,436

4,681,132

-

4,683,568

Total liabilities at fair value 

2,436

4,681,132

-

4,683,568







As at December 31, 2013 (audited)






Assets at fair value 






Trading securities 

5

884,640

-

-

884,640  

Derivative financial instruments

6

1,767

3,614,436

-

3,616,203                         

Investment securities 

7





     - Quoted 


20,480,037

-

-

20,480,037

     - Unquoted 


-

58,147

316,588               

            374,735  

Investment properties 

9

-

560,690

-

560,690

Total assets at fair value 

21,366,444

4,233,273

316,588

25,916,305

Liabilities at fair value 






Derivative financial instruments

6

-

3,965,587

-

3,965,587

Total liabilities at fair value 

                       -  

3,965,587

                       -  

        3,965,587      







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


September 30


December 31


2014


2013


unaudited


audited


AED'000


AED'000

At January 1,

316,588               


               278,436

Acquisitions during the period/ year

47,786


                  49,217

Matured/disposals during the period/ year

(20,471)


                 (9,726)

Fair value adjustments

22,773


(2,502)                  

Transfer from Level 1

-


 1,163

Balance at

366,676


316,588               

 

Net gain of AED 20,429 thousand on disposal of level 3 investments were included under other operating income in the condensed consolidated interim income statement (Note 23).

 

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

 

There is no change in valuation techniques during the period.

 



 

32.   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.


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