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 these 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 six month period ended June 30, 2014 are similar in nature and magnitude. Note 8 of these condensed consolidated interim financial information provide details of lending exposure to government entities.

 

The results for the six month period ended June 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 these 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 these 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 January 1, 2014

 

Amendments to 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.

 

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

 

Amendment to IAS 36 - Impairment of Assets to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique.

 

Amendment to 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.

 

Other than the above, there are no other IFRSs that were effective for the first time for the financial year beginning 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 amendments to Standards:	Effective for annual periods beginning on or after
Amendments:
IAS 19 - Employee Benefits clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. IFRS 2 - Share-based Payment amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition'. IFRS 3 - Business Combinations (a) require contingent consideration that is classified as an asset or a liability to be measured at fair value at each reporting date (b) clarify that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. IFRS 8 - Operating Segments requires disclosure of the judgements made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets only required if segment assets are reported regularly. 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. IAS 16 - Property, Plant and Equipment and IAS 38 - Intangible Assets clarify that the gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount.	July 1, 2014

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 amendments to Standards:	Effective for annual periods beginning on or after
Amendments (continued):
IAS 24 - Related Party Disclosures clarify how payments to entities providing management services are to be disclosed. IFRS 1 - First Time Adoption of International Financial Reporting Standards clarify which versions of IFRSs can be used on initial adoption (amends basis for conclusions only). IAS 40 - Investment Property clarifies the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.
IFRS 11 - Joint Arrangements requires an acquirer of an interest in a joint operation in which the activity constitutes a business (as defined in IFRS 3 Business Combinations) to: -    apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the guidance in IFRS 11. -    disclose the information required by IFRS 3 and other IFRSs for business combinations. The amendments apply both to the initial acquisition of an interest in joint operation, and the acquisition of an additional interest in a joint operation (in the latter case, previously held interests are not remeasured).	January 1, 2016
IAS 16 - Property, Plant and Equipment and IAS 38 - Intangible Assets brings the following: -    clarify that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment. -    introduce a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate, which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. -    add guidance that expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technological or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset.	January 1, 2016
IAS 16 - Property, Plant and Equipment and IAS 41 - Agriculture include and clarify the following: -    include 'bearer plants' within the scope of IAS 16 rather than IAS 41, allowing such assets to be accounted for as property, plant and equipment and measured after initial recognition on a cost or revaluation basis in accordance with IAS 16. -    introduce a definition of 'bearer plants' as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. -    clarify that produce growing on bearer plants remains within the scope of IAS 41.	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 amendments to Standards:	Effective for annual periods beginning on or after
New Standards:
IFRS 14 - Regulatory Deferral Accounts permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes, for 'regulatory deferral account balances' in accordance with its previous GAAP, both on initial adoption of IFRS and in subsequent financial statements.	January 1, 2016
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 (intended as complete replacement for IAS 39).	January 1, 2018

Key requirements of IFRS 9 are described as follows:

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

 

Management anticipates that these IFRSs will be adopted in the condensed consolidated interim financial statements in the initial period when they become mandatorily effective. The Bank will assess IFRS 9's full impact once the standard is formally issued.

 

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
	June 30		December 31
	2014		2013
	unaudited		audited
	AED'000		AED'000
Cash on hand	547,259		586,709
Balances with central banks	645,543		370,743
Reserves maintained with central banks	8,723,333		7,448,647
Certificate of deposits with UAE Central Bank	2,775,000		1,475,000
Reverse repo with Central Bank	49,466		80,107
Total cash and balances with central banks	12,740,601		9,961,206

 

3.   Cash and balances with central banks (continued)

 

	As at		As at
	June 30		December 31
	2014		2013
	unaudited		audited
	AED'000		AED'000
The geographical concentration is as follows:
Within the UAE	12,665,382		9,857,886
Outside the UAE	75,219		103,320
	12,740,601		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
	June 30		December 31
	2014		2013
	unaudited		audited
	AED'000		AED'000
Nostro balances	1,102,859		1,031,020
Margin deposits	146,631		232,021
Time deposits	13,370,274		8,061,659
Reverse repo placements	2,252,206		-
Murabaha placements	-		1,870,000
Wakala placements	1,200,000		150,000
Certificate of deposits	183,983		-
Total deposits and balances due from banks	18,255,953		11,344,700
The geographical concentration is as follows:
Within the UAE	5,597,690		4,614,768
Outside the UAE	12,658,263		6,729,932
	18,255,953		11,344,700

 

The Bank entered into collateral swap agreements, under which bonds with fair value of AED 2,260,369 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 deposits 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 June 30, 2014 was AED 9,020 thousand (December 31, 2013 - AED Nil).

 

5.    Trading securities

 

	As at		As at
	June 30		December 31
	2014		2013
	unaudited		audited
	AED'000		AED'000
Bonds	210,918		136,772
Equity instruments	-		747,868
Total trading securities	210,918		884,640
The geographical concentration is as follows:
Within the UAE	184,972		659,568
Outside the UAE	25,946		225,072
	210,918		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 (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 June 30, 2014 (unaudited)		AED'000		AED'000
Derivatives held or issued for trading
Forward foreign exchange contracts		185,280		164,500
Foreign exchange options		9,968		60,310
Interest rate and cross currency swaps		2,795,325		2,816,728
Options		101,976		183,877
Futures (exchange traded)		17,243		20,558
Commodity and energy swaps		60,022		59,586
Swaptions		82,893		25,225
Total derivatives held or issued for trading		3,252,707		3,330,784
Derivatives held as fair value hedges
Interest and cross currency swaps		262,201		529,997
Derivatives held as cash flow hedges
Interest and cross currency swaps		35,807		197
Forward foreign exchange contracts		62,330		23,681
Total derivatives held as cashflow hedges		98,137		23,878
Total derivative financial instruments		3,613,045		3,884,659
As at December 31, 2013 (audited)
Derivatives held or issued for trading
Forward foreign exchange contracts		96,863		55,816
Foreign exchange options		7,734		31,525
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 losses relating to the fair value and cash flow hedges amounting to AED 523 thousand (June 30, 2013 - losses of AED 3,807 thousand) have been recognised in the condensed consolidated interim income statement.

 

As at June 30, 2014, the Bank received cash collateral of AED 284,359 thousand (December 31, 2013 - AED 341,993 thousand) against positive fair value of derivative assets from certain counterparties.

 

As at June 30, 2014, the Bank placed cash collateral of AED 201,638 thousand (December 31, 2013 - AED 280,378 thousand) and investment securities of AED 1,460,571 thousand (December 31, 2013 - AED 1,502,425 thousand) against the negative fair value of derivative liabilities. 

7.    Investment securities

 

		Other
		GCC	Rest of
	UAE	countries	the world	Total
As at June 30, 2014 (unaudited)	AED'000	AED'000	AED'000	AED'000
Available-for-sale investments
Quoted:
Government securities	2,394,276	2,086,145	1,257,829	5,738,250
Bonds - Public sector	5,480,396	45,322	1,243,646	6,769,364
Bonds - Banks and financial institutions	2,582,373	861,854	5,942,157	9,386,384
Bonds - Corporate	94,216	-	-	94,216
Equity instruments	1,087	-	-	1,087
Mutual funds	75,531	-	92,078	167,609
Total quoted	10,627,879	2,993,321	8,535,710	22,156,910
Unquoted:
Government securities	66,330	-	-	66,330
Bonds - Public sector	59,752	-	-	59,752
Bonds - Banks and financial institutions	-	-	33	33
Bonds - Corporate	-	-	910	910
Equity instruments	248,180	-	13,234	261,414
Mutual funds	89,965	-	-	89,965
Total unquoted	464,227	-	14,177	478,404
Total available-for-sale investments	11,092,106	2,993,321	8,549,887	22,635,314
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 foreign currency swaps and designates these as fair value and cash flow hedges, respectively. The net negative fair value of these interest rate swaps as at June 30, 2014 was AED 187,680 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 June 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	3,190,459		3,094,847		2,390,637		2,274,631

 

Further, the Bank pledged investment securities with fair value amounting to AED 1,478,825 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
		June 30			December 31
		2014			2013
		unaudited			audited
		AED'000			AED'000
Overdrafts (retail and corporate)		3,889,233		4,396,183
Retail loans		16,235,760		14,957,734
Corporate loans		100,233,851		101,121,762
Credit cards		2,539,757		2,238,316
Islamic financing assets  (see below)		11,170,393		10,666,627
Other facilities		6,956,875		5,157,995
Gross loans and advances		141,025,869		138,538,617
Less: Allowance for impairment		(6,723,542)		(6,889,947)
Total loans and advances, net		134,302,327		131,648,670

 

Islamic financing assets

 

		As at		As at
		June 30		December 31
		2014		2013
		unaudited		audited
		AED'000		AED'000
Murabaha		1,632,895		1,038,429
Ijara financing		5,089,688		5,594,710
Mudaraba		255,630		463,049
Salam		4,080,291		3,476,441
Others		111,889		93,998
Gross Islamic financing assets		11,170,393		10,666,627
Less: Allowance for impairment		(175,297)		(102,384)
Net Islamic financing assets		10,995,096		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 June 30, 2014 was AED 3,322 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 June 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	240,082		323,627		563,709		1,170,603		383,517			1,554,120
Recoveries during the period/year	(141,710)		-		(141,710)		(187,964)		-			(187,964)
Net charge for the period/year	98,372		323,627		421,999		982,639		383,517			1,366,156
Discount unwind/others	(78,415)		(44,245)		(122,660)		(144,016)		-			(144,016)
Net amounts written-off	(466,020)		-		(466,020)		(795,407)		-			(795,407)
Currency translation	167		109		276		(158)		(348)			(506)
Balance at	3,804,299		2,919,243		6,723,542		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 June 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	210,547	-	210,547		215,777	-	215,777
Energy	710,558	674,584	1,385,142		527,279	183,377	710,656
Trading	2,648,331	253,426	2,901,757		2,172,597	155,286	2,327,883
Real estate investment & hospitality	52,057,162	777,734	52,834,896		51,704,059	733,630	52,437,689
Transport	2,116,141	725,628	2,841,769		558,357	673,627	1,231,984
Personal	31,985,480	266,303	32,251,783		29,901,512	389,073	30,290,585
Government & public sector entities	26,185,861	-	26,185,861		31,690,007	560,690	32,250,697
Financial institutions (*)	10,170,519	7,552,102	17,722,621		9,844,961	4,987,911	14,832,872
Manufacturing	1,251,332	616,696	1,868,028		944,955	364,810	1,309,765
Services	1,466,622	211,420	1,678,042		1,586,456	352,906	1,939,362
Others	813,385	332,038	1,145,423		769,479	221,868	991,347
	129,615,938	11,409,931	141,025,869		129,915,439	8,623,178	138,538,617
Less: Allowance for impairment			(6,723,542)				(6,889,947)
Total loans and advances, net			134,302,327				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	32,006	-	32,006
As at June 30, 2014 (unaudited)	592,696	-	592,696

 

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
		June 30		December 31
		2014		2013
		unaudited		audited
		AED'000		AED'000
Interest receivable		985,977		911,968
Advance tax		22,495		79,603
Clearing receivables		1,573		404
Prepayments		90,517		38,985
Acceptances		3,272,422		2,140,725
Others		231,857		232,953
Total other assets		4,604,841		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
		June 30		December 31
		2014		2013
		unaudited		audited
		AED'000		AED'000
Vostro balances		347,377		192,242
Margin deposits		220,861		255,097
Time deposits		6,550,263		3,843,672
Total due to banks		7,118,501		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 positive fair value of these swaps as at June 30, 2014 was AED 729 thousand (December 31, 2013 - AED Nil).

 

12.   Deposits from customers

 

		As at		As at
		June 30		December 31
		2014		2013
		unaudited		audited
		AED'000		AED'000
Category :
Time deposits		50,949,623		65,550,746
Current account deposits		49,080,955		37,131,506
Savings deposits		8,202,129		6,951,691
Murabaha deposits		9,947,900		4,974,515
Long term government deposits (Note 8)		425,898		436,008
Margin deposits		434,391		383,242
Total deposits from customers		119,040,896		115,427,708