Speaker #1: Detailed by components, starting with net interest margins on slide 4. The overall margin is 3.24% year-to-date, so tracking well to our full-year guidance of 3.1% to 3.3%.
Speaker #1: Just breaking that up a bit: ENBD ex-DenizBank and RBL NIMS remained resilient at 2.6% year-to-date and 2.58% in Q3, increasing 4 basis points quarter-on-quarter.
Speaker #1: Throughout Q3, we have seen EBOR rates rise by around 50 basis points, including the 25 basis point Fed rate hike. This, combined with the increased mix of time deposits, has indeed increased our cost of funding. However, we have continued to maintain our disciplined asset pricing approach, which has more than offset the funding cost increase.
Speaker #1: So we're still in a good position with respect to margins, tracking well to our verbal guidance of 2.5% to 2.6% margin. Emirates NBD Bank reported a net interest margin of 6.87% year-to-date, as I had indicated in the previous quarter.
Speaker #1: We did see some pressure on margins in DenizBank, reflecting the impact of higher overnight rates on funding costs. That continued into Q3, as rates remained elevated.
Speaker #1: The good news is that we have seen overnight rates come down in the latter part of Q3. I think we're still tracking close enough to the 7% full-year NIM that I mentioned in earlier quarters.
Speaker #1: Further rate cuts are expected in Q4, which will help. RBL NIMs stood at 4.06% for the consolidated period on an IFRS basis, with a positive contribution of 6 basis points to the group's quarterly NIM, as you can see in the bottom-right chart.
Speaker #1: Overall, a strong deposit franchise and solid liquidity position provide us with the flexibility to remain disciplined in deposit pricing while we continue to price asset yields appropriately.
Speaker #1: Moving to non-funded income on page 5, we delivered another strong quarter, with total NFI increasing 18% year-on-year to AED 12.8 billion for the first 9 months.
Speaker #1: This reflects the strength and diversification of our revenue base, with broad-based growth across segments and product lines. Net fee and commission income is up 22% year-on-year to AED 7.4 billion, supported by continued strong fee-generating asset growth and robust customer activity across cards, wealth management, trade finance, and transaction banking.
Speaker #1: Total other non-funded income increased 12% year-on-year to $5.4 billion year-to-date, driven by strong client flow income, particularly in FX and derivatives, as we continue to enhance our global market product offerings and deepen client engagement.
Speaker #1: Turning to costs on page 6, our cost-to-income ratio stood at 31.4% for the first nine months; that does include RBL with the first full quarter of results. Without that, it is 30.8%, and tracking to an expected full-year outcome of around the 31% mark.
Speaker #1: With RBL, I think we'll be around 33% or just over. RBL has a 50% cost-income ratio, so going forward, that will mean we are typically higher than before.
Speaker #1: I'll come back to January to give you a better idea of what that means for long-term guidance overall. For Q3, in the bottom-left-hand table, I have called out the RBL cost base, noting that costs are up 6% quarter-on-quarter and 11% for Q3 year-on-year, which is almost entirely due to the inflation pressure in DenizBank.
Speaker #1: We have been maintaining our strict cost discipline, but having said that, we do continue to invest in technology, digital capabilities, and strategic growth initiatives, ensuring that our infrastructure supports our future growth.
Speaker #1: Turning to page 7, loan growth was exceptionally strong in Q3. Gross loans increased 27% year-to-date; excluding RBL, loans were up 18%, which is a particularly strong outcome. This has led us to revise positively our full-year guidance to low 20s from mid-teens.
Speaker #1: Retail loan growth is across all products, driving the 17% increase year-to-date. And corporate loan growth, with 22%, has exceeded expectations and is across almost every industry sector, perhaps with the one exception of hotels.
Speaker #1: It's also when a well-balance between GREs, governments, and the private sector. Particularly in the UAE, where business activity remains strong. On the liability sides, deposits increased 149 billion during the first 9 months, excluding RBL deposits grew 12% year-to-date, while RBL adds 55 billion of deposits, representing around 6% of group deposits.
Speaker #1: While we continue to observe CASA migration to time deposits, primarily from corporate customers, we expect this to be a trend broadly consistent with the overall market.
Speaker #1: That said, there is clearly higher competition for liquidity across the market, particularly on the back of continued strong loan demand. Our approach has been to remain disciplined on deposit pricing while maintaining business momentum and protecting the overall sustainability of our funding base.
Speaker #1: Importantly, our market-leading deposit franchise and strong liquidity position give us the flexibility to continue to be selective in attracting deposits. Turning to page 8, on credit quality, the NPL ratio improved to 2.0%, mainly as a function of the larger lending denominator and no net material change in the NPL stock balance.
Speaker #1: We have tightened our full-year guidance to approximately 2.0%, from approximately 2.5%, to reflect this. Touching on cost of risk, as we did in Q2, we have again updated our macroeconomic variables used in our ECL models to reflect the evolving operating environment.
Speaker #1: Which was on the positive side. DenizBank's cost of risk remained elevated at 307 basis points, as we have seen the flow through from the impact of inflationary pressure in segments like Agri, SME, and credit cards.
Speaker #1: However, elevated risk costs continue to be supported by strong lending margins, allowing the bank to maintain healthy risk-adjusted returns. Overall, the cost of risk for the group landed at 37 basis points year-to-date, which remains within our full-year guidance of 30 to 50 basis points, looking ahead to Q4.
Speaker #1: We expect the full-year cost of risk to land towards the upper end of our guidance, and potentially marginally above, as we may not see the positive impact from MEVs repeat and possibly lower recoveries than in the first three quarters.
Speaker #1: Just moving to slide 9. Funding and liquidity remain clear strengths for the group, with an AD ratio of 87% and an LCR of 147%.
Speaker #1: Providing substantial flexibility to support balance sheet growth. During the first nine months, Emirates NBD issued $34.8 billion of term debt and, in Q3, we successfully issued our inaugural 150 million Swiss franc public green bond, reopening the Swiss franc market for GCC issuers. RBL completed its first-ever $350 million EMTN issuance.
Speaker #1: These transactions demonstrate the strength of our funding franchise and our continued ability to access diversified markets on attractive terms. Turning to capital, our position remains solid, with a CET1 ratio of 13.4%, absorbing the RBL investment and consolidation, as well as the continued strong balance sheet growth impact.
Speaker #1: Strong retained earnings in Q3 absorbed 4% quarter-on-quarter growth in total risk-weighted assets, with total RWAs reaching AED 1 trillion. Our capital base remains a key pillar of strength, giving us the capacity to support healthy customer growth, support balance sheet expansion, and continue creating long-term shareholder value.
Speaker #1: Slide 11 shows continued strong performance across our key businesses. Retail delivered an excellent performance with a record operating profit of $11.2 billion. This momentum was evidenced across the business, with lending growing 17%, complemented by $29 billion of deposit growth year-to-date and a strong 71% CASA ratio.
Speaker #1: CNIB delivered a 7% year-on-year increase in profit before tax. Lending momentum was particularly strong, with loans up 22%, while the business remained focused on liquidity and high-quality client relationships.
Speaker #1: Global Markets and Treasury delivered $1.9 billion of income, supported by our enhanced product suite and strong client activity. The team also maintained its market-leading position in term debt markets, issuing AED 34.8 billion of term debt in Sukuk.
Speaker #1: And finally, Denise Bank delivered $1.8 billion profit before tax, with strong local currency loan and deposit growth continuing to support performance. With that, we can now open up the call for questions.
Speaker #2: Thank you, Patrick. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced.
Speaker #2: If you wish to cancel your request, please press *2. To participate in our written questions, just type your query into the 'Ask a Question' text area, then click the Submit button.
Speaker #2: Once again, please press star-1 on your telephone if you wish to ask a question. Our first question comes from John Keith from UBS.
Speaker #2: Please go ahead.
Speaker #3: Hi, thank you. Well done on the results. First question, please, is just on loan growth. I appreciate that you'll give us next year's guidance with the Q4 results, but given the momentum you've got at the moment, would it be reasonable to assume at least mid-teens growth for next year, or is there something that might slow it more than that?
Speaker #3: I can see consensus is about 11% to 12% at the moment, which seems on the lower end. And then, second question, please, about asset quality.
Speaker #3: Did you release any of your overlay in the quarter, and can you remind us where those stand at the moment? And as we think out to next year, is there the potential to release overlays, along with the potential to get more recoveries, that might see the cost of risk again quite a bit below the through-the-cycle rate?
Speaker #3: Thank you.
Speaker #1: John, thank you very much. Thanks for joining. Just briefly on those, just for the loan growth for 2027—you're right, we do come back typically in January to give guidance on that.
Speaker #1: We're in the budget-setting cycle at the moment, and that's when we sort of lock out across the five core markets what the potential is, and that is including also RBL.
Speaker #1: And then bring that together and provide the updated guidance. In the meantime, the momentum has been strong so far this year, and perhaps surprised a little on the upside, particularly in the corporate side. That has been genuine across all sectors.
Speaker #1: There were a few standout sectors, like manufacturing, management companies, and FIs, etc. So, I think time will tell as we go through the next quarter how much that momentum continues.
Speaker #1: But there's nothing we are seeing that means there is reduced appetite. Obviously, geopolitics and those sorts of things may have some factor on the pace of investment in the year to come, but that's one of the unknown unknowns for the future.
Speaker #4: And what I would say, John, is that the pipeline, as you know—management board, credit committees, obviously—and the pipeline is strong. The one thing we're not sure of is asks.
Speaker #4: The question is, are we getting enough return for the asks? We are also being a lot more particular about returns and making sure we're getting the right returns on risk capital.
Speaker #4: Especially given the tightness of liquidity in the market, we can be more selective and push pricing a bit higher than historically, given the increased cost of liquidity.
Speaker #1: And John, just on the second one around asset quality and the overlays: yes, we made that AED 865 million overlay provision in Q1. We updated—I think we are one of the few banks to actually update—the ECL models with the macroeconomic variables in Q2.
Speaker #1: We've done that yet again. A number of the key variables that actually supported that overlay have improved significantly over the last two quarters. So we have around half that original overlay left, equivalent, just from some of those releases effectively in the model that we've been able to do.
Speaker #3: Got it. Thank you.
Speaker #2: Thank you. Our next question comes from Naresh Bill and Dani from Jefferies. Your line is now open. Please proceed.
Speaker #3: Thank you very much. It's Naresh from Jefferies. Congrats on the results. Three quick questions, please. One, would you say that there is scope for the UAE segment to outperform further on the net interest margin, given that the EIBOR only rose meaningfully in September, so the full loan book has not been repriced?
Speaker #3: Or should the benefits be tempered by the risk of a rise in funding costs, as we've seen some erosion in the CASA mix?
Speaker #3: So that's the first question. My second question is on asset quality. Can you please guide me on the extent to which the central bank support package that was offered in March has concluded or not?
Speaker #3: Are there any measures still in place, or that have firmly concluded across the board? And with that conclusion happening on 30th September, should this have any impact on the Q4 impairment charges or not?
Speaker #3: That's the second question. And my third and final question is again on asset quality. Are we seeing that your industry-leading provisions-to-loans ratio, which is right now 2.93%, erode somewhat as you have enjoyed recoveries in recent quarters?
Speaker #3: For our medium-term modeling, is there a level that you can guide us to in order to refine the impairment charge estimates more precisely through the medium term?
Speaker #3: Thank you.
Speaker #1: All right.
Speaker #4: Sorry, Naresh, on the last question, do you mean stage three coverage ratios?
Speaker #3: No, the overall provisions-to-loans ratio. So, overall provisions to loans is 2.93%, which was, I think, 4.9% or so at the recent peak about six to eight quarters in the past.
Speaker #3: But that has come off, as we've had enjoyed recoveries. So I'm just trying to—just so that for us to model the impairment charges for the medium term—is there a level, is there a level that you can guide us on this ratio at all?
Speaker #3: Thank you.
Speaker #1: Yeah, Naresh, just on the NIMS and the sensitivity around that, yes, EIBOR has gone up 50 basis points, including the 25 basis points Fed rate hike.
Speaker #1: There may be another rate hike this year, so that's one of the key reasons it's not all going to be upside for us. We are tracking nicely to our target NIM margin.
Speaker #1: So, on one hand, you have some of the upside from the rate sensitivity, but also there is the competition for liquidity. And with that, we have changed the mix in our book significantly, from CASA to time deposit.
Speaker #1: So that does cost more, so that then blunts some of that upside. In fact, the rate sensitivity has shifted somewhat, where the upside is now more like AED 250 million for a rate cut and AED 160 million for a rate rise.
Speaker #1: Sorry, I said that the wrong way round. So, because of that mix in the funding book, the bank is now a lot less rate-sensitive than we might have been in the past.
Speaker #1: But with that pressure on liquidity, we are really focused on making sure we're not overpaying for time deposits. Yes, the mix is changing, but we're not outcompeting the market.
Speaker #1: And then, on the asset side, we're making sure we're being very disciplined around the pricing for the assets on that side, as this helps maintain that margin.
Speaker #1: Having said that, there is an aspect of, if there is more GRE or government-related lending, inevitably the gross client spread of that, because it's at the better end of the PD curve, means a lower overall customer spread.
Speaker #1: And that can actually reduce margins, net-net, a bit, but you are still getting strong returns on risk assets. Just on the asset quality and the central bank, the FIRP has been rolled forward to the 15th of January.
Speaker #1: Happily, that's amid month after a year-end, rather than being on the day of a period end, which helps enormously. But in respect of the asset quality part of it, the intention of the central bank guidance there was to say, yes, please support your customers with deferrals.
Speaker #1: If customers are availing themselves of deferrals, that doesn't mean in your models you have to automatically downgrade someone for forbearance from Stage 1 to Stage 2, for example.
Speaker #1: But if you actually look in Note 23 of our accounts, you will see that we have actually been downgrading from Stage One to Stage Two.
Speaker #1: So, you have seen a slight step-up in that flow. And to me, that really does demonstrate that we are not holding back from downgrading customers from a credit quality point of view, as opposed to just because there is temporarily temporary relief.
Speaker #1: And as we know from during COVID, having the deferrals actually avoided a significant amount of impairments in the future. And just on the coverage side of things, coverage will reduce due to a higher loan base.
Speaker #1: So that's a big factor in the dilution of some of those ratios. Even in the presentation, when we're looking at both the Stage 3 and the overall coverage on page eight, the actual impaired loan stock has not been moving a lot over the last couple of years.
Speaker #1: Okay. We've had significant recoveries, and then some new inflows from that. With that, because you then have a higher denominator, you also end up with some dilution in some of the other key coverage ratios as well.
Speaker #1: So, it might be better to look at some of the absolutes from the numerator and denominator, rather than a target ratio per se.
Speaker #3: Our next question comes from—thank you. Our next question comes from Shabir Malik from Morgan Stanley. Your line is now open. Please proceed.
Speaker #1: Hi, thank you very much. I just wanted to get one clarification. So, you said that sensitivity on rates has changed. If you can, please repeat what's the sensitivity now?
Speaker #1: That's my first question. My second question is regarding your revenue mix. What percentage of revenue does the bank currently generate from outside the UAE?
Speaker #1: So that will be pretty helpful. And thirdly, I think just in terms of margins going into the fourth quarter—I think this quarter, in the third quarter, we saw the NIM margins coming off a bit, but given the way interest rates are shaping up in Turkey, there's a possibility of NIM expansion in the fourth quarter.
Speaker #1: And you've kind of alluded to the favorable sensitivity to rates for the UAE business, so the signs seem to suggest that NIMs should expand going into the fourth quarter.
Speaker #1: Is that a reasonable assumption, or do you think there are risks to that thesis? And maybe finally, RBL benefited from a capital injection from Emirates NBD, but it also saw inflow of NRI deposits.
Speaker #1: How does that play out in terms of its NIM trajectory going into the fourth quarter and into 2027? Thank you.
Speaker #4: Okay, Shabir, four things are okay, right? Just on the rate sensitivity, just to repeat that—actually, on an Emirates NBD standalone basis, for a 25 basis point increase, it's AED 160 million.
Speaker #4: And for 25 basis points down, it's $250 million. And that's because the mix of time deposits means it's lower than it was before.
Speaker #4: As a group as a whole, it's about $200 million, just over $210–215 million for a 25 basis point increase, and about $300 million on the downside.
Speaker #4: So that's just the update on the change in rate sensitivity. Just on the revenue mix, I think you were talking about, for international—so just for the pure international, excluding Deniz and RBL, it's around 6% or so.
Speaker #4: And if I included all of international, outside of the UAE, it's about 27% of our overall revenue. On the Denise NIMS, what's that looking like for Q4?
Speaker #4: So, very similar to last year, you may recall they had a rate hike or a pause in the rate cutting near the end of Q1.
Speaker #4: We knew then that Q2 NIMS would have a short-term negative impact. This year, however, and then last year, they continued the rate cut into Q3 and Q4.
Speaker #4: This year, the rate cutting has paused for longer. And indeed, I think the overnight rates were up around 40% versus the more usual 37%.
Speaker #4: So, it was a bit higher for longer, and that continued into Q3. In the latter part of Q3, though, they did reduce that overnight rate, and we are expecting more rate cuts.
Speaker #4: So it won't have a material impact on this year's financials, but we'll be positive in Q1 next year for net. So I'll keep an eye on the exit rate for Q4, which I am expecting to be slightly better than Q3.
Speaker #4: And even if it stayed where it is today, it's close enough to the 7% verbal guidance I think I gave earlier, as part of the overall group target of 3.1% to 3.3%.
Speaker #4: And you can see I said 3.24 yesterday as a whole group. We're right in the middle of that guidance, so I'm quite comfortable with that.
Speaker #4: And then RBL, capital injection, benefits from FCNR. Yes, the good thing about the FCNR was that anything that was either originated in the UAE or originated onshore by RBL—all of that funding has been kept inside our banking group, which is a significant benefit from a funding point of view.
Speaker #4: And the capital injection, yes, we will have a benefit from that—both from the FCNR and the capital injection—by, in the first instance, being able to retire some of the more expensive term funding that they had pre-acquisition.
Speaker #4: So that's also showing some real benefits. I am not breaking out the monetary value of that at the moment, but you will see some of that upside coming through more in Q4 and in Q1.
Speaker #4: I think that covers everything. Did you want to add anything else to that, Shane?
Speaker #2: No, I think the other thing just to remember from the analyst perspective is we've also got to be quite careful about how we guide you on RBL, because it's a publicly listed company.
Speaker #2: That's separately regulated. So we also need to be mindful of governance requirements when it comes to RBL. On giving a forward outlook, given that they are publicly listed as an entity.
Speaker #4: Okay, thanks, Nuresh. Oh, sorry, Shabir. Shabir, sorry.
Speaker #3: I know. Our next question comes from Raul Bajaj from Citibank. Your line is now open. Please proceed.
Speaker #5: Yeah, hi. Thanks for taking my question. Raul Bajaj from Citi. I have three questions mainly. The first one is on the comment you made earlier around international expansion, which said international expansion remains a core part of the long-term strategy.
Speaker #5: I just wanted to understand, given that we are done with the RBL acquisition now and the Egypt kind of acquisition is also in process, what next?
Speaker #5: What’s next on ENBD’s radar? What are you thinking in terms of the strategy, which remains very core, as you said earlier? That’s my first question.
Speaker #5: My second question is on slide six, actually, and maybe a technical clarification here. If I look at the bottom right-hand side chart on slide six, I see that non-client income has been negative in every quarter for the last five or six quarters.
Speaker #5: Why? I mean, why are you not able to generate positive non-client income? What is going on here? That's kind of my second question. And my third and final question is on FCNR again.
Speaker #5: I just wanted to understand the loan growth that you have shown in the ENBD XRBL business—I think 7% quarter-on-quarter. To what extent does that incorporate an uplift coming from the leveraged FCNR, where ENBD over here was taking part as the leverage provider for the FCNR deposit?
Speaker #5: So is that leverage part of the ENBD number or part of the RBL number? What I'm trying to get to is basically, how much is the underlying UAE growth, excluding the leveraged part of the FCNR?
Speaker #5: Thank you.
Speaker #4: Okay, Raul. Maybe international expansion—Shane, do you want to touch on that one?
Speaker #2: I think what we've said many times is that, obviously, RBL was our focus to get that deal closed—which we have. What I would say on India is we've got a lot of work to do when it comes to integration, technology, etc.
Speaker #2: So there's a lot of work to do there to get that better down. On Egypt, I've said quite a few times on this call, we're far too small in our minds.
Speaker #2: We've looked at other acquisitions in Egypt. Historically, we never got them over the line, for the price that we wanted, etc. This one came along and it's relatively cheap.
Speaker #2: As an acquisition, it gives us a big boost in our deposit franchise and our wealth franchise in Egypt. So I think that made a lot of sense for us to actually expand there.
Speaker #2: And acquire there. We would continue to look for bolt-ons in our core markets. Do I see us going out and doing a massive offshore acquisition in the foreseeable future?
Speaker #2: I think the answer to that is unlikely, unless something magic comes along. Given that our CT1 is down to 13.4, we need some rebuild there.
Speaker #2: RBL took about 1% in total with the RWAs, yeah, off where we would have been. So we do generate strong capital pretty quickly. But I think from a strategic perspective, boltons and bulking up where we are in our five core markets is always important to us.
Speaker #2: That’s been our strategy for years now. We continue to execute on that strategy, and we look for opportunities. But we’re very picky, and we’re very price-sensitive as to what actual transactions we end up with.
Speaker #2: And we end up losing more. So, I think these two came along, they were saying with acquisitions, it's like waiting in London for a bus.
Speaker #2: You wait for hours, and then three come along at the same time. Well, I think that's a bit what happened with RBL in Egypt, and two buses came along.
Speaker #2: We're mindful that we need to give returns to our shareholders. We're mindful that we need to maintain our capital and liquidity. But we're also mindful that we need scale in these markets, and certainly in the five core markets that we've nominated, we want scale in all of those markets.
Speaker #2: We don't want to be a tiny percent market share participant. That doesn't work because you need scale in banking these days.
Speaker #4: Thanks, Shane. I'll take the second and third one, maybe. Actually, Raul, I think you were referring to page five for the non-funded income, rather than page six. If we can just turn to that one.
Speaker #4: Yep, I'll take it. Okay, right, okay, there we go. So, Raul, I think you're referring to the "Pay All Blues" at the bottom right-hand corner there.
Speaker #4: For the non-client flow component of other non-funded income, the most substantial part of that is two things. One is the swap funding cost in DenizBank in Turkey.
Speaker #4: So that's when they're swapping their foreign currency through the central bank into local currency for lending—that swap funding cost component of the derivative.
Speaker #4: Cost goes through that line, so that's what that is. Some quarters, actually, and that has been rising or it had been coming down for a number of quarters as interest rates were coming down, but then when the rate cuts paused, and then temporarily, I guess, the overnight rate went up from 37% to 40%.
Speaker #4: That increased it a bit. But then, from quarter to quarter, we can sometimes see small one-off gains on property sales from time to time, as part of the inventory that we would have historically had from recovered credits. And when the property market is right, then you sell those from time to time.
Speaker #4: So that's why it can be a little bit up and down and lumpy. But that's the whole point of this chart—to pull out for you what the real, recurring client-related flow income is, and how consistent and steady that typically is quarter to quarter.
Speaker #4: That's that for that question two. Question three, just on loan growth and how much did the FCNR leverage contribute to that, and which part of it is?
Speaker #4: So that's on slide seven, when we're looking at the Q2 to Q3 movement. We're not going to break out that in detail, either in total quantum or between which line it's in.
Speaker #4: I will help you figure out the total number, but it is partly in the RBL growth. You can see they went from $10 billion, from $44 billion to $54 billion.
Speaker #4: So they will have worked with some of their international customers and some of that leverage, and their retail business. And then in the retail component, going from 204 to 216, that's up 14.
Speaker #4: A part of that would have been, also, the UAE working with customers, doing leverage and that. So that would have been a component of that.
Speaker #4: But if.
Speaker #2: But I think, strategically for us, this made a lot of sense. One, there's obviously money to be made in the leverage that we provide in the UAE and the swap cost, because you don't want to leave the interest rate risk on the table for highly leveraged deposits.
Speaker #2: But the advantage for us, versus some other banks, is we were putting it into ourselves. So we weren't giving that skin in the game to one of the other Indian banks; we were actually consuming it ourselves to lower the cost of funding in RBL itself.
Speaker #2: So I think for us, it was a win-win when we get growth and profitability from the loans and the swaps here. And two, we injected into RBL as long-term deposits, thereby lowering their borrowing costs.
Speaker #2: So for us, it was a win-win structure. We were pretty happy with it. I think half the staff here wanted to know how they could get Indian passports, given the yields you were getting on those deposits.
Speaker #4: Yeah. And Raul, I know that's not particularly helpful if we don't tell you the overall quantum, and if that was a one-off, how much of the growth was that?
Speaker #4: But.
Speaker #2: RBL has declared how much.
Speaker #4: Well, they've said what they have done in total, but that doesn't correlate to exactly how much leverage we would have provided customers to do that.
Speaker #4: So they did make a public statement on that, saying that overall they had attracted $3.4 billion of FCNR, and a substantial part, or I think they said maybe the majority of that, was from within the group.
Speaker #4: But that's why we have updated the guidance to the low twenties. So, if you took 20-21 percent, just say for the loan growth, I think you can work back to what we're expecting Q4 growth to be, and if that is a lower amount than what you saw in Q3, a little bit of that will be attributable to FCNR, but not everything.
Speaker #4: That's the best way I can frame that when I'm afraid. Hope that helps a little bit. Thanks, Raul.
Speaker #1: My next question comes from Raul Rajan from Bank of America. You may now proceed.
Speaker #5: Yes, hi, good evening. Thank you for taking my questions. This is Raul Rajan from Bank of America. I have a few questions from my side, please.
Speaker #5: Firstly, regarding the pricing benefits that you commented upon, which are coming through on the asset side, could you shed some light on where these are coming from and how durable they are?
Speaker #5: That's number one. Secondly, regarding your Turkey business and the acquisition of some assets from HSBC Turkey: will this require further capital infusion into Turkey, or will it be funded through the existing capital at DenizBank itself?
Speaker #5: And thirdly, from loan growth in the third quarter, we saw strong loan growth from sovereign as well as personal loans. I'm assuming some part of personal loans is this FCNR that you have been talking about.
Speaker #5: But if there are any other particular sources within that, and also within Sovereign, is this more Abu Dhabi or are there any other Emirates that you could probably shed some light on?
Speaker #5: Thank you so much.
Speaker #4: Thanks, Raul. Just on pricing benefits of assets, that's more around it's more a discipline of making sure that you're pricing correctly for risk at the point of origination and I think I said a little bit earlier, yes, if you do if you skew significantly towards GREs and Sovereign, your margins will compress because the credit spread will be lower even if the returns on the risk adjusted as on a risk adjusted basis are just as good as something else in the middle of the BD curve.
Speaker #2: I'd just add to that, Patrick. When we look at pricing for our corporate customers, we're also looking at the overall returns, not just lending.
Speaker #2: We're looking at cash management, trade, FX, derivatives, etc. So for us, when we're considering where we'll go on pricing, it's about the overall return on risk capital for that client, including all ancillary products that they utilize.
Speaker #2: So now, if we've just got a borrowing-only relationship from a client, they don't give us ancillaries. Therefore, the pricing is going to be quite different to someone that's giving us their full suite of products.
Speaker #2: And utilizing us as their main bank. So we do price for risk on a relationship basis, not just purely on a credit basis.
Speaker #4: Okay, yeah. And Raul, you can also see clearly—the evidence of that is on page four, in the bottom right-hand corner with the chart, if we can pop that back up.
Speaker #4: You can see that the asset yield, just in the quarter, has gone up 16 basis points, while the funding cost has increased by 11 basis points.
Speaker #4: So that's what I was referring to in the presentation as well. Sure, if your funding cost is going up, you have to pass that cost on to the clients and customers, unfortunately.
Speaker #4: But it's about that discipline, because while there's a lot of appetite and demand for loan growth, it's at what price you do it that is really the key thing.
Speaker #4: So, hopefully that's the evidence that we've been able to achieve that. Your second question—I think there must be some confusion. You mentioned something about Turkey.
Speaker #4: Shane's been referring solely to Egypt, so I don't know if you want to clarify the question, or maybe that's just a mix-up.
Speaker #2: But on Egypt, I think our forecast is we're probably—it's largely a deposit franchise, but those deposits are also invested into government securities, etc. So the estimation on the capital is about 30–40 basis points.
Speaker #2: The CT1, what's that? It's completed. We probably don't think that'll complete until the third quarter of 2027. We need to switch all the systems over at the same time.
Speaker #2: So I think we're on track to cut over on a systems basis by the third quarter of '27.
Speaker #4: And I think the third question there was on Sovereign, up $12 billion for the quarter. I think it's up $18 billion so far for the year.
Speaker #4: None of that is related-party sovereign. So, in other Emirates, we have a strong presence across all the Emirates. We're very much at the table when it comes to any of the economic activity outside the Emirate of Dubai as well.
Speaker #4: I think that was the main part of the question.
Speaker #1: Thank you. I'll now hand over to Karan Govel for the written questions.
Speaker #6: Thank you, Drew. I think Patrick and Shane, we have already covered most of the questions on the numbers, but a lot of people are asking about the underlying customer activity. The loan growth has been very strong.
Speaker #6: Shane and Patrick, what are you seeing on the corporate and retail side?
Speaker #2: I mean, on the corporate side, the pipeline coming through is very significant, so we're not seeing a slowdown. Seeing a management credit committee, and the flows are large.
Speaker #2: And the requests are large. So, I think, on pipeline, on the corporate side, I'd say it's very, very strong. I think, on the retail side, it would probably be approximately 85% of pre-war volumes.
Speaker #2: So, not much difference. On the car loans, a bit down because of logistics of getting cars in, but not that much off, as logistics have improved over time.
Speaker #2: So I think you've got population growth in Dubai, which generally means we get at least our market share of that population growth—hopefully more than the normal market share for new arrivals.
Speaker #2: So we are seeing account openings are strong, loan demand is strong, and we are getting deposit growth. So I think across the board, if I said an activity, the one thing that we're not seeing at the moment—and it'll surprise no one who lives in Dubai—is new launches.
Speaker #2: Of property. So we've probably got about one-third of escrow accounts in the country. And with our escrow function, we know every individual counterparty within that project's sales.
Speaker #2: So, we can see if people are paying, and they are paying. Generally, we are aware only at the upper tier of developers.
Speaker #2: And those developers demand big upfront payments. We're seeing the continuity of those payments coming through as milestones are hit, and the clients need to pay more.
Speaker #2: So people ask me, "So are we—are people dropping out?" The answer is no. No more than we would have seen pre-war. People that can't meet the requirements that are happening and that have been sold.
Speaker #2: We're still seeing cash flow come in from those. On new developments, that's not what we're not seeing a lot of new launches. And I think if we when I talk to our big developers, they're completely focused on delivering on time, if not in front of time, the developments that they've largely pre-sold and they've got big profit margins in them and they want to release that cash, right?
Speaker #2: So they're really focused on that. On hospitality, this is one that Patrick mentioned—that we haven't had a lot of loan growth in there.
Speaker #2: But when I talk to my hospitality clients, I spoke to one the other day who has a large number of hotels. They're running at about 70% of pre-war cost per room.
Speaker #2: So the room rates are about 70% of pre-war, which, if you remember, pre-war, the rates were pretty outstanding. So 70% of that is a good recovery.
Speaker #2: And the hotels are running—and I'm talking about the number of hotels, not just one or two—are running between 60% and 75% occupancy. And they are profitable.
Speaker #2: So, the hotels are profitable. Even though hospitality has absolutely been affected, it's coming off what was very, very high occupancy and very, very high rates to be more affordable, but still generating substantial cash for our clients.
Speaker #2: So, I think from our perspective, even the hospitality section that we were a bit concerned about seems to have recovered pretty well. And to get 60–75% occupancy in summer, it's not bad.
Speaker #2: It's not bad at all. So that one surprised me quite considerably. And if anyone has tried to get on a plane with Emirates Airlines, you'll find that it's, one, very expensive, and, two, it's full.
Speaker #2: So I think the airlines are doing well. Hospitality has recovered quite well from the lows they were at. Restaurants are back to being packed again. So I think the population is growing.
Speaker #2: Business travel has certainly not stopped at all. In fact, it has increased into the country. So I think we're seeing some pretty good signs there.
Speaker #4: And, Shane, there's been quite a lot of economic data coming out recently, on top of population growth and the GDP numbers as well. Overall, it's moderated.
Speaker #4: There are some sectors that are still growing very strongly, despite the fall in activity we're seeing. Particularly when you look at loan growth, more than half of our loan origination and actual growth is coming from the private sector.
Speaker #4: It's not just all skewed towards government activity. And even some things on the retail side, we continue to see strong new-to-country and new-to-bank customers coming in. That means deposits, activity, and I think that's also borne out in some of the scores.
Speaker #2: School numbers are good.
Speaker #4: Over 4%. So the activity, I think, was the question, Karen, is very strong. And I think overall, our balance sheet growth bears that out.
Speaker #1: Thank you so much. That's very clear. With that, Shane, over to you for the closing remarks.
Speaker #2: That's it for the questions.
Speaker #3: Well, that was probably the last question, so no other questions. I'd like to thank you all for joining us on today's call. Building on this strong foundation, we enter the final quarter with clear momentum and confidence in our ability to continue delivering sustainable, long-term value for shareholders.
Speaker #3: I'll now hand you back to Drew, who will provide further details in case you have any follow-up questions and will close the call. Over to you, Drew.
Speaker #5: Thank you. For any further questions, please contact our Investor Relations department, whose contact details can be found on the Emirates NBD website and in the results press release.
Speaker #5: A replay of this call and webcast will also be available on the Emirates NBD website next week. Ladies and gentlemen, that does conclude today's conference call.
