Speaker #1: Welcome to the Dubai Islamic Bank Q3 2026 earnings call presentation. If you'd like to register a question during the presentation, please email your question to the team at webcast@dib.ae.
Speaker #1: I'll now hand it over to Janani Vemadeva to begin. Please go ahead.
Speaker #2: Thank you, Alex. Good morning and good afternoon, everyone. And thank you for joining us today. This is Janani Vemadeva, and on behalf of Arkham Capital, I'm pleased to welcome you to DIB's Q3 2026 earnings conference call.
Speaker #2: I have with me here today from DIB management, Dr. Adnan Shirwan, the Group Chief Executive Officer, John Macedo, the Chief Financial Officer, and Kashif Musa, the Chief Sustainability and Investor Relations Officer.
Speaker #2: Without any further delay, I'll now turn the call over to Kashif. Kashif, over to you.
Speaker #3: Thank you, Janani, and good afternoon, everyone. And welcome to DIB's third quarter results webcast for 2026. This webcast shall be led by Dr. Adnan Shirwan, Group CEO of DIB.
Speaker #3: John Macedo, CFO of DIB, and myself. Before we start the presentation, I request you to please send your questions to the email address webcast@dib.ae, and we shall aim to address as many as possible in the Q&A session post the presentation.
Speaker #3: With that, let's kick off today's presentation. So, on the operating environment slide 4, let me start by briefly touching on the global economic environment.
Speaker #3: The global economy continues to demonstrate resilience, with GDP growth forecast at around 3.1% in 2026 and expected to edge up to 3.4% in 2027, while growth in emerging economies is projected to remain ahead of the global average.
Speaker #3: Inflation is expected to rise modestly in 2026, as as geopolitical developments, high-energy costs, and supply disruptions create near-term price pressures. However, inflation is projected to ease as supply conditions improve and the broader environment stabilizes.
Speaker #3: U.S.-effective federal fund rates remain below its previous peak, but following the 25 basis point increase last month, the interest rate environment is expected to remain elevated in the near term.
Speaker #3: Oil prices have moved above U.S. dollars 100 per barrel, amid supply constraints, and the continued geopolitical uncertainty. For the GCC, this provides support to fiscal balances and system liquidity, and at the same time it may also contribute to the broader commodity price pressures.
Speaker #3: Moving on to slide 5, and coming home to UAE, GDP growth is expected to ease at 3.1% in 2026, primarily reflecting regional tensions. Before rebounding 7% to 7.7% in 2027, supported by higher hydrocarbon production, and continued growth in the non-oil economy.
Speaker #3: Business activity remains resilient, with UAE PMI returning to its pre-conflict levels of 55.3 in September, signaling continuing expansion in the private sector. Oil production reached a multi-year high of 3.83 million barrels per day in September 2026, supporting fiscal and current account surpluses and anticipated acceleration in GDP growth in 2027.
Speaker #3: UAE inflation is forecast to reach 2.4% in 2026, and just under 2% in 2027, remaining well above the global inflation and reinforcing the country's broader macroeconomic stability.
Speaker #3: Moving to slide 6, and turning to the key drivers that are supporting UAE's performance, they remain main broadly based across major sectors: economic diversification continues to gain momentum, supported by proactive policies, infrastructure investment, and resilient domestic activity.
Speaker #3: This reinforces long-term economic outlook. The banking sector remains resilient as well, supported by strong capital buffers and improved asset quality, and with about 5.5% to 5.6 trillion in assets and an NPF ratio of about 2.8% across the sector, it remains well positioned to support economic growth.
Speaker #3: Higher oil prices and production levels are supporting fiscal revenues as well, enabling continued government investment in infrastructure and the wider economy. Production capacity is targeted to reach 5 million barrels per day in 2027.
Speaker #3: On the real estate, the sector continues to expand, supported by sustained investor interest and population growth. Transaction value reached values reached around 574 billion in Dubai, and 170 billion in Abu Dhabi, during the first 9 months of 2026.
Speaker #3: The UAE financial markets recovered to pre-conflict levels, supported by higher trading volumes and continued investor participation. With this preamble, I will now move the discussion to DIB's financial and business performance in detail, and hand over to Dr. Adnan Shirwan, Group CEO.
Speaker #3: Dr. Adnan, please.
Speaker #4: Thank you, Kashif. Good afternoon, everyone. I will run the presentation in a page-turn format, and then spend a large part of the hour on questions.
Speaker #4: And as always, we'll use the last 5 minutes to summarize my key messages. Let me now briefly walk you through the summary of our financial performance for the first 9 months, and I'm turning to page 8.
Speaker #4: From a balance sheet perspective, we continue to grow our market presence. Total assets by having increased by around 3% year to date, and a reached 427 billion.
Speaker #4: This is driven by continued expansion of our financing portfolio. The net financing assets, as you can see, have grown by 10% year to date, to 287 billion.
Speaker #4: Supported by growth across key economic sectors. Our sukuk investments stood at around 85 billion, as the bank's strategically recalibrates its sukuk portfolio to prioritize financing opportunities offering attractive risk-adjusted returns.
Speaker #4: The bank delivered a strong operating performance during the period. Gross revenues grew by 7% year on year, to stand at 18.6 billion. While operating profit grew by 4% year on year, to stand at 7.1 billion.
Speaker #4: Underpinned by continued cost management with operating expense remaining flat year on year. We continue to see an improvement in asset quality, supported by prudent credit underwriting and proactive portfolio management.
Speaker #4: The non-performing financing ratios stood at 2.4%, improving by 30 basis points year to date, while the cumulative cost of risk stood at 25 basis points.
Speaker #4: The bank's capital position continued to strengthen, with the CET1 ratio increasing by 110 basis points year to date, to stand at 13.4%, and the capital adequacy ratio increasing by 100 basis points year to date, to stand at 16.5%.
Speaker #4: From a liquidity perspective, customer deposits stood at 323 billion, supported by a stable kasa balance base of around 34%. So overall, the bank delivered a well-balanced performance during the first 9 months of the year, demonstrating steady balance sheet growth and stable profitability.
Speaker #4: This obviously was complemented by continued improvement in asset quality, strong capital buffers, and a stable liquidity position.
Speaker #3: If you turn to slide 9, where we look at the income statement, the bank has delivered a well-balanced performance during the first 9 months of the year.
Speaker #3: A gross revenue has increased by 7%, like I've mentioned, to reach 18.6 billion. And a 8% year-on-year growth in gross funded income, as well as 2% growth in non-funded income.
Speaker #3: Operating expenses remained flat, compared with the corresponding period in 2025, driven by continued cost optimization. Now, this has allowed the operating profit to grow by 4% year on year, to reach 7.1 billion.
Speaker #3: We have maintained a prudent approach to provisioning during this period, reflecting active portfolio management and a continued focus on managing credit risk. Net profit before tax has remained stable at 6.6 billion, while net profit after tax stood at 5.6 billion.
Speaker #3: The bank continued to generate strong returns with pre-tax return on tangible equity at 20% and pre-tax return on assets at 2.1% during this period.
Speaker #3: This demonstrates the bank's resilient earnings and its continued capacity to generate capital. Slide 10, you can see that we have maintained healthy revenue momentum during the first 9 months of the year.
Speaker #3: Supported by steady balance sheet and revenue growth. Net funded income grew by 3% year on year, to stand at 6.8 billion. This was supported by continued growth in financing assets across key businesses like consumer, corporate, as well as commercial banking.
Speaker #3: Net profit margin remained stable at 2.4%, amid higher cost higher funding costs across the banking sector. Non-funded income continues to provide revenue diversification, through fee and commission income, foreign exchange activity, and recurring contributions from property and associates.
Speaker #3: The bank continued to benefit from a well-balanced mix of funded and non-funded income, providing greater revenue stability supporting resilient performance and sustained earning growth, amid challenging operating environment.
Speaker #3: When we look at slide 11, we can see a healthy cost-to-income ratio and that has remained a key strength during this period. Operating expenses declined sequentially, to reach 816 million in the third quarter, mainly driven by decline in personal expenses.
Speaker #3: The bank's cost-to-income ratio remained well controlled at 28.1% for the first 9 months of the year, in line with our year-end guidance. And this reflects continued benefits from our investments in the digital infrastructure.
Speaker #3: As a result, the operating profit increased by 4% year on year, to reach 7.1 billion, demonstrating the bank's ability to deliver strong operating results.
Speaker #3: On slide 12, we turn now to balance sheet, where the bank has delivered healthy growth during the period, primarily driven by continued expansion in our financing book, across key economic sectors.
Speaker #3: Net financing assets increased by 10% year to date, to reach 287 billion. Supported by around 68.5 billion in gross new financing across all our core businesses.
Speaker #3: This reflects healthy customer demand and our ability to capture quality growth opportunities. During this period, we strategically repositioned our sukuk portfolio, reducing the investments to stand at 85 billion, as we continue to pursue attractive risk-adjusted financing growth opportunities.
Speaker #3: Total assets have grown by 3% year to date, and they stand at 427 billion, while customer deposits stood at 323 billion, reflecting continued growth in financing and a strong funding base.
Speaker #3: Slide 13, this slide highlights a well-balanced composition of our balance sheet and financing portfolio. You can see that net financing assets and sukuk investments have grown by 6% year to date, and they stand in total to 372 billion dirhams.
Speaker #3: Supported by continued growth in financing activity. Our financing portfolio remains very well diversified across our consumer and wholesale business, with exposures across multiple economic sectors.
Speaker #3: Overall, we continue to deliver steady balance sheet growth, supported by a balanced asset mix, and prudent risk management practices. When we turn to slide 14, it looks at our asset quality, we've continued to see improvements during the first 9 months of the year, with key indicators moving in the right direction.
Speaker #3: NPF ratio improved by 30 basis points year to date, and it stands at 2.4%, reflecting sound credit underwriting practices, and continued focus on asset quality.
Speaker #3: The cumulative cost of risk, as you can see, stood at 25 basis points, reflecting the underlying strength of the bank's financing portfolio, amid the external headwinds that we've witnessed.
Speaker #3: Provisioning levels remained robust, with cash coverage of 123% and total coverage ratio of 155%, providing a healthy buffer. Slide 15, looking at portfolio quality, the portfolio continued to strengthen during the first 9 months of the year, stage one exposures have remained stable at 94%, while stage two and stage three combined exposures declined to 6.1%, compared to 7.4% a year earlier, reflecting continued improvement in the overall risk profile of our financing book.
Speaker #3: And ECL coverage has remained healthy, reflecting the bank's prudent provisioning approach. Slide 16, moving on to liquidity, we've maintained a strong position during the period, supported by a stable customer deposit base and diversified sources of funding.
Speaker #3: Customer deposits stood at 323 billion, while CASA balances remained stable at 34%, reflecting our strong customer relationships and the stability of our deposit base.
Speaker #3: LCR and NSFR ratios stood at 126% and 105%, respectively, comfortably above the regulatory requirements, underpinned by solid funding profile and sound liquidity management. The funding base remained stable and diversified, supported by a balanced mix of corporate, commercial, and customer deposits, which accounted for 65%, 8%, and 27% of the overall deposits, respectively.
Speaker #3: During the quarter, the bank closed its debut 750 million dollars syndicated Islamic financing facility, diversifying institutional funding sources and attracting approximately 1.2 billion dollars in commitments.
Speaker #3: Slide 17 turns to capital. The bank's position strengthened further during the period, providing sufficient headroom to support future growth opportunities. During this period, the CET1 ratio increased by 110 basis points year to date, and it stood at 13.4%, and the capital adequacy ratio grew by 100 basis points year to date, and it stood at 16.5%.
Speaker #3: Our capital ratios remained comfortably above the regulatory requirements, providing sufficient capacity to support banks' future growth trajectory, while maintaining a strong and well-capitalized balance sheet.
Speaker #3: The next few slides look at our businesses, we start with slide 19, where we look at our consumer banking business. This business delivered strong performance, driven by growth in financing and deposit portfolios, stable yields, and continued momentum in customer acquisition.
Speaker #3: Net financing assets grew by 18% year to date, to stand at 91 billion, this was supported by 31 billion in gross new financing driven by healthy demand across personal home auto and car products.
Speaker #3: Business revenues remained stable at 973 million dirhams in the third quarter, supported by strong yields of 6.1% and diversified income generation across funded and non-funded activities.
Speaker #3: On the funding side, consumer deposits stood at 88 billion, with CASA balances of 44 billion 44% of the total deposits, reinforcing the franchise's high-quality funding profile.
Speaker #3: We maintained healthy customer acquisition momentum, adding approximately 160,000 new digital users during the period and expanding our total customer base to 1.9 million. Slide 20 looks at our corporate business, both local and cross-border.
Speaker #3: We continued to deliver strong balance sheet growth, supported by diversified client base across sectors, stable revenue generation, and healthy yields. Net financing assets grew by 6% year to date, to reach 187 billion, supported by more than 28 billion of gross new financing during the period.
Speaker #3: This growth was well diversified across key economic sectors. In the third quarter, revenue grew by 17% year on year, to reach 867 million, primarily driven by continued growth in funded income and healthy financing yields of over 5%.
Speaker #3: Within the corporate business on the funding side, deposits reached 206 billion, with CASA ratio remaining stable at 25%, contributing to a well-diversified funding profile.
Speaker #3: Slide 21 looks at our commercial banking business. The franchise maintained strong growth momentum, supported by healthy financing growth, a strong CASA mix, and high yields.
Speaker #3: Franchise revenue increased to 293 million, in the third quarter, driven by higher funded income and expanding customer base across key commercial sectors. Net financing assets within the commercial bank grew by 13% year to date, to stand at 9 billion, supported by more than 2 billion of new underwriting during this period.
Speaker #3: Growth remained well distributed across the SME and mid-corporate businesses, with yields of around 6%. On the funding side, deposits increased by 18% year to date, to stand at 26 billion, with CASA balances remaining exceptionally strong at 61% of the total commercial banking deposits.
Speaker #3: Looking ahead, commercial banking is well positioned to deliver strong growth, while continuing to generate attractive margins and contribute a resilient low-cost funding base to the group.
Speaker #3: Slide 22 looks at our treasury business. This franchise has remained focused on supporting the bank's broader balance sheet, and liquidity objectives, while strategically recalibrating the sukuk portfolio.
Speaker #3: On the revenue side, the business generated 475 million dirhams in the third quarter, with stable yields of around 4.6%. During the period, the bank repositioned its sukuk investment portfolio to pursue attractive risk-adjusted growth opportunities, in customer financing.
Speaker #3: This demonstrates our disciplined approach to balance sheet management and continued focus on enhancing return. We remained focused on maintaining a high-quality sukuk portfolio, which predominantly comprises of sovereign, quasi-sovereign, and financial institutions issuances, this high-quality composition supported capital preservation while providing a stable contribution to earnings.
Speaker #3: Slide 23, we look at our digital business, where we continued to see strong customer adoption, and engagement across our digital channels, reflecting the progress made in delivering a simpler, convenient, and accessible banking experience.
Speaker #3: Our digital users have grown 14% year on year, and they stand at around 1.9 million. Around 97% of our customers actively use our digital channels, with more than 95% of transactions processed digitally.
Speaker #3: Our digital capabilities continue to support customer acquisition, with 82% of new customers onboarded through the digital channels during this period. So overall, our digital investments continue to simplify processes and improve operational efficiency, enabling the bank to achieve its growth objectives.
Speaker #3: Slide 24, turning to sustainability, we continue to make steady progress against our strategy and remain focused on embedding sustainability into growth, client engagement, and long-term value creation.
Speaker #3: Under financing, a sustainable future year to date, we have originated nearly 7 billion in sustainability-linked and sustainability-linked financing, across sectors, including aviation, real estate, transportation, clear energy, and the circular economy.
Speaker #3: Alongside financing, we continue to expand our green concierge proposition, providing clients with strategic advice specialist expertise and ecosystem partnerships that help identify and advance sustainability operations.
Speaker #3: Now, we have also enhanced our sustainability-linked finance framework, expanding the range of eligible KPIs and increasing flexibility across sectors. Together with our sustainable finance framework, this strengthens our ability to meet growing client demand.
Speaker #3: With that, we will pause here and open the floor for a Q&A session. And we'll take as many questions as we can. Followed by the last few minutes of the hour, where I would summarize certain key messages for the benefit of the audience.
Speaker #1: Thank you. As a reminder, if you'd like to ask a question, please email your question to the team at webcast@dib.ae. Again, to ask a question, please email them to the team at webcast@dib.ae.
Speaker #2: Yeah, sorry. For the delay when you're back. So first few questions from Jananeh from Arqam. The first is on some color on the staff cost during the quarter.
Speaker #2: And the second is on margins that have remained stable despite the headline on deposit pricing. And the third is on the loan growth, having already met the target, so are we expecting this to increase or are we expecting the repayments?
Speaker #3: Thank you, Jananeh, for your question. I think the first one on staff cost and the reduction in staff cost, as you would appreciate, we are we've embarked on a digital transformation journey a few years ago, where we have invested heavily on the technology side.
Speaker #3: And enhancing the infrastructure and the digital infrastructure of the bank, investments in AI, as well as payment gateways, this long-term investments allows us to apportion a certain percentage of those costs and capitalize them over a period, which is what we have done.
Speaker #3: And the reduction in staff cost is nothing but equivalent cost that can be associated with that transformation program has been capitalized within the bank's financials.
Speaker #3: In terms of margins, our margins have remained stable. Despite the recent deposit pricing and the premiums that we are seeing in the being paid on mobilizing liquidity, we remain confident that we can weather that storm.
Speaker #3: We are in line with our guidance. As you remember, our overall net interest margin guidance for the year is 2.3. So we will settle down at that by the end of the year.
Speaker #3: Of course, the deposits are being still mobilized within the market, and this is just a broad brush on the way the financial service industry is.
Speaker #3: Cost of liquidity has gone up. DIB has also seen that uptake, but we've managed that quite well. And hence, we've been able to, with a mix of our CASA as well as our fixed deposits and making sure that we pick up deposits at not very high rates, we've managed to make sure that our net interest margins are stable.
Speaker #3: Of course, it's also the contribution from the asset side of our balance sheet, where both these lines we've made sure that they are well controlled and maintained.
Speaker #3: And we were able to deliver stable net interest margins. But you can definitely expect that that pressure continues, especially when we go into Q4.
Speaker #3: Because that's an industry phenomena. And that's why we have anticipated that our full-year guidance should be at around 2.3%. Year to date, loan growth has already met the full-year guidance.
Speaker #3: We give guidance on the overall growth, and that overall growth includes both loans as well as sukuk. That overall guidance is at 10%. And year to date, we are at 6%.
Speaker #3: So we are still maintaining that guidance. We have some way to go towards that. But as I mentioned in my preamble, the idea is to make sure that we've got balanced growth.
Speaker #3: We would recompose our balance sheet and relook at each of our businesses and make sure that we are not only looking at growth, but also risk-adjusted returns on that growth.
Speaker #3: And hence, you see us reducing our sukuk book a bit. And redeploying that liquidity in financing. But overall, our loan growth, the total growth guidance, if I may, stands at 10%.
Speaker #3: And year to date, we are at 6%.
Speaker #1: As a reminder, if you'd like to ask a question, please email your question to the team at webcast@dib.ae.
Speaker #2: So a few questions from Rahul from Sydney. Rahul, the first question on the staff cost was just answered in detail. So we'll take the next two.
Speaker #2: Fee and commission income has been weak in third quarter. What is driving this? And also the decline in deposits during the quarter. Is it hard in this market to grow deposits in this environment?
Speaker #2: Thank you, Rahul. We've already answered the first question, but there was an extended question to that, where you were talking about major headcount reduction.
Speaker #2: Like I've mentioned, this is because of capitalization of certain costs that we can associate with transformational programs. And not due to any headcount reduction.
Speaker #2: Fees and commissions have been weak in Q3. Yeah, in Q3, our loan growth has also been muted. So when you look at that, it's just a very conscious strategy that we have.
Speaker #2: Like I've mentioned, we are pivoting towards certain key sectors. We are making sure that we are focusing on certain businesses that might not be heavy in fee income generation.
Speaker #2: So for example, when you look at the consumer banking franchise, a lot of activity has happened during the first nine months there. But that contribution does not directly correlate with the kind of business that you do because fee income on the consumer side is less.
Speaker #2: On the corporate side, we've been quite balanced in underwriting. We have an overall plan. And we are making progress towards that overall growth number.
Speaker #2: So of course, in Q3, we've seen a little bit muted activity on the loan side in the wholesale business. And that has impacted the income generation.
Speaker #2: The fees and commissions. But Q4, we see that activity to come back. Of course, it's also a combination of lower FX, lower trade volumes, some low arrangement fees.
Speaker #2: But again, that's just a reflection of the volumes that we have underwritten in Q3. Deposits have declined in the quarter. While the loan-to-deposit ratio has reached close to 90% mark.
Speaker #2: Is it hard to grow deposits in the environment? Of course, the environment is challenging at this point in time. It's not hard to grow deposits, but you have to pay a premium.
Speaker #2: If you've got to mobilize the deposits, which every financial institution is witnessing, for us, we have consciously based on the liquidity backdrop and the premiums, that our being warranted in this area, we have consciously not mobilized deposits excessively.
Speaker #2: We've maintained our LDR ratio at close to 90%, but more importantly, our NSFR ratio at 105%. And our LCR ratio at close to about 120.
Speaker #2: We've consciously maintained that LDR position to make sure that it does not impact our P&L negatively. Okay. So a few questions from Rahul Rajan from Bofa.
Speaker #2: Rahul, the first two obviously have been answered around OPEX as well as deposits. So we'll just go to number three and four. The first one is on the asset quality coverage.
Speaker #2: And what's driving the low cost of risk in third quarter? And the fourth one is about the change at the board with the new chairman coming in.
Speaker #2: And how is it impacting any?
Speaker #3: Thank you, Rahul. Like Tasheed mentioned, repeated questions in one and two. So I'll take three. Asset quality coverage, I've already mentioned that our asset quality is very robust.
Speaker #3: We can start by pointing you towards a non-performing financing, which is at record low levels of 2.4%. But then we need to look at the coverage of that non-performing financing.
Speaker #3: In terms of cash, we are at 123%. And in terms of total coverage, we are at 155%, which provides a healthy buffer. But then when you deep dive into exposures by stages, you'll see that stage one exposure has remained constant at 94%.
Speaker #3: Whereas stage two and three have come down. From 7.4% to 6.1%. Now, when you look at ECL coverages, we are adequately covered across all these stages.
Speaker #3: So asset quality continues to be robust. And because of that, we've also seen a low cost of risk. And that low cost of risk is also supported by some timely recoveries that we've got.
Speaker #3: And we always spoke about the strength of our underwriting. And this just demonstrates that whatever we've underwritten in the past, we've managed to keep it within the performing book, as well as some of the underwriting that became non-performing has now seen recoveries.
Speaker #3: And that has enhanced our P&L, i.e., with a low cost of risk. So that's quite strong. And you can see that trend has continued over the last 18 months or so.
Speaker #3: The cost of risk has been pretty strong as far as DIV is concerned. And our non-performing financing ratio keeps coming down, not on account of the denominator increasing, but also on account of absolute recoveries.
Speaker #3: And the absolute number continues to come down. You ask a pertinent question in the change in chairmanship in the board. And if there's any change in strategy, I can comfortably say that the strategy remains the same.
Speaker #3: We are in flight to that strategy. And we are going to see that strategy being delivered. There's no change in the overall direction of the bank.
Speaker #3: We will continue to focus on innovation, enhancing our products and services, remaining customer-centric, focusing on each of our key businesses, whether it is the consumer banking franchise, whether it's the wholesale banking franchise.
Speaker #3: We have already spoken about the strategy at the beginning of the year, which meant growth across all our key businesses in terms of consumer, corporate, as well as commercials.
Speaker #3: And we also alluded to the fact that we will relook at our fixed income book and look at right-sizing it to release some capital both on pillar one and pillar two basis so that we can redeploy it in risk-adjusted returns on some of our businesses that give us better returns.
Speaker #3: So overall, I think with the changes this leadership that we have, we are looking at it very positively. And it will only take us forward all the great work that has happened in the last decade or so is only going to be strengthened going forward.
Speaker #3: And the we are coming to the close of the year. And definitely, the market will expect us to come up with a new strategy because, as you would appreciate, we are coming towards the FAG end of the five-year plan.
Speaker #3: And we are now expected to come up with the next three-year strategy, which we will do at the beginning of next year. But no change in direction.
Speaker #3: Everything is as is. And the bank will continue to deliver on the guidance that it has given, across key metrics that we will discuss towards the end of this call.
Speaker #1: As a reminder, if you'd like to ask a question, please email your question to the team at webcast@dib.ae.
Speaker #2: So questions from Q? Siko Ben? A couple of questions on OPEX and fee income have already been answered. So we'll take the ones that haven't been.
Speaker #2: The first one is on the. Some clarity on the income from associates and what's driving the line item. And the second one is on the real estate prices.
Speaker #2: And are they having any impact on your earnings? Thank you, Shiro. Your question on income from associates, again, our associates have not just for this quarter, but in the last few quarters, you can see they continue to do well.
Speaker #2: These are contributions from our investments in some of the associates like Bank of Khartoum, Panin Bank, also we've got our investments in some of the other line items that we've spoken about in the past.
Speaker #2: Nothing specifically skews this. We continue to enjoy very good contributions from these associates. And I see that the direction of travel is good. And going forward also, we will continue to benefit from this line.
Speaker #2: Real estate price correction, if that happens by 15%, does it impact our earnings, not at all? Because when we look at some of the earnings for this quarter, you can already see that the earnings the real estate gains that we made in the past from sales of some of the inventory that we had have started to be muted during this year.
Speaker #2: So that does not then impact our line item going forward for the full year. Also, we've got a portfolio where we've got rental lease, we continue to see no drop in that.
Speaker #2: So overall, I think it is fair to say that any correction does not impact our earnings. And definitely, any correction in rental yields or in valuation for that matter does not impact our overall collateral side also because we've got a very decent FTV cover.
Speaker #2: So on both income as well as valuation, it does not impact us negatively. Okay. A few questions from Jitendra from Alrams. Jitendra, your question two and three on OPEX and deposits and funding has already been answered.
Speaker #2: So we'll go to the first one that you have, which is on liquidity and NSFR, which is around 105% versus the regulatory above the regulatory minimum.
Speaker #2: And are you looking do you have any internal buffers, or do you expect this to put any further pressure on funding costs?
Speaker #3: Jitendra, thank you for your question. If you actually look at our NSFR ratio over the last so many quarters, you will see that we've continued to maintain at these levels.
Speaker #3: Of course, the regulatory minimum is 100. And even during the geopolitical crisis that regulatory minimum has been brought down to around 90%, but despite that, we continue to operate at 105 and above.
Speaker #3: And I think these are good levels for us. We don't see any constraints on our financing growth. Of course, you will also appreciate that deposit mobilization and long-term deposit mobilization can happen easily.
Speaker #3: But we maintain a balance between our P&L as well as where this ratio should be. So we can very easily go to 107, 108 percent, or even 110 percent, but that would put pressure on our P&L.
Speaker #3: So we are maintaining a balance between our financing growth to be in line with guidance, between deposit mobilization to make sure that we don't pick up undue deposits that will put pressure on our P&L, and with our NSFR ratio, which is healthy at 105, and it consistently has been quarter on quarter.
Speaker #2: We're getting a number of questions come up, and there's a big line, so we're going to focus on the critical ones. Questions from John Peace, UBS.
Speaker #2: Why has the loan growth been slower than UAE peers? It should be expect some higher growth in 2027. And the second one is on the NIMS as to can we get a detailed two-decimal point figure.
Speaker #3: Thank you, John. I think the easier one first, the two-decimal net interest margin, in Q2 used to be 2.41, and in Q3 is 2.37.
Speaker #3: I hope that helps. As far as loan growth is concerned, and you say that we are lagging behind UAE peers, and whether we can expect higher growth in 2027.
Speaker #3: I think let's focus on 2027 when we announce our full year results and we give guidance to the market. So I'll take that question probably sometime in January.
Speaker #3: But when you look at loan growth lagging behind UAE peers, I think we need to put context around DIB's ambitions. We've given loan guidance of around 10% at the beginning of the year.
Speaker #3: So we are making progress. And that guidance was given to keep in mind three prime objectives. One was where do we stand in terms of capital?
Speaker #3: Our capital consumption and our capital retention. So that was extremely important for us, irrespective of what peers were doing. Second was we were cognizant of the geopolitical sensitivities around what was happening.
Speaker #3: So we wanted to make sure that we are balanced in that loan. And then how we were going to deliver that growth of around 10% was by focusing on certain key businesses.
Speaker #3: And reclassifying and recomposing our balance sheet to make sure that we come out of certain positions to generate capital and then to use that capital and deploy it in other businesses.
Speaker #3: So we were exactly done that. We have not deviated from that overall strategy and the guidance that we've given. Irrespective of what the peers are doing, because we want to maintain our balance sheet growth in a balanced manner by focusing on profitability as well as capital consumption.
Speaker #3: So I think it'll be unfair for anyone to look at DIB's Q3 results and say that you're lagging behind peers, because this is a strategy that we embarked upon and we guided the market.
Speaker #3: And we are continuing to deliver on that strategy. Of course, it's extremely important to see things in context. It's not only about balance sheet growth and growing your loan book, but it's also where do we grow that loan in which areas of the bank we focus on, and how do we consume or generate capital with profitability as well as consumption of that loan growth.
Speaker #2: Okay. So we were going I was going through the list of questions that are there now. There are quite a few people have obviously asked.
Speaker #2: It's primarily related to those elements that have already been parameters that have been already been answered earlier by Dr. Nat. So we will take this last few minutes to have give it back to Dr. Nat for his summary.
Speaker #3: Thank you, Kashif. Like Kashif has mentioned, we've seen the same questions come up again and again, and I think I've taken time to address them.
Speaker #3: And if we probably missed out on something while sitting to those questions, please do reach out to our investment relation team. I wanted to use the last five minutes of this call to summarize certain key messages we can sometimes get lost in translation or between the Q&A session or between page turns.
Speaker #3: So our performance during the first nine months reflects one of our defining strengths. Which is the consistency of our strategic execution. I think there was a question around, is the strategy changing with the change in leadership, or are you pivoting towards something that you have not spoken about?
Speaker #3: And the simple answer to that is no. The strength of our results is the strength of our strategic execution. We have been consistent in delivering key messages across the nine months results.
Speaker #3: And I think in Q3, it is no different. We have continued to balance growth, profitability, as well as financial resilience. While strengthening our customer propositions and investing in capabilities that would shape our future.
Speaker #3: Now, we look at three components of that statement, right? I've spoken about balance growth. I've spoken about profitability, and I've spoken about financial resilience.
Speaker #3: When it comes to balance growth, this has allowed us to sustain business momentum reflected in our balance sheet. Where we've grown our assets by 3% and our financing and scope growth has been by 6%, in line with the overall 10% guidance that we've given.
Speaker #3: When we look at financial profitability in that statement, it talks about positive momentum with revenues of 18. Revenues growing by 18.6% or 18.6 billion, which is about 7% year-on-year growth.
Speaker #3: And our operating profit has grown by 4% to reach 7.1 billion. Resulting in a first nine months profitability to be at 6.6 billion. So we've looked at balance growth.
Speaker #3: We've looked at financial profitability and both seen in positive momentum. And then when it comes to financial resilience, we've ensured strong foundation in terms of asset quality, which remains at non-performing financing at 2.5%.
Speaker #3: That remains strong. Our capital levels, both CET1 at 13.4% and cars, car ratio at 16.5%, both of these have been up year to date by about 110 basis points or so.
Speaker #3: So overall, I think balance growth, robust profitability, and financial resilience has resulted in us making progress towards the overall guidance that we had given at the beginning of the year.
Speaker #3: And that can be seen on the summary slide on page 26, where you can see that our guidance of 10% growth, we stand at 6%.
Speaker #3: Our net profit margin guidance of 2.3%, we are at 2.4%. Cost to income ratio guidance of 28%, we are at 28.1%. Tangible equity return on tangible equity at 21%, we are at 20.
Speaker #3: Return on assets 2.2%, we are at 2.1. Non-performing financing of 2.5%, we have bettered that at 2.4. And total coverage of 160%, we have bettered we are close to around 155%.
Speaker #3: All of these metrics pointing to year-end guidance and making progress towards that. So overall, you should expect DIB to continue making progress towards these guidances.
Speaker #3: And continue the momentum that we've seen in the first nine months. That hinges around balance growth, robust profitability, as well as financial resilience. With that, we come to the end of the hour.
Speaker #3: If there are any follow-up questions or something that we've not answered, please reach out to the investor relations team. I will touch base with you again when we are going to talk about the full year results.
