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Management Discussion and Analysis Report
National Bank of Fujairah PJSC
For the three month period ended 31 March 2023
National Bank of Fujairah PJSC (NBF) - Q1 2023 Results
Net profit surges 151.8% reaching AED 152.0 million
NBF’s solid financial performance is underpinned by quality core business
growth, proactive asset and liability management, improvement in asset quality
and strong capital adequacy
26 April 2023: NBF is pleased to announce its results today for the three month period
ended 31 March 2023.
Overview of Results and Operational Performance for the three month period
ended 31 March 2023
NBF recorded year-on-year growth of 151.8% to close the three month period with a net
profit of AED 152.0 million compared to AED 60.4 million in the corresponding period of
2022. This demonstrates the bank’s enhanced focus on quality business, an efficient
funding base and improving resilience facilitated by notable local growth despite the
uncertain geopolitical conditions and global environment.
NBF maintained its policy of prudent and transparent recognition of problem accounts taking
into consideration the new credit risk standards being introduced by the Central Bank of the
UAE and the risk of global recession. NBF secured net impairment provisions of AED 245.8
million for the three month period ended 31 March 2023 compared to AED 232.9 million in
the corresponding period of 2022. During the period, the bank’s impairment reserve reduced
by 1.8% to AED 165.1 million compared to AED 168.2 million as at 31 December 2022.
Total provision coverage ratio improved to 110.2% compared to 101.5% as at 31 December
2022. The NPL ratio improved to 5.9% compared to 6.9% as at 31 December 2022 reflecting
the improving quality of the credit portfolio and the progress made with a small number of
exceptional exposures.
Page 1 of 6
Classified as: NBF ExternalSummary of profit and loss for the three month period ended 31 March 2023.
I Operating income Operating Expenses
12.0%
1 34.2% I -18.1%
55I 4.1 1 I 30.7% 19I 0.8
494.7 y I 1
412.8 0 156.3
4 119.6
X
Lu
Q1-23 Q1-22 Q4-22
Q1-23 Q1-22 Q4-22
Operating profit Net impairment losses
I 30.9%
26.6%
f
35.7% I I 5.6% I
39/ 7.9 I I I
7 5 245.8 232.9
, ..3 1 r 293.2 303.9 0 I4u 194.2
Q1-23 Q1-22 Q4-22 Q1-23 Q1-22 Q4-22
Net profit - NBF Group Net profit - NBF Islamic
38.6%
I 151.8% I 1,944.2%
152/ .0 1 I 34.0% 1
7 5
0 I I
1 109.7 4 28.2
18.6
60.4
0.9
Q1-23 Q1-22 Q4-22 Q1-23 Q1-22 Q4-22
Supported by higher net interest, net income from Islamic financing and investment
activities, and fees and commissions, NBF posted an operating profit of AED 397.9 million
for the three month period, a rise of 35.7% compared to AED 293.2 million in the
corresponding period of 2022 and up 30.9% quarter-on-quarter.
Operating income reached AED 554.1 million, up 34.2% compared to AED 412.8 million in
the corresponding period of 2022 and up 12.0% compared to Q4 2022 reflecting the robust
core business performance, good levels of activity and enhanced asset and liability
management in a rising interest rate environment. Net interest income and net income from
Islamic financing and investment activities, up 69.4% and net fees, commission and other
income, up 6.6% compared to the corresponding period of 2022, reaching AED 404.1 million
and AED 112.8 million respectively; and experienced a growth of 10.5% and 24.5%
respectively compared to Q4 2022. Foreign exchange and derivatives income stood at AED
40.1 million compared to AED 47.1 million in the corresponding period of 2022 and up 3.3%
compared to Q4 2022.
Loans and advances and Islamic financing receivables rose by 2.3% to reach AED 27.5
billion compared to AED 26.9 billion at 2022 year-end, up by 1.2% from 31 March 2022.
Page 2 of 6
Classified as: NBF ExternalM
DEA
ni
serugiF
Movement in Operating Income
554.1
412.8
M 16.6 -6.9 -24.3 -9.6
165.5
31 -Mar -22 Net interest Net fees and Foreign exchange Loss from Other operating 31 -Mar- 23
income and net commission and derivatives investments and income
income from income income Islamic
Islamic financing instruments
and investment
activities
M
DEA
ni
serugiF
Investments and Islamic instruments increased by 12.7% to reach AED 7.2 billion
compared to AED 6.3 billion at 2022 year-end, up by 97.1% from 31 March 2022
evidencing the deployment of a portion of liquidity towards a high-quality investment book
offering good risk-to-return as well as access to market liquidity.
Movement in Operating Expense
156.3
119.6
0.3 14.7
21.7
31 -Mar- 22 Employee benefits Depredation and Other operating 31 -Mar -23
expense amortization expenses
Operating expenses increased by 30.7%, reflecting NBF’s investments in its businesses,
systems, infrastructure and people. These investments include a set of digital initiatives
to further enhance our focus on exceptional customer service through digital adoption and
innovation. Nevertheless, NBF’s cost-to-income ratio improved to 28.2% compared to
29.0% in the corresponding period of 2022. This provides ample headroom to continue
investing in our technological capabilities and enhancing the customer experience going
forward.
Page 3 of 6
Classified as: NBF ExternalSummary of financial position as at 31 March 2023
Figures in AED NI
MAR -2023 DEC -2022 Change % MAR -23 MAR -22 Change %
=IL
Total Assets 47,529 47,624 -0.2% 47,529 42,616 11.5%
Loans and Advances and Islamic Financing
Recievables 27,521 26,915 2.3% 27,521 27,206 1.2%
Customer Deposits and Islamic Customer
Deposits 34,840 35,736 -2.5% 34,840 32,167 8.3%
Investments and Islamic instruments 7,156 6,350 12.7% 7,156 3,632 97.1%
Total Equity 6,017 5,850 2.8% 6,017 5,694 5.7%
Customer deposits and Islamic customer deposits stood at AED 34.8 billion compared to
AED 35.7 billion at 2022 year-end, up by 8.3% from 31 March 2022. Current and Saving
Accounts (CASA) deposits stood at 43.2% of total customer deposits softening the impact
of increasing rates for fixed term products on deposit costs.
Summary of the cash flows and capital expenditure during the three month ended
31 March 2023
During the period, surplus liquidity has been deployed to fund quality loans and investment
book growth, while liquidity balances remain well above the bank’s risk appetite and
regulatory requirements. Cash and cash equivalents amounted to AED 2.5 billion
compared to AED 3.6 billion in 31 March 2022. The decrease is mainly on account of a
planned reduction in deposit balances and the utilization of liquidity through the increase
in the investment and loans and advances growth.
During the three month period ended 31 March 2023, NBF had incurred AED 35.2 million
in capital expenditure relating to the additions of property, equipment and intangibles
compared to AED 21.7 million in the corresponding period.
Page 4 of 6
Classified as: NBF ExternalM
DEA
ni
serugiF
Key Performance Indicators
▪ Total assets remained stable at AED 47.5 billion compared to AED 47.6 billion at 2022
year-end, up by 11.5% from 31 March 2022.
▪ Ample liquidity has been maintained with lending to stable resources ratios at 75.1%
(2022: 72.1%) and eligible liquid assets ratio (ELAR) at 22.8% (2022: 24.9%), well
ahead of Central Bank of the UAE’s minimum requirements.
▪ Return on average assets improved to 1.3%, up from 0.6% for the corresponding
period.
▪ Return on average equity improved to 10.2%, up from 4.2% for the corresponding
period.
Our Segmented Focus
NBF’s business strategy continues to revolve around client relationships, supported by the
segmented approach adopted by the bank to serve its customer needs. This also helps in
building diversification and maintaining stable growth.
The operating income from Corporate and Institutional banking customers (including
business banking) for the three month period ended 31 March 2023 was AED 395.7 million,
an increase of 37.4% compared to the corresponding period. Operating income from Retail
Banking increased by 2.5%, and Treasury, ALM & others have increased by 38.4%
compared to the corresponding period.
Segments' contribution to Operating Income
117.4 1 84.8
41.1 40.1
177.0 132.3
218.6 155.6
Mar -23 Mar -22
Corporate and Institutional Banking Business Banking
Retail Banking Treasury, ALM and Others
Further, NBF Islamic recorded operating income of AED 37.7 million for the three month
period ended 31 March 2023 compared to AED 32.3 million in the corresponding period.
Page 5 of 6
Classified as: NBF Externalnbf
nbf Islamic
ail at,
N klal. b.i o.s n_ as l t B 8a.1n_k4 _ o4. l fkaair an
Expectation regarding the economy, sector and its impact on the Bank
NBF's performance has been very encouraging with a robust set of results for the first
quarter supported by the relatively buoyant business environment and the government's
commitment to diversifying the UAE's economy. NBF's staunch focus on quality growth in
supporting our customer's business across all principal segments, improvement in asset
quality and proactive management of investment portfolio enabled it to achieve a strong
overall financial performance.
Despite the uncertain global landscape dominated by significant geopolitical
developments, lingering inflationary pressures exacerbating growth concerns and the
recent stress seen in the global financial system, the UAE has progressed well on the back
of the government's efforts helped by significant hydrocarbon demand. This was evidenced
by the UAE achieving an exceptional 7.9 per cent GDP growth in 2022; and it is anticipated
to continue growing at a steady pace.
NBF is well positioned to gain from this growth and has built the platform for enhanced
value creation aided by its robust capital and liquidity position, digitally enabled bank
strategy for better servicing client needs, prudent risk and compliance management standards and a sound balance sheet. NBF's environmental, social and governance [ESG] approach is in alignment with the sustainability vision of the country and enhanced efforts are being dedicated to benefit from the new opportunities that are arising in this space. We look forward to the NBF franchise continuing to perform with distinction throughout the course of the year and remain confident in its capabilities to navigate the uncertainties with poise and propel
future growth. .
NBF's key shareholders include the Government of Fujairah, Easa Saleh Al Gurg LLC and Investment Corporation of Dubai. Rated Baal / Prime -2 for deposits and A3 for
counterparty risk assessment by Moody's and BBB / A-2 by Standard & Poor's, both with
a stable outlook, the bank is listed on the Abu Dhabi Securities Exchange under the symbol
"NBF". It has a branch network of 15 (of which 1 is an electronic banking service unit) across the UAE.
Awards and Accolades
NBF has been given the Best Fraud & Risk Management Solutions award to recognize its efforts in implementing solutions to tackle online card fraud. The Bank was also recognized
by JP Morgan for best -in -class straight through processing and awarded an Elite Quality Recognition Award for the years 2021 a 022. L AAI ikws)47,,J Vince CooIc A. Anwar Brian Mulholland Chief Executive Officer Deput Chief Executive Chief Financial Officer Officer
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National Bank of Fujairah PJSC PO Box 887, Fujairah, UAE Tel: 600 565551 Outside UAE: +971 450 78499 Fax: +971 9222 7992 nbf.ae
Ir Page 6 of 6
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