Ahli United Bank: Interim Condensed Consolidated Financial Statements (Reviewed) - 30 June 2019

Transcription

1. Ahli United Bank B .S.C. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2019
3. Ahli United Bank B .S.C. INTERIM CONSOLIDATED STATEMENT OF INCOME Six months ended 30 June 2019 (Reviewed) Three months ended 30 June 2019 USD'000 Note Six months ended 2018 USD'000 30 June 2019 USD'000 2018 USD'000 Interest income Interest expense 476,924 230,001 412,480 174,568 935,790 445,601 796,662 329,420 Net interest income 246,923 237,912 490,189 467,242 29,568 14,304 27,405 31,859 10,428 39,599 63,949 24,111 51,837 69,459 21,566 54,139 Fees and other income 71,277 81,886 139,897 145,164 OPERATING INCOME 318,200 319,798 630,086 612,406 20,845 29,034 34,334 42,287 297,355 290,764 595,752 570,119 50,721 8,761 27,437 50,463 5,515 28,264 98,375 17,230 51,268 96,053 10,733 53,335 86,919 84,242 166,873 160,121 PROFIT BEFORE TAX 210,436 206,522 428,879 409,998 Tax expense and zakat 10,713 12,227 20,246 23,530 199,723 194,295 408,633 386,468 15,067 11,584 31,117 29,043 184,656 182,711 377,516 357,425 1.9 1.9 4.1 3.9 Fees and commissions Trading income Investment income and others Provision for credit losses 3 7c NET OPERATING INCOME Staff costs Depreciation Other operating expenses 2.3 OPERATING EXPENSES NET PROFIT FOR THE PERIOD Net profit attributable to non-controlling interests NET PROFIT ATTRIBUTABLE TO THE OWNERS OF THE BANK EARNINGS PER SHARE ATTRIBUTABLE TO THE OWNERS OF THE BANK FOR THE PERIOD Basic & diluted earnings per ordinary share (US cents) Meshal AbdulAziz Alothman Chairman 4 Mohammad J. Al-Marzooq Deputy Chairman Adel A. El-Labban Group Chief Executive Officer & Managing Director The _______________________________________________________________________________________________ attached notes 1 to 11 form part of these interim condensed consolidated financial statements 2
4. Ahli United Bank B .S.C. INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Six months ended 30 June 2019 (Reviewed) Three months ended 30 June 2018 2019 USD'000 USD'000 Six months ended 30 June 2018 2019 USD'000 USD'000 199,723 194,295 408,633 386,468 1,555 2,377 2,619 14,140 1,843 4,883 2,857 10,452 15,869 (25,908) 22,725 (8,432) 4,931 1,085 (11,497) (8,249) (5,909) 6,314 12,293 1,085 (16,972) (21,019) (5,909) 12,121 Other comprehensive income for the period 14,320 (16,993) 25,857 (9,930) Total comprehensive income for the period 214,043 177,302 434,490 376,538 Total comprehensive income attributable to non-controlling interests 18,928 7,294 36,522 27,920 Total comprehensive income attributable to owners of the Bank 195,115 170,008 397,968 348,618 Net profit for the period Other comprehensive income (OCI) Items that will not be reclassified to consolidated statement of income Net change in fair value of financial assets measured at fair value through OCI Net change in pension fund reserve Items that may be reclassified subsequently to consolidated statement of income Foreign currency translation adjustments Net change in fair value of financial assets measured at fair value through OCI Transfers to consolidated statement of income Net change in fair value of cash flow hedges _______________________________________________________________________________________________ The attached notes 1 to 11 form part of these interim condensed consolidated financial statements 3
5. Ahli United Bank B .S.C. INTERIM CONSOLIDATED BALANCE SHEET 30 June 2019 (Reviewed) 30 June 2019 US$ ’000 (Audited) 31 December 2018 US$ ’000 1,460,016 2,002,821 3,664,722 20,302,254 8,441,837 318,348 231,364 843,564 297,416 483,858 1,390,470 1,918,727 3,061,818 19,503,961 7,568,528 318,802 265,794 764,094 237,064 478,319 38,046,200 35,507,577 Deposits from banks Borrowings under repurchase agreements Customers’ deposits Interest payable and other liabilities Subordinated liabilities 5,578,783 2,436,581 23,579,573 1,466,022 27,685 3,752,792 1,832,134 23,660,035 1,097,911 192,697 TOTAL LIABILITIES 33,088,644 30,535,569 Ordinary share capital Treasury shares Reserves 2,193,611 (13,190) 1,709,407 1,992,541 (13,190) 1,929,350 Equity attributable to the owners Perpetual Tier 1 Capital Securities Non-controlling interests 3,889,828 600,000 467,728 3,908,701 600,000 463,307 TOTAL EQUITY 4,957,556 4,972,008 38,046,200 35,507,577 Note ASSETS Cash and balances with central banks Treasury bills and deposits with central banks Deposits with banks Loans and advances Non-trading investments Investment in associates Investment properties Interest receivable and other assets Premises and equipment Goodwill and other intangible assets 7 8 TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES EQUITY TOTAL LIABILITIES AND EQUITY Meshal AbdulAziz Alothman Chairman Mohammad J. Al-Marzooq Deputy Chairman Adel A. El-Labban Group Chief Executive Officer & Managing Director _______________________________________________________________________________________________ The attached notes 1 to 11 form part of these interim condensed consolidated financial statements 4
6. Ahli United Bank B .S.C. CONSOLIDATED STATEMENT OF CASH FLOWS Six months ended 30 June 2019 (Reviewed) Six months ended 30 June 2018 2019 US$ ’000 US$ ’000 OPERATING ACTIVITIES Profit before tax Adjustments for: Depreciation Investment income Provision for credit losses Fair Value of Employee Share Purchase Plan (ESPP) charge Share of profit from associates 428,879 409,998 17,230 (41,035) 34,334 705 (14,861) 10,733 (29,770) 42,287 2,217 (20,130) Operating profit before changes in operating assets and liabilities Changes in: Mandatory reserve deposits with central banks Treasury bills and deposits with central banks Deposits with banks Loans and advances Interest receivable and other assets Deposits from banks Borrowings under repurchase agreements Customers’ deposits Interest payables and other liabilities 425,252 415,335 84,560 196,508 242,720 (821,460) (85,046) 1,825,991 604,447 (80,462) 39,335 (121,755) 58,438 (219,579) (415,549) (155,885) (253,333) (331,606) 1,847,061 104,414 Cash from operations Income tax paid 2,431,845 (22,867) 927,541 (27,038) Net cash from operating activities 2,408,978 900,503 (1,516,117) 944,720 34,208 (21,820) 13,603 (1,890,445) 1,348,869 4,646 (15,369) 12,955 (545,406) (539,344) Distribution on Perpetual Tier 1 Capital Securities Repayment of subordinated liabilities Dividends and other appropriations paid Dividends paid to non-controlling interest Capital increase due to Mandatory Share Plan (MSP) & ESPP shares Purchase of treasury shares (19,250) (165,012) (386,878) (29,716) 4,200 - (19,250) (11,222) (332,418) (23,667) 17,797 (1,529) Net cash used in financing activities (596,656) (370,289) 1,266,916 (9,130) 13,415 (1,984) Cash and cash equivalents at 1 January 3,088,964 2,528,722 CASH AND CASH EQUIVALENTS AT 30 JUNE 4,369,295 2,517,608 Comprising: Cash and balances with central banks, excluding mandatory reserve deposits Deposits with banks, central banks & treasury bills with an original maturity of three months or less 1,058,022 741,482 3,311,273 1,776,126 4,369,295 2,517,608 INVESTING ACTIVITIES Purchase of non-trading investments Proceeds from sale or redemption of non-trading investments Net movement in investment properties Net increase in premises and equipment Dividends received from associates Net cash used in investing activities FINANCING ACTIVITIES INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Net foreign exchange difference ____________________________________________________________________________________________________ The attached notes 1 to 11 form part of these interim condensed consolidated financial statements 5
7. Ahli United Bank B .S.C. INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Six months ended 30 June 2019 (Reviewed) Attributable to the owners Reserves Perpetual Balance at 1 January 2019 Donations Bonus shares issued Additional shares issued Transfer from OCI reserve Distribution related to Perpetual Tier 1 Capital Securities Distribution related to Perpetual Tier 1 Sukuk Ordinary share capital US$ ’000 Treasury shares US$ ’000 Share premium US$ ’000 Statutory reserve US$ ’000 1,992,541 (13,190) 763,660 586,481 - Retained Proposed earnings appropriations US$ ’000 US$ ’000 634,672 - - - 199,419 - - - - 1,651 - 2,549 - - - - - (3,415) - - - - (13,750) (199,419) - - - - - (4,120) Ordinary share dividend - - - - 1,082 Dividends of subsidiaries - - - - - Movement in associate - - - - - - - - - - - - 399,838 Other reserves (note 9) US$ ’000 Total reserves US$ ’000 Tier 1 Capital Securities US$ ’000 Noncontrolling interests US$ ’000 Total US$ ’000 (455,301) 1,929,350 600,000 463,307 4,972,008 (1,000) - (1,000) - - (1,000) - - (199,419) - - - - - 2,549 - - - (3,415) - - - (13,750) - - - (4,120) - - (397,756) - - (397,756) - (29,716) (29,716) (398,838) - - - - - 377,516 790,861 (1,705) (1,705) - 705 705 - - 20,452 397,968 - - (434,144) 1,709,407 (1,005) (1,380) 4,200 (4,420) (13,750) (5,500) (1,705) Fair value amortisation of share based transactions - - 705 Total comprehensive income for the period Balance at 30 June 2019 2,193,611 (13,190) 766,209 586,481 600,000 36,522 434,490 467,728 4,957,556 ________________________________________________________________________________________________________________________________________________ The attached notes 1 to 11 form part of these interim condensed consolidated financial statements 6
8. Ahli United Bank B .S.C. INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Six months ended 30 June 2019 (Reviewed) Attributable to the owners Reserves Balance at 31 December 2017 Ordinary share capital US$ ’000 Treasury shares US$ ’000 Share premium US$ ’000 Statutory reserve US$ ’000 Retained earnings US$ ’000 Proposed appropriations US$ ’000 Other reserves (note 9) US$ ’000 1,889,213 (11,661) 754,308 516,728 799,366 342,578 (474,910) Total reserves US$ ’000 Perpetual Tier 1 Capital Securities US$ ’000 1,938,070 600,000 Noncontrolling interests US$ ’000 Total US$ ’000 472,532 4,888,154 Transition adjustment on adoption of IFRS 9 - - - - (249,543) - 54,644 (194,899) (30,432) - (225,331) Restated balance at 1 January 2018 Donations Bonus shares issued Additional shares issued Purchase of treasury shares Transfer from OCI reserve Distribution related to Perpetual Tier 1 Capital Securities Distribution related to Perpetual Tier 1 Sukuk Ordinary share dividend Dividends of subsidiary Fair value amortisation of share based transactions Total comprehensive income for the period Balance at 30 June 2018 1,889,213 94,883 8,445 - (11,661) 754,308 516,728 - - - - - - (1,529) - 9,352 - 549,823 - 600,000 442,100 4,662,823 (1,000) - - (94,883) - - (94,883) - - - - (5,705) - - 9,352 (5,705) - - 17,797 (1,529) (5,705) - - (13,750) - - (13,750) - (4,120) - (1,380) (5,500) - (340,760) - - (23,667) (340,760) (23,667) 2,217 - - - (13,750) - - - - (4,120) - - - - 818 - - - - - - - - - - 763,660 1,743,171 - - (13,190) (420,266) (1,000) - 1,992,541 342,578 516,728 (341,578) - 2,217 357,425 - (8,807) 348,618 789,608 - (426,856) 1,643,140 600,000 - (1,000) 2,217 27,920 376,538 444,973 4,667,464 ________________________________________________________________________________________________________________________________________________ The attached notes 1 to 11 form part of these interim condensed consolidated financial statements 7
9. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 1 CORPORATE INFORMATION The parent company, Ahli United Bank B.S.C. ("AUB" or "the Bank") was incorporated in the Kingdom of Bahrain on 31 May 2000 originally as a closed company and changed on 12 July 2000 to a public shareholding company by Amiri Decree number 16/2000. The Bank and its subsidiaries (collectively known as "the Group") are engaged in retail, commercial, islamic and investment banking business, global fund management and private banking services through branches in the Kingdom of Bahrain, the State of Kuwait, the Arab Republic of Egypt, Republic of Iraq, the United Kingdom and an overseas branch in Dubai International Financial Centre (DIFC). It also operates through its associates in Libya and in the Sultanate of Oman. The Bank operates under a retail banking license issued by the Central Bank of Bahrain. The Bank also engages in life insurance business through it's subsidiary, Al Hilal Life B.S.C. (c). The Bank's registered office is located at Building 2495, Road 2832, Al Seef District 428, Kingdom of Bahrain. The interim condensed consolidated financial statements of the Group for the six-month period ended 30 June 2019 were authorised for issue in accordance with a resolution of the Directors dated 29 July 2019. 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES The interim condensed consolidated financial statements of the Bank and the Group are prepared in accordance with International Accounting Standard IAS 34, Interim Financial Reporting ("IAS 34"). The accounting policies used in the preparation of the interim condensed consolidated financial statements are consistent with those used in the preparation of the annual consolidated financial statements for the year ended 31 December 2018, except for changes to the accounting for adoption of IFRS 16: Leases from 1 January 2019 as explained below. IFRS 16 Leases 2.1 IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model. Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor. Prior to the adoption of IFRS 16, the Group accounted and classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease in accordance with IAS 17. 2.2 Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases that it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 January 2019 and accordingly, the comparative information is not restated. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. 2.3 The Group has recorded right-of-use assets representing the right to use the underlying assets under premises and equipment and the corresponding lease liabilities to make lease payments under other liabilities. The rightof-use assets and lease liabilities recorded as at 1 January 2019 amounted to US$ 60.6 million, with no impact on retained earnings. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate of 2.5% at 1 January 2019. Lease costs for the period ended 30 June 2019 relating to right-of-use assets amount to US$ 5.3 million and are included under depreciation expense. _______________________________________________________________________________________________ 8
10. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) IFRS 16 Leases (continued) Summary of new accounting policies 2.4 The accounting policies of the Group upon adoption of IFRS 16 are as follows: a) Right of use assets The Group recognises right of use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right of use assets are subject to impairment. The carrying value of right-of-use assets are recognised under premises and equipment in the balance sheet. b) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset and is recognised under other liabilities in the balance sheet. 3 INVESTMENT INCOME AND OTHERS Investment income and others include income amounting to US$ 11,396 thousand for the six months ended 30 June 2019 (30 June 2018: US$ 7,814 thousand) which is of a seasonal nature. _______________________________________________________________________________________________ 9
11. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 4 EARNINGS PER ORDINARY SHARE Three months ended 30 June Six months ended 30 June 2019 US$ ’000 2018 US$ ’000 2019 US$ ’000 2018 US$ ’000 Net profit for the period attributable to Bank's ordinary equity shareholders for basic and diluted earnings per share computation 184,656 182,711 377,516 357,425 (Less): Perpetual Tier 1 Capital Securities distribution (Less): Perpetual Tier 1 Sukuk distribution (13,750) (4,120) (13,750) (4,120) (13,750) (4,120) (13,750) (4,120) Adjusted net profit for the period attributable to Bank's ordinary equity shareholders for basic and diluted earnings per share computation 166,786 164,841 359,646 339,555 8,751 8,745 8,748 8,745 1.9 1.9 4.1 3.9 8,774.4 7,970.2 23.8 21.6 30 June 2019 US$ ’000 (Audited) 31 December 2018 US$ ’000 2,741,240 108,864 376,951 2,600,252 126,455 576,710 3,227,055 3,303,417 Weighted average ordinary shares outstanding during the period adjusted for bonus shares (in millions) Basic & diluted earnings per ordinary share (US cents) Issued and fully paid ordinary shares of US$ 0.25 each (in millions) Number of treasury shares (in millions) 5 CONTINGENT LIABILITIES The Group had the following credit related contingent liabilities: Guarantees Acceptances Letters of credit 6 SEGMENT INFORMATION For management reporting purposes the Group is organised into four major business segments: - Retail banking Corporate banking Treasury and investments Private banking Transactions between segments are conducted at estimated market rates on an arm's length basis. Interest is charged/credited to business segments based on a pool rate, which approximates the cost of funds. ________________________________________________________________________________________________ 10
12. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 6 SEGMENT INFORMATION (Continued) Segmental information for the period was as follows: Retail banking US$ ’000 Corporate banking US$ ’000 Treasury & investments US$ ’000 Private banking US$ ’000 Total US$ ’000 Six months ended 30 June 2019: Net interest income Fees and commissions Trading, investment income and others 100,137 17,942 1,774 220,694 34,343 8,647 129,445 1,290 65,462 39,913 10,374 65 490,189 63,949 75,948 OPERATING INCOME 119,853 263,684 196,197 50,352 630,086 Provision for credit losses 3,606 33,170 (2,350) (92) 34,334 116,247 230,514 198,547 50,444 595,752 Operating expenses 59,389 41,909 48,832 16,743 166,873 PROFIT BEFORE TAX 56,858 188,605 149,715 33,701 428,879 NET OPERATING INCOME 20,246 Tax expense NET PROFIT FOR THE PERIOD 408,633 31,117 Less : Non - controlling interests NET PROFIT ATTRIBUTABLE TO THE OWNERS OF THE BANK Inter segment interest included in net interest income above 377,516 143,124 (201,231) 33,204 24,903 - Retail banking US$ ’000 Corporate banking US$ ’000 Treasury & investments US$ ’000 Private banking US$ ’000 Total US$ ’000 95,342 16,264 1,760 225,086 38,400 9,712 - 110,550 2,142 64,156 - 36,264 12,653 -77 467,242 69,459 75,705 OPERATING INCOME 113,366 273,198 176,848 48,994 612,406 Provision for credit losses 5,283 38,870 108,083 234,328 177,818 49,890 570,119 Operating expenses 55,612 39,266 47,729 17,514 160,121 PROFIT BEFORE TAX 52,471 195,062 130,089 32,376 409,998 Six months ended 30 June 2018: Net interest income Fees and commissions Trading, investment income and others NET OPERATING INCOME Tax expense NET PROFIT FOR THE PERIOD Less : Non-controlling interests NET PROFIT ATTRIBUTABLE TO THE OWNERS OF THE BANK (970) (896) 42,287 23,530 386,468 29,043 357,425 Inter segment interest included in net interest income above 114,357 (143,661) 14,119 15,185 ________________________________________________________________________________________________ 11
13. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 7 LOANS AND ADVANCES a) Carrying amount of loans and advances Stage 1 US$ ’000 Loans and advances High standard grade Standard grade Impaired Less: ECL allowances 351,724 2,213,193 - 411,509 12,751,601 7,915,172 411,509 18,101,856 2,564,917 411,509 21,078,282 (115,012) (310,704) (350,312) (776,028) 61,197 20,302,254 31 December 2018 Stage 2 Stage 3 US$ ’000 US$ ’000 Total US$ ’000 Stage 1 US$ ’000 Less: ECL allowances Total US$ ’000 12,399,877 5,701,979 - 17,986,844 Loans and advances High standard grade Standard grade Impaired 30 June 2019 Stage 2 Stage 3 US$ ’000 US$ ’000 2,254,213 12,016,100 5,146,227 - 452,471 2,324,630 - 379,779 12,468,571 7,470,857 379,779 17,162,327 2,777,101 379,779 20,319,207 (125,066) (365,332) (324,848) (815,246) 54,931 19,503,961 2019 Stage 2 Stage 3 US$ ’000 US$ ’000 Total US$ ’000 17,037,261 2,411,769 b) ECL allowance movements of loans and advances Stage 1 US$ ’000 At 1 January Add/(Less): Transfer from stage 1 Transfer from stage 2 Net remeasurement of ECL allowances for the period Amounts written off during the period Exchange rate and other adjustments At 30 June 125,066 365,332 324,848 815,246 (4,819) - 3,331 (79,811) 1,488 79,811 - (5,182) 20,160 21,497 36,475 (53) 1,692 (80,919) 3,587 (80,919) 5,226 115,012 310,704 350,312 776,028 _________________________________________________________________________________________________ 12
14. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 7 LOANS AND ADVANCES (continued) b) ECL allowance movements of loans and advances (continued) Stage 1 US$ ’000 2018 Stage 2 Stage 3 US$ ’000 US$ ’000 Total US$ ’000 589,068 260,259 At 1 January Transition adjustment on adoption of IFRS 9 At 1 January - restated Add/(Less): Transfer from stage 1 Transfer from stage 2 Net remeasurement of ECL allowances for the period Amounts written off during the period Exchange rate and other adjustments 145,982 378,666 324,679 849,327 (6,797) - 5,198 (9,175) 1,599 9,175 - 8,632 51,986 28,931 89,549 32 (1,042) (7,414) 9,339 (7,414) 8,329 At 30 June 147,849 366,309 939,791 425,633 c) Provision for credit losses The net ECL measurement for provision for credit losses in the interim consolidated statement of income is determined as follows: Six months ended 30 June Net remeasurement of ECL on loans and advances (note 7 b) Recoveries from loans and advances during the period (from fully provided loans written off in previous years) Net remeasurement of ECL for non-trading investments (note 8 b) Net remeasurement of ECL on off-balance sheet exposures and others Provision for credit losses 2019 2018 US$ ’000 US$ ’000 36,475 89,549 (13,308) (2,350) 13,517 (37,161) (970) (9,131) 34,334 42,287 _________________________________________________________________________________________________ 13
15. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 8 NON-TRADING INVESTMENTS a) Carrying amount of non-trading investments Stage 1 US$ ’000 Non trading investments High standard grade Standard grade Less: ECL allowances Equity instruments and funds at fair value 30 June 2019 Stage 2 Stage 3 US$ ’000 US$ ’000 Total US$ ’000 5,908,375 2,094,749 27,282 195,401 - 5,935,657 2,290,150 8,003,124 222,683 - 8,225,807 (8,559) (2,521) - (11,080) - - - 227,110 - 8,441,837 31 December 2018 Stage 2 Stage 3 US$ ’000 US$ ’000 Total US$ ’000 7,994,565 Stage 1 US$ ’000 220,162 Non trading investments High standard grade Standard grade 5,022,919 2,123,813 4,909 151,944 - 5,027,828 2,275,757 Less: ECL allowances 7,146,732 (9,729) 156,853 (3,722) - 7,303,585 (13,451) - - 278,394 - 7,568,528 Equity instruments and funds at fair value 7,137,003 153,131 Equity instruments and funds held at fair value include investments amounting to US$ 119.5 million (31 December 2018: US$ 168.7 million) which are designated as FVTPL. b) ECL allowance movements of non-trading investments Stage 1 At 1 January Add/(Less): Transfer from stage 1 Net remeasurement of ECL allowances for the period (note 7 c) Exchange rate and other adjustments At 30 June 2019 Stage 2 Stage 3 Total US$ ’000 US$ ’000 US$ ’000 US$ ’000 9,729 3,722 - 13,451 (127) 127 - - (1,022) (21) (1,328) - - (2,350) (21) 8,559 2,521 - 11,080 _________________________________________________________________________________________________ 14
16. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 8 NON-TRADING INVESTMENTS (continued) b) ECL allowance movements of non-trading investments (continued) Stage 1 US$ ’000 2018 Stage 2 US$ ’000 Stage 3 Total US$ ’000 US$ ’000 39,221 (23,404) At 1 January Transition adjustment on adoption of IFRS 9 At 1 January - restated Add/(Less): Net remeasurement of ECL allowances for the period (note 7 c) Exchange rate and other adjustments At 30 June 12,847 2,520 450 15,817 (433) (2,988) (537) 450 (450) (970) (2,988) 9,426 2,433 - 11,859 _________________________________________________________________________________________________ 15
17. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 9 MOVEMENT IN OTHER RESERVES Balance at 1 January 2019 Currency translation adjustments Transfers to consolidated statement of income Net fair value movements Transfers to retained earnings Fair value movements and others Balance at 30 June 2019 Balance at 31 December 2017 Transition adjustment on adoption of IFRS 9 Balance at 1 January 2018 -restated Currency translation adjustments Transfers to consolidated statement of income Net fair value movements Transfers to retained earnings Fair value movements and others Balance at 30 June 2018 Cumulative changes in Cash flow OCI hedge ESPP reserve reserve reserve US$ ’000 US$ ’000 US$ ’000 Capital reserve US$ ’000 Property revaluation reserve US$ ’000 Foreign exchange translation reserve US$ ’000 8,480 35,225 (435,370) 3,639 (17,021) - - 18,034 - - - - - - - 8,480 35,225 (417,336) Capital reserve US$ ’000 Property revaluation reserve US$ ’000 Foreign exchange translation reserve US$ ’000 8,480 35,568 (423,986) - - 8,480 35,568 - Total other reserves US$ ’000 - (50,254) (455,301) - - - 18,034 1,085 10,007 3,415 (446) (16,526) - - - 639 (6,519) 3,415 - - 705 4,883 5,588 18,146 (33,993) 705 (45,371) (434,144) Cumulative changes in Cash flow OCI hedge ESPP reserve reserve reserve US$ ’000 US$ ’000 US$ ’000 Pension fund reserve US$ ’000 Total other reserves US$ ’000 (12,981) (26,659) - (55,332) (474,910) 54,644 - - - 54,644 41,663 (26,659) - (55,332) (420,266) (7,007) - - - - (7,009) - (2) Pension fund reserve US$ ’000 (423,986) - - - (5,909) (24,167) 5,705 610 11,511 - - - (5,299) (12,656) 5,705 - - - - - 2,217 10,452 12,669 8,480 35,566 17,292 (14,538) 2,217 (44,880) (426,856) (430,993) _______________________________________________________________________________________________________________ 16
18. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL 30 June 2019 (Reviewed) 10 FAIR VALUE MEASUREMENT The fair value of financial assets and financial liabilities, with the exception of non-trading investments that are carried at amortised cost, approximate their carrying values. The fair value of the non-trading investments held at amortised cost is US$ 6,961.1 million as at 30 June 2019 (31 December 2018: US$ 6,182.9 million). Carrying value of these non-trading investments is US$ 7,021.9 million as at 30 June 2019 (31 December 2018: US$ 6,338.8 million). The Group's primary medium and long-term financial liabilities are the subordinated liabilities. The fair values of these financial liabilities are not materially different from their carrying values, since these liabilities are repriced at intervals of three or six months, depending on the terms and conditions of the instrument and the resultant applicable margins approximate the current spreads that would apply for borrowings with similar maturities. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:Level 1 : Quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2 : Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3 : Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. Level 1 US$ ’000 Equity instruments and funds at fair value Debt instruments (FVTOCI) Derivative assets Derivative liabilities 117,258 1,152,177 642 - Level 1 US$ ’000 Equity instruments and funds at fair value Debt instruments (FVTOCI) Derivative assets Derivative liabilities 168,403 938,394 260 30 June 2019 Level 2 Level 3 US$ ’000 US$ ’000 70,754 40,695 120,011 465,660 Total US$ ’000 39,098 - 227,110 1,192,872 120,653 465,660 31 December 2018 Level 2 Level 3 US$ ’000 US$ ’000 Total US$ ’000 70,912 12,950 117,888 186,896 39,079 - 278,394 951,344 117,888 187,156 During the six month period ended 30 June 2019 and 30 June 2018 there have been no transfers between Levels 1, 2 and 3. __________________________________________________________________________________________________ 17
19. Ahli United Bank B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2019 (Reviewed) 11 RELATED PARTY TRANSACTIONS The Group enters into transactions with major shareholders, associates, directors, senior management and companies which are controlled, jointly controlled or significantly influenced by such parties in the ordinary course of business at arm's length. All the loans and advances to related parties are performing and are subject to ECL. The income, expense and the period end balances in respect of related parties included in the interim consolidated financial statements were as follows: 2019 For the six months ended 30 June 2019 Interest income Interest expense Fees and commissions Short term employee benefits End of service benefits Directors' fees and related expenses As of 30 June 2019 Deposits with banks Loans and advances Deposits from banks Customers’ deposits Subordinated liabilities Commitments and contingent liabilities Derivative assets Senior management Non Executive Management Directors Directors Others US$ ’000 US$ ’000 US$ ’000 Major shareholders US$ ’000 Associates US$ ’000 93,487 - 1,931 769 1,606 - 3,749 920 246 1,274 89 24 3 5,874 920 - 14 11 2 1,623 93 - 5,783 95,211 1,857 7,497 1,013 1,274 6,486,368 9,689 - 89,383 60,713 35,394 4,056 158,705 62,959 187,091 - 3,745 5,494 - 577 1,952 - 89,383 163,027 60,713 6,556,773 9,689 222,485 4,056 Total US$ ’000 2018 Senior management For the six months ended 30 June 2018 Interest income Interest expense Fees and commissions Short term employee benefits End of service benefits Directors' fees and related expenses As of 31 December 2018 Deposits with banks Loans and advances Deposits from banks Customers’ deposits Subordinated liabilities Commitments and contingent liabilities Derivatives liabilities Major shareholders US$ ’000 Associates US$ ’000 Non Executive Directors US$ ’000 61,150 - 2,872 11 1,217 - 3,823 556 46 1,057 130 54 10 6,698 924 - 16 5 6 1,536 85 - 6,841 61,776 1,279 8,234 1,009 1,057 7,057,754 9,700 - 120,148 25,865 137,818 96,290 800 172,261 96,846 161,172 - 7,705 5,297 - 1,024 1,111 - 120,148 206,855 137,818 7,161,008 9,700 257,462 800 Management Directors US$ ’000 Others US$ ’000 Total US$ ’000 ________________________________________________________________________________________________________ 18