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Emirates Investment Bank: Condensed Consolidated Interim Financial Information - 31 March 2019

IM Insights
By IM Insights
4 years ago
Emirates Investment Bank: Condensed Consolidated Interim Financial Information - 31 March 2019

Credit Risk, Provision


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  1. Emirates Investment Bank P .J.S.C. CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION For the three months period ended 31 March 2019
  2. Emirates Investment Bank P .J.S.C. Review report and condensed consolidated interim financial information for the period from 1 January 2019 to 31 March 2019 Contents Pages Report on review of condensed consolidated interim financial information 1 Condensed consolidated interim statement of financial position 2 Condensed consolidated interim income statement 3 Condensed consolidated interim statement of other comprehensive income 4 Condensed consolidated interim statement of cash flows 5 Condensed consolidated interim statement of changes in equity Notes to the condensed consolidated interim financial information 6-7 8 - 24
  3. Emirates Investment Bank P .J.S.C. CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT For the three month period ended 31 March 2019 (Unaudited) Notes Interest income Net income from investments 8 9 Three month period ended 31 March 2018 2019 AED’000 AED’000 19,819 22,560 16,807 17,841 ─────── ─────── Interest expense INTEREST AND INVESTMENT INCOME, NET Fee, commission and other income Exchange gain, net OPERATING INCOME General and administrative expenses Net impairment loss on financial assets ─────── ─────── 27,888 9,575 895 23,891 16,958 1,020 ─────── ─────── 38,358 41,869 ─────── ─────── (25,203) (1,625) (25,457) (3,596) ─────── ─────── (26,828) (29,053) OPERATING EXPENSES ─────── PROFIT FOR THE PERIOD Attributable to: Equity holders of the parent Non-controlling interests PROFIT FOR THE PERIOD BASIC AND DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT (in AED) 34,648 (10,757) 42,379 (14,491) 10 ─────── 9,305 15,041 ═══════ ═══════ 9,305 - 14,466 575 ─────── ─────── 9,305 15,041 ═══════ ═══════ 13.29 20.67 ═══════ ═══════ The accompanying notes from pages 8 to 24 form an integral part of this condensed consolidated interim financial information. 3
  4. Emirates Investment Bank P .J.S.C. CONDENSED CONSOLIDATED COMPREHENSIVE INCOME INTERIM STATEMENT OF OTHER For the three month period ended 31 March 2019 (Unaudited) Three month period ended 31 March 2018 2019 AED’000 AED’000 PROFIT FOR THE PERIOD 9,305 15,041 (204) 86 65 - Other comprehensive income Items that will not be reclassified subsequently to income statement Fair value reserve (equity instruments) net changes in fair value Gain on sale of investment Items that may be reclassified subsequently to income statement Fair value reserve (debt instruments) net changes in fair value Expected credit losses on investment in debt instruments measured at fair value through other comprehensive income Other comprehensive income/(loss) for the period TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Attributable to: Equity holders of the parent Non-controlling interests TOTAL COMPREHENSIVE INCOME FOR THE PERIOD (3,306) 1,329 97 3,881 ─────── 5,092 ─────── 14,397 ═══════ ─────── (3,144) ─────── 11,897 ═══════ 11,322 575 14,397 ─────── 14,397 ═══════ ─────── 11,897 ═══════ The accompanying notes from pages 8 to 24 form an integral part of this condensed consolidated interim financial information. 4
  5. Emirates Investment Bank P .J.S.C. CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS For the three month period ended 31 March 2019 (Unaudited) Three month period ended 31 March 2018 2019 AED’000 AED’000 OPERATING ACTIVITIES Profit for the period Adjustments for: Depreciation Net impairment loss on financial assets 9,305 15,041 635 3,596 666 1,625 ─────── ─────── Operating profit before changes in operating assets and liabilities Change in UAE Central Bank statutory deposits Change in due to bank with original maturity of over three months Change in due from bank with original maturity of over three months Change in loans and advances, net Change in investments, net Change in other assets Change in customers’ deposits Change in other liabilities 13,536 (17,305) 17,332 (4,368) (237,723) (122,569) 132,159 (285,719) (16,675) 43,690 12,148 12,075 (225,704) 212,564 (7,560) (384,103) (13,474) ─────── (515,807) ─────── ─────── Net cash used in operating activities (355,889) ─────── INVESTING ACTIVITY Purchase of property and equipment Net cash used in investing activity ─────── ─────── (554) ─────── (554) ─────── FINANCING ACTIVITY Funds used in non-controlling interests Net cash used in financing activity ─────── ─────── NET DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at 1 January CASH AND CASH EQUIVALENTS AT 31 March (14,362) ─────── (14,362) ─────── (355,889) 636,596 ─────── 280,707 ═══════ (530,723) 397,319 ─────── (133,404) 125,578 879,426 (724,297) ─────── 280,707 ═══════ 112,012 957,625 (1,203,041) 14,353 23,341 4,353 13,152 24,314 2,823 ═══════ Cash and cash equivalents comprise the following amounts in the statement of financial position with original maturities of three months or less: Cash and balances with the UAE Central Bank (excluding statutory deposits) Due from banks Due to banks Operational cash flows from interest and dividends Interest paid Interest received (including interest from investments) Dividends received ─────── (133,404) ═══════ The accompanying notes from pages 8 to 24 form an integral part of this condensed consolidated interim financial information. 5
  6. Emirates Investment Bank P .J.S.C. CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY For the three month period ended 31 March 2019 (Unaudited) At 1 January 2019 Share Capital AED’000 (Unaudited) Legal reserve AED’000 (Unaudited) Special reserve AED’000 (Unaudited) Credit impairment reserve* AED ’000 (Unaudited) Cumulative changes in fair values AED’000 (Unaudited) Retained earnings AED’000 (Unaudited) 70,000 35,000 44,251 23,742 9,450 - - - - - Changes on initial application of IFRS 16 (Note 2.4) ────── Balance at 1 January 2019 after application of IFRS 16 Profit for the period Other comprehensive income for the period Total comprehensive income for the period Balance at 31 March 2019 ────── ────── ─────── ─────── Total AED’000 (Unaudited) Noncontrolling interests AED’000 (Unaudited) Total AED’000 (Unaudited) 288,034 470,477 228 470,705 (752) (752) - (752) ────── ─────── ─────── ─────── 70,000 35,000 44,251 23,742 9,450 287,282 469,725 228 469,953 - - - - - 9,305 9,305 - 9,305 - - - - 5,092 - 5,092 - 5,092 ────── ────── ────── ─────── ─────── ────── ─────── ─────── ─────── - - - - 5,092 9,305 14,397 - 14,397 ────── ────── ────── ─────── ─────── ────── ─────── ─────── ─────── 70,000 35,000 44,251 23,742 14,542 296,587 484,122 228 484,350 ══════ ══════ ══════ ═══════ ═══════ ══════ ═══════ ═══════ ═══════ * The Bank has created a special reserve titled as ‘credit impairment reserve’ in lieu of the general provision required to be created in accordance with the “Circular No 28/2010” issued by the UAE Central Bank. The accompanying notes from pages 8 to 24 form an integral part of this condensed consolidated interim financial information. 6
  7. Emirates Investment Bank P .J.S.C. CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY For the three month period ended 31 March 2019 (Unaudited) At 1 January 2018 Changes on initial application of IFRS 9 Share Capital AED’000 (Unaudited) Legal reserve AED’000 (Unaudited) Special reserve AED’000 (Unaudited) Credit impairment reserve* AED ’000 (Unaudited) Cumulative changes in fair values AED’000 (Unaudited) Retained earnings AED’000 (Unaudited) 70,000 35,000 40,556 - 18,359 257,658 Total AED’000 (Unaudited) Noncontrolling interests AED’000 (Unaudited) Total AED’000 (Unaudited) 421,573 147,412 568,985 - - - 23,742 (4,799) (2,883) 16,060 - 16,060 ────── ────── ────── ─────── ─────── ────── ─────── ─────── ─────── Restated balance at 1 January 2018 70,000 35,000 40,556 23,742 13,560 254,775 437,633 147,412 585,045 Profit for the period - - - - - 14,466 14,466 575 15,041 Other comprehensive loss for the period Total comprehensive income for the period Movement in noncontrolling interests Balance at 31 March 2018 - - - - ────── ────── ────── ─────── ─────── (3,144) ────── - ─────── (3,144) ─────── ─────── - - - - (3,144) 14,466 11,322 575 11,897 - - - - - - - ────── ────── ────── ─────── ─────── ────── ─────── - (14,362) ─────── (3,144) (14,362) ─────── 70,000 35,000 40,556 23,742 10,416 269,241 448,955 133,625 582,580 ══════ ══════ ══════ ═══════ ═══════ ══════ ═══════ ═══════ ═══════ The accompanying notes from pages 8 to 24 form an integral part of this condensed consolidated interim financial information. 7
  8. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION For the three month period ended 31 March 2019 (Unaudited) 1 INCORPORATION AND ACTIVITIES Emirates Investment Bank P.J.S.C. (the “Bank”) was incorporated on 17 February 1976 in Dubai, United Arab Emirates by a decree of HH The Ruler of Dubai. In 1999, the Bank was registered under the UAE Commercial Companies Law No. (8) Of 1984 (as amended) as a Public Joint Stock Company. The Federal Law No. 2 of 2015, concerning Commercial Companies has come into effect from 28 June 2015, replacing the existing Federal Law No. 8 of 1984. The Bank is engaged in the business of private banking and investment banking. The address of the Bank’s registered office is P. O. Box 5503, Dubai, United Arab Emirates. The condensed consolidated interim financial information for the period ended 31 March 2019 comprise the financial statements of the Bank and its subsidiaries (together referred to as the “Group”). The Bank is a subsidiary of Al Futtaim Private Company LLC, which holds 52.85% (2018:52.85%) of the shares in the Bank. 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The condensed consolidated interim financial information of the Bank are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. The condensed consolidated interim financial information do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2018. In addition, results for the three months ended 31 March 2019 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2019. The accounting policies applied by the Group in the preparation of the condensed consolidated interim financial information are consistent with those applied by the Group in the annual consolidated financial statements for the year ended 31 December 2018, except for changes in accounting policies as disclosed in Note 2.4. In preparing these condensed consolidated interim financial information, significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation were the same as those that were applied to the consolidated financial statements as at and for the year ended 31 December 2018. 2.2 New and revised IFRS applied on the condensed consolidated interim financial information The following new and revised IFRS, which became effective for annual periods beginning on or after 1 January 2019, have been adopted in these financial statements. The application of these revised IFRSs, except where stated, have not had any material impact on the amounts reported for the current and prior years.  IFRS 16, ‘Leases’ - This standard replaces the current guidance in IAS 17 and is a far reaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting remains mainly unchanged. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The impact of the IFRS 16 on the condensed consolidated interim financial information of the Group have been disclosed in note 2.4. 8
  9. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 New and revised IFRS applied on the condensed consolidated interim financial information (continued)  Amendment to IFRS 9, ‘Financial instrument’ - The amendment permits more assets to be measured at amortised cost than under the previous version of IFRS 9, in particular some prepayable financial assets. The amendment also confirms that modifications in financial liabilities will result in the immediate recognition of a gain or loss.  IFRIC 23 Uncertainty over Income Tax Treatments – The interpretation address the determination of taxable profit (tax loss) tax bases, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. It specifically considers  Whether tax treatments should be considered collectively  Assumptions for taxation authorities  The determination of taxable profit (tax loss), tax bases, unused tax losses, and tax rates  The effect of changes in facts and circumstances 2.3 New and revised IFRS in issue but not yet effective and not early adopted The Group has not yet early applied the following new standards, amendments and interpretations that have been issued but are not yet effective: Effective for annual periods beginning on or New and revised IFRS after 1 January 2022  IFRS 17, ‘Insurance contracts’ - On 18 May 2017, the IASB finished its longstanding project to develop an accounting standard on insurance contracts and published IFRS 17, ‘Insurance Contracts’. IFRS 17 replaces IFRS 4, which currently permits a wide variety of practices. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features. The standard applies to annual periods beginning on or after 1 January 2021, with earlier application permitted if IFRS 15, ‘Revenue from contracts with customers’ and IFRS 9, ‘Financial instruments’ are also applied. IFRS 17 requires a current measurement model, where estimates are remeasured in each reporting period. The measurement is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin (“CSM”) representing the unearned profit of the contract. A simplified premium allocation approach is permitted for the liability for the remaining coverage if it provides a measurement that is not materially different from the general model or if the coverage period is one year or less. However, claims incurred will need to be measured based on the building blocks of discounted, risk-adjusted, probability weighted cash flows.  Amendments to IFRS 3 – This amendment revises the definition of a business. According to feedback received by the IASB, application of the current guidance is commonly thought to be too complex, and it results in too many transactions qualifying as business combinations. 9 1 January 2020
  10. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 New and revised IFRS in issue but not yet effective and not early adopted (continued)  Amendments to IAS 1 and IAS 8 - These amendments to IAS 1, ‘Presentation of financial statements’, and IAS 8, ‘Accounting policies, changes in accounting estimates and errors’, and consequential amendments to other IFRSs: i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting; ii) clarify the explanation of the definition of material; and iii) incorporate some of the guidance in IAS 1 about immaterial information. 1 January 2020 The Group is currently assessing the impact of these standards, interpretations and amendments on the future financial statements and intends to adopt these, if applicable, when they become effective. 2.4 Significant accounting policies Hedge accounting The Group designates certain hedging instruments, which include derivatives as either fair value hedges or cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the consolidated income statement immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognised in the consolidated statement of income statement. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to the consolidated income statement from that date. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the consolidated statement of other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in consolidated income statement, is included in the other income line item. Amounts previously recognised in the consolidated statement of other comprehensive income and accumulated in equity are reclassified to consolidated income statement in the periods when the hedged item affects in the recognition of a non-financial assets or a non-financial liability, the gains and losses previously recognised in consolidated statement of comprehensive income and accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. 10
  11. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 2 2.4 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) Significant accounting policies (continued) Hedge accounting (continued) Cash flow hedges (continued) Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in the consolidated statement of other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the consolidated income statement. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in the consolidated income statement. Leasing Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable • variable lease payment that are based on an index or a rate • amounts expected to be payable by the lessee under residual value guarantees • the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and • payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability • any lease payments made at or before the commencement date less any lease incentives received • any initial direct costs, and • restoration costs. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the profit or loss. Short-term leases are leases with a lease term of 12 months or less. Changes in accounting policies The Group has adopted IFRS 16 prospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening statement of financial position on 1 January 2019. On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 2.89%. 11
  12. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) 2.4 Significant accounting policies (continued) Changes in accounting policies (continued) The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. Other right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position as at 31 December 2018. The net impact on retained earnings on 1 January 2019 was a decrease of AED 752 thousand. Policy applicable before 1 January 2019 Until the financial year ended 2018, leases of properties were classified as operating leases. Lease income from operating leases where the group was a lessor was recognised in income on a straight-line basis over the lease term. The respective leased assets were included in the balance sheet based on their nature. 3 DUE FROM BANKS, NET 31 March 2019 AED’000 (Unaudited) Domestic Regional International 72,549 4,463 802,414 ─────── 879,426 (908) ─────── 878,518 ═══════ Less: allowance for impairment (note 6) 31 December 2018 AED’000 (Audited) 77,146 5,666 751,364 ───── 834,176 (757) ───── 833,419 ═════ Part of the balances with banks amounting to AED 363,345 thousand (2018: AED 312,589 thousand) is pledged as collateral with banks against credit facilities. Refer note 7.1 for the detail of credit facilities as at reporting date. 4 LOANS AND ADVANCES, NET Gross loans and advances Less: allowance for impairment (note 6) Less: interest in suspense Loans and advances, net 12 31 March 2019 AED’000 (Unaudited) 31 December 2018 AED’000 (Audited) 1,199,113 (1,094) (169) ──────── 1,197,850 ══════ 1,331,176 (902) (73) ──────── 1,330,201 ══════
  13. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 5 INVESTMENTS, NET 31 March 2019 AED’000 (Unaudited) Investment at fair value through profit or loss Debt instruments Quoted Equity instruments Quoted Unquoted Total investments measured at fair value through profit or loss 7,520 39,065 ──────────── ──────────── 63,988 183,723 88,539 246,279 ──────────── ──────────── 247,711 334,818 ──────────── ──────────── 255,231 ──────────── Investments at fair value through other comprehensive income Debt instruments Quoted Unquoted Equity instruments Quoted Total investments measured at fair value through other comprehensive income Investments at amortized cost Debt instruments Quoted Total investments measured at amortised cost Investment in bullion Investments, net 13 373,883 ──────────── 660,015 8,299 223,068 8,299 ──────────── ──────────── 668,314 231,367 ──────────── ──────────── 52,032 52,236 ──────────── ──────────── 720,346 283,603 ──────────── ──────────── 754,501 785,667 ──────────── ──────────── 754,501 785,667 ──────────── ──────────── 610 Gross investments Less: allowance for impairment (note 6) 31 December 2018 AED’000 (Audited) 605 ──────────── ──────────── 1,730,688 (5,548) 1,443,758 (6,176) ──────────── ──────────── 1,725,140 ════════ 1,437,582 ════════
  14. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 5 INVESTMENTS, NET (continued) Debt instruments: Domestic Regional International Equity instruments: Domestic Regional International Investment in bullion Gross investments Less: allowance for impairment (note 6) Investments, net 31 March 2019 AED’000 (Unaudited) 31 December 2018 AED’000 (Audited) 128,260 286,337 1,015,738 125,296 108,953 821,850 ───────── ───────── 1,430,335 1,056,099 ───────── ───────── 60,272 1,295 238,176 61,096 1,649 324,309 ───────── ───────── 299,743 387,054 ───────── ───────── 610 605 ───────── ───────── 1,730,688 (5,548) 1,443,758 (6,176) ───────── ───────── 1,725,140 ════════ 1,437,582 ════════ Part of the proprietary investment portfolio of the Group having a carrying value of AED 517,994 thousand (2018: AED 430,723 thousand) is pledged as collateral with banks against credit facilities. Refer note 7.1 for the detail of credit facilities as at reporting date. 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. 14
  15. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 5 INVESTMENTS, NET (continued) As at 31 March 2019, the Group held the following investments measured as follows: 31 March 2019 AED’000 (Unaudited) Debt instruments: Domestic Regional International Equity instruments: Domestic Regional International Investment in bullion Gross investments Less: allowance for impairment (note 6) Investments, net Investments carried at fair value Level 1 Level 2 Level 3 AED’000 AED’000 AED’000 (Unaudited) (Unaudited) (Unaudited) Investments carried at amortised cost AED’000 (Unaudited) 128,260 286,337 1,015,738 69,889 271,525 326,121 - 8,299 - 50,072 14,812 689,617 60,272 1,295 238,176 45,552 1,295 62,746 1,099 175,430 13,621 - - 610 ─────── 610 ─────── ─────── ─────── ─────── 1,730,688 777,738 176,529 21,920 754,501 ════════ ════════ ════════ ════════ (5,548) ─────── 1,725,140 ════════ As at 31 December 2018, the Group held the following investments measured as follows: Total 2018 AED’000 (Audited) Debt instruments: Domestic Regional International Equity instruments: Domestic Regional International Investment in bullion Gross investments Less: allowance for impairment (note 6) Investments, net Investments carried at fair value Level 1 Level 2 Level 3 AED’000 AED’000 AED’000 (Audited) (Audited) (Audited) Investments carried at amortised cost AED’000 (Audited) 125,296 108,953 821,850 66,675 94,127 101,331 - 8,299 - 50,322 14,826 720,519 61,096 1,649 324,309 46,698 1,649 86,001 801 219,548 13,597 18,760 - 605 ─────── 1,443,758 605 ─────── 397,086 ─────── 220,349 ─────── 40,656 ─────── 785,667 (6,176) ─────── 1,437,582 ════════ ════════ ════════ ════════ ════════ The fair value of debt instruments carried at amortised cost as at 31 March 2019, amounts to AED 749,825 thousand (31 December 2018: AED 770,348 thousand) 15
  16. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 5 INVESTMENTS, NET (continued) There were no transfers between the levels of the fair value hierarchy in the three months to 31 March 2019. The following table shows a reconciliation of the opening and closing amounts of level 3 investments recorded at fair value: 31 March 2019 AED’000 (Unaudited) At the beginning of the period/year Remeasurement of impairment under IFRS 9 Disposal Net unrealised loss recognised in income statement 40,656 (18,760) 24 ───── 21,920 ═════ At the end of the period/year 31 December 2018 AED’000 (Audited) 50,907 (10,000) (251) ───── 40,656 ═════ The Group has assessed the sensitivity of the fair value measurement of investments under level 3 due to changes in inputs used. Based on the assessment, no major changes in the fair value of investments under level 3 are noted as at 31 March 2019. Such an assessment is performed on a quarterly basis by reviewing the changes in unobservable inputs which might result in higher or lower fair value measurement. A legal case in which the Group is a plaintiff in respect of an outstanding commercial paper with a gross outstanding value of AED 19.8 million is still in progress. Based on the advice of counsel, management is confident of a positive outcome to the case and recovery of full book value. 16
  17. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 6 ALLOWANCE FOR IMPAIRMENT LOSSES ON FINANCIAL ASSETS 31 March 2019 AED’000 (Unaudited) Investments Movement in allowances for impairment losses Balance at 1 January Impairment allowance adjusted against carrying value of investments Initial application of IFRS 9 Impairment allowance for the period/year Loans and advances Movement in allowances for impairment losses Balance at 1 January Initial application of IFRS 9 Impairment allowance for the period/year Due from banks Movement in allowances for impairment losses Balance at 1 January Initial application of IFRS 9 Impairment allowance for the period/year 31 December 2018 AED’000 (Audited) 6,176 (628) ───── 5,548 ═════ 26,300 (10,000) (12,298) 2,174 ───── 6,176 ═════ 902 192 ───── 1,094 ═════ 15,000 (14,543) 445 ───── 902 ═════ 757 151 ───── 908 ═════ 3,099 (2,342) ───── 757 ═════ Expected credit losses The analysis of expected credit losses by stage for loans and advances, investment in debt instruments measured at amortised cost and due from banks is as follows: Expected credit losses -Lifetime ECL (Stage 3) Expected credit losses- 12-months ECL (Stage 1) Expected credit losses- lifetime ECL (Stage 2) Expected credit losses Total expected credit losses 17 31 March 2019 AED’000 (Unaudited) 31 December 2018 AED’000 (Audited) 3,222 3,000 2,901 1,427 ───── 4,328 ───── 7,550 ═════ 2,976 1,859 ───── 4,835 ───── 7,835 ═════
  18. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 7 DUE TO BANKS Term deposits Repurchase agreements Demand and call deposits 7.1 31 March 2019 AED’000 (Unaudited) 31 December 2018 AED’000 (Audited) 447,395 273,732 3,170 ─────── 724,297 ═══════ 485,665 137,723 158 ─────── 623,546 ═══════ Information on collateral Term deposits: Collateralized by investments Collateralized by due from banks Repurchase agreements: Collateralized by debt instruments Balance 31 March 2019 AED’000 (Unaudited) Collateral value 31 March 2019 AED’000 (Unaudited) Balance 31 December 2018 AED’000 (Audited) Collateral value 31 December 2018 AED’000 (Audited) 95,385 226,281 104,335 283,456 327,010 ─────── 422,395 ═══════ 363,345 ─────── 589,626 ═══════ 281,330 ─────── 385,665 ═══════ 312,589 ─────── 596,045 ═══════ 273,732 ═══════ 291,713 ═══════ 137,723 ═══════ 147,267 ═══════ The group has unsecured term deposits amounting to AED 25,000 thousand (2018: AED 100,000 thousand) as at the reporting date. 8 INTEREST INCOME Three months ended 31 March ─────────────────────── Loans and advances Bank placements 18 2019 AED’000 2018 AED’000 (Unaudited) (Unaudited) 18,675 1,144 ─────── 19,819 ═══════ 15,684 1,123 ─────── 16,807 ═══════
  19. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 9 NET INCOME FROM INVESTMENTS Three months ended 31 March ────────────────────────── Interest income on investments in debt instruments Net income from interest rate swaps Net realised gain on disposal of investments measured at amortised cost Net realised (loss)/gain from investment securities measured as fair value through profit or loss Net unrealised gain/(loss) from investment securities measured as fair value through profit or loss Dividend income (Loss)/gain on redemption of investments Portfolio management fees paid to other financial institutions 10 2019 AED’000 (Unaudited) 2018 AED’000 (Unaudited) 9,307 15 - 14,579 2,563 (2,041) 1,142 11,164 (3,078) 4,353 (8) (230) ─────── 22,560 ═══════ 2,823 6 (194) ─────── 17,841 ═══════ BASIC AND DILUTED EARNINGS PER SHARE Basic earnings per share of AED 13.29 (31 March 2018: AED 20.67) is calculated by dividing the profit attributable to the equity holders of the parent of AED 9,305 thousand for the three month period ended 31 March 2019 (31 March 2018: AED 14,466 thousand) by the weighted average number of shares outstanding during the period of 700,000 of AED 100 each (31 March 2018: 700,000 shares of AED 100 each). The figure for basic and diluted earnings per share is the same as the Group has not issued any instruments which would have an impact on earnings per share when exercised. 11 SEGMENTAL ANALYSIS For operating purposes, the Group is organised into two major business segments: (a) Investments, which is principally involved in managing the Group’s own investment portfolio and provides treasury services; and (b) Banking Services, which principally manages clients’ investment portfolios, provides credit facilities, accepts deposits from corporate and individual customers and provides advisory services on corporate finance and capital market transactions. These segments are the basis on which the Group reports its primary segment information. Transactions between segments are conducted at rates determined by management taking into consideration the cost of funds and an equitable allocation of expenses. Management monitors the operating results of the operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss. 19
  20. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 11 SEGMENTAL ANALYSIS (continued) Investments Three months ended 31 March 2018 2019 AED’000 AED’000 (Unaudited) (Unaudited) Revenue * Inter-segment adjustment Profit for period Banking Services Three months ended 31 March 2018 2019 AED’000 AED’000 (Unaudited) (Unaudited) 21,538 18,111 27,714 1,636 ─────── 3,535 ─────── (1,636) ─────── 23,174 ═══════ 21,646 ═══════ 6,280 ═══════ 5,185 ═══════ 32,890 Total Three months ended 31 March 2018 2019 AED’000 AED’000 (Unaudited) (Unaudited) 49,252 51,001 (3,535) ─────── ─────── ─────── 26,078 ═══════ 29,355 ═══════ 49,252 ═══════ 51,001 ═══════ 3,025 ═══════ 9,856 ═══════ 9,305 ═══════ 15,041 ═══════ the * Revenue comprises of interest income, net income from investments, fee commission and other income and exchange gain/ (loss) less net impairment loss on financial assets Investments 31 December 31 March 2018 2019 AED’000 AED’000 (Audited) (Unaudited) Segment assets Segment liabilities and equity 12 Banking Services 31 December 31 March 2018 2019 AED’000 AED’000 (Audited) (Unaudited) Total 31 March 31 December 2018 2019 AED’000 AED’000 (Audited) (Unaudited) 2,961,641 ═══════ 2,666,262 ═══════ 1,225,474 ═══════ 1,350,619 ═══════ 4,187,115 ═══════ 4,016,881 ═══════ 757,001 ═══════ 642,102 ═══════ 3,430,114 ═══════ 3,374,779 ═══════ 4,187,115 ═══════ 4,016,881 ═══════ COMMITMENTS AND CONTINGENT LIABILITIES Credit-related commitments and contingent liabilities Credit-related commitments include commitments to extend credit, letters of credit, guarantees and acceptances which are designed to meet the requirements of the Group’s customers. Letters of credit, guarantees and acceptances commit the Group to make payments on behalf of customers, contingent upon the failure of the customers to perform under the terms of the contract. The Group has the following credit related contingent liabilities and commitments: Guarantees Unutilised committed credit facilities* 31 March 2019 AED’000 (Unaudited) 31 December 2018 AED’000 (Audited) 44,307 142,581 ─────── 186,888 ═══════ 46,908 148,338 ─────── 195,246 ═══════ The Group has commitments of AED 35,365 thousand on account of investment in equity instruments (31 December 2018: AED 35,698 thousand). 20
  21. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 12 COMMITMENTS AND CONTINGENT LIABILITIES (continued) Credit-related commitments and contingent liabilities (continued) * Unutilised committed credit facilities represent a contractual commitment to permit draw downs on a facility within a defined period subject to conditions precedent and termination clauses. As commitments may expire without being drawn down and since conditions precedent to draw down have to be fulfilled, the total contract amounts do not necessarily represent exact future cash requirements. 13 RELATED PARTY TRANSACTIONS The Group enters into transactions in the ordinary course of business with related parties, defined as major shareholders, directors, key management personnel and their related companies. All loans and advances to related parties are performing advances and are free of any provision for possible loan losses. Pricing policies and terms of related parties’ transactions are approved by the Group’s management. The significant balances outstanding in respect of related parties included in the condensed consolidated interim financial information are as follows: Directors, their related parties and key management personnel: Loans and advances Investments Customers’ deposits Commitments and contingencies Other liabilities 31 March 2019 AED’000 (Unaudited) 31 December 2018 AED’000 (Audited) 14,476 ═════════ 21,345 ═════════ 517,522 ═════════ 36,931 ═════════ 4,996 ═════════ 14,999 ═════════ 21,061 ═════════ 543,038 ═════════ 39,481 ═════════ 1,936 ═════════ The income and expenses in respect of related parties included in the condensed consolidated interim financial information are as follows: Three month ended 31 March ────────────────────────── 2019 AED’000 (Unaudited) Directors, their related parties and key management personnel: Interest income Interest expense Net realised gain on disposal of investments measured at amortised cost Other income General and administration expenses 21 2018 AED’000 (Unaudited) 55 (4,230) 3,854 (1,869) 742 (1,899) 2,563 670 (1,840)
  22. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 13 RELATED PARTY TRANSACTIONS (continued) Outstanding balances at the period end arise in the normal course of business. For the period ended 31 March 2019, the Group has not recorded any impairment on amounts owed by related parties (2018: Nil). Three month ended 31 March ────────────────────────── Salaries and other benefits 14 2019 AED’000 (Unaudited) 2018 AED’000 (Unaudited) 2,944 ══════ 2,911 ══════ DERIVATIVE FINANCIAL INSTRUMENTS In the ordinary course of business the Group enters into transactions that involve derivative financial instruments. A derivative financial instrument is a financial contract between two parties where payments are dependent upon movements in price in one or more underlying financial instrument, reference rate or index. The purpose of derivative financial instruments in the Group’s business is to mitigate the risks arising from default, currency and interest fluctuations and other market variables. The Group uses forward foreign exchange contracts and options to mitigate the currency risk on certain investments. The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with the notional amounts. The notional amount, recorded gross is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the period end and are neither indicative of the market risk nor credit risk. 31 March 2019 Notional amount by term to maturity Less than 1 to 5 1 year years Over 5 years AED’000 AED’000 AED’000 (Unaudited) (Unaudited) (Unaudited) Positive fair value AED’000 (Unaudited) Negative fair value AED’000 (Unaudited) Notional amount AED’000 (Unaudited) 166 711 94,772 94,772 - - 288 288 190,288 190,288 - - 1,098 ─────── 1,552 ═══════ 9,624 ─────── 10,623 ═══════ 255,274 ─────── 540,334 ═══════ ─────── 285,060 ═══════ ─────── ═══════ 255,274 ─────── 255,274 ═══════ Derivatives: Forward foreign exchange contracts Foreign exchange Option contracts Interest rate swaps 22
  23. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 14 DERIVATIVE FINANCIAL INSTRUMENTS (continued) 31 December 2018 Notional amount by term to maturity Less than 1 to 5 Over 5 1 year years years AED’000 AED’000 AED’000 (Audited) (Audited) (Audited) Positive fair value AED’000 (Audited) Negative fair value AED’000 (Audited) Notional amount AED’000 (Audited) 304 284 97,842 97,842 - - 737 ─────── 1,041 ═══════ 737 ─────── 1,021 ═══════ 161,582 ─────── 259,424 ═══════ 161,582 ─────── 259,424 ═══════ ─────── ═══════ ─────── ═══════ Derivatives: Forward foreign exchange contracts Foreign exchange option contracts Derivatives often involve at their inception only a mutual exchange of promises with little or no transfer of consideration. A relatively small movement in the value of the asset, rate or index underlying a derivative contract may have an impact on the profit or loss of the Group. The Group’s exposure under derivative contracts is closely monitored as part of the overall management of the Group’s market risk. Derivative product type Forwards Forwards are contractual agreements to either buy or sell a specified currency, commodity or financial instrument at a specific price and date in the future. Forwards are customised contracts transacted in over-the-counter markets. Options Options are contractual agreements that convey the right, but not the obligation, to either buy or sell a specific amount of a commodity or financial instrument at a fixed price, either at a fixed future date or at any time within a specified period. Swaps Swaps are commitments to exchange one set of cash flows for another. For interest rate swaps, counter-parties generally exchange fixed and floating rate interest payments in a single currency without exchanging principal. Fair value The Derivatives are recorded at fair value by using the published price quotations in an active market or counterparty prices or valuation techniques using a valuation model that has been tested against the prices of actual market transactions and the Group's best estimate of the most appropriate model inputs. Foreign exchange forward contracts, foreign exchange option contracts and interest rate swaps are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying commodity. Derivative related credit risk Credit risk in respect of derivative financial instruments arises from the potential for a counterparty to default on its contractual obligations and is limited to the positive fair value of instruments that are favorable to the Group. With gross–settled derivatives, the Group is also exposed to a settlement risk, being the risk that the Group honors its obligation, but the counterparty fails to deliver the counter value. Changes in counterparty credit risk have no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value. All the derivative contracts are recorded at fair value under level 2 of the fair value hierarchy. 23
  24. Emirates Investment Bank P .J.S.C. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (CONTINUED) For the three month period ended 31 March 2019 (Unaudited) 15 FIDUCIARY ASSETS Balance of fiduciary assets 31 March 2019 AED’000 (Unaudited) 31 December 2018 AED’000 (Audited) 5,520,684 ═══════ 5,676,901 ═══════ The Group provides custody services for its customers’ assets. These assets are held by the Group in a fiduciary capacity and are, accordingly, not included in these condensed consolidated interim financial information as assets of the Group. 24