National Bank of Fujairah: Condensed Consolidated Interim Financial Information - 30 June 2022

Transcription

1. National Bank of Fujairah PJSC Condensed consolidated interim financial information for the six month period ended 30 June 2022 51
2. Condensed consolidated interim financial information For the six month period ended 30 June 2022 Contents Page Independent auditor ’s review report to the board of directors 1 Consolidated interim statement of financial position 2 Consolidated interim statement of income (Unaudited) 3 Consolidated interim statement of comprehensive income (Unaudited) 4 Consolidated interim statement of cash flows (Unaudited) 5 Consolidated interim statement of changes in equity (Unaudited) 6 Notes to the condensed consolidated interim financial information 52 7-50
5. National Bank of Fujairah PJSC Consolidated interim statement of income – (Unaudited) For the six month period ended 30 June 2022 Notes Three month period ended 30 June 2022 AED’000 Three month period ended 30 June 2021 AED’000 Six month Six month period ended period ended 30 June 2022 30 June 2021 AED’000 AED’000 Interest income and income from Islamic financing and investment activities Interest expense and distribution to Islamic depositors Net interest income and net income from Islamic financing and investment activities 360,392 309,396 661,580 611,830 (78,840) (67,873) (141,450) (142,739) 281,552 241,523 520,130 469,091 Fees and commission income Fees and commission expense 107,262 (12,183) 88,220 (10,898) 209,000 (23,700) 171,422 (21,202) 95,079 77,322 185,300 150,220 Net fees and commission income Foreign exchange and derivatives income (Loss) / income from investments and Islamic instruments Other operating income Operating income Operating expenses Employee benefits expense Depreciation and amortization Other operating expenses Total operating expenses Operating profit before impairment losses Net impairment losses Profit for the period Earnings / (loss) per share (basic and diluted) 55,492 23,672 102,545 54,572 (110) 13,609 445,622 11,243 10,543 364,303 21,279 29,210 858,464 34,618 16,011 724,512 (80,756) (9,011) (40,030) (129,797) (66,937) (6,503) (36,976) (110,416) (151,168) (16,353) (81,874) (249,395) (135,700) (13,228) (73,630) (222,558) 15 315,825 (225,663) 90,162 253,887 (219,682) 34,205 609,069 (458,551) 150,518 501,954 (425,741) 76,213 16 AED 0.026 AED (0.002) AED 0.056 AED 0.019 The notes on pages 7 to 50 form an integral part of the condensed consolidated interim financial information. The independent auditor’s review report of the Group condensed consolidated interim financial information is set out on page 1. 3
6. National Bank of Fujairah PJSC Consolidated interim statement of comprehensive income – (Unaudited) For the six month period ended 30 June 2022 Three month Three month Six month period ended period ended period ended 30 June 2022 30 June 2021 30 June 2022 AED’000 AED’000 AED’000 Profit for the period Six month period ended 30 June 2021 AED’000 90,162 34,205 150,518 76,213 Movement in fair value reserve (equity instruments): -Net change in fair value (963) 5,914 (11,341) 8,933 Items that may be reclassified subsequently to the statement of income: Movement in fair value reserve (debt instruments): -Net change in fair value -Net change in allowances for impairment -Net amount transferred to the statement of income (14,755) (2,841) (557) 12,787 2,356 (13,818) (31,186) (2,412) (22,074) 2,007 768 (35,412) Other comprehensive (loss) / income for the period (19,116) 7,239 (67,013) (23,704) 71,046 41,444 83,505 52,509 Other comprehensive income: Items that will not be reclassified subsequently to the statement of income: Total comprehensive income for the period The notes on pages 7 to 50 form an integral part of the condensed consolidated interim financial information. The independent auditor’s review report of the Group condensed consolidated interim financial information is set out on page 1. 4
7. National Bank of Fujairah PJSC Consolidated interim statement of cash flows – (Unaudited) For the six month period ended 30 June 2022 Six month period ended 30 June 2022 AED’000 Six month period ended 30 June 2021 AED’000 150,518 76,213 16,353 14,331 458,551 13,228 7,994 425,741 (28,036) (30,548) 6,757 (4,070) Cash flow from operating activities before changes in operating assets and liabilities and payment of employee end of service and other long term benefits Payment of employee end of service and other long term benefits Change in due from central bank Change in due from banks and financial institutions Change in loans and advances and Islamic financing receivables Change in other assets Change in due to banks Change in customer deposits and Islamic customer deposits Change in other liabilities Net cash (used in) / generated from operating activities 618,474 (6,152) (880,166) (604,927) (2,558,232) 137,617 203,756 (359,831) (5,332) (3,454,793) 488,558 (6,749) 1,199,360 (20,297) (856,274) (90,078) (91,975) 63,487 68,326 754,358 Investing activities Purchase of property and equipment and capital work-in-progress Purchase of investments and Islamic instruments Proceeds from sale of investments and Islamic instruments (36,530) (3,930,660) 3,126,177 (28,904) (1,398,992) 1,736,345 (841,013) 308,449 257,110 (514,220) (37,763) 440,760 (367,300) (37,763) (294,873) (4,590,679) 4,540,036 (50,643) 35,697 1,098,504 3,377,899 4,476,403 Notes Operating activities Profit for the period Adjustments for : Depreciation and amortization Provision for employee end of service and other long term benefits Net impairment losses Net fair value gain on disposal of investments and Islamic Instruments Net changes in fair value of investments at fair value through profit or loss 15 Net cash (used in) / generated from investing activities Financing activities Proceeds from term borrowings Repayment of term borrowings Tier 1 capital securities coupon paid Net cash (used in) / generated from financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period 19 The notes on pages 7 to 50 form an integral part of the condensed consolidated interim financial information. The independent auditor’s review report of the Group condensed consolidated interim financial information is set out on page 1. 5
8. National Bank of Fujairah PJSC Consolidated interim statement of changes in equity – (Unaudited) For the six month period ended 30 June 2022 AED’000 Share Statutory capital reserve Special reserve Fair value reserve Proposed dividends Retained earnings Impairment reserve Tier 1 capital securities Total At 01 January 2021 Profit for the period Other comprehensive loss for the period Total comprehensive income for the period Excess provisions under UAE central bank requirements over IFRS 9 (note 10.2) Tier 1 capital securities coupon paid Zakat impact (note 22) At 30 June 2021 1,914,762 - 936,053 - 561,899 - 92,583 (23,704) (23,704) - 597,943 76,213 69 76,282 283,469 - 1,285,550 - 5,672,259 76,213 (23,635) 52,578 1,914,762 936,053 561,899 68,879 - 13,264 (37,763) 1,393 651,119 (13,264) 270,205 1,285,550 (37,763) 1,393 5,688,467 At 01 January 2022 Profit for the period Other comprehensive loss for the period Total comprehensive income for the period Excess provisions under UAE central bank requirements over IFRS 9 (note 10.2) Tier 1 capital securities coupon paid At 30 June 2022 2,000,000 - 947,578 - 573,424 - 44,041 (67,013) (67,013) - 635,396 150,518 6,178 156,696 189,674 - 1,285,550 - 5,675,663 150,518 (60,835) 89,683 - - - - - 17,676 (37,763) (17,676) - - (37,763) 2,000,000 947,578 573,424 (22,972) - 772,005 171,998 1,285,550 5,727,583 The notes on pages 7 to 50 form an integral part of the condensed consolidated interim financial information. The independent auditor’s review report of the Group condensed consolidated interim financial information is set out on page 1. 6
9. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 1 . Legal status and activities National Bank of Fujairah (the Bank) is a Public Joint Stock Company registered under the laws of the United Arab Emirates. The Bank operates under a banking license issued on 29 August 1984 by the Central Bank of the United Arab Emirates (the UAE Central Bank) and commenced operations on 20 September 1984. The shares of the Bank were listed on Abu Dhabi Securities Exchange (ADX) on 23 October 2005. The Bank's key shareholders include the Department of Industry and Economy – Government of Fujairah, Easa Saleh Al Gurg LLC and Investment Corporation of Dubai. The principal activity of the Bank is commercial banking which is carried out from its network of fifteen branches, including one electronic banking service unit, across the UAE in emirates of Fujairah, Abu Dhabi, Dubai and Sharjah. The Bank has two fully owned subsidiary companies:  NBF Financial Services FZC was established in December 2004 with limited liability status in the Fujairah Free Trade Zone to provide support services to the Bank.  NBF Markets (Cayman) Limited is registered in the Cayman Islands as an exempted company limited by shares under the Companies Law (revised) of the Cayman Islands and regulated by the Cayman Island Government General Registry. The Company was established on 31 January 2017 to provide support services to the Bank to enter into foreign exchange and derivative transactions with financial institutions / counterparties under the terms and conditions of International Swaps and Derivatives Association (ISDA). The condensed consolidated interim financial information for the six month period ended 30 June 2022 comprise the Bank and its subsidiaries (together referred to as ‘the Group’). The registered address of the Group is Hamad Bin Abdullah Street, P. O. Box 887, Fujairah, United Arab Emirates. 2. Basis of preparation Statement of compliance The condensed consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), International Accounting Standard (IAS) 34: Interim Financial Reporting as issued by International Accounting Standard Board (IASB). On 20 September 2021, the UAE Federal Decree Law No. 32 of 2021 ("Companies Law") was issued and came into effect on 2 January 2022 which repealed the UAE Federal Law No. 2 of 2015. The Group is in the process of reviewing the provisions of the UAE Federal Decree Law No 32 of 2021 and will apply the requirements thereof no later than one year from the effective date. 7
10. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 2. Basis of preparation (continued) The Group has presented Basel III Pillar 3 disclosures separately in accordance with the guidelines issued by the UAE Central Bank. These condensed consolidated interim financial information do not include all the information and disclosures required for full annual consolidated financial statements prepared in accordance with IFRS and should be read in conjunction with the Group’s consolidated financial statements as at and for the year ended 31 December 2021. In preparing this condensed consolidated interim financial information, significant judgments made by the 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 2021 except for the new judgements and estimates explained in Note 3. 3. Significant accounting policies Changes in accounting policies The accounting policies adopted in the preparation of the condensed consolidated interim financial information are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2021, except for the adoption of new standards effective as of 1 January 2022. New and revised IFRS adopted in the condensed consolidated interim financial information The following new and revised IFRS, which became effective for annual periods beginning on or after 1 January 2022, have been adopted in this interim financial information. The application of these revised IFRSs, except where stated, have not had any material impact on the amounts reported for the current and prior periods. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Interbank offered rates (“IBORs) reform disclosure – Phase 2 In August 2020, the IASB issued IBOR reform - Phase 2, which amends IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases. IBOR Reform Phase 2 provides temporary reliefs that allow the Bank’s hedging relationships to continue upon the replacement of an existing interest rate benchmark with an alternative risk-free benchmark reference rate (“RFR”). The reliefs require the Bank to amend hedge designations and hedge documentation. This includes redefining the hedged risk to reference an RFR, redefining the description of the hedging instrument and / or the hedged item to reference the RFR and amending the method for assessing hedge effectiveness. Updates to the hedging documentation must be made by the end of the reporting period in which a replacement takes place. For the retrospective assessment of hedge effectiveness, the Bank may elect on a hedge by hedge basis to reset the cumulative fair value change to zero. The Bank may designate an interest rate as a non-contractually specified, hedged risk component of changes in the fair value or cash flows of a hedged item, provided the interest rate risk component is separately identifiable. The Group has assessed the impact of Phase 2 and concluded that it is not material to the Group’s condensed consolidated interim financial information. IBORs, such as the London Interbank Offered Rate (“LIBOR”), play a critical role in global financial markets, serving as reference rates for derivatives, loans and securities, and as parameters in the valuation of financial instruments. 8
11. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 3. Significant accounting policies (continued) New and revised IFRS adopted in the condensed consolidated interim financial information (continued) Uncertainty surrounding the integrity of IBOR rates has in recent years led regulators, central banks and market participants to work towards a transition to RFRs and market-led working groups in respective jurisdictions have recommended alternative risk-free reference rates, which are gradually being adopted. Progress in the transition to these new benchmarks has resulted in significant uncertainty in the future of IBOR benchmarks beyond 1 January 2022. The majority of LIBOR and other IBORs are to be discontinued after 31 December 2021 and replaced with certain Alternative Reference Rates (“ARRs”), with the exception of certain USD LIBOR rates where cessation is delayed until 30 June 2023. The transition away from the IBORs covers most of the business units and support functions of the Group. Further, details on IBOR reforms and related disclosures can be referred to in note 5(f) of the Group’s consolidated financial statements as at and for the year ended 31 December 2021. Narrow-scope amendments and annual improvements to the IFRS Amendments to IFRS 3, ‘Business combinations’ update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. Amendments to IAS 16, ‘Property, plant and equipment’ prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss. Amendments to IAS 37, ‘Provisions, contingent liabilities and contingent assets’ specify which costs a company includes when assessing whether a contract will be loss-making. Annual improvements make minor amendments to IFRS 9, ‘Financial instruments’, and the Illustrative Examples accompanying IFRS 16, ‘Leases’. Standards, amendments and interpretations issued but not yet effective and not early adopted   Amendments to IAS 1, Presentation of financial statements’ on classification of liabilities - These narrow-scope amendments to IAS 1, ‘Presentation of financial statements’, clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (for example, the receipt of a waiver or a breach of covenant). The amendment also clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability. Amendment to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction - These amendments require companies to recognise deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable and deductible temporary differences. 9 Deferred until accounting periods starting not earlier than 1 January 2024 1 January 2023
12. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 3. Significant accounting policies (continued) Standards, amendments and interpretations issued but not yet effective and not early adopted (continued)  Amendments to IAS 1, ‘Presentation of financial statements’, IFRS Practice statement 2 and IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ The IASB amended IAS 1, ‘Presentation of Financial Statements’, to require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendment also clarifies that accounting policy information is expected to be material if, without it, the users of the financial statements would be unable to understand other material information in the financial statements. Further, the amendment to IAS 1 clarifies that immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not obscure material accounting policy 1 January 2023 information. To support this amendment, the Board also amended IFRS Practice Statement 2, ‘Making Materiality Judgements’, to provide guidance on how to apply the concept of materiality to accounting policy disclosures. The amendment to IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, clarifies how companies should distinguish changes in accounting policies from changes in accounting estimates. The distinction is important, because changes in accounting estimates are applied prospectively to future transactions and other future events, but changes in accounting policies are generally applied retrospectively to past transactions and other past events as well as the current period. 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. The preparation of the condensed consolidated interim financial information requires management to make estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty, and actual results may therefore differ resulting in future changes in these estimates. In preparing the condensed consolidated interim financial information, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation and uncertainty were the same as those that applied to the audited consolidated financial statements as at and for the year ended 31 December 2021. There are no other applicable new standards and amendments to the published standards or IFRS IC interpretations that have been issued but are not effective for the first time for the Group’s financial year beginning on 01 January 2022 that would be expected to have a material impact on the Group’s condensed consolidated interim financial information. 10
13. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 4. Financial risk management The Group’s financial risk management objectives, policies and procedures are consistent with those disclosed in the audited consolidated financial statements as at and for the year ended 31 December 2021. (a) Fair value measurement principles Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When available, the fair value of a financial instrument is based on quoted market prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis. If a quoted market price is not available or if a market for a financial instrument is not active, the fair value is determined by using valuation techniques. Valuation techniques include net present value techniques, discounted cash flow methods, comparison to similar instruments for which market observable prices exist. For investments under management with external fund managers, fair value is provided by the external fund managers, and is determined based on the market value of underlying investments of each fund. In all other cases, the instruments are measured at acquisition cost, including transaction cost, less impairment losses, if any. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market-related rate at the date of the consolidated interim statement of financial position for an instrument with similar terms and conditions. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group and the counterparty, where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties; to the extent that the Group believes a third-party market participant would take them into account in pricing a transaction. The fair value of derivatives that are not exchange traded is estimated at the amount that the Group would receive or pay to terminate the contract at the date of the consolidated interim statement of financial position, taking into account current market conditions and the current creditworthiness of the counterparty. 11
14. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 4. Financial risk management (continued) (b) Fair value hierarchy The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:  Level 1: Quoted market price (unadjusted) in an active market for an identical instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry, group, pricing service or regulatory agency, and those prices represent actual and regularly recurring market transactions on an arm’s length basis.  Level 2: Valuation techniques based on observable input, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.  Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Pursuant to disclosure requirements of IFRS 7 Financial Instruments: Disclosures, the Group has disclosed the relevant information in the table below: Fair value measurement – fair value hierarchy: 30 June 2022 (Unaudited) AED’000 Investments and Islamic instruments Debt securities / Islamic sukuks Other investments Forward foreign exchange contracts Currency options Interest rate derivatives Commodity derivatives 12 Notional Level 1 Level 2 Level 3 19,006,515 6,027,776 5,900,081 834,296 1,884,857 404,800 - 2,807 (12,270) 7 14,744 (5,589) -
15. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 4. Financial risk management (continued) (b) Fair value hierarchy (continued) Fair value measurement – fair value hierarchy (continued) 31 December 2021 (Audited) AED’000 Investments and Islamic instruments Debt securities / Islamic sukuks Other investments Forward foreign exchange contracts Currency options Interest rate derivatives Commodity derivatives Notional Level 1 Level 2 Level 3 20,109,187 3,369,558 5,699,622 369,249 1,885,970 649,169 - 2,862 13,281 66 7,971 2,762 - (c) Management of liquidity risk The positive / negative fair values of derivative financial instruments, entered into by the Group, at the reporting date are as below: AED’000 Derivatives Forward foreign exchange contracts Currency options Interest rate derivatives Commodity derivatives 30 June 2022 (Unaudited) Positive Negative Notional fair value fair value 19,006,515 6,027,776 5,900,081 834,296 31,768,668 82,128 94,398 33,949 33,942 72,081 57,337 15,588 21,177 203,746 206,854 13 Net (12,270) 7 14,744 (5,589) (3,108) 31 December 2021 (Audited) Positive Negative Notional fair value fair value 20,109,187 3,369,558 5,699,622 369,249 29,547,616 59,580 22,393 92,598 9,611 184,182 Net 46,299 13,281 22,327 66 84,627 7,971 6,849 2,762 160,102 24,080
16. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 4. (d) Financial risk management (continued) Financial assets and liabilities Classification and measurement The fair values and carrying values of the financial assets and liabilities are shown below: 30 June 2022 (Unaudited) AED’000 Financial assets Cash and balances with the UAE Central Bank Due from banks and financial institutions Investments and Islamic instruments Loans and advances and Islamic financing receivables Other assets Total financial assets Financial liabilities Due to banks Customer deposits and Islamic customer deposits Term borrowings Other liabilities Total financial liabilities At fair value At fair value through other through comprehensive profit or loss income Allowances for impairment (Expected Amortized Credit Losses cost ECL) Carrying amount - - 5,680,082 - 5,680,082 - - 2,483,867 (7,912) 2,475,955 20,092 2,272,372 2,846,894 (14,314) 5,125,044 20,092 2,272,372 30,190,251 1,927,552 43,128,646 (2,465,573) (2,487,799) 27,724,678 1,927,552 42,933,311 - - 3,462,997 - 3,462,997 - - 31,838,914 257,110 2,115,273 37,674,294 90,571 90,571 31,838,914 257,110 2,205,844 37,764,865 14
17. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 4. Financial risk management (continued) (d) Financial assets and liabilities (continued) 31 December 2021 (Audited) AED’000 At fair value At fair value through other through comprehensive profit or loss income Financial assets Cash and balances with the UAE Central Bank Due from banks and financial institutions Investments and Islamic instruments Loans and advances and Islamic financing receivables Other assets Total financial assets Financial liabilities Due to banks Customer deposits and Islamic customer deposits Term borrowings Other liabilities Total financial liabilities Amortized cost Allowances for impairment (ECL) Carrying amount - - 8,006,023 - 8,006,023 - - 2,137,809 (8,386) 2,129,423 1,783 2,536,220 1,842,607 (6,274) 4,374,336 1,783 2,536,220 27,795,449 2,086,977 41,868,865 (2,180,549) (2,195,209) 25,614,900 2,086,977 42,211,659 - - 2,133,539 - 2,133,539 - - 32,198,745 514,220 2,150,744 36,997,248 88,042 88,042 32,198,745 514,220 2,238,786 37,085,290 Fair value of Investments and Islamic instruments measured at amortized cost amounted to AED 2,725.8 million (31 December 2021: AED 1,846.1 million). Management considers that the carrying amounts of all other financial assets and financial liabilities measured at amortised cost in the consolidated financial statements approximate their fair values. The Group performed a detailed analysis of its business models for managing financial assets and analysis of their cash flow characteristics. Allowances for impairment under Other Liabilities represent ECL for off-balance sheet items. (e) Market risk Derivative financial instruments In the ordinary course of business, the Group enters into various types of derivative transactions that are affected by variables in the underlying instruments. A derivative is a financial instrument or other contract with all three of the following characteristics: (i) its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non‐financial variable that the variable is not specific to a party to the contract (sometimes called the ‘underlying’); 15
18. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 4. Financial risk management (continued) (e) Market risk (continued) Derivative financial instruments (continued) (ii) it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and (iii) it is settled at a future date. Derivative financial instruments which the Group enters into includes forward foreign exchange contracts, interest rate derivatives, commodity derivatives and currency options. The Group uses derivative financial instruments for hedging purposes as part of its asset and liability management activities in order to reduce its own exposure to fluctuations in interest rates. The Group uses interest rate swaps to hedge interest rate risks. In all such cases, the hedging relationship and objectives including details of the hedged item and hedging instrument are formally documented and the transactions are accounted for based on the type of hedge. The following table shows the positive (assets) and negative (liabilities) fair values of derivative financial instruments on account of hedging relationships. Hedging instrument 30 June 2022 (Unaudited) AED’000 Derivatives held as fair value hedges Interest rate swaps Total derivative financial instruments Assets Liabilities Notional 185 185 - 216,318 216,318 - 5,302 5,302 178,141 178,141 Hedging instrument 31 December 2021 (Audited) AED’000 Derivatives held as fair value hedges Interest rate swaps Total derivative financial instruments The carrying value of investments (hedged item) is AED 212.4 million (31 December 2021: AED 197.3 million) and the accumulated amount of fair value adjustments to investments (hedged item) is AED 0.2 million (31 December 2021: AED 5.3 million). The gains / losses attributable to the hedged risk for investments amounted to AED 0.2 million (31 December 2021: AED 5.3 million) and on the interest rate swaps (hedging instrument) amounted to AED 0.2 million (31 December 2021: AED 5.3 million). All the hedges were fully effective for the period ended 30 June 2022 and the year ended 31 December 2021. 16
19. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 5. Cash and balances with the UAE Central Bank Cash on hand Certificates of deposit (CDs) with the UAE Central Bank Other balances with the UAE Central Bank (note 5.1) 30 June 2022 AED’000 Unaudited 254,689 4,107,376 1,318,017 31 December 2021 AED’000 Audited 272,685 6,013,366 1,719,972 5,680,082 8,006,023 5.1 Other balances with the UAE Central Bank include regulatory cash reserve deposits of AED 1,318.0 million (31 December 2021: AED 1,720.4 million). 6. Due from banks and financial institutions 30 June 2022 AED’000 Unaudited 6.1 31 December 2021 AED’000 Audited By type Placements Current accounts / term deposits Bills discounted Less: Allowances for impairment (ECL) (note 10.1) 257,110 844,944 1,381,813 2,483,867 (7,912) 2,475,955 512,122 992,084 633,603 2,137,809 (8,386) 2,129,423 As at 30 June 2022, current accounts / term deposits include cash collateral of AED 111.6 million (31 December 2021: AED 125.0 million) in respect of negative fair value of derivatives in accordance with the agreements with interbank counterparties. Due from banks and financial institutions include a Wakala placement amounting to AED 36.7 million (31 December 2021: AED 73.5 million) undertaken through a Shari’ah - compliant Islamic window, NBF Islamic. Due from banks and financial institutions include bank risk discounting portfolio amounting to AED 1,381.8 million (31 December 2021: AED 633.6 million) to support customers’ trade business. 6.2 By geographical area UAE GCC Europe Americas Others Less: Allowances for impairment (ECL) (note 10.1) 17 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 314,483 422,090 677,388 221,665 848,241 2,483,867 (7,912) 538,984 239,940 510,648 453,528 394,709 2,137,809 (8,386) 2,475,955 2,129,423
20. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 6. Due from banks and financial institutions (continued) 6.2 By geographical area (continued) 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 252,317 385,319 1,063,368 110,684 672,179 2,483,867 (7,912) 2,475,955 467,546 231,268 724,111 225,384 489,500 2,137,809 (8,386) 2,129,423 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 154,092 1,831,375 80,430 1,344 2,048 414,578 2,483,867 (7,912) 2,475,955 262,292 1,395,666 36,819 133,223 12,796 297,013 2,137,809 (8,386) 2,129,423 The dispersion of due from banks and financial institutions portfolio based on the redistribution of risk is set out below: UAE GCC Europe Americas Others Less: Allowances for impairment (ECL) (note 10.1) 6.3 By currency AED USD EUR GBP XAU Others Less: Allowances for impairment (ECL) (note 10.1) 18
21. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 6. Due from banks and financial institutions (continued) 6.4 Based on external credit ratings 30 June 2022 AED’000 Unaudited 2,588 10,834 119,189 766,524 703,998 60,989 819,745 2,483,867 (7,912) 2,475,955 AA AA− A+ A A− BBB+ BBB BBB− and below Less: Allowances for impairment (ECL) (note 10.1) 6.5 31 December 2021 AED’000 Audited 1,160 39,480 48,496 219,634 450,283 759,934 19,588 599,234 2,137,809 (8,386) 2,129,423 Due from banks and financial institutions stage-wise analysis The following table contains an analysis of the credit risk exposure of due from banks and financial institutions. The gross carrying amount of due from banks and financial institutions, including accrued interest / profit, represents the Group’s maximum exposure to credit risk on these assets: 30 June 2022 (Unaudited) AED’000 Outstanding balance Allowances for impairment (ECL) (note 10.1) Carrying amount Stage 1 Stage 2 Stage 3 Total 2,484,005 - - 2,484,005 (7,912) 2,476,093 - - (7,912) 2,476,093 31 December 2021 (Audited) AED’000 Outstanding balance Allowances for impairment (ECL) (note 10.1) Carrying amount Stage 1 Stage 2 Stage 3 Total 2,138,314 - - 2,138,314 (8,386) 2,129,928 - - (8,386) 2,129,928 Due from banks and financial institutions were in stage 1 throughout the period and therefore have insignificant ECL. Accordingly, there have been no significant movements between stages in respect of these financial assets. 19
22. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 7. Investments and Islamic instruments Investments at fair value through profit or loss (FVTPL) (note 7.1) Investments at fair value through other comprehensive income (FVOCI) Debt securities / Islamic sukuks (note 7.2) Other investments / Islamic instruments (note 7.3) Investments measured at amortized cost Debt securities / Islamic sukuks (note 7.2) Less: Allowances for impairment (ECL) (note 10.1) 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 20,092 1,783 1,884,857 387,515 2,272,372 1,885,971 650,249 2,536,220 2,846,894 1,842,607 5,139,358 4,380,610 (14,314) (6,274) 5,125,044 4,374,336 7.1 Investments at FVTPL include various funds whose fair values are based on the net asset values provided by the fund managers. 7.2 Debt securities aggregating AED 4,622.1 million (31 December 2021: AED 3,650.3 million) represent the Group’s investments in bonds and notes which are quoted on recognized exchanges and prices of which are available on internationally recognized platforms of Reuters and Bloomberg and are liquid in normal market conditions. The debt securities portfolio includes floating rate securities amounting to AED 733.3 million (31 December 2021: AED 748.3 million). Debt securities portfolio include Islamic sukuks amounting to AED 658.0 million (31 December 2021: AED 588.7 million). Debt securities portfolio include additional tier 1 perpetual bonds of AED 109.6 million (31 December 2021: AED 78.3 million). 7.3 Other investments include various funds whose fair values are based on the net asset values provided by the fund managers, amounting to AED 386.4 million (31 December 2021: AED 649.2 million). No shares were purchased by the Bank during the period (31 December 2021: nil). 7.4 The dispersion of the investment portfolio is set out below: 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited Government Banks and financial institutions Others 1,439,133 2,911,111 789,114 2,114,735 1,272,597 993,278 Less: Allowances for impairment (ECL) (note 10.1) 5,139,358 (14,314) 4,380,610 (6,274) 5,125,044 4,374,336 20
23. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 7. Investments and Islamic instruments (continued) 7.5 By geographical area UAE GCC Europe Americas Others 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 1,268,689 397,260 1,465,646 1,434,011 573,752 5,139,358 1,570,272 728,534 700,819 749,127 631,858 (14,314) 5,125,044 4,380,610 (6,274) 4,374,336 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited UAE GCC Europe Americas Others 1,538,724 626,855 1,264,541 784,460 924,778 1,777,386 942,815 319,589 320,697 1,020,123 Less: Allowances for impairment (ECL) (note 10.1) 5,139,358 (14,314) 5,125,044 4,380,610 (6,274) 4,374,336 Less: Allowances for impairment (ECL) (note 10.1) The dispersion of investment portfolio based on the redistribution of risk is set out below: Others include investments in multilateral development banks amounting to AED 327.7 million (31 December 2021: AED 368.7 million). 7.6 By currency AED USD EUR GBP JPY Less: Allowances for impairment (ECL) (note 10.1) 21 30 June 2022 AED’000 Unaudited 147,192 4,839,811 86,655 65,700 - 31 December 2021 AED’000 Audited 1,080 4,230,262 119,165 30,102 1 5,139,358 (14,314) 4,380,610 (6,274) 5,125,044 4,374,336
24. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 7. Investments and Islamic instruments (continued) 7.7 Based on external credit ratings 30 June 2022 (Unaudited) AED’000 Debt securities / Islamic sukuks Other investments Total 590,387 765,217 68,306 610,381 1,086,361 762,706 447,858 400,535 108,053 268,728 30,826 698,440 765,217 68,306 879,109 1,086,361 762,706 447,858 431,361 (11,578) (2,736) (14,314) 4,720,173 404,871 5,125,044 Debt securities / Islamic sukuks Other investments Total 1,142,231 560,434 251,182 687,498 710,733 107,575 36,764 232,161 163,354 213,645 232,097 42,936 163,354 1,355,876 560,434 251,182 919,595 710,733 107,575 36,764 275,097 (4,662) (1,612) (6,274) 3,723,916 650,420 4,374,336 AA AAA+ A ABBB+ BBB BBB- and below Less: Allowances for impairment (ECL) (note 10.1) 31 December 2021 (Audited) AED’000 AAA AA AAA+ A ABBB+ BBB BBB- and below Less: Allowances for impairment (ECL) (note 10.1) BBB- and below rating investments include unrated issuances by Government related entities. 22
25. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 7. Investments and Islamic instruments (continued) 7.8 Debt investments and Islamic instruments stage-wise analysis The following table contains an analysis of the credit risk exposure of debt investments and Islamic instruments. The gross carrying amount of debt investments and Islamic instruments, including accrued interest / profit, represents the Group’s maximum exposure to credit risk on these assets: 30 June 2022 (Unaudited) AED’000 Outstanding balance Allowances for impairment (ECL) (note 10.1) Carrying amount Stage 1 Stage 2 Stage 3 Total 5,108,533 (14,314) 5,094,219 - - 5,108,533 (14,314) 5,094,219 31 December 2021 (Audited) AED’000 Outstanding balance Allowances for impairment (ECL) (note 10.1) Stage 1 Stage 2 Stage 3 Total 4,337,674 (6,274) - - 4,337,674 (6,274) Carrying amount 4,331,400 - - 4,331,400 Debt investments and Islamic instruments were in stage 1 throughout the period and therefore have insignificant ECL. Accordingly, there have been no movements between stages in respect of these financial assets. 23
26. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 8. 8.1 Loans and advances and Islamic financing receivables 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited Overdrafts Term loans Loans against trust receipts Bills discounted Bills drawn under letters of credit 2,408,796 20,620,435 4,184,473 2,686,235 290,312 2,289,408 19,982,404 2,990,319 2,239,960 293,358 Gross loans and advances and Islamic financing receivables 30,190,251 27,795,449 Allowances for impairment (ECL) (note 10.1) (2,465,573) (2,180,549) Net loans and advances and Islamic financing receivables 27,724,678 25,614,900 By type 8.2 Loans and advances and Islamic financing receivables include Murabaha Tawarruq and Ijara financing activities amounting to AED 3,181.8 million (31 December 2021: AED 3,299.0 million) provided through a Shari’ah compliant Islamic window, NBF Islamic. 8.3 Loans and advances and Islamic financing receivables and acceptances stage-wise analysis The following table contains an analysis of the credit risk exposure of loans and advances and Islamic receivables and acceptances. The gross carrying amount of loans and advances and Islamic receivables and acceptances, including accrued interest / profit, represents the Group’s maximum exposure to credit risk on these assets: 30 June 2022 (Unaudited) AED’000 Outstanding balance Allowances for impairment (ECL) (note 10.1) Carrying amount 31 December 2021 (Audited) AED’000 Outstanding balance Allowances for impairment (ECL) (note 10.1) Carrying amount 24 Stage 1 Stage 2 Stage 3 Total 27,371,927 (253,272) 27,118,655 1,894,440 (511,279) 1,383,161 2,977,042 (1,701,022) 1,276,020 32,243,409 (2,465,573) 29,777,836 Stage 1 Stage 2 Stage 3 Total 25,158,457 (271,304) 24,887,153 1,707,868 (242,250) 1,465,618 3,062,797 (1,666,995) 1,395,802 29,929,122 (2,180,549) 27,748,573
27. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 8. Loans and advances and Islamic financing receivables (continued) 8.4 Movement in the gross balance of loans and advances and Islamic financing receivables and acceptances Outstanding balance (Unaudited) AED’000 Gross carrying amount - 31 December 2021 Stage 1 25,158,457 Stage 2 Stage 3 Total 1,707,868 3,062,797 29,929,122 Transferred from Stage 1 (170,728) 151,852 18,876 - Transferred from Stage 2 34,180 (78,081) 43,901 - Transferred from Stage 3 - 37,207 (37,207) - 2,350,018 75,594 52,103 2,477,715 - (163,428) (163,428) Originated / (derecognized) during the period Written-off during the period Gross carrying amount – 30 June 2022 27,371,927 Outstanding balance (Audited) AED’000 Gross carrying amount – 31 December 2020 Stage 1 22,781,653 1,894,440 2,977,042 32,243,409 Stage 2 Stage 3 Total 3,360,911 3,034,312 29,176,876 Transferred from Stage 1 (204,441) 150,199 54,242 - Transferred from Stage 2 497,986 (1,280,790) 782,804 - - 8,303 (8,303) - 2,083,259 (530,755) 105,304 1,657,808 Transferred from Stage 3 Originated / (derecognized) during the year Written-off during the year 25,158,457 Gross carrying amount - 31 December 2021 25 - (905,562) (905,562) 1,707,868 3,062,797 29,929,122
28. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 8. Loans and advances and Islamic financing receivables (continued) 8.5 Movement in the provision for impairment of loans and advances and Islamic financing receivables and acceptances ECL (Unaudited) AED’000 Stage 1 Stage 2 Stage 3 Total ECL allowance - 31 December 2021 Transferred from Stage 1 271,304 (3,040) 242,250 12,220 1,666,995 9,306 2,180,549 18,486 381 (3,520) 12,522 9,383 Transferred from Stage 2 Transferred from Stage 3 Originated / (derecognized) during the period including changes in PDs / LGDs / EADs - 4,104 (20,976) (16,872) (15,373) 256,225 196,603 437,455 Net allowance for impairment losses (18,032) 269,029 197,455 448,452 - - (163,428) (163,428) ECL allowance – 30 June 2022 253,272 511,279 1,701,022 2,465,573 ECL (Audited) AED’000 Stage 1 Stage 2 Stage 3 Total ECL allowance - 31 December 2020 265,072 563,113 1,385,622 2,213,807 Transferred from Stage 1 (7,023) 7,843 24,562 25,382 Transferred from Stage 2 12,983 (275,752) 385,885 123,116 - 622 (5,537) (4,915) 272 (53,576) 785,405 732,101 6,232 - (320,863) - 1,190,315 (908,942) 875,684 (908,942) 271,304 242,250 1,666,995 2,180,549 Written-off during the period Transferred from Stage 3 Originated / (derecognized) during the year including changes in PDs / LGDs / EADs Net allowance for impairment losses Written-off during the year ECL allowance - 31 December 2021 26
29. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 8. Loans and advances and Islamic financing receivables (continued) 8.6 Risk mitigation, credit quality, collateral and credit enhancements The Group manages credit exposure by obtaining security where appropriate, and in certain cases, the Group may also close out transactions or assign them to other counterparties to mitigate credit risk. The amount and type of collateral depends on assessments of the credit risk of the counterparty. The types of collateral mainly include cash, guarantees, pledge over listed shares and mortgage and liens over properties or other securities over assets. Pledged interests over vehicles, ships and equipment are also obtained. Collateral generally is not held against non-trading investments and due from banks and financial institutions. Management monitors the market value of collateral, and wherever necessary the Group requests additional collateral in accordance with the underlying agreement, and considers collateral obtained during its review of the adequacy of the allowance for impairment losses. Estimates of fair value are generally assessed on a periodic basis in accordance with the respective credit policies. The credit quality of the loans and advances and Islamic financing receivables is managed by the Group using internal credit ratings comprising 22 grades. The risk rating system is used as a credit risk management tool whereby any risks taken on the Group’s books are rated against a set of predetermined standards which are in line with the UAE Central Bank guidelines. The Group’s Credit Risk Rating Methodology reflects its assessment of the probability of default of individual counterparties mapped to the ratings specified by the External Credit Assessment Institutions (ECAIs). The mapping is based on a statistical model which takes into consideration the industry weights, country specific factors and the sensitivity of the counter party to systematic risk. Risk classification / grading system has been presented below: Risk grades of gross loans and advances and Islamic financing receivables AED’000 30 June 2022 (Unaudited) Stage 1 Stage 2 Stage 3 RR 1-19 Grade RR 1 – 17: Performing 25,720,679 391,362 - 26,112,041 Grade RR 18 – 19: Watchlist Total – RR 1-19 31,832 25,752,511 1,477,183 1,868,545 - 1,509,015 27,621,056 RR 20-22: Non-performing Total 25,752,511 1,868,545 2,569,195 2,569,195 2,569,195 30,190,251 27 Total
30. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 8. Loans and advances and Islamic financing receivables (continued) 8.6 Risk mitigation, credit quality, collateral and credit enhancements (continued) Risk grades of gross loans and advances and Islamic financing receivables 31 December 2021 (Audited) 9. AED’000 RR 1-19 Grade RR 1 – 17: Performing Grade RR 18 - 19: Watchlist Total – RR 1-19 Stage 1 Stage 2 Stage 3 Total 23,298,056 76,591 23,374,647 228,774 1,466,334 1,695,108 - 23,526,830 1,542,925 25,069,755 RR 20-22: Non-performing Total 23,374,647 1,695,108 2,725,694 2,725,694 2,725,694 27,795,449 Contingent liabilities and commitments Contingent liabilities represent credit related commitments under letters of credit and guarantees which are designed to meet the requirements of the Group's customers towards third parties. Commitments represent credit facilities and other capital expenditure commitments of the Group which are undrawn at the date of consolidated interim statement of financial position. All credit related commitments are unconditionally cancellable / revocable at the discretion of the Group except for the amounts mentioned in the following table. Contingent liabilities:  Letters of credit covering movement of goods  Financial guarantees and other direct credit substitutes  Bid bonds, performance bonds and other transaction related contingencies Commitments:  Undrawn irrevocable commitments – credit related  Others 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 1,822,045 706,980 1,230,156 656,527 4,443,165 4,438,071 6,972,190 6,324,754 54,308 139,190 193,498 77,111 96,650 173,761 7,165,688 6,498,515 The total undrawn commitments which are revocable at the discretion of the Bank amount to AED 12,331.3 million (31 December 2021: AED 10,863.6 million). Many of the contingent liabilities and commitments will expire without being funded in whole or in part. Therefore, the amounts do not necessarily represent expected future cash flows. 28
31. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 9. Contingent liabilities and commitments (continued) 9.1 Off balance sheet exposures stage-wise analysis The following table contains an analysis of the credit risk of relevant off balance sheet exposures and the related ECL. The gross carrying amount of off balance sheet exposures below represents the Group’s maximum exposure to credit risk on these assets: 30 June 2022 (Unaudited) AED’000 Outstanding balance Allowances for impairment (ECL) Carrying amount Stage 1 Stage 2 Stage 3 Total 6,127,059 139,648 481,758 6,748,465 (17,194) (3,553) (69,824) (90,571) 6,109,865 136,095 411,934 6,657,894 31 December 2021 (Audited) AED’000 Outstanding balance Allowances for impairment (ECL) Carrying amount 9.2 Stage 1 Stage 2 Stage 3 Total 5,489,636 153,273 481,505 6,124,414 (17,478) (1,547) (69,017) (88,042) 5,472,158 151,726 412,488 6,036,372 Movement in the gross balance of off–balance sheet exposures Outstanding balance (Unaudited) AED’000 Stage 1 Stage 2 Stage 3 Total 5,489,636 (25,280) 153,273 25,280 481,505 - 6,124,414 - Transferred from Stage 2 9,845 (10,345) 500 - Transferred from Stage 3 - 160 (160) - 652,858 (28,720) (87) 624,051 - - - - 6,127,059 139,648 481,758 6,748,465 Stage 1 Stage 2 Stage 3 Total 5,674,286 950,537 189,348 6,814,171 Transferred from Stage 1 (14,108) 13,783 325 - Transferred from Stage 2 Transferred from Stage 3 310,358 (682,203) - 371,845 - - Originated / (expired) during the year Written-off during the year (480,900) (128,844) - (80,013) - (689,757) - Gross carrying amount - 31 December 2021 5,489,636 481,505 6,124,414 Gross carrying amount - 31 December 2021 Transferred from Stage 1 Originated / (expired) during the period Written-off during the period Gross carrying amount - 30 June 2022 Outstanding balance (Audited) AED’000 Gross carrying amount - 31 December 2020 29 153,273
32. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 9. Contingent liabilities and commitments (continued) 9.3 Movement in the provision for impairment of off–balance sheet exposures ECL – AED ’000 (Unaudited) Stage 1 Stage 2 Stage 3 Total Transferred from Stage 1 17,478 (255) 1,547 2,484 69,017 - 88,042 2,229 Transferred from Stage 2 106 (181) 240 165 - 1 (99) (98) (135) (298) 666 233 (284) 2,006 807 2,529 - - - - 17,194 3,553 69,824 90,571 Stage 1 Stage 2 Stage 3 Total ECL allowances - 31 December 2021 Transferred from Stage 3 Originated / expired during the period including changes in PDs / LGDs / EADs Net allowance for impairment losses Written-off during the period ECL allowances - 30 June 2022 ECL – AED ’000 (Audited) ECL allowances - 31 December 2020 19,058 7,155 95,756 121,969 Transferred from Stage 1 (87) 137 154 204 Transferred from Stage 2 1,094 (3,916) 14,697 11,875 Transferred from Stage 3 - - - - (2,587) (1,829) (41,590) (46,006) (1,580) (5,608) (26,739) (33,927) - - - - 17,478 1,547 69,017 88,042 Originated / expired during the year including changes in PDs / LGDs / EADs Net allowance for impairment losses Written-off during the year ECL allowances – 31 December 2021 The provision for ECL against the off-balance sheet exposures disclosed above, amounting to AED 90.6 million, (31 December 2021: AED 88.0 million) is classified under other liabilities. 30
33. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 10. Stage-wise ECL and movement in the impairment reserve 10.1 The analysis of ECL by stage for loans and advances and Islamic financing receivables and acceptances, due from banks and financial institutions, debt investments and Islamic instruments and off-balance sheet items is as follows: AED’ 000 30 June 2022 (Unaudited) Loans and advances and Islamic financing receivables and acceptances Due from banks and financial institutions Investments and Islamic instruments Off-balance sheet exposures Stage 3 1,701,022 - - 69,824 1,770,846 51.2% Stage 2 Stage 1 511,279 253,272 764,551 7,912 7,912 14,314 14,314 3,553 17,194 20,747 514,832 292,692 807,524 25.3% 0.7% 2,465,573 7,912 14,314 90,571 2,578,370 5.5% 7.6% 0.3% 0.3% Total ECL ECL rate AED’ 000 Total ECL rate 1.3% 31 December 2021 (Audited) Loans and advances and Islamic financing receivables and acceptances Due from banks and financial institutions Stage 3 1,666,995 - - 69,017 1,736,012 49.0% Stage 2 Stage 1 242,250 271,304 513,554 8,386 8,386 6,274 6,274 1,547 17,478 19,025 243,797 303,442 547,239 13.1% 0.8% 2,180,549 8,386 6,274 88,042 2,283,251 5.4% 7.3% 0.4% 0.1% 1.4% Total ECL ECL rate 31 Investments Off-balance and Islamic sheet instruments exposures Total ECL rate
34. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 10. Stage-wise ECL and movement in the impairment reserve (continued) 10.2 Impairment reserve Pursuant to the UAE Central Bank guidelines on IFRS 9 during 2018, banks are required to compare provisions calculated as per the UAE Central Bank and IFRS 9. Where UAE Central Bank requirement is higher, excess over IFRS 9 requirement is charged to Impairment Reserve. The following tables analyse the movement in the impairment reserve during the period ended 30 June 2022 and the year ended 31 December 2021: Impairment reserve General AED’000 (Unaudited) At 01 January 2022 Change in general provision under CBUAE over stage 1 and 2 requirements under IFRS 9 Reduction in excess specific provision under CBUAE over stage 3 requirements under IFRS 9 At 30 June 2022 - 189,674 189,674 - - - - (17,676) (17,676) - (17,676) 171,998 (17,676) 171,998 Impairment reserve General AED’000 (Audited) At 01 January 2021 Change in general provision under CBUAE over stage 1 and 2 requirements under IFRS 9 Reduction in excess specific provision under CBUAE over stage 3 requirements under IFRS 9 32 Impairment Impairment reserve reserve Specific - 283,469 283,469 - - - (93,795) (93,795) 189,674 (93,795) (93,795) 189,674 - At 31 December 2021 Impairment Impairment reserve Reserve Specific
35. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 11. Due to banks and term borrowings By type: Bilateral borrowings (note 11.1) Due to banks (note 11.2) Repurchase agreements with banks 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 257,110 2,108,857 1,354,140 3,720,107 514,220 981,420 1,152,119 2,647,759 1,845,604 13 1,450,408 135,393 288,689 3,720,107 855,329 25 1,230,240 440,760 121,405 2,647,759 By geographical area: UAE GCC Europe Americas Others As at 30 June 2022, due to banks include cash collateral of AED 41.7 million (31 December 2021: AED 10.5 million), in respect of positive fair value of derivatives, in accordance with the agreements with the interbank counterparties. The investment securities under repo agreements amounted to AED 1,507.1 million (31 December 2021: AED 1,345.3 million). Due to banks include a Wakala borrowing amounting to AED 180.0 million (31 December 2021: nil) undertaken through a Shari’ah - compliant Islamic window, NBF Islamic. 11.1 Bilateral borrowings comprise of several borrowings obtained from other banks and financial institutions as follows. Loan no. 1 2 3 4 5 6 7 11.2 Year obtained Maturity Interest rate 2022 2022 2022 2021 2021 2021 2020 Apr-23 Apr-23 May-23 Jun-22 Mar-22 Mar-22 Mar-22 SOFR + Margin SOFR + Margin SOFR + Margin Libor + Margin Libor + Margin Libor + Margin Libor + Margin 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 110,190 91,825 55,095 257,110 183,650 183,650 73,460 73,460 514,220 Due to banks include gold related borrowings amounting to AED 352.8 million (31 December 2021: AED 185.5 million) utilized to finance gold loans extended to customers on a matched basis. 33
36. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 12. Customer deposits and Islamic customer deposits By type: Demand and margin deposits Saving deposits Fixed term and notice deposits By geographical area: UAE GCC Europe Americas Others 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 15,090,488 831,752 15,916,674 31,838,914 14,562,186 850,576 16,785,983 32,198,745 28,998,970 1,179,455 1,219,551 109,177 331,761 31,838,914 29,200,200 1,440,749 1,005,404 27,132 525,260 32,198,745 12.1 Customer deposits and Islamic customer deposits include Qard Islamic current accounts, Murabaha, Wakala and Mudaraba deposits amounting to AED 2,837.9 million (31 December 2021: AED 3,488.7 million) undertaken through a Shari’ah - compliant Islamic window, NBF Islamic. 13. Shareholders’ equity 13.1 Share capital Authorised, issued and fully paid: 2,000,000,000 shares of AED 1 each (2021: 2,000,000,000 shares of AED 1 each) 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 2,000,000 2,000,000 Pursuant to the requirements of UAE Central Bank notice number CBUAE/BSD/N/2021/2200 dated 25 April 2021 pertinent to ‘Minimum Capital for Banks Regulation’ (circular number 12/2021) and following the approval by shareholders at the General Assembly Meeting in September 2021, the Bank increased its paid-up capital by way of issuing 85,238,116 bonus shares from retained earnings to reach AED 2 billion. 13.2 Proposed cash dividends and bonus issue The Board of Directors did not propose a dividend for the year ended 31 December 2021. 34
37. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 14. Tier 1 capital securities In October 2019, the Bank issued US$ 350 million (AED 1,285.6 million) regulatory Additional Tier 1 (AT1) capital securities. These securities are perpetual, subordinated and unsecured and are classified as equity. The Bank can elect not to pay a coupon at its own discretion and has an option to call back the securities. The transaction costs relating to the issuance were accounted for as a deduction from equity. 15. Net impairment loss Loans and advances and Islamic financing receivables, acceptances and off-balance sheet items Due from banks and financial institutions Investments and Islamic instruments 16. 30 June 2022 AED’000 Unaudited 30 June 2021 AED’000 Unaudited 450,981 (474) 8,044 458,551 432,251 (6,044) (466) 425,741 Earnings / (loss) per share The calculation of earnings per share for the six month period ended 30 June 2022 is based on net profit of AED 112.8 million after deduction of AED 37.8 million of additional Tier 1 capital securities coupon payment (30 June 2021: AED 38.5 million after deduction of AED 37.8 million of additional Tier 1 capital securities coupon payment) divided by the weighted average number of shares of 2,000.0 million (30 June 2021: 2,000.0 million shares) outstanding during the period. The calculation of earnings per share for the three month period ended 30 June 2022 is based on net profit of AED 52.4 million after deduction of AED 37.8 million of additional Tier 1 capital securities coupon payment (30 June 2021: net loss of AED 3.6 million after deduction of AED 37.8 million additional Tier 1 capital securities coupon payment) divided by the weighted average number of shares of 2,000.0 million (30 June 2021: 2,000.0 million shares) outstanding during the period. 17. Related parties Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In the case of the Group, related parties, as defined in the International Accounting Standard No. 24, include major shareholders of the Group, directors and officers of the Group and companies of which they are principal owners and key management personnel. Banking transactions are entered into with related parties on agreed terms and conditions approved by the Board of Directors. The significant transactions and balances included in the condensed consolidated interim financial statements, which predominantly relate to directors and shareholders of the Group, are as follows: 35
38. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 17. Related parties (continued) 30 June 2022 AED’000 Unaudited 31 December 2021 AED’000 Audited 3,669,745 3,534,719 7,997,278 7,998,573 186,320 75,449 112,305 33,988 293,840 293,840 91,257 59,104 270,054 65,669 59,572 276,729 30 June 2022 AED’000 Unaudited 30 June 2021 AED’000 Unaudited 8,632 8,632 48,579 64,799 7,654 15,497 31,867 63,451 6,593 11,462 9,328 921 7,247 481 Statement of financial position items Loans and advances and Islamic financing receivables Customer deposits and Islamic customer deposits Investments and Islamic instruments Acceptances Tier 1 capital securities Contingent liabilities Letters of credit Financial guarantees and other direct credit substitutes Transaction related contingencies Statement of changes in equity items Tier 1 capital securities coupon paid Statement of income items Interest income and income from Islamic financing and investment activities Interest expense and distribution to Islamic depositors Other income Operating expenses Key management compensation Salaries and other short-term benefits Employee end of service benefits No stage 3 provisions for impairment have been recognized in respect of loans and advances and Islamic financing receivables to related parties (31 December 2021: nil). The loans and advances and Islamic financing receivables given to related parties amounting to AED 3,669.7 million (31 December 2021: AED 3,534.7 million) have been secured against collateral amounting to AED 2,227.7 million (31 December 2021: AED 1,862.5 million). During the period, capital expenditure transactions with related parties amounted to AED 1.0 million (31 December 2021: AED 1.5 million). 36
39. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 18. Capital adequacy ratio The Bank’s risk weighted assets (RWA) are weighted on the basis of relative credit, market, and operational risks. Credit risk includes both on and off-balance sheet risks. In accordance with the Basel III Compliance – Standardized Approach, the Bank is following the standardized measurement approach for credit, market and operational risk, under the existing Pillar 1 of Basel III requirements with the addition of the respective changes pertinent to capital supply. The quantitative requirements, based on the regulations / guidelines, have been detailed below: i. Total regulatory capital (net of regulatory adjustments) – at least 10.5% of risk weighted assets (RWAs) – comprises of two tiers: a. Tier 1 capital – at least 8.5% of RWA, composed of:  Common equity Tier 1 (CET1) – at least 7.0% of RWA; and  Additional Tier 1 (AT1) Common equity Tier 1 (CET1) includes ordinary share capital, statutory reserve, special reserve, retained earnings and fair value reserves relating to unrealized gains on investments classified as FVOCI / available-for-sale with a hair-cut of 55%; and Additional Tier 1 (AT1) comprises of Tier 1 capital notes. b. Tier 2 capital It includes collective impairment provision and sub-ordinated facilities. Collective impairment provision, including credit risk reserve, shall not exceed 1.25% of total credit risk weighted assets. ii. Banks must maintain a Capital Conservation Buffer (CCB) of 2.5% of RWAs in the form of CET1 capital. CBUAE may also require banks to implement Countercyclical Buffer (CCyB), to protect the banks from periods of excess aggregate credit growth. CCyB must be met by using CET1 capital and the level may vary between 0 - 2.5% of RWAs. Pursuant to the UAE Central Bank standards pertinent to TESS issued on 16 December 2021, the Regulator allowed banks to utilize the capital conservation buffer up to a maximum of 60% without supervisory consequences, effective from 15 March 2020 until 30 June 2022. Minimum transitional arrangements as per UAE Central Bank Capital element Basel III 2022 7.0% 8.5% 10.5% 2.5% Minimum common equity tier 1 ratio Minimum tier 1 capital ratio Minimum capital adequacy ratio Capital conservation buffer 37 Basel III 2021 7.0% 8.5% 10.5% 2.5%
40. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 18. Capital adequacy ratio (continued) AED’000 30 June 2022 Unaudited 31 December 2021 Audited Share capital Statutory reserve Special reserve Retained earnings IFRS 9 transitional arrangement – ECL (stage 1 and 2) impact Accumulated other comprehensive income 2,000,000 947,578 573,424 772,005 2,000,000 947,578 573,424 635,396 209,267 (22,972) 18,738 19,818 CET1 total 4,479,302 4,194,954 Tier 1 capital securities (note 14) 1,285,550 1,285,550 Total Tier 1 5,764,852 5,480,504 Collective impairment provision 382,967 344,866 Total Tier 2 382,967 344,866 6,147,819 5,825,370 30,637,349 27,589,268 114,872 41,298 2,850,595 2,850,595 33,602,816 30,481,161 Capital adequacy ratio (a) / (b) - % 18.3 19.1 Tier 1 ratio - % 17.2 18.0 Common equity tier 1 ratio (CET 1) - % 13.3 13.8 CET1 capital Additional Tier 1 (AT1) Capital Tier 2 Capital Total capital base (a) Risk weighted assets Credit risk Market risk Operational risk Total risk weighted assets (b) 38
41. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 19. Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balances from the date of acquisition: 30 June 30 June 2022 2021 AED’000 AED’000 Unaudited Unaudited Cash on hand Balances with the UAE Central Bank (note 19.1) Due from banks with less than three month maturity Due to banks with less than three month maturity 254,689 699,736 1,102,054 250,835 4,938,542 582,846 2,056,479 5,772,223 (2,107,122) (50,643) (1,295,820) 4,476,403 19.1 Balances with the UAE Central Bank include certificates of deposit with less than three month maturity. 19.2 Based on residual maturities, cash on hand, balances with the UAE Central Bank and due from banks, net of balances due to banks, are amounting to AED 1,406.5 million maturing within three months from 30 June 2022 (30 June 2021: AED 4,792.6 million maturing within three months from 30 June 2021). 20. Segmental reporting The Group uses business segments for presenting its segment information in line with the Group’s management and internal reporting structure. The Group’s operations are confined mainly in the UAE. Business segments pay and receive interest, to and from Treasury on an arm’s length basis to reflect allocation of capital and funding costs. Business segments The Group conducts its activity through the following clearly defined business segments: Corporate and Institutional banking Corporate and Institutional segments The segment offers a range of products and services including credit and trade finance products, and services to large and medium sized corporate customers through separate units and to financial institutions, and accepts deposits. Business banking segment The segment offers a range of products and services including credit and trade finance products, and services to small and medium sized customers through separate units, and accepts deposits. The segment also offers transactional services to small and medium sized businesses. 39
42. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 20. Segmental reporting (continued) Business segments (continued) Retail banking The segment offers a range of products and services to individuals and high net worth individuals including personal and mortgage loans, credit cards, other transactions and balances, and accepts their deposits. Treasury, Asset and Liability Management (ALM) and others The segment undertakes the Group’s asset and liability management centrally and is responsible for optimum utilization of resources in productive assets and management of exchange and interest positions within the limits and guidelines set by management and approved by the Board. Treasury also offers various foreign exchange and derivative products to customers and is entrusted with the responsibility of managing the Group’s investment portfolio together with the Investment Management Unit under the guidance from the Investment Committee and Asset and Liability Committee. The Group’s capital and investment in subsidiaries is recognised under this segment. The Group has central shared services which include Operations, Risk Management, Human Resources, Finance, Information systems and Technology, Product Development, Legal, Credit and Internal Audit. The shared services costs are allocated to business segments based on transaction and relevant drivers. The segment analysis based on business segments is set out below: Six month period ended 30 June 2022 AED’000 (Unaudited) Corporate and institutional segments Business banking segment Retail banking Treasury, Consolidated ALM and others Segment revenue 336,824 278,589 78,127 164,924 858,464 Segment operating cost (84,339) (104,410) (45,052) (15,594) (249,395) Segment operating profit 252,485 174,179 33,075 149,330 609,069 Net impairment losses (411,027) (31,709) (7,547) (8,268) (458,551) Profit / (loss) for the period (158,542) 142,470 25,528 141,062 150,518 Segment assets 20,361,686 6,897,730 3,888,478 12,566,716 43,714,610 Segment liabilities 22,925,073 8,336,461 3,127,394 3,598,099 37,987,027 - - - 36,530 36,530 30 June 2022 (Unaudited) Capital expenditure 40
43. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 20. Segmental reporting (continued) Six month period ended 30 June 2021 AED’000 (Unaudited) Corporate and institutional segments Business banking segment Retail Treasury, banking ALM and others Consolidated Segment revenue 269,030 242,100 75,287 138,095 724,512 Segment operating cost (71,524) (92,899) (43,276) (14,859) (222,558) Segment operating profit 197,506 149,201 32,011 123,236 501,954 Net impairment losses (385,799) (29,415) (12,566) 2,039 (425,741) Profit / (loss) for the period (188,293) 119,786 19,445 125,275 76,213 Segment assets 18,701,773 6,232,420 3,507,199 14,504,156 42,945,548 Segment liabilities 23,885,446 8,415,289 2,424,986 2,544,164 37,269,885 - - 31 December 2021 (Audited) Capital expenditure 21. - 55,705 55,705 Impact of COVID-19 and macroeconomic variables with respect to ECL The COVID-19 pandemic continues to have a profound impact globally. However, the UAE economy has fared well as a result of the country’s overall economic support measures, its achievement in containing the financial and economic challenges resulting from the COVID-19 fall-out, sustainable government spending, positive outlook for credit growth and the progress in business sentiment. NBF has been closely monitoring the situation and has successfully implemented remote working and use of digital solutions to ensure continuity of customer services and precautionary measures to ensure health and safety of all stakeholders. NBF has been proactively managing its liquidity and further strengthened its position to navigate through uncertainty and complexity with poise. As at 30 June 2022, NBF’s advances to deposits ratio stood at 87.1% (31 December 2021: 79.6%), lending to stable resources ratio (LSRR) at 81.5% (31 December 2021: 76.5%) and eligible liquid assets ratio (ELAR) at 17.2% (31 December 2021: 26.2%). The Management Risk Committee (‘MRC’) and Central Credit Committee (‘CCC’) of the Group ensures governance over all critical decisions and requirements of the IFRS 9 standard and the related guidance and notices issued by the Regulator are complied and monitored with the appropriate involvement of key stakeholders including Risk, Credit, Finance and the Business divisions. These include key technical accounting and risk methodology decisions, management overlays, inputs and assumptions used for the determination of ECL and macro-economic factors consideration. 41
44. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Execution of principal decisions and results of reviews and monitoring are presented to the Board Audit Committee, Board Risk Committee and the Board, as NBF is committed to upholding the highest corporate governance standards. NBF has considered the standards and joint guidance with respect to Targeted Economic Support Scheme (TESS) and the Treatment of IFRS 9 Expected Credit Loss Provisions in the UAE in the context of the COVID-19 crisis issued by the UAE Central Bank during April 2021 and April 2020 respectively. Pursuant to these standards and the joint guidance, NBF granted repayment holiday to its impacted customers and offered payment deferral relief in the context of COVID-19 under the TESS scheme or otherwise. Management, at the time of assessing significant increase in credit risk, have factored in the past and expected future performance of the customers benefitting from payment deferrals. NBF segregated its customers benefitting from payment deferrals into two groups as follows: Group 1 – customers not expected to face substantial changes in their creditworthiness, beyond liquidity issues, caused by the COVID-19 crisis; and Group 2 – customers expected to be significantly impacted by the COVID-19 crises and are expected to face substantial deterioration in their creditworthiness triggering a migration to stage 2. In exceptional circumstances, stage 3 migration may have also been triggered where significant disruptions have threatened the long-term sustainability of the customers’ business model causing the business to be permanently impaired. The principal parameters for the grouping consideration included customers’ account conduct, credit worthiness, economic sector, collateral, level of the COVID-19 impact, customers’ supply chains and sales markets, severity of industry impacts and implications reflected in the operating performance, where available. NBF has been diligently monitoring its credit risks and the detailed review of all business segment portfolios was undertaken on these lines with the COVID-19 impacts cumulatively assessed and riskmatrixed to adequately protect the Group from any adversarial movements. The impact of the extension of loans and advances and Islamic financing receivables on account of COVID-19 has been assessed and considered in accordance with the requisites of IFRS 9 for modification of the terms of the facilities. The uncertainties caused by COVID-19 had required NBF to update the inputs and assumptions used for the determination of ECL. NBF has considered the impact of volatility in the forward-looking macroeconomic factors, when determining the severity and likelihood of economic scenarios for ECL determination. Given the economic recovery, the assigned probabilities for base case, upside and downside scenarios have been applied as follows: Scenario Base case Upside Downside Assigned probabilities 40% 30% 30% The Group has considered the potential impacts of the current market situation in determination of the reported amounts of the Group’s financial and non-financial assets and these are considered to represent management's best assessment based on observable information. The impacts remain sensitive to market fluctuations which the Group will continue to monitor and reflect appropriately in the ECL calculations. Therefore, actual results may be considerably different to those forecast. NBF on an on-going basis reviews prudently the staging and grouping decisions to ensure accurate reflection of the Group’s assessment of these aspects at the reporting date. 42
45. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Stage-wise analysis of customers benefitting from payment deferrals Pursuant to the Joint Guidance on the treatment of IFRS 9 ECL provisions in the UAE in the context of COVID-19 crisis issued by the UAE Central Bank during April 2020, NBF granted repayment holiday to some of its impacted customers. The bank had availed the assistance under TESS and had offered payment deferral relief to selected customers; where the final tranche amounting to AED 46.1 million was fully settled on 30 December 2021. The following table contains an analysis of the deferred amount of principal outstanding and accrued interest / profit pertinent to loans and advances and Islamic financing receivables of the customers, who have been provided with such benefits, and the related ECL: 30 June 2022 AED’000 Deferred amount Allowances for impairment (ECL) Carrying amount Customer Count Stage 1 9,156 (85) 9,071 Stage 2 230 (62) 168 Stage 3 - Total 9,386 (147) 9,239 10 2 - 12 43
46. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Stage-wise analysis of customers benefitting from payment deferrals (continued) The following table contains an analysis of the credit risk exposure of loans and advances and Islamic receivables and acceptances and the relevant off-balance sheet exposures and the related ECL of the customers benefiting from payment deferrals. The gross carrying amount of loans and advances and Islamic receivables and acceptances, including accrued interest / profit, and off-balance sheet exposures below represents the Group’s maximum credit exposure to customers benefitting from payment deferrals: Loans and advances and Islamic financing receivables and acceptances 30 June 2022 Off–balance sheet exposures AED’000 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Outstanding balance Allowances for impairment (ECL) Carrying amount 277,552 (1,580) 275,972 2,269 (169) 2,100 - 279,821 (1,749) 278,072 6,817 (8) 6,809 - - 6,817 (8) 6,809 Loans and advances and Islamic financing receivables and acceptances 31 December 2021 Off–balance sheet exposures AED’000 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Outstanding balance Allowances for impairment (ECL) Carrying amount 267,095 (3,082) 264,013 - - 267,095 (3,082) 264,013 11,941 (11) 11,930 - - 11,941 (11) 11,930 44
47. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Analysis of customers benefitting from payment deferrals by type, groups and segments, with the related ECL The following table contains an analysis of the outstanding balance of loans and advances and Islamic financing receivables and acceptances, including accrued interest / profit, of the customers benefitting from payment deferrals: Corporate and institutional segments 30 June 2022 AED’000 Loans and advances and Islamic financing receivables and acceptances Allowances for impairment (ECL) Carrying amount Customer count 30 June 2022 AED’000 Term loans Allowances for impairment (ECL) Carrying amount Customer count Group 1 - Business banking segment Group 1 Group 2 Total Group 1 Group 2 Total 227,150 (877) 226,273 - 227,150 (877) 226,273 2 50,905 (728) 50,177 1,766 (144) 1,622 52,671 (872) 51,799 10 Retail banking Group 2 Total - - 45 30 June 2022 AED’000 Loans and advances and Islamic financing receivables and acceptances Allowances for impairment (ECL) Carrying amount Customer count Consolidated Group 1 Group 2 278,055 (1,605) 276,450 1,766 (144) 1,622 Total 279,821 (1,749) 278,072 12
48. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Analysis of customers benefitting from payment deferrals by type, groups and segments, with the related ECL (continued) The following table contains an analysis of the related relevant off–balance sheet exposures of the customers benefitting from payment deferrals: 30 June 2022 AED’000 Corporate and institutional segments Group 1 Group 2 Total Business banking segment Group 1 Group 2 Total Off–balance sheet exposures - - - 6,817 - 6,817 Allowances for impairment (ECL) Carrying amount - - - (8) 6,809 - (8) 6,809 Group 1 6,817 Group 2 - Total 6,817 (8) 6,809 - (8) 6,809 Consolidated 30 June 2022 AED’000 Off–balance sheet exposures Allowances for impairment (ECL) Carrying amount 46
49. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Movement in the gross balance of loans and advances and Islamic financing receivables and acceptances and off-balance sheet exposures of the customers benefitting from payment deferrals Loans and advances and Islamic financing receivables and acceptances Off–balance sheet exposures AED’000 Gross carrying amount – 31 December 2021 Transferred from Stage 1 Transferred from Stage 2 Transferred from Stage 3 Originated / (derecognized) during the period Gross carrying amount – 30 June 2022 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total 267,095 (2,060) - 2,060 - - 267,095 - 11,941 - - - 11,941 - 12,517 277,552 209 2,269 - 12,726 279,821 (5,124) 6,817 - - (5,124) 6,817 The following table contains the movement in the gross balance of loans and advances and Islamic financing receivables and acceptances of the customers benefitting from payment deferrals by segment: AED’000 Gross carrying amount 31 December 2021 Transferred from Stage 1 Transferred from Stage 2 Transferred from Stage 3 Originated / (derecognized) during the period Gross carrying amount- 30 June 2022 Corporate and institutional segments Stage 1 Stage 2 Stage 3 Total Business banking segment Stage 1 Stage 2 Stage 3 Total Retail banking Stage 2 Stage 3 Stage 1 Total 226,430 - - - 226,430 - 40,665 (2,060) - 2,060 - - 40,665 - - - - - 720 - - 720 11,797 209 - 12,006 - - - - 227,150 - - 227,150 50,402 2,269 - 52,671 - - - - 47
50. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Movement in the gross balance of loans and advances and Islamic financing receivables and acceptances and off-balance sheet exposures of the customers benefitting from payment deferrals (continued) The following table contains the movement in the related relevant off-balance sheet exposures of the customers benefitting from payment deferrals by segment: AED’000 Gross carrying amount - 31 December 2021 Transferred from Stage 1 Transferred from Stage 2 Originated / (derecognized) during the period Gross carrying amount - 30 June 2022 Stage 1 Corporate and institutional segments Stage 2 Stage 3 Total Business banking segment Stage 1 Stage 2 Stage 3 Total - - - - 11,941 - - - 11,941 - - - - - (5,124) 6,817 - - (5,124) 6,817 48
51. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Movement in the provision for impairment of loans and advances and Islamic financing receivables and acceptances and off-balance sheet exposures of the customers benefitting from payment deferrals (continued) Loans and advances and Islamic financing receivables and acceptances AED’000 ECL allowance - 31 December 2021 Transferred from Stage 1 Off–balance sheet exposures Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total 3,082 - - 3,082 11 - - 11 (37) 144 - 107 - - - - Transferred from Stage 2 Originated / (derecognized) during the period including changes in PDs / LGDs / EADs - - - - - - - - (1,465) 25 - (1,440) (3) - - (3) Net allowance for impairment losses Written-off during the period (1,502) - 169 - - (1,333) - (3) - - - (3) - 1,580 169 - 1,749 8 - - 8 ECL allowance – 30 June 2022 49
52. National Bank of Fujairah PJSC Notes to the condensed consolidated interim financial information For the six month period ended 30 June 2022 (continued) 21. Impact of COVID-19 and macroeconomic variables with respect to ECL (continued) Sector-wise ECL analysis of Corporate and Institutional banking and Business banking segments’ customers benefitting from payment deferrals The following table contains the change in ECL by sector of Corporate and Institutional banking and Business banking segments: Corporate and institutional segments Business banking segments AED’000 30-Jun-22 31-Dec-21 Change 30-Jun-22 31-Dec-21 Change Trade Real estate and construction Manufacturing Total ECL - - - 392 241 151 8 869 877 1,713 670 2,383 (1,705) 199 (1,506) 220 268 880 175 294 710 45 (26) 170 ECL analysis by product of Retail banking customers benefitting from payment deferrals The following table contains the change in ECL by product of Retail banking: AED’000 Term loans Total ECL 30-Jun-2022 31-Dec-2021 Change - - - 22. Zakat In line with the CBUAE regulations and The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Shari’ah standards, zakat payable amounting to AED 1.39 million, had been reflected in the 31 December 2020 consolidated financial statements as an appropriation from retained earnings. However, pursuant to the CBUAE notice CBUAE/BSD/N/2021/956 dated 16 February 2021 regarding the cancellation of the resolution pertinent to the transfer of Zakat monies to the Zakat Fund in the United Arab Emirates (UAE), zakat payable of the same amount had been reversed back to retained earnings during Q1 2021. 23. Comparative figures Certain comparative figures have been reclassified where appropriate to conform to the presentation and accounting policies adopted in these condensed consolidated interim financial information. 50