Ladies and gentlemen, welcome to the Emirates NBD second quarter of 2023 financial year results call and webcast for analysts and investors. Today's call is being recorded. Please note that this call is open to analysts and investors only. Any media personnel should disconnect immediately. I'll now pass the call over to our host, Mr. Shayne Nelson, Group CEO of Emirates NBD. Thank you, Alex. Welcome to our first half results call. There are a few points on transformation I want to cover before running through the main highlights of the outstanding first half results. Firstly, we are now celebrating the Group's 60th anniversary. This occasion marks an incredible journey from a local bank with one branch to a major international bank with nearly 900 branches, employing over 30,000 people, serving 20 million customers in 13 countries. As the sector transitions away from the role of a traditional banker, we are recognized as a leader in talent development, empowering staff to shape their own careers and transition into new roles. We successfully implemented our biggest ever IT transformation. We are now one of the few banks in the world to be 100% cloud native. Our best-in-class IT architecture enables us to launch new products and services with tremendous agility. In the last quarter, we launched 10 new products and services, including carbon trading and real-time FX. We are currently rolling out our ENBD X, a complete revamp of our banking app with enhanced user interface. This transformation is meeting the changing needs of customers. U.A.E.'s national energy strategy expects up to AED 200 billion of investment as it triples the contribution of renewable energy by 2030. As the U.A.E. hosts COP28 later this year, ENBD is playing a major role delivering ESG solutions to customers to help them meet their net zero ambitions and sustainability goals. We're shaping our ESG framework, integrating ESG best practice into all aspects of our business, and aligning to national goals, including the U.A.E.'s accelerated emission reduction targets. Given the success of our transformation of talent, IT, and culture, it's fitting that we celebrate our 60th anniversary. Emirates NBD was named Best Bank in the U.A.E. and Best Bank in the Middle East at the recent Euromoney Awards for Excellence in 2023. The bank was also named Middle East Best for Digital and Best Domestic Private Bank by Euromoney. In terms of the operating environment, GCC economies remain resilient against a weaker global backdrop and higher interest rates. Our research team revised this year's forecast for U.A.E. GDP lower to 2.9% on the expectation of lower hydrocarbon production, although we revised up our forecast for non-oil growth to 5%. We expect considerable investment in renewable energy in the coming years to meet U.A.E.'s ambitious targets. Other economic sectors, such as tourism, are flourishing, with Dubai tourist numbers recovering close to pre-pandemic levels. In the wider MENAT region, Egypt made successful asset sales, reflecting their commitment to revamp the economy. In Turkey, we saw interest rates increase and a partial unwind of regulations. The strong regional economy helped us deliver the highest ever half-year income and profit of any bank in the region. There are many other highlights which underline our key strengths. All businesses delivered higher income and profit. Retail lending increased by a record AED 12 billion. Corporate lending closed key deals across the region, despite intense competition, underlying our regional franchise and enabling an upward revision in loan growth guidance. NBD grew deposits by AED 53 billion in the first half, including a hugely impressive AED 37 billion of low-cost CASA. We now have a 1/3 market share in all U.A.E. credit card spend and close to that level on debit card spend. Global Markets and Treasury delivered nearly 2 billion AED in profit. DenizBank continues to deal remarkably well with a challenging operating environment, adding AED 1.9 billion to Group profit. Emirates Islamic had its best ever half year, adding over AED 1.2 billion to Group profit. NBD's investment in technology, AI, and Advanced Analytics is driving new customer services and products and propelling future business growth. The balance sheet surpassed the AED 900 billion milestone for the first time ever. We look forward to the COP28 in the U.A.E. ENBD is delivering exciting ESG solutions to customers as their net zero ambition sustainability goals drive further economic activity. To sum up, NBD delivered another record set of results built on a leading regional franchise, state-of-the-art IT infrastructure, an adaptable and enthusiastic workforce. We are forward-looking and well placed to harness the power of generative AI to further enhance NBD's operations and enhance productivity. The U.A.E.'s ambitious ESG national goals provide customers and NBD a virtuous growth opportunity, the future looks bright at Emirates NBD. I'll now hand you over to Patrick to go through the results in more detail. Over to you, Patrick. Thank you, Shayne, and a very good afternoon to all of you. Just running down the H1 summary financials on page two. Total income of AED 21.3 billion is up 50% year-on-year. Within that, both NII and NFI are up substantially. Net interest income increased as our efficient funding base benefits from higher interest rates. All business segments are performing well, with strong volume growth, contributing positively to interest income. Retail lending had a record half year, and corporate successfully closed some key transactions and saw lower repayments in Q2. Non-funded income grew by AED 2.1 billion - AED 6.9 billion. We saw a strong growth in client business flows such as customer remittance, FX, and interest rate hedging, increased local and international card business in the ENBD and Deniz, and increased trade finance. Turkey also had lower swap funding costs, boosting NFI relative to last year and the last quarter. Costs increased 34% year-on-year, supporting very strong business volume growth, particularly in retail and accelerated investment in our digital capabilities and international network. The cost income ratio is 25.6% for H1, is comfortably within long-term guidance, more on that from Paddy shortly. Impairment allowances are down significantly by 50% year-on-year. As expected, and as I signaled in the last few quarters, strong recoveries in both the U.A.E. and Turkey came through in the first half. This gives us a very strong profit before tax of AED 14.9 billion, which is just over $4 billion, up 80% year-on-year, and a AED 12.3 billion profit after hyperinflation and tax, which is up 130%. We have issued very clear full-year guidance on NIMs, loan growth costs, and cost of risk. Whilst we are really delighted with the first half results, we did benefit from strong non-funded income and credit recoveries. Looking forward to the second half, the same level of non-funded income may not be repeated, and we expect some compression in margins from Turkey and a higher cost of risk. If I may encourage you to look at the full-year guidance parameters rather than simply annualizing this very strong first half profit. Looking very briefly at the quarter-on-quarter numbers on the same page. Net interest income is up by 1%, as loan growth and stable margins at ENBD offset a decline in DenizBank margin. NFI is up 10% from higher FX and derivative income from DenizBank and lower swap funding costs. Expenses are 7% higher due to business-driven staff costs and to some extent, VAT associated with higher business volumes. As of now, we anticipate the new U.A.E. corporate tax that will be effective for ENBD from 1 January 2024 to be at a rate of 9%. That could increase subsequently, should OECD members agreement on minimum tax rate of 15% be implemented in countries within our footprint. We'll keep you updated should that change. In the bottom summary table, you can see the balance sheet metrics are all in good shape, with assets, loans, and deposits all growing. Capital, liquidity, and credit quality metrics, all considerably stronger than 12 months ago. Given strong loan growth in the first half, we have revised loan growth guidance to high single digits for the full year. Now turning to Net Interest Income on slide three. The bottom charts show that margins improved by 110 basis points year-on-year, helped by improving loan and deposit mix and higher interest rates. NIMs are down 18% in the second quarter, as expected, due to lower DenizBank NIMs. The first half NIM of 3.96% is within our guidance range of 3.8%-4.0%. Expect that NIMs will trend towards the lower end of guidance due to a combination of lower DenizBank NIMs, partly offset by favorable CASA behavior, healthy loan mix, and the potential for U.A.E. interest rates to remain higher for longer. Of course, we'll keep you updated each quarter as these main NIM drivers evolve. Slide four shows that fee and commission income is up by 12% year-on-year, with a solid trend of quarterly growth, mainly from increased local and international retail card business in both ENBD and Deniz, strong investment banking revenue, and trade finance growth. Other operating income in Q2 2023 is significantly up by 54% year-on-year, due to higher customer remittance volumes and FX. Additional corporate hedging activity and derivative income from hedging and swaps relating to DenizBank. As I mentioned earlier, Turkey had lower swap funding costs, boosting NFI relative to last year and to the last quarter. In net P&L terms, however, this derivative funding cost has rarely switched to net interest income, as DenizBank raised more Turkish lira deposits rather than swapping euros and dollars to Turkish lira, which in turn partly contributed to lower NIMs in Deniz. Over the last four or five quarters, around 80%-90% of FX and derivative income was client flow, but in Q2, non-client income rose with greater mark-to-market gains from market volatility around the Turkish election time. Some of this may reverse in future quarters, or at least not recur. On slide five, we see that growth lending increased 5% during H1, helped by a record of AED 12 billion growth in retail and AED 14 billion net growth in corporate lending on strong origination with fewer repayments. DenizBank loans declined in dirham terms due to currency depreciation, but they grew their local currency book by 24%. Still strong local business momentum. Total deposits increased AED 53 billion in H1, up 11%. Within that, CASA is up another AED 37 billion. The ability to attract and retain CASA remains one of ENBD's core strengths. CASA represents a healthy 61% of total Group deposits, despite higher interest rates, which gives a lower cost of funding. Corporate and Government-related deposits have increased in H1, reflecting their good financial health, but this can be seasonal and may reduce in future if these deposits are deployed in projects to support further economic development. Just turning to slide six, we see that the NPL ratio improved by 0.4% - 5.6% during the first half, helped by strong recoveries in both U.A.E. and Turkey. These recoveries also meant the annualized cost of risk for H1 was 41 basis points, substantially lower than the 108 basis points for the whole of 2022. The growth cost of risk, excluding recoveries, was slightly lower than last year. Our cost of risk guidance is 50 to 70 basis points, is higher than the actual first half, as we may not realize the same level of recoveries in H2. Corporate recoveries can be more lumpy, and it's harder to determine exact timing. Coverage rose by 2% -147% during the first half, and slightly down in Q2, as any inflow of new NPLs typically has less initial cover versus the higher coverage of recovered loans. Paddy will now take us through the remaining slides. Thanks, Patrick. On slide seven, we see that the cost-to-income ratio rose slightly to 26% in the second quarter from 25.3 in Q1. Staff costs increased year-on-year to deliver strong business growth and drive underlying earnings, coupled with human capital investment in digital and international to deliver future growth. Other costs increased due to VAT associated with higher business volumes, higher service, legal and professional fees, and an increase in social contributions. We expect this year's cost-to-income ratio to be just under the 30% area. Slide eight, funding and liquidity, shows that the Group continues to operate with very strong liquidity, with an AD ratio of 79% and an LCR of 217%. Given the high rate environment, we are able to deploy excess liquidity and attractive yielding high-quality debt securities. As with last quarter, we make additional disclosure on page 11 of the financial statements, which shows the unrealized loss on our AED 118 billion investments. Measured amortized cost is AED 3.3 billion. This equates to about 57 basis points of capital. In the first half, the Group issued AED 9 billion of term debt, which more than covers 2023's total maturities of AED 8.6 billion. DenizBank successfully rolled over their mid-year syndicated loan and upsized this as they attracted new investors, and they also issued another diversified payment rights transaction for over $500 million, with a weighted average life in excess of four years. Capital adequacy on slide nine shows that the Common Equity Tier 1 ratio strengthened to 16.6% in H1, as AED 8.9 billion of net earnings more than offset a 2% increase in risk-weighted assets. The Common Equity Tier 1 ratio, excluding the ECL regulatory add-back, was 16.1%. RWAs only grew by 2% compared with 5% lending growth, as new corporate lending is very high quality, resulting in a lower risk-weighted density. On slide 10, we see that RBWM income improved 40% during the year. It was a record half year for retail lending, which grew AED 12 billion. The retail deposit gathering engine continued in H1, adding a further AED 24 billion of deposits. ENBD X, or enhanced mobile banking app, is being rolled out, and the Liv brand is being refreshed. CIB delivered a 36% increase in income. This, along with significant recoveries, boosted profit by 116%. CIB continues to roll out additional products and services, including new global custody services and easier access to trading on the Abu Dhabi Securities Exchange. businessONLINE was extended to both India and KSA. Emirates Islamic's results are reported in the respective retail and or corporate sectors. It is worth noting the 71% increase in EI income, helping deliver a record net profit of over AED 1.2 billion. EI is a publicly listed company, and the financial statements are available on the website. Global Markets and Treasury delivered an outstanding performance, with half year profit reaching almost AED 2 billion. Net interest income jumped on higher income from balance sheet positioning and an increase in investment income. Non-funded income was higher on a strong trading and sales performance. DenizBank income was up 15% and coupled with significant recoveries, helped grow profits to AED 1.9 billion. We have a couple of extra slides in the appendix containing more granular detail on the dollar convenience translation. With that, we'll open up the call to questions. Alex, please go ahead. Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. Please ensure you're unmuted locally when asking your question. You can also type your question into the Q&A chat box. Our first question for today comes from Waleed Mohsin from Goldman Sachs. Your line is now open. Please go ahead. Thank you much for the presentation, and congratulations, a very strong set of results. Three questions please from my side. First, if you could comment on the direction of the net interest margin for the domestic business. Is it fair to say that, you know, margins domestically have peaked, and from here on we would see a gradual decline? That would be the first question. Secondly, wanted to get your thoughts on capital levels at DenizBank. As you alluded, there is a change in regulation in Turkey, with some of the prior, you know, regulations being unwound. As a result, rates are going up, the currency has depreciated, which all have implications for DenizBank's capital. Wanted to get your thoughts on how you see the capital levels and if they're adequate as they stand. Also wanted to get your thoughts on the upgrade that you made to loan growth guidance. You know, any particular sectors where you're seeing strength, which are, which have led to that, you know, change in guidance? Because historically, what we were seeing was that although the economy continued to remain strong, we were not seeing that translate into credit demand, given that corporates were relatively cash flushed. My fourth and final question is on IDBI. Is there any update that you can share on that bidding process? That would be very helpful. Thank you. Waleed, good afternoon. Welcome to the call. Thanks for joining. Maybe I'll tackle the first three of those, I'll ask Shayne to deal with the fourth one there. Just on the direction of NIMs for the domestic business, has it peaked? As we all know, the rates went up 25 basis points yesterday. That may give some upside. You'll notice in the details or in the appendix, we've actually split out the margin by ENBD and Deniz. You can see that for Q1 and Q2, the margin at just over 390 basis points was quite stable for the first two quarters, having benefited from the rate rises through last year. Has it peaked?[audio distortion] There may be some upside, but also a big dependency on that is the behavior of CASA and whether we see more migration to term deposits. The market's still quite liquid, so we haven't seen that, and at the levels that we might have expected when we were heading into this year, that it would be quite a reasonable assumption as rates peak, that we might see that migration, and therefore that implicitly increases the cost of funding somewhat. Capital in Deniz. Yes, from a subsidiary point of view, Deniz itself, doesn't actually have a significant impact at all on the Group capital base, because as you get Turkish lira depreciation, while you might have a negative impact on the numerator, you also have a benefit from essentially lower risk-weighted assets on the denominator. In fact, what we can find is that quarter- to- quarter, sometimes there's a small benefit when there's a period of depreciation. I think more to the essence of your question is more domestically in the local capital base. They do have double-digit CET1. We keep a very close eye on that, obviously, as the Turkish lira depreciate any foreign currency risk-weighted assets they have and essentially goes up higher. They can manage that and pull on levers as and when they need to as well. That's well in hand. Loan growth, corporate sectors. I think for the first half, we have seen particularly strong growth across four corporate sectors and across pretty much all of the retail personal lending, whether it's credit cards, auto, mortgage. On the corporate side, one of their key strengths has been around transport and communication. The other is trade, financial institutions, and also management companies, i.e., more like conglomerates, et cetera. That's probably the standout sectors where we've seen growth through the first half. I'll just add to that, Patrick. One of the things we're seeing, with the property market, as we've discussed previously, is that, because the market's so strong, presales are also strong, and therefore, we're providing guarantees for the escrows, rather than funding the actual development themselves. That does take some of the probably the historical loan demand we would have seen in the property sector out of the equation, for a lot of the larger developers who have good brand and brand recognition and good projects. The flip side of that is, those escrow accounts that we provide the guarantees for are with us, and that gives us sticky liquidity that comes with those escrow accounts. We lose on one side on the lending to the property sectors, but we actually, on the flip side, on the CASA side, we actually get the benefit for that. I think from that perspective, yes, it'd be better to have it, I suppose, on the lending side, but actually the flip side is we're getting it on the CASA side. On the IDBI question, I'm gonna give you the stock answer for this one, Waleed, which is we haven't made any announcement, and we're aware of what our obligations are under the DFM and the regulators. We're constantly evaluating opportunities. We obviously have the capital base, and the liquidity, to make acquisitions. We continue to look in to markets like Egypt, Turkey, Saudi, and India, as we've said previously. Got it. Thank you much. That's, that's very helpful. Maybe just to follow up on the DenizBank comment. On your base case, as things stand, despite, you know, reversal of some of the regulations, rates going up, lira weakening. On your base case, you do not have. Do you have a scenario of any need to inject capital into DenizBank as it stands, or for DenizBank to raise capital? I mean, we're very aware of all the different variables that can increase their capital base and may decrease it, and we're aware of the sensitivity, both locally and at a Group level, and we manage that, on a, you know, through a business as usual basis. I mean, Waleed, on Deniz, the Group attends their ALCO session every month, and a part of that is the capital management. We're, you know, I think the biggest impact you're always gonna see on Turkey's capital is the foreign exchange loans. We're very tight on foreign exchange loan growth in Turkey, for the obvious reasons. One is around the currency, two is around the capital. Yeah. Yeah, we do currency sensitivity and given the loan mix we have as to where it will be, plus obviously loan growth. We monitor that very closely, and at this stage, no requirement. Got it. Okay, thank you so much. That's very helpful, as always. Thank you. Thanks, Waleed. Thank you. Our next question comes from Naresh Bilandani from HSBC. Naresh, your line is now open. Please go ahead. Hi, thank you. It's Naresh Bilandani from JP Morgan, please, not HSBC. Hi, Shayne, Patrick, Paddy. Ooh, hi. It's Naresh from JP Morgan. Thank you for the presentation. Thank you very much for the presentation, and congrats on the results. Just a few questions from my side. One is the scope for continuation of strength in FX and derivatives income. This is currently 20% of your total revenue, so quite a sizable number for us from a modeling perspective. It would be keen to know: How should we think about this going in the second half? You did mention that this similar strength may not continue, but I'm just trying to understand, if you could please, during the presentation, you did provide some insight on what drove the strength, and you said that a bigger portion, that did come from mark-to-market gains in Q2. Would be very keen to understand, to what extent should we think of this as being correlated to a depreciation in the TRY, and is that a fair way of thinking? You know, any insights that you can provide on what could be a number or the size going into the second half, that would be super helpful. That's the first question. The second one is on your RWA density. Just, you know, you did mention that yes, the growth has been towards a high-quality corporate loan growth, but then all the factors that one could think of would sort of like intuitively tell you that the risk-weight assets should be, the density should be increasing because your sovereign book is maturing, loans are growing in both the corporate and the retail book. Clearly, there should be an increase intuitively in the RWA density, but actually it's decreasing. If you can please give some insights on what is helping this reduction, again, that would be great. The third question is on your outlook on the sovereign repayments. Have we reached the bottom of the repayment cycle, and do you or do you reckon there could potentially be still some risk again on this line, assuming sort of like the tax collection effort kickstarts with on a greater size in starting early next year? If you can please share some insight there, that would be great. Thanks. Thank you. All right. Naresh, welcome, let me see, I'll tackle those from the top there. Just on the NFI, okay, let me unpack that a bit. I think the slide, switch back to slide four there. You're right, it's been a significant step up in the last couple of quarters. I think pretty much every quarter I've been doing this presentation, there's been a weighted attribution of the variability to DenizBank, and the last two quarters, probably not too different. What I want to emphasize, though, is that underlying those numbers is a really strong client flow business. In ENBD, we've seen strong FX, customer-driven flow business, quarter to quarter growing, and even in Turkey, their client FX business has been very strong as well. Actually in Q2, around the time of the election, the spreads on spot FX transactions just got wider and wider. They probably have narrowed a bit more, so we won't see that again through the second half, probably. I did say earlier in the opening remarks that typically in the last year or so, the average quarterly client income has been 80%-90% of that FX, that dark blue FX and derivative income line. In Q1 this year, that was probably between 80% and 90% of the $1.4 billion, was client flow related. What we saw in the second quarter was a step up on some of the gains in Turkey, particularly as there was a sharp depreciation of the lira around the time of the elections as well. That's one of the things where banks, typically, if they're positioned correctly, will make money in that sort of event. There was quite a strong pop up on the any open position that we would have had in Turkey. I think out of that AED 2.1 billion, between 60% and 70% of that would have been underlying client flow. If you want to use that as your base, it's not a perfect guide as to what might happen in the second half, because you may still see some upside or even downside reversals from any previous quarter mark-to-market gains from Turkey. It might then diminish that a bit, but that should give you an idea of what a reasonable underlying client business looks like. Just on the second point, risk-weighted asset density. Oh, God, I mean, it's a mix of a lot of moving parts in there. For example, when the CRR went up, the reserve requirements went up in April, that meant assets switched out of risk-weighted bonds into zero risk-weighted government bonds. When we originate new corporate business, the weighting on that's going to depend which end of the PV curve you are. Are you at the strong end with the GREs that might be risk-weighted at 20% or other private companies that might be at 100%? It's really going to be quite a mix as well. Another substantial part of that for this quarter was the Deniz FX translation. I think that was down AED 10 billion as well, following the 28% depreciation of the Turkish lira. Lots of moving parts in there. Sovereign repayments, you can see consistently since Q1, 2020, that the trend has been downwards. There was a small increase in Q1, which was just the timing of cash flow. You can see on page five, that's come back up on the screen there. 113 from Q4, end of last year, went up to 116, it's now back to 112. That trend seems to be continuing. We, we can't give specific guidance on whether we think it'll be up or down. You just need to judge that on the trend that you're seeing. I think that was your three questions. Is it? Yeah. That is correct. Sure. Sure. Just the point on the tax collection, do you, do you reckon that could still potentially continue to be a risk on this line? Well, the government finances are in very strong shape, so it's up to them what they then do with that, whether it's investment or debt reduction, et cetera. I can't really otherwise comment on that. Well, I think most of you live in Dubai, and you see the strength of the economy at the moment. It's firing on all cylinders everywhere. That's translating into our results. you know, I think the government's financial position is obviously strong in the U.A.E. and Dubai itself. Okay, thank you very much. Once again, congrats on the results. Thank you. Thanks. Thanks, Naresh. Thank you. Our next question comes from Chander Kumar, from Al Ramz Capital. Your line is now open. Please go ahead. Hi, good afternoon. First of all, congratulations on good set of results. My first question is related to, like, ENBD recorded like AED 6 billion of profits in second quarter, while the increase in equity was only AED 2.6 billion. If you can, please provide some insight into this notable difference between equity and net profit. It seems like, positive impact of, like, DenizBank operation on P&L is being offset by higher currency translation losses on balance sheet. Please confirm if my understanding is correct. Yeah, Chander, thanks for the question. I would point you to page four of the financials. After the call, you can have a look at that. Yes, we have our P&L earnings, and then in the other comprehensive income, we also have the impact of FX depreciation on our structural investments in both Egypt and Turkey. That reduces that sort of net equity contribution amongst a number of other things that are also shown in there, along with hyperinflation and whatnot. Yeah. Fine. My second question is related to DenizBank NIMs. If you can provide the guidance on DenizBank NIMs, especially in the context of monetary tightening, like we have seen a sharp increase in interest rate from 8% -1 7%, and expectations are that, like, it's going to further increase. If you can provide some color on DenizBank NIM, that would be really appreciated. No, certainly. Actually, this is the previous page. I think page 12 is the dirham equivalent. Yeah. Actually what we've put up on the screen is the ENBD versus DenizBank NIM. we exited last year with Turkey having NIMs just under 9%. At Q1 this year, they came down to about, was it 3, 4.5 or 5, 4.6 or so, similar to Q1 last year, and now it's come down to 3.4. Now, that is the impact of a number of things. On one hand, there's been the regulation on the pricing of assets, so there were certain penalties for lending at rates over certain amounts. That compressed the gross yield on your asset side. There's also a requirement to have a 60% Turkish lira funding base. There was competition for deposits that put the cost of funding up. Also, any CPI-linked income with lower inflation through the first half also meant that income credit was a little lower in the first half as well. I mean, the monetary policy at the moment is transitioning, and some of the regulatory rules are being adjusted. We've already seen that the ability to price the assets higher is starting to come through. The requirement on the Turkish lira deposit base is starting to be lowered as well. For the next quarter, I would expect the margins in Turkey to continue some further compression. It does take time. Even if you get into a positive situation where your asset pricing is higher than your cost of funding for new vintages of origination, it can take time for that to come through in the overall margins as well. If the monetary policy continues along its current trajectory, there may be some margin pickup in the towards the end of the year. Certainly we are seeing the new economic team making adjustments to interest rates. The maximum we can charge has gone up to what? 25, if my memory isn't wrong. We're seeing that negative spread in NIMs that was there for a while contract significantly. I think you've also got a situation where the new governor just announced their forecast for inflation, which for the first time it's been stated over 50%. I think that also helps on our inflation-linked bonds, which will actually got flowing through into NIMs as well. Oh, sorry. Just one other point, as Patrick mentioned when he was talking about the NIM guidance, that's all baked into the guidance of 3.8%-4%, but with the expectation that we will land at the lower end of that expectation. This, overall Group forecast for NIM is already incorporated for Deniz and NIM compression? Yes, that's correct. That's right. Yeah. It's consolidated view. Okay. Okay, my last question is related to corporate tax. As you mentioned, like, corporate tax, will be, like, 9% for ENBD starting from beginning of 2024, and it will gradually increase to 15% in line with global practice. For modeling perspective, how should we, how much in a corporate tax we incorporate for the, like, in the medium term? For next year, it's more likely to be around that 9%. For it to be 15%, the OECD countries have to have actually implemented that. I think on the biggest stumbling block at the moment, it's stuck in the U.S. Senate, is my understanding. Yeah. For the ratification. In fact, I think Canada's saying they're going alone. For it to get a global OECD agreement, they need the U.S. politicians to agree, which, as you know, in the U.S., is not an easy thing to get them to agree on anything. You know, I think at this stage we're looking at 9 and I would think it would be quite normal to have an expectation in the U.A.E. that when OECD does go to 15, that the U.A.E., for multinationals and, and companies like ourselves, will move to 15. That would be my anticipation. I can't mind read the government, but that would be in the back of our mind for our forecasting. The reason I would say that is because if we don't... If a multinational doesn't pay 15%, if they pay 9% here, they'll have to pay the top-up somewhere else. The U.A.E. might as well get the revenue income for where that property is earned, rather than have another jurisdiction pick up that difference between the 15 and the 9. Just to add to that, the European Union wouldn't be implementing this in any case until 2025 or the U.K. You know, and that's part of our footprint. I'd, I would be thinking about 2025 at the earliest. Of course, if it is earlier, we'll be sure to let you know at the quarterly updates. Thank you so much. Welcome. Thanks, Chander. Thank you for joining. Thank you. Our next question comes from Rahul Bajaj of Citigroup. Rahul, your line is now open. Please go ahead. Hi, thank you. Thank you for taking my question. This is Rahul Bajaj from Citi. I have two quick questions, actually. The first one is on your unfunded exposures. I see last couple of quarters, we've seen decent pickup in provisioning for unfunded exposures. In fact, almost equal for 1Q and 2Q. Just wanted to understand what is driving it, and is there a change in how the bank provisioned for this particular item? Linked to this, on your cost of risk guidance, and when you said, you expect a pickup in the second half, I just wanted to understand to what extent the pickup in the second half on cost of risk is driven by less recoveries versus any specific stress that you see coming out of higher interest rates. You know, is that also a factor for you not changing your cost of risk guidance? That's kind of my first set of questions. The second one is on DenizBank. Just quickly on, if I look at the Ag loan and asset sequential trends, they're down quite meaningfully. How should I think about the strategy at the local level? I mean, to what extent is this FX related, or is there a strategy to go slow on the DenizBank business from the from the top? Any thoughts there would be appreciated. Thank you. Sure, Rahul. Let me pick those up. Just on your point about the unfunded provisions, just to give everyone else on the call a point of reference, I think you're talking about note 15, which just shows that we booked AED 536 million for that in the first half. I think we also discussed this in Q1 as well, but it has gone up from Q1 was about AED 290 odd million, and it has gone up a bit. Look, the increase for that is a combination of a few things, partly updating of our ECL models, which I think I noted in the last quarter, plus the growth in our unfunded exposure and the composition and mix of the portfolios and sectors as well. These... You've got to remember, these models are forward-looking. It's not just about looking at buoyant economies today, but it has a number of variables that get factored in to some years in advance. That's a factor as well. You'll also notice in our accounts that contingencies and commitments have also been growing in the last few years. I think by the end of 2021, we're at AED 116 billion. We're now at AED 131 billion. We do count that AED 536 million as part of our overall cost of risk in the 41 basis points, just so you know, we haven't excluded that in the risk that we're facing. I think that segues a bit into the... You're asking about the guidance for the full year on the cost of risk. The main driver is indeed expected lower recovery levels. In the detailed accounts, in the notes, note 23, I think it is, you can see that we recovered AED 2.2 billion in the first half, and that compares with AED 1.1 billion in the H1 of last year. The P&L charge went down from, what? AED 1.9 billion last year to AED 0.9 billion for the first half this year. Guided my cost of risk for the second half was around 80 basis points. Not too bad, considering the pattern that we were showing for the previous 3 years. That would also imply an H2 charge of something like AED 1.8 billion or something like that, which would be similar to last year's H1, if I can just round that off like that. I'll just add that, you know, one of the things that I suppose is a bit unusual about our bank compared to some of our competitors, is we're so highly covered in Stage 3s and in high 90s, that anything that we work through, basically we're getting it right back. I, I think the, you know, with the way the property market is, and, you know, obviously some of this is, some of these problem loans have property collateral. We're pushing our workout teams to close out some of these problems as quickly as we can. Given how robust the property market is and where prices are, we're pushing like hell to get these things finalized. The problem with, as you know, with problem loans is you don't know when a property is going to sell. You don't know when you're going to get the legal approval to go for it. You know, there is a time drag on, you know, when can you get this stuff through? It's pretty unpredictable. You know, are we hopeful we could get some more recoveries in the second half? Of course, we are. Are we pushing for them? Of course, we are. You know, we wouldn't bank on that when we're giving you guys what our cost of risk is. I think there was a quick- Thank you. There was another quick... Deniz, wasn't it? I'll grab that. Yeah, I'll copy that to you. Okay. Did I miss? Thank you. Our next question comes from Shabbir Malik of EFG Hermes. Shabbir, your line is now open. Please go ahead. Thank you, and congratulations on a good set of results. A couple of questions from my side. Only good, Shabbir. Should be only good. Great, great set of results. Thank you. Thank you. A couple of questions, please. This year, U.A.E. is hosting COP28. We're seeing a lot of, you've talked about real estate sector, but also you're seeing a lot of construction activity taking place. Are these, emerging as growth themes for the bank? Or like, are you seeing any sustainable increase in demand for sustainable financing, demand from the construction sector for loans? Is that something that you're seeing in your, in your business? My second question is, I'll take that. I'll take that first, if you like, Shabbir. Do you want me to take that one? Sure. I'd say on that, certainly in the power side, we are. You're seeing quite a lot of stuff that's happening in Saudi and the U.A.E., and also the demand coming forward, that U.A.E. has announced that AED 200 billion additional. From that side, yes, sustainable finance from there, will grow, I think, quite substantially, both from Saudi and from the U.A.E. We can see clearly a pipeline there. On construction, not so much at this stage. It, we are seeing some green buildings, and in fact, ourselves, you know, we've got a Gold LEED on a few of our branches. We are seeing improvements in client expectations and behavior when it comes to greening their buildings. Would I say in the construction industry at the moment? I'd say no. We as a country and we as a bank and our customers need to do a lot more work, I think, in the building and construction area, given the emissions that do come out of the steel components and the cement going into these properties. I think there's still more work to do, I think, from ourselves, from government and from our contractors and developers. Thanks for that. What I meant with the construction sector is that generally the activity, for example, there was some reports of restarting the Jebel Ali Palm. Broadly speaking, the construction sector has, I think there is some anecdotal evidence of a pickup in that space. Is that translating into loan growth for the bank, not just green construction, but generally speaking? I mean, contractors for us as an industry is, we obviously do go contracting finance. We have quite a few contractors on our books, but we're also quite, I wouldn't say risk-averse, but we're risk cautious on that sector. Contractors historically in both Saudi and the U.A.E., I think as a risk profile, has not been a great experience for banking, the banking industry as a whole. Not just us, but lots of other banks. Whereas the margins have been historically very thin. What we are seeing now, I think, with the contractors, is a better management of their margins. Because there is fewer contractors around now, they I think they have the capacity to price far better than they have historically. I think there is some we are seeing some loan growth in that sector. Would I say it's huge? No, because we're quite cautious on what we'll do. It's not a sector of industry that we, that we will take a massive amount of risk on, because historically it hasn't been a good sector from a return on risk for us. Great. Great. A question on mortgages. Mortgages in the U.A.E. are floating rate, and we've seen interest rates gone up so sharply. Now, I appreciate that property prices have gone up, but how are you managing potentially, you know, cash flow issues for the client, because interest rates have gone up too much and maybe it's becoming a bit more challenging for them to repay the loan? Are you seeing that in your portfolio? If there is this case, then how are you managing that? We're still seeing quite robust demand for mortgages, new mortgages within the portfolio. As you know, in the U.A.E., 60%-70% of transactions seem to be cash. The demand for property versus demand for mortgages is less. I think the good thing at the moment in the U.A.E. is if clients are in distress, there's an easy solution: they can sell. We're not seeing. And they're selling for profits. It's not that they're selling and losing money on the transactions. I think that we're in a privileged position where there is an easy way out with clients with stress. We're not seeing substantial stress in our mortgage portfolio at all. Would you ask me if it was surprising? My answer would be yes, I think it's actually quite surprising. We are not seeing that stress within our mortgage portfolio at all. Yep. Thank you. Finally, if I look at your capital position, it's become exceedingly strong. Are you comfortable having a relatively bloated capital base, let's say if you don't find it, the right deal with the right price, or would you be open to maybe changing out cash dividends? It's hard to say yes, after you've described it as a bloated capital position, isn't it there? Look, I think the reality is we obviously have a very strong capital base. We obviously have a increased capacity to pay dividends. I think at this sort of level, capital base, it certainly makes a lot of our return metrics, even though our return on equity is extremely high, even with that, with our bloated capital base, certainly it is not at the level that we would like to maintain going forward, if we don't find something to acquire, or if the board decides to increase dividends at the end of the year. Thank you. Thanks for that. Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad, or you can write your question into the Q&A chat box. Our next question comes from Aybek Islamov from HSBC. Your line is now open. Please go ahead. All right, well, yeah, thank you very much for the conference call. I think we had already a very long Q&A session. I think one area I just wanted to ask about is retail segment, right? And in the retail segment, what I see, it looks like you are really boosting your provisions at the time when you're reversing your recovering your provisions in the corporate, you are boosting your provisions in the retail and the cost of risk, if I'm correct, close to 3% in retail. At the same time, there's a slowdown in retail loan growth. Can you explain to me what's happening in the retail segment? Do you feel that the segment is at the peak, and you're just taking the opportunity to be cautiously for cautious countercyclical provisioning in retail? Yeah. That's my first question. I think I'd say on that one, all of the above. I mean, we did. In the first half, we have seen AED 12 billion of growth in retail. we're not seeing, you know, we're not seeing a slowdown in growth in retail. We're seeing an acceleration of growth in retail, and we're taking market share. also, obviously, the population is growing, which is helping us substantially. also remember, right, when you're doing ECL models, we're very heavy credit cards, yeah? given the nature of risks in credit card, if you're building up that revolver book, your ECL, being forward-looking, is gonna build as well as you grow that book. As I said earlier, we're, you know, 1/3 of credit card payments and nearly 1/3 of debit card payments are ENBD. That book is big, and as we keep growing it, which we have, that has an ECL translation. It also has a charge, right? Because we have losses on that credit card? Yes, but the spreads on them are so large that the risk-adjusted yield is very, very strong for us. You are seeing, as we're growing, you're going to see that ECL. Are we being conservative? Absolutely. You know, we have always been very conservative on how we provision. Okay. Very helpful. Thank you. Next question, I wanted to ask you about the real estate sector, right? You mentioned on the call that you're guaranteeing escrow accounts, escrow deposits- Yeah which are coming in as, prepayments, payments for the new projects, right? Under construction properties. Where else the strong real estate activity is manifesting itself in your balance sheet, apart from CASA deposits, apart from the strong deposits flow? Any other areas that? Yeah. Well, I think, on CASA growth, it's been pretty much across the board. We're obviously seeing a strong CASA growth in corporate. We're seeing strong CASA growth in GRE. We're seeing strong CASA growth in retail and SME. You know, we have got a situation in U.A.E., where the economy is robust. We're getting population growth, and we're benefiting from that. You know, we'd like to think we're the go-to bank, certainly in Dubai, for new, the new population moving into the country, new businesses being established. We're continuing to see, you know, very strong results. Again, if you'd ask me, would we have seen more switch into term deposits? Well, we are seeing switch into term deposits from existing customers, we're also growing our customer at a faster rate than that switch. you know, we're sort of benefiting from that, from because even FDs now, we can make them profitable, right? With our investment side. I think, you know, we're benefiting just from the strong liquidity in the country and our capacity to attract that liquidity. this is not sort of like, it's happened by accident. We've been talking about our focus on CASA now for years and years and years, because we always saw it as, once we saw rates go up, we would be the beneficiary of that. you know, it's not without cost. We pay our staff, you know, sales incentive to grow that CASA and to get new accounts. Mm-hmm. that develop CASA for it. It's, it's not a, it's not an accident that it just walks in the door. It's also a lot of feet on the street marketing, plus obviously, our digital capabilities now, you know, ease of opening accounts makes it, that we do attract CASA from other banks and also from new population growth. Mm-hmm. Super excellent. One last question? You spoke about construction, that you are cautious on lending to the construction sector. Yeah ... if I understood you correctly. Now, obviously there are developers, who are Government-related entities. Would you be still cautious in this case? That's, one part of the question, but secondly, you could also be lending against projects, construction projects, which are guaranteed by the government. Can you when you say, are you cutting off here between developers and contractors? Well, I guess, yes, I'm mixing two things, right? Are you lending to developers, or there could be projects where developers can guarantee them, and these projects are executed by the construction companies? There could be two ways to participate in the construction boom. One is funding projects, which are guaranteed by developers, but done by the contractors, and the second one is lending to contractors directly. I understand you're not doing lending to contractors, but what about project finance? Okay. If you look at our numbers, our exposure to real estate lending is down. It's about from AED 48 billion - AED 45 billion. That's coming down. Some of that is from what I said earlier, it's that, you know, the big developers of this world are pre-selling things like hotcakes, and they're using the escrow account to fund the development. We provide the guarantee to the developer, right? Contractor is a different piece of the puzzle, right? The contractors are the ones doing the work, doing the building or the villas or whatever they're doing. That to us is the more risky piece, and historically, that has been because margins in that sector have been rock bottom. They've been, you know, too low, and a lot of the contractors were relying upon variations to make good profitability out of the development rather than the base margin of the development itself. That works well if everyone agrees on the variations. If they don't agree, that might not work out so well for the contractors. Are we banking contractors? Absolutely. We bank contractors, but we are also very risk cautious on which contractors we will bank and what developments that we would back them into. Obviously, the paymaster is one of the key issues for us. Have they got the right paymaster, the developer, with that contractor? Okay. Okay. Aybek, we're actually over time. Yeah and I have some questions on the web. If you have anything further, I'm happy to follow up with you. Okay, thanks. I'll just run through some of the questions that have come through on the web. Turkish Central Bank normalization of rates, is that going to hurt DenizBank NIMs? I think Patrick gave a very clear answer in terms of there is some further DenizBank NIM contraction backed into our overall guidance trending towards the lower end of guidance. Can you confirm the proportion of corporate and real estate loans are backed by property collateral? Certainly for mortgages, retail mortgages, that would be the within retail, that would be backed by property. In corporate, there, you know, some of the loans will have collateral, property collateral backing them. If you look at our coverage ratio, for example, our coverage ratio, including collateral, for example, is closer to 200%. So there is. Of course, there is property collateral there, but it will be on a case-to-case basis. Guidance for cost-to-income ratio for 2024. We've issued no guidance yet for 2024. Given the high capital, would you consider increasing the dividend payout ratio in years to come? Again, that is a decision for shareholders and the board, and reviewed closer to the annual dividend declaration. Following the recent U.A.E.-Turkey agreement, worth over $50 billion, do you expect more business between for ENBD, thanks to DenizBank? We do absolutely see it as an opportunity, and we very much welcome increased trade ties and flows between Turkey and the U.A.E. I think on that one, if, you know, if any U.A.E. investor is looking to invest in Turkey, who do they talk to? Us. Because we're the go-to bank for those discussions, because we, you know, we have a substantial investment in Turkey, and we know the market well. We have an excellent management team there to assist them. Yeah. In terms of mark-to-market, potential impact on DenizBank's investment book, of course, that's something that we look at and monitor. Again, do we anticipate a temporary relaxation of regulations in respect to that mark-to-market? I mean, we have seen an unwind of some of the regulations, you know, the regulators there are cognizant of the number of regulations, and as interest rates have increased, we have seen a partial unwind. You know, that DenizBank is in good shape, as we said, in terms of capital. Couple more questions. In terms of, Patrick, maybe you could help me with this one. More color on the provision reversal in Turkey. There's been a provision reversal for two consecutive quarters. Yes. Any more color of that, on that? Yeah. You can see in the accounts, we have the $2.2 billion of recoveries about for the first half, about $0.8 billion of that relates to Turkey. They've got a net credit of $0.6 billion. Net/net, they took $200 million of charges otherwise. ... And then, and a question- I'd say on that is, from memory, from the last time I looked at the peer comparison in Turkey, we had the top coverage for Stage 3 in the market. Again, you know, the financials for Turkey are transparent. They're publicized on the website if anyone wants to have a dig into the financials of DenizBank in Turkey. I think, you know, certainly being so highly provided helps us when it comes to especially property collateral in Turkey, because in dollar terms for good quality property in Turkey, it's doubled in price. If you're in Istanbul or Bodrum, those sort of areas, property's doubled in price in dollar terms, so that also helps with our recoveries in that market. Thanks. Thanks, Shayne. And then in terms of the impact on potential, drop in interest rates, are we doing anything to protect against that? Of course, I mean, predominantly, we are a floating rate bank, but on the periphery, we can take... You know, we have been taking action. If you look at, the treasury income, for example, with the investment book, they, you know, they're able to invest in longer-dated securities, particularly at these higher rates. Hedge as well to some extent. We are over a AED 200 billion. We're an AED 800 billion balance sheet, so we can't hedge the whole thing. Again, given the benefit of the CASA, ultimately, you know, we are benefiting from that, from a higher rate environment. The last question we have is in terms of potential M&A activity in Turkey, given that our Turkish acquisition has done so well, is that something that we would look at further? I'll let maybe Shayne answer that. Before Shayne answers that, the very final question in terms of the movement from Stage 2 to Stage 3, there's movement throughout all the different stages. You know, there is natural movement, even though we have had significant write-backs and recoveries. Of course, there will be some new movements. The, they are quite granular. I wouldn't say it relates to one specific case. Shayne, just back to you in terms of M&A activity, Is Turkey something you would consider? I think the answer for Turkey is, if there was a small, medium bolt-on, yes. I don't see at the moment we'd do a large-scale additional acquisition in Turkey. Small bolt-on, I think would be doable, if it made sense financially for us. I think the, you know, where I'd rather focus would be on Egypt, which is, we're too small in Egypt, which I've said to the investor community before. It's quite a small place for us. We'd love to grow more on acquisition in Saudi, but I think the issue for us on Saudi is that that 40% threshold in Saudi is a difficult one for us. you know, we are very clear that we must have a board and management control, and be more than 51%, and the right price before we'll consider any acquisition, and that 40% does provide an inhibitor for a Saudi acquisition. India, we've talked about. It's a market we've been growing in. We've opened another two branches last year up to three now, and that market has been good for us. We also get a lot of cross-border business actually from India. There's no Saudi banks, for example, in India and no Indian banks in Saudi, so that gives us that capacity as well into cross-border. We're seeing good growth, India to Turkey, India to Egypt, for example, as we're working those cross-border pipelines a lot better these days. Thanks, Shayne. Shayne, there's no further questions. Well, if there's no further questions, I'd like to thank you all for participating in today's call. We delivered a very strong set of results, and even better, are very excited about the opportunities in the coming quarters. I'll hand you back to Alex, to provide details in case you have any further follow-up questions, and to close the call. Over to you, Alex. Thank you. For any further questions, please contact our Investor Relations department. These contact details can be found on the Emirates NBD website and on the results press release. A replay of this call and webcast will also be available on the Emirates NBD website next week. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation.