Good afternoon or good morning, wherever you are. Welcome to Abu Dhabi Islamic Bank's second quarter results call, co-hosted by EFG Hermes. My name is Shabbir Malik. The management will take some time to go through the slides, and then we will open the floor for question and answers. At this time, I will hand the call over to Lamia, the Head of Investor Relations, Communications and Marketing. Lamia, over to you.
Thank you, Shabbir. Good morning, good afternoon for everyone on the call, and thank you for joining us today on this call. Before we get started, I just want to say that the presentation is already on our website and on our investor relation app, and you as well have received the email with the presentation and the MD&A. It is also posted on the ADX. I have with me on the call Mr. Mohamed Abdelbary, our Acting Group CEO, and Mr. Ahsan Akhtar, our Acting Group CFO. The agenda of today is very consistent with the previous quarter. We will start with a detailed analysis of our financial performance. We will then conclude with the guidance for the rest of 2024 before we open the door for the Q&A. With that, I will hand over to Mr. Mohamed Abdelbary, who will take us through the presentation.
Thank you, Lamia. Thank you, Shabbir, and good morning, good afternoon, everyone, and thank you for joining our call today. We are very pleased to report yet another strong set of financials for the first half of 2024. Again, it is reflecting the consistent growth story we have been signaling for a few quarters now. We are reporting a net income after tax of AED 3.03 billion, which is 30% up year-on-year. If you were to exclude or normalize for the tax impact from last year, we are talking about AED 3.42 billion, which would take us to approximately 40% up year-on-year. The profits for the quarter, we are reporting before tax AED 1.78 billion, which is up 8% from the previous quarter and 38% up year-on-year.
If one would just dive into the main drivers, the results were driven by strong growth across all our business. Particularly, we are very happy to see the progress on our funded and non-funded income combined and the way we have seen our underlying volumes growing quarter-on-quarter. It is also worth highlighting that our cost-to-income ratio has dropped to 28.6%, which is an improvement of 183 basis points from the last quarter. For those who have been following ADIB for some time now, I think that is definitely a number worth acknowledging, given that a few years ago, we were probably in the higher- 40% mark, and from that onwards, we have been always signaling to the market that we are on the right path in achieving a cost on income ratio, which we are reporting today.
We have also welcomed around 100,000 new clients, which is again, a reflection of our ability to continue to attract clients to ADIB. From a balance sheet perspective, we are very pleased to have passed our first milestone, exceeding a balance sheet of AED 200 billion for the first time, which was supported by a growth in net customer financing of 21%. As known for ADIB, we have been able to efficiently fund that growth, a combination between CASA and wakala class contractual financing opportunities, and hence we are protecting the efficient funding mix we have. At the same time, we have not lost sight in terms of continuously enhancing our NPA ratio, and we will come to it in the next few slides, where we are reporting a net profit asset ratio of 4.7%.
Again, this chart will speak for itself when we come to it, where we see quarter-on-quarter the progress. I would like to always go back and say that we have been signaling that projection over the quarters, and I am very pleased that with the team here, we have been delivering on the promises we made. Lamia, if you move forward to the next slide. Okay. I think it is important also to understand where the performance has come from. Our revenue has grown 25% year-on-year, and that was supported by, as mentioned, both from a funded and non-funded income perspective. It is absolutely critical for us that as we deliver growth, in our profitability quarter-on-quarter, it is very important for us to understand where the profitability is coming from.
As we grow our core business, it gives us a lot of sustainability and continuity as we go into probably next year's cycle, where the rates are expected to be lower. I spoke about the cost to income ratio, but also if one would look at our capitalization situation, we are reporting a total CAR of north of 17%, and we come to the CET1, which has touched 12.9% as well. Okay, I think we can move forward on this slide, Lamia, if it is okay. Let us talk about the income statement. Again, from an income statement perspective, if you look at the top left chart, we are seeing consistent growth every quarter. Net profit has grown 8% versus last quarter, and that is after incorporating UAE tax.
One number I am particularly proud of is that when you look at the quarter net profit after tax, it has almost recovered from the first quarter of 2024, where we said that if you exclude tax, we will still be showing growth quarter-on-quarter, but now even after incorporating tax for the second quarter of 2024, we continue to show growth from quarter-on-quarter perspective. Moving forward, Lamia, on the funded income side, as was already mentioned, funded income growth 13% year-on-year to AED 3.3 billion in half one from 9% growth on average profit earnings. The number which I am really proud of is that our net profit margins have held up quite nicely in very challenging environment because we are not only mindful of the fact that as we stand now, our portfolio has largely repriced.
We kind of hit the top angle of our gross yields, but also given the competitive environment in the market, we have been very disciplined in our pricing approach and hence our net profit margin, if even one compares it to first half of 2023, moving from 4.41% to 4.6%, something I think would be quite unique if one would compare to other financial institutions in the market. On the expenses, the story continues. Our expenses have grown 6% year-on-year to AED 1.5 billion. If you were to look at where predominantly the expense growth has come from, it is from two main categories. First one is employee cost, and that is just a reflection of us continue to invest in our people. The 4% is the net growth.
The underlying actually is a bit higher because we made sure that our compensation to employees are in line with market, but also we have created some efficiencies as we went ahead on our digital journey. That reflects on the second pillar you see, which is a 12%, and that is predominantly the cost of the flow through of our digital spend. Being on a journey for now, almost, I would say, three to four years in terms of really focusing on your digital agenda, we are at inflection point where our delivery cycle is becoming shorter and shorter. What it means is that projects which we have invested in maybe 12 to 18 months ago are being delivered, but also the ones which started six months ago are also being delivered much faster.
I think we are learning as we go, and we have demonstrated that we are leading in terms of our digital servicing capability and making significant progress in terms of our sales origination efforts as well. Moving forward on impairments. Impairments has increased 9% year-on-year, and that is something which, again, we were very keen to ensure that our cost of risk or our impairments is keeping in line with our financing growth. If one would look at, okay, so financing has grown around 21%, we need to ensure that we are keeping a lot of discipline in terms of our underwriting standards, and hence our provisions have been actually higher, despite the fact that the actual underlying cost of risk has remained quite benign.
That is important to reflect on the next slide, Lamia, which we see, is that our coverage ratio from a cash perspective has gone up to 77%. Again, shouldn't be a surprise to the market. We did commit to the market that this is the number we are focusing on, and we will continue enhancing, but also our NPA ratio dropping to 4.7% where it was 7.5% only 12 months ago. Again, something which is structurally being executed at best focus levels. As we are looking at our pipeline, we do expect that this trend will continue as we finish 2024. It is a combination of actual legacy recoveries, which we again told the market we are focusing on, but also we have been very prudent in terms of our write-off approach. Moving forward through the balance sheet.
Bank total assets, as I mentioned, have now crossed the AED 200 billion mark for the first time. We are reporting AED 213 billion as of the second quarter of 2024. Underlying is actually AED 223 billion, and the AED 9 billion is the impact of the FX devaluation in our Egypt subsidiary. Egypt underlying on a local currency basis has done extremely well, has grown, but given the FX devaluation, I think the bank, as mentioned, has been impacted by AED 9 billion. What we are quite proud of is actually when we start talking about our financing growth. Lamia, if you can go to the next slide where we see where the buildup is coming from. 17% growth from the beginning of the year, and as we can see, nicely contribution from retail as well as from our corporate or wholesale banking division.
Both engines are firing, are delivering, and are staying on course. If one would now bifurcate the retail delivery in the lower right-hand chart, you would see that home finance has had a significant contribution to our growth as well as personal finance and auto finance. I would like to believe that if one would look at our home finance book and personal finance book now, I think we are probably market leading for these two specific books in the UAE. From a corporate perspective, I just make one point, is that the importance of having a good mix between GREs and corporate is of significance given the RWA benefits which we are getting, as well as enhancing our credit quality. This is in terms of our sukuk investment, again, quite nicely on track, on strategy.
We have added a few billions from the beginning of the year. Now we are reporting AED 27.2 billion. Our portfolio remains to be predominantly investment grade, which is, I think, quite unique for this market and for ADIB in specific. It is helping us to give stability. It helps us to give long-term financing, fixed rate opportunities in an environment where we expect rates to go down. We will continue to build on that portfolio selectively and where it best fits ADIB's profile and risk appetite. From a deposit perspective, we have grown, as I mentioned in my opening remarks, in line with our financing growth. ADIB always had the benefit of being a fairly liquid bank. This has not changed at all.
What it meant is that when we spoke in the previous quarters of keeping liquidity on hand, keeping our powders dry, being able to deploy when we needed to deploy, that is crystallizing now as we speak. As engines are firing on all fronts, we had the ability to call on effectively priced funding opportunities with a mix of wakala to ensure that as we support our asset side of the balance sheet, the funding mix by no means is impacted from any of the acceleration we are seeing on the asset side. It is also important that we are making conscious decisions of mixing between CASA as well as wakala.
While we have the ability to continue growing our CASA, given the uniqueness of ADIB's profile, it is important for us that we are creating duration on the liability side to ensure that we do not create any mismatch from a funding perspective as we grow our financing book. Last but not least, I will talk about our capital and liquidity position. Our CET1 is now standing at 12.9%. It gives us a lot of comfort, especially if I were to compare to second quarter of 2023, 12.9% versus 12.8% 12 months ago. We are definitely heading in the right direction. We are creating value to the franchise. We are ensuring that capital is deployed at its best level.
As you can see, balance sheet growth, financing growth, strong liquidity, but more importantly, by no means we are diluting our capital position as we position also ourself for year-end to ensure that dividends decision can be made within the bank's policy. Now, on the right-hand side, we see the liquidity position. Again, very liquid bank, I have to say, and even despite the fact that the change in the CRR ratio, which happened a couple of months ago, moving from 11% to 14%, while it might have some profitability angle, it did not create too much pressure on us in terms of having to raise funding for that, given that we always have that ammunition on hand and able to deploy as and when required. Moving on to the outlook and guidance.
Now, I have to say, given the impressive performance, which we are all very proud of, particularly in the second quarter of 2024, we are revising only one metrics in our guidance, which is our gross financing. Year- to- date, we are already at 14%. We are saying that we are closing the year probably above 16% year- on- year. Net profit margin, we have always said, going to be above 4.5%. I am maintaining this position. I do believe that we probably hit the high point in terms of financing yield, given the profile of products we have, but also given that, as I mentioned, the cycle of repricing our assets has probably concluded by now. So our net profit margin is probably above 4.5%, and we are very confident that this number will be maintained.
Cost of risk has remained the same between 40 basis points and 60 basis points. Cost to income ratio, we are saying 30%. We are already at 28.6%. I think that probably that is the number we are going to land on. Return equity, north of 25%. We are already running at 29%. With that, I am concluding our introduction, and we are happy to take any questions.
Thank you very much, Mohamed and Lamia. We will now open the floor for Q&A. If you would like to speak, please raise your hand. If you would like to send in text messages, please use the Q&A box. We have a couple of questions.
I think [inaudible]
Yes, please. Adnan, please go ahead. Adnan Farooq, can you hear us? I think we'll try. One second. We'll try the next participant. One second. Naresh, please go ahead.
Hi, can you hear me?
Yes, we can. Go ahead.
Oh, perfect. Thank you. Hi, Mr. Mohamed. Hi, Lamia. Congrats on a very good set of results. Sorry, I didn't get a chance to go through the great detail, but just a few quick questions after listening to your presentation. One is, it would be very helpful to understand the sustainability of the very strong volume growth that you have recorded in the first half of this year. I see your guidance, which on the first look, does not imply that a similar strength could continue in the second half. Are you just being conservative here or is there more room for further sort of growth surprises? How should we think of the growth in the second half of the year? That would be my first question. My second question is on the margin outlook.
As you kindly mentioned that you seem to have hit the high point in the yields, could you please throw some light on the expected trajectory of the NIMs once we start seeing rates go lower? Is it fair to assume that you will still continue to see some support from the Egyptian franchise, where the NIMs still remain quite strong? But the UAE NIMs could sort of be much more in the direction of where the Fed rates go. If you can throw some light there, that would be extremely helpful. That's the second one. My third and final question is, having heard the investor calls in some of your peers, there has been a discussion around the new revised provisioning standards that are being promulgated by the UAE Central Bank .
If you can please just share your thoughts on the first take on the potential impact that we could see from these new regulations, that would be super helpful. Thank you.
Thank you so much, Naresh. I will take them one by one, and if I miss any point, do let me know. The first question was how sustainable do we believe this performance will be in half two? My answer would be is that I think we are cautiously optimistic that the growth story will continue. Your question was specifically on the financing book. Second quarter has seen tremendous activity, particularly in the GRE side. I think that's probably just glancing over the other banks' announcement, that's probably a market dynamic, which we have seen. ADIB wasn't alone in this. Hence, when we talk about half two, I am not sure that this will repeat. There was a lot of demand from the GRE in Q2. There will still be, in my view, but not to that extent.
Hence, we believe that on the retail side, the growth story will continue and actually will do a bit more, but on the corporate side, it will probably slightly modernize or moderate. We have seen cycles where Q3 corporates tend to be now slightly slower in terms of activities, has to do with the summer months, with the vacation months, and you had a very strong Q2, and then it picks up again by the end of the year as some of these corporates try to get their balance sheet in order before the year-end closes. So probably a slower Q3 and a higher pickup in Q4, particularly on the corporate side. On the retail side, all engines are firing, all our products are taking market share, and we have just seen the numbers. The numbers are publicly available.
I think our team has done extremely well in terms of positioning ADIB from a retail perspective, particularly on home finance and personal finance, really taking the market by storm. So that will definitely continue in half two. Hence, if I now link it back to the profitability in half two, we are very cautiously optimistic that these are numbers where it's predominantly core business. It does not have a lot of volatility. There are pluses and minus like any other business would have, but the core itself is reflective of what we see today, and I think we will continue in half two as well. Now, on the second point, which was the margin outlook, what would probably happen, and that is just re-emphasizing the points I had flagged with the team here in our Q1 result announcement.
When we looked at Q1, we did say that by half one, we are still going to be fairly okay in terms of margins because we saw some of the elements of the portfolio fully pricing. Today, I can confidently say I think we are at that point now, which means that for half two, the yield will hold, but maybe some of the funding costs might catch up with you because they have not been originated from the beginning of the year. It's always kind of a year-to-date impact. So the gross yield will hold, but funding costs might creep up a bit. But the good thing about it, and maybe that is not known to the market, is that when we talk about our CASA ratio, which is around 63%-64%, on the retail side, it's almost 90%.
On the corporate side, it is around 35%, between 30% and 35%. What really drops or puts pressure on your net profit margins and raises your funding cost is the corporate side, as expected, and rightly so. Because if you are a corporate treasurer, you would demand a return for your deposits much more, I think, aggressively than any other client. What this means for us is that as the curve starts to turn next year, we will be able to efficiently reposition ourselves in terms of our funding costs and bring back the funding, our net profit margin corridor to a level which will ensure that we will be able to continue providing these numbers you have seen in front of you. The last point is on the revised risk standards, and I think it is something which we have been discussing with the regulator for some time.
We are very close probably to see the regulation coming out. What will be the impact on ADIB? We will have, at that point, a look at it. I think there are still a few questions which need to be resolved. But the good thing is that our expectation is that implementation, particularly on the value of collateral, and hence reflection and provision, there will be an implementation timeline. That is our expectation. I do not want to make assumptions till we see the circular coming out, but usually when these circulars come out, there is a timeline of implementation. What I would advise also the committee or the analysts to look at is that some of the elements, which are the provisions particularly, which are booked against equity directly, would be a good proxy to understand the impact for us. These are publicly available numbers. We disclose them.
I think I said AED 165 million we have on our books. That is really the extent what you can think about. If that gets recycled probably in P&L, that is the AED 165 million. In ADIB's context, okay, it is AED 165 million, but it is not very material, right? Hence, we are watching the space. We are waiting for the regulations. But once implemented, I think we will be in a better position to tell the market what it means for us going forward.
Understood. Thank you very much. That is very clear. Just one very quick follow-up. On the GRE loan growth, could you please offer some more insight into what parts of GREs, which areas, what projects basically drove this loan growth in the second quarter?
I think it will be quite difficult for us to disclose more information on this given the confidentiality of the matter, but these are particularly, I can classify them as strategically important projects for the government. Right? And hence, it was not ADIB specific, but slightly more banks you would have seen that. But beyond, I think, that point, it will be difficult for us to disclose.
Understood. Thank you very much. Once again, congrats on the results. Thanks a lot.
Thank you.
Thank you. We will now move to the next question. Aybek, your line should be open.
We cannot hear the question, Shabbir. I do not know if the problem is at our end or your end.
No, Aybek, can you hear us?
Yes, I can hear you. Can you hear me okay?
Yes. Please go ahead.
Okay. Thank you. I think a couple of things I wanted to clarify with you on this call is, first is fee income. Very difficult to see what happened with fee income in the second quarter, how it compares to Q1, and in particular last year, and your expectations for the remainder of the year, right? That's one question. Otherwise, will be also interesting to know on your asset policy. If you were to write off your NPLs which are older than five years, what would be the impact on your loan portfolio? Or put another way, what percentage of your loan book is in the NPLs, which are older than five years? That will be my second question. In terms of my third question, your dividend payout, right?
In view of your historical dividend payout ratios, what kind of CET1 ratio are you comfortable with? Do you think your focus will be on continuing to accumulate CET1 heading into the second half of the year?
Thanks, Aybek. Okay, I'll take your question one by one, not particularly in the same order, but if I miss any one point, let me know. I take the last one first, the dividend payout. Again, while we do not really disclose the number itself, but we have been very consistent in the past few years of the percentage of net income we always recommend as dividends. At this point, probably I don't see a reason why this should change. Again, no commitment. There's Board approval, the regulator we have to clear with, but our dividend policy has been consistent over the past few years. Probably will continue as such, barring any other regulatory approvals. What it means for us is that we will have to probably hit a CET1 ratio of 13.5%- 13.6%. We are today very closely monitoring the situation.
We see, again, no reason why we will not be able to create internal equity enough to meet that CET1 ratio, and hence meet the requirements of our shareholders or expectations of shareholders, as well as create enough internal equity to support 2025 and beyond growth aspirations. That's on the dividend point. In terms of the impact on, again, on the regulation now, I think it's still yet to be seen, and you mentioned the five-year bucket, right? Is the five-year bucket or the collateral in terms of its aging of five-year, when does it start? If it is a starting point today and we look back and anything older than five years will need to be taken into consideration as write-off, then how many years do you have to actually to comply with?
We do not, at least at this point, expect that, let's say, we have a collateral's value of AED 1 billion or so. We don't expect that this goes into your P&L immediately, but probably you will have time to implement. In terms of aging, if one would just look at our collateral value, we can probably send you separately the aging of that, but a big portion of what you would see as collateral is, and property is already taking a haircut of 50%, but also they are legacy. We have to be very clear with the market, right? Because we have been very disciplined in terms of our NPAs for the last two to three years. What you see today in terms of collection against Non-Performing Assets is legacy, and probably a lot of it is older than five years, right?
What we will do, I'll send as a follow-up, the bifurcation, we can do that. But this should only be used as a proxy because the implementation timeline, we still believe that there should be a timeframe for implementation. That's not for ADIB specifically, but it's an industry phenomenon, right? We're not talking only ADIB. ADIB is probably not going to be the problem of the market. But, given the size of where collectors will sit in the industry, I think there will definitely have to be an implementation timeline which will be recommended and consulted as such. Then, Aybek, you had a question on fee income. On fee income, what we've seen is approximately a 52% growth year-on-year.
I would say that of the growth, moving from AED 1.3 billion to AED 2 billion, I would probably say you can shave off approximately AED 120 million-AED 130 million considered as one-offs in our portfolio, in our financial statements. Does it mean that one-offs will not repeat in the future? No. Because I think we've also learned that one-offs, after a while, become core, and we are looking at these. But if you want to normalize this non-funded income of the 52% growth, take probably out AED 120 million- AED 130 million. It's a mix of many things. I'm not either able to pinpoint one element of it.
But part of our core, obviously we have an investment portfolio, we have a property company, which holds a lot of properties, and as we always told the market, as we acquire organic financing opportunities, in some cases, we also look at buyout of portfolios, which we have been doing, and they always give you some upside in that as well. This will continue. It's not new to ADIB, but I just want to flag that this is some of the numbers we have here as well.
But Aybek, just to add on Mohamed, fee income year-on-year were up by 28%.
This is second quarter or first half?
H1 .
H1, first half.
You're talking fee income only?
Fee income only.
Okay, I was talking non-funded income, Aybek, sorry. Non-funded income is up 52%. Fee and commission, yeah, alone is 28%, correct.
The one-offs you mentioned not in fee income, it is other elements, right, of non-funded income.
Yeah, that is what I was talking about. So the fee income is pure BAU, you can consider it will continue. In the other income lines, probably take out between, Ahsan, AED 120 million- AED 130 million?
Yes.
Yeah, AED 120 million- AED 130 million of various items. Some of them are NPA adjustments we had, right? I cannot pinpoint one point, but my challenge always to myself and the team is that one-offs become BAU. The business does not go only on BAU. Yes, you build the core, but you also have to continuously looking for, I would not call it one-off opportunities, but more significant transactions which gives you air cover as and when required, and they almost become BAU.
Hmm. Thank you. Very helpful. Thank you.
We will move to the next question. Olga, your line should be open.
Yeah, good day, and thank you for the presentation. I have several remaining questions. One is on lending to GREs. Can you maybe quantify for us what part of the substantial loan growth in the first half or in the second quarter came from the GREs? More holistically, do you think that this shift towards GREs will be pressuring your net interest margin and supporting your cost of risk going forward? This is my first question. Another question on the financing growth. Your retail financing growth was so solid, and I am wondering what helps you to keep delivering such a strong growth in this segment. Do you bring payroll customers from GREs? Do you make special offers? Anything that makes you really different from the rest of the market in this segment. This is on financing growth. The other question is on impairment charge.
Sorry, I did not have a chance to look in detail in the financials, but I think on one of the slides, you showed that the credit risk went up in the second quarter, but it was not driven by retail or corporate segment. What was it? Was there some impairment on non-financing or not? This is my second question. Third question, back to the previous question. I hear that there were some one-offs in non-funded income line, but even if I take AED 120 million-AED 130 million one-off, still the non-funded income was extremely solid. Maybe you can share with us what exactly was there in this line in the second quarter. Thank you.
Thank you. I will start with, again, the first point on the financing growth, in corporate and retail. You asked what was specifically big-ticket items and probably government or GRE sector. It is between AED 4 billion and AED 5 billion. I cannot be more specific because, again, we do not disclose too much detail. As you can see, AED 8 billion growing, and if you go to Q1, you would almost see it is flat. So it is all a Q2 phenomena in the corporate and government sector, and of which probably AED 4 billion or AED 5 billion is one specific category of transactions. That is why when we said for the rest of the year, probably this part will not continue, unless this specific situation repeats itself again. But for now, I would caution that maybe take out AED 4 billion or AED 5 billion from the government and public sector financing growth.
Now, in terms of retail growth, this is a recorded call, so I cannot tell you all our secrets of how we are able to deliver such strong performance. All I can tell you is that it is a mix of redefining our strategy, particularly in the last four or five months, in terms of really using what we have. That is in simple words, ADIB has potential in its client base, in its corporate relationship, whether it is on retail link to its corporate relationship, which I think has been untapped for too long. We are focused on that specific element. We did not do any price concession. You can check the market. We are not the cheapest in the market, definitely. We are competitive, but we are not the cheapest.
These alignments where you create these strategic alliances with some of your corporate relationships and link it to other products, that is the outcome you see on the slide. Hence, when I see these numbers, I am comfortable because I know they are not a one-off phenomenon, but they will continue as such. Home finance, again, is a reflection of the market. The market is doing extremely well in the property market, whether it is Dubai, Abu Dhabi, or even in Northern Emirates. So we are with the client, we are following the needs of the client, and we try to ensure that we give them best service. As I said, it is a mix between origination efforts as well as buyouts.
It has to come from both because the only way to take market share is you capture new demand and you go after existing financing books as well, which we have done very successfully, particularly in the second quarter of 2022. If you look at personal finance, auto finance, these are the net growth which we are seeing. From a growth perspective, our personal finance has doubled in terms of origination over the last 12 months. Auto finance has more or less stayed the same. Auto finance, we are competitive, but as the market knows, auto finance is an anchor product which we sell to our clients because the clients want it, and we will continue to be there to serve our clients. So that is the financing part. On impairment charges, I think your question was in terms of what is driving the growth in impairments.
It is an element of a few things. One is predominantly that we are looking at usual financing growth, and we want to ensure that we are in line with our origination efforts. It is by no means a reflection of us relaxing our risk, our underwriting standards. They have not changed. They show in our staging, you can see them in our financial statements, very healthy projection. From a bifurcation of retail book perspective, still 80% of the book is still financed to UAE nationals, 20% is to expats. The pie has become bigger, so we are financing more to expats, but at the same time, can't complain. UAE nationals have also been quite active in that front, and hence the 80% has remained the same. On the corporate side, this is a recovery which you see due to some repayments which happened.
Again, we cannot disclose the names, but you might have seen in the news, some Dubai entities have repaid, have consolidated, and have raised new financing in a different way. Hence, when you get repaid, we release our ECL charges against these names, and we are able to take some additional provisions to ensure that, I would almost call them overlays, to protect our provision coverage ratios, whether it is cash or collateral levels as well. The third question I think you had was on the-
Non-funded income.
non-funded income. Okay, non-funded income. So non-funded income overall has grown 52%. Fees on commission alone has grown 28%. The main driver, again, if you look at investment income, I said investment income, this also includes the sukuk part, right?
Yes.
It is a reflection of our sukuk book or the fixed income book really growing, and hence, that is the reflection of the profits earned on the sukuk book. It is reported as non-funded income. I think this is the accounting standard which we follow. Most banks do that, but you could almost quietly say it is on the back of balance sheet financing. That is the investment income side. That is alone 38% growth. Other than that, there is nothing. I mentioned the AED 120 million-AED 130 million one-off. It is the list, as I said, we need to understand ADIB has a property company, has a big real estate book. We do crystallize on this from time to time, as well as some of the buyouts we make, and then we can realize some day one gain whenever we acquire a portfolio. Please let me know if I am missing any of your points.
Thank you. Thank you very much. If I may, can I ask a very small question on this Central Bank proposal about new credit standards? What do you think is behind? Why are they proposing new standards now?
I think we understand why, where it is coming from. For us, I think it makes a lot of sense. It brings a lot of stability. It is not uncommon. We have seen it in other markets as well. The only point, which I think the Central Bank is doing very well, is that it is in consultation. We are doing it, and we will probably do it in a way which will serve the purpose of why we are doing it. It just gives, I think, more stability to the market, right? What will it do eventually is that it kind of says, if your collateral has not been realized for the last five, six years, maybe probably the ability to crystallize it when needed becomes a bit smaller. If you are to crystallize it is going to be an upside for you, right?
We are not saying it has no value, but we are just saying once after five years, you are able to crystallize it, take it in your P&L. But after five years, just reduce your reliance gradually on it and hence you are strengthening your position. It could also imply that maybe some categories of collection might be untested and hence, while it ages, you put less and less reliance on it. From my perspective and from the team perspective, we understand the logic. For us, it makes a lot of sense, and it is all about implementation, when and how.
Fantastic. Thank you very much.
Thank you.
Thank you. We have about 10- 15 minutes left. We have a couple of questions in the Q&A box. I will start with those. This is from Ahmed Bani Hani. The non-performing asset ratio improved to 4.7%. What steps did the bank take to achieve this improvement, and how sustainable is this lower NPA ratio?
Sorry, I am sorry. This was on the NPA, the 4.7%?
Yes, so the NPA ratio has improved to 4.7%.
Yes.
What steps has the bank taken to achieve this improvement, and how sustainable is this lower NPA?
Very good. I really like this question because we just started a journey two years ago, and we stayed the course. We said always, number one, we have to ensure that the inflow and the NPA has to be controlled. You cannot fix one side, and the other side keeps on pumping NPAs. So over the past two years, our inflow from stage two into three has been, I think, phenomenal. It has shown understanding of credit standards and early alert system, which allows us to cure before it goes into stage three. So that's the first thing we did. Second of all, we have almost bifurcated our non-performing assets book and ensure that a team, a specialized team, has been put on the case to ensure that we recover.
We are being pragmatic about our approach, and we do what is best for the client and the bank as well. So on that basis, we have been able to recover significant amounts of legacy exposures, which has been sitting on the books probably for more than five, six years. The third thing is that as we have been building provisions over time, and again, Islamic banks, we have been slightly more different structure than commercial banks, is that we were able to also proceed with write-offs against a fully covered exposure. It doesn't mean that we've let go of our legal approach. We still will preserve our rights to go after the rights of the bank.
But it allowed us to write off the exposure against the provision at a time where it will enhance your NPA ratio, but also protects your provision coverage ratio as well as your coverage with collateral. So all this combined is what you see today, which means that the 4.7%, as I said, will continue to improve over the next few quarters. At one point, it probably will stabilize because you are in the business of taking risks, and this number dropping too low is actually also not so good because it means that you're almost stalling the machinery. But we are not where we want to be yet. I know we are at market levels today, but we still have ambitions to go even lower than that number.
Thank you. Next question is from Adnan Farooq. Can you please elaborate on the source of other income booked during this quarter?
Okay, Adnan. So we touched on this in a previous question. Again, it's a combination of few one-offs. Again, we're not bifurcating as such, but what we can tell you is, number one, we do have properties which are in the money, so that has value. We have, in the process of, particularly in Q2, been able to acquire a few portfolios. Again, as I said, we acquire or we grow the book organically and inorganically. So we go after very specific sets of assets, which then once booked, have an intrinsic value where you can book a day one gain. Again, it's not material in the bigger context, but putting this all together, as I mentioned, you can assume a benefit in our quarterly number between AED 120 million and AED 130 million.
Again, I need to stress, it has to be a recurring element for us, one of part of the business. We raise, we enhance our organically core business. We look at one-offs, and also we continue to be on the lookout for inorganic opportunities in the form of portfolios which add value to the franchise.
Thank you. We will go to the next question. This is from [Metehan]. Given the very strong gross financing growth in 1H 2024, when would be the time to upgrade your growth guidance? I think you have done it, if I am not mistaken.
Yes. We have done it. 16%. We have done it. We have gone to 16%, more than 16%, yeah.
Okay, we now move to the next question. This is again, a follow-up from Adnan Farooq. In addition, what were the sources of FX income?
FX income, when you say sources, it is very difficult to quantify because FX income is a product which you offer all your clients, right? So if the question is which specific segment is driving the growth, I think it is a fairly balanced approach. So our corporate clients, we are able to provide them services within their scope of business, and hence FX is part of that origination. Our retail clients, particularly on BBD, so SME, BBD, our business banking for us is a big source of FX income as well. It is the nature of the business for what they have, and hence we provide that service. And then on the retail side, our FX proposition is again, a digital proposition. It is automated, so clients are quite comfortable transaction on the mobile app, and that is again a source. But never underestimate the FX made on international spend on our cards.
We are the biggest spend on cards, full stop in the UAE. We just look at the numbers, we are number one. In terms of debit and credit cards combined spend, we are number one in the UAE, and particularly when there is international spend, that attracts FX income as well.
Thank you. I think we do not have any other questions. Maybe we can give another minute for people to log in any follow-up questions. Maybe one question from my side. Your mortgage growth has been pretty good this year. If you think about mortgage growth this year and last year, do you think that the volume of growth you have seen in mortgages this year is better than last year, or is it similar or lower? Considering that interest rates are high and property prices have gone up, have you seen a slowdown or still there is decent demand on the mortgage front?
Yeah, I think if I compare this year to last year, definitely there has been a very healthy growth, particularly for us. We have grown faster than the market. This number, I would not say it is reflective of the market, it is actually us growing with the market and taking market share as well. The demand for property is still very high. The numbers are very healthy. There is lots of confidence from residents as well as international investors in the market. People just need to be mindful is that of the numbers they see in terms of public transaction, probably 67% are cash versus being financed by banks. Once you capture that market share, you see the projection. Answering your question, I think this year will definitely continue to be higher than last year in terms of the home financing book.
Great. I see a raised hand. Just let me try this one more time. Adnan, your line should be open. Please go ahead. Adnan, Yes, I can hear you now. Please go ahead.
Yeah, I'm sorry about that. Thank you so much for taking my question, and sorry for going back to it. But the other income booked during this quarter is AED 331 million, which is significantly higher than your normal run rate. You did mention that there are AED 120 million to AED 130 million in one-offs, and you highlighted some of the sources of that. Would it be fair to assume that other income on a quarterly basis could be in the range of AED 200 million going forward?
Yeah, I would say not AED 200 million. I think if you want to model a projection, I would probably would put AED 150 million. As I mentioned, I want to target for more, because while it is one-off, one-off has to continue, right? Because you have a book, you have to find opportunities, and you almost originate and distribute and create more value to what you create today, and you replace it with something which can be monetized in the future as well. It's almost like a rolling activity, which we have. But for your modeling perspective, I would probably put AED 150 million there for the future.
Thank you. There's one question in the Q&A box. What will be the impact on funded income considering one to two possible rate cuts by the end of 2024?
Okay. Sorry, your question is that, the impact of our funded income if rate cuts happen this year or next year?
This year, one to two rate cuts by the end of 2024.
This year, I think minimal impact because, again, there are different views in the market, and our guess is probably as good as anyone's guess. Some views are now September and November. It used to be only November. We do not really know, right? I think we will eventually know. But if one cut or two cuts this year, I would not be too concerned about any material impact on the numbers. Going into next year, we would have hopefully optionality. We would have grown the book enough to compensate for any compression in the variable portion of the financing book, and we take it from there. But this year, I am not seeing any material impact. The whole focus for us is really exiting on a strong note to give us air cover next year as rates starts to moderate a bit.
Got it. Maybe one more question. This is in the Q&A box. The strong loan growth that we saw into Q2 2024, would it be fair to say a large component came through towards the end of the quarter? Or was the growth fairly balanced during the second quarter? This is from Alok.
On retail, balanced except for May. May, when the flood happened. I think the flood was in May, right?
April, I think. April.
Yeah, April, yeah. April was soft, and made up for it in the following months. But overall, on average, retail has been fairly consistent. You are right, the corporate book has been at the later part of the quarter, not in the beginning.
Thanks. I think that's all the question that I can see. I can hand it back over to you for any concluding remarks.
Thank you, Shabbir, and thank you, everyone. As I said, I know you didn't have time to digest it, but we're available for questions. If you have any follow-up questions, we are available here. Okay. Thank you so much.
Thank you, everyone. Thank you so much. Appreciate your time today.
Thank you very much. Take care. Have a good evening, everyone.