Ladies and gentlemen, welcome to the Dubai Islamic Bank Full Year 2025 Financial Results Earnings Call. Please note, for all those listening to us via the webcast, to kindly refresh your browser link in case you're experiencing any intermittent audio issues. As a reminder, please ask your questions by submitting them via email to webcast@dib.ae.
I will now hand over to your host, Janany Vamadeva from Arqaam Capital. Please go ahead.
Thank you, Seb. Good morning, everyone, and thank you for joining us today. This is Janany Vamadeva, and on behalf of Arqaam Capital, I'm pleased to welcome you to DIB's full year 2025 Earnings Conference Call. I have with me here today from DIB management, Dr. Adnan Chilwan, the Group Chief Executive Officer, John Macedo, the Chief Financial Officer, and Naveen Rajanala, the Head of Investor Relations.
Without any further delay, I'll now turn the call over to the Head of Investor Relations. Naveen, over to you.
Thanks, Janany. Good afternoon, everyone, and welcome to DIB's full year 2025 results webcast. This webcast shall be led by Dr. Adnan Chilwan, Group CEO of DIB, Mr. John Macedo, CFO of DIB, and myself. Before we start the presentation, can I just remind everyone to send in your respective questions to webcast@dib.ae, and we shall aim to address as many questions as possible in the Q&A session post the presentation. With that, let's kick off today's presentation. Let's start with slide 4. Now, we shall start with the global macro picture on this slide, and then move on to the region and UAE macro stories over the next few slides. Now, the global economic growth is expected to moderate slightly in 2025, around 3%-3.2%, but the global economy is expected to be stronger in 2026.
Let's look at some of the key underlying indicators. Now, inflation has clearly cooled from its post-COVID peaks. For example, the U.S. inflation has fallen from about 5% in 2022 to below 3% in 2025. This has allowed central banks across the world to start shifting away from aggressive tightening towards gradual rate cuts. The bond markets are reflecting this, with U.S. Treasury yields coming off their highs. So lower U.S. rates typically support EM currencies, capital flows, and credit conditions. So overall, the macro backdrop looks steady, better liquidity, and more supportive environment for credit growth. Now let's shift focus to the region closer home. GCC continues to deliver one of the strongest multi-year macro performances globally. Now, while global growth has moderated, GCC has benefited largely from robust domestic demand cycle, sustained reform momentum, and large-scale investment programs.
Now, the decoupling of GCC growth from hydrocarbons is becoming more and more visible. Oil prices have remained range-bound, yet the GCC's output performance has outpaced other major producers and global energy exporters. Now, you can see that across all six economies, non-oil sectors now account for majority of the respective GDP, as shown in the top right chart. Now, this rising non-oil contribution positions the region for more stable medium-term growth. Now, the scale of, Just to put in context, the scale of GCC economies, as it expands, Saudi, UAE, and Qatar together are, are sitting on a combined GDP base of more than $2 trillion, which is very comparable to the larger economies in the world. So overall, the GCC region is now less cyclical, more diversified, and better positioned to navigate external shocks.
Moving on to slide 6. Now, the UAE has emerged as one of the most consistent growth stories in the region. Growth hasn't just been strong; it has also been steady. After expanding by around 4% in 2023, the economy is on track to approach +5% growth in 2026, well ahead of global level averages. Now, with more than three-quarters of GDP now coming from non-oil sectors, there's a clear structural shift. The private sector momentum remains strong. As you can see, the PMI readings have stayed firmly in expansionary territory, pointing to healthy order books, continued job creation, and broad-based business activity. The UAE today looks less like an oil economy with diversification plans, but more like a diversified economy that also produces oil.
Moving on to Dubai. Now, Dubai remains on a solid, visible growth path. GDP approaching AED 241 billion in the first half of 2025, which is up 4% year-on-year. Now, this momentum is reinforced by record tourism inflows. Visitor numbers rose from 17 million in 2023 to nearly 20 million in 2025, 19.6 million to be exact. Now, this is also reiterated by sustained real estate activity, with transaction volumes continuing to be high across 2025. Now, growth visibility clearly extends beyond the near term. It's underpinned by a large pipeline of strategic infrastructure projects, as highlighted in the bottom right. Together, these indicators point to an economy driven by people, capital, and projects, making Dubai one of the most dynamic and resilient urban growth centers globally.
With that, I will hand over to Dr. Adnan to take you through the financial results and business updates. Dr. Adnan, over to you, sir.
Thank you, Naveen. Good afternoon, everyone. Like always, I will run a page turn style presentation and then open the call for questions, and finally use the last five minutes of the hour to summarize our call today. On slide 9, let me share my thoughts on the macroeconomic environment before I talk about DIB's performance during 2025. Briefly, the key trends in 2025 have been cooling of inflation, softer rates, and trade uncertainties. This is something that Naveen has already alluded to in the preceding slides. But despite the geopolitical tensions last year, the global GDP growth in 2025 is expected to be moderately strong, around 3%-3.2%. Within the UAE economy, we are charting our own course, an expected growth of about 5% in 2025, with little to no dependence on oil prices.
This growth is being driven by the non-oil GDP, growing strongly across key sectors. That is coupled with organic population rise, continued reforms, and investment in infrastructure. This really positions UAE as one of the strongest economies going into the next five years or so. Looking at DIB's performance, in 2025, this was yet another strong year for the bank, with performance surpassing most of our key guidance metrics. Let me start by covering the key headlines for the year, and I'll expand on each of these as we move through the next slides. When you look at growth, we've delivered double-digit asset growth of around 20%, reinforcing the strength of our franchise as the bank continues to gain market share, well ahead of the initial guidance of 15%.
Now, you will recall that our start of the year guidance was 10%. We had then revised it within the first nine months to 15%, and we ended the year with achievement of around 20%. Asset quality continues its multi-year improvement, with the non-performing financing ratio declining to 2.65%, one of the lowest levels in many years, much lower than the initial guidance of around 3.5%. Coverage ratios, on the other hand, have strengthened further to 160%. Now, that demonstrates the depth of our risk discipline. Again, much higher than the guided figure of 140% at the beginning of the year. Returns have remained strong, with pre-tax return on tangible equity at 22%, and that has exceeded our full year guidance. So in a nutshell, broad-based balance sheet growth, exceptionally strong asset quality, and solid earnings despite margin compression, summarize the bank's performance in 2025.
On slide 10, we are looking at the income statement. You can see that operating revenues have grown by 5% year-on-year on a normalized basis. Now, I will keep alluding to the word normalized. It's important to understand why we want to make a distinct demonstration of our 2025 results on a normalized basis. We've reached around AED 13.2 billion of total operating revenues, and that is driven largely by a solid 10% year-on-year increase in full year 2025 non-funded income, while the bank's funded income remained firm despite the softening rate environment. A few lines below, you can look at impairment charges. These have dropped by 71% year-on-year on a normalized basis, supported by continued recoveries and sustained strong portfolio quality.
As a result, the pre-tax net profit for 2025 has reached AED 9 billion. Now, that's a 20% increase year-on-year on a normalized basis. Now, I want to spend a couple of minutes on the normalization applied here. If you recollect, in 2024, specifically in the fourth quarter of 2024, the bank had a large one-off recovery. If we exclude the impact of this recovery to compare the two years on an equalized basis, i.e., normalized basis, in full year 2025, we have had recoveries, but they are more business as usual in nature, and the full year 2025 numbers do not include any such large one-off recovery transactions that we witnessed in 2024. So on an overall basis, when you compare the profits of AED 9 billion with the normalized profits of 2024, which is at AED 7.5 billion, you will get an increase of around 20% year-on-year in terms of pre-tax net profit. And as a result, the bank's returns continue to be strong, with pre-tax return on tangible equity at 22% and pre-tax return on assets at 2.4%.
Slide 11 looks at some of our revenue drivers. The bank's funded income in full year 2025 continued to be stable, growing by 3% on a normalized basis, despite the lower rate environment that we've already mentioned. Non-funded income was supported by strong fees, commissions, and FX performance, along with continued momentum on income from properties. Fees, commissions, and FX income line is the core component of the non-funded income, and this income line grew by 7% year-on-year, driven by increased client activity in the consumer business and higher trade-related income from the corporate clients. Yields and cost of funds have remained broadly stable, and you can see that throughout the year, despite the three rate cuts that we had witnessed during the year.
Slide 12 looks at operating efficiency. DIB continues to be one of the most efficient banks within the UAE, with a low cost-to-income ratio, which stands at around 28.4%. Efficiency remains structurally strong while the bank continues its investments in technology, people, as well as the digital infrastructure. In the full year 2025 results, the bank has delivered operating profit of around AED 9.5 billion, achieving a growth of 4% year-on-year on a normalized basis. Slide 13 looks at balance sheet, and our focus and strategy has been clear from day one. We want to grow responsibly, support the economy, and pursue only the most solid, high-quality opportunities within the UAE or across the GCC. As a result, full year 2025 has marked a milestone year with strong double-digit growth in asset base across the all asset products, and hence the balance sheet has also grown by double digits.
The core business assets, and by that I mean financing and Sukuk put together, has grown by 20% year-on-year to AED 353 billion, driven by gross new underwriting of about AED 104 billion across the consumer business as well as the wholesale business, and needless to say, the cross-border business as well. The total balance sheet has grown by 21% year-on-year, and it stands at AED 416 billion dirhams. On the liability side, our deposits have grown by 29% year-on-year, and they stand at AED 320 billion. This has been supported by increasing our CASA balances, as well as continued success in strengthening our funding base.
Slide 14 is looked at our asset. Now, the top two charts on this slide reflect the consistency of growth quarter-over-quarter in the financing book, as well as the Sukuk investments portfolio. You can see this trend has continued over the last 24 months. Net financing has grown by 23%, and that's the first chart on top, right, the top left of the slide. The net financing has grown by 23% year-over-year, and it stands at AED 262 billion. While the Sukuk portfolio, which is the top right chart, shows the Sukuk portfolio has grown by 10% year-over-year to AED 91 billion. We will look at these assets in greater details when we look at the business review sections. So our well-calibrated growth is reflected in the diversified asset book, as shown in the bottom right pie chart, where consumer assets stand at 30% of the portfolio, while the corporate assets are well spread across many sectors.
Slide 15 looks at asset quality, and our asset quality improvement, especially in the last two years, underscores the tremendous progress the bank has achieved and highlights that the improvement is an outcome of execution of obviously disciplined risk management, and it's well supported by robust macro backdrop within the UAE. Now, on this page, all the key metrics are trending in the right direction. Let me start with the non-performing financing ratio. Our NPF ratio has improved by 135 basis points since December 2024.
Now, this sort of remarkable improvement reflects not just the success in recoveries and resolutions of legacy exposures, but more importantly, and this is something that I've always alluded to, it underscores the credit quality of new origination over the last few years. The bank's cost of risk, as a result, continues to be very low, and it is at 14 basis points for the full year of 2025, similar to the levels that we reported in 2024, and obviously, this is net of all recoveries. I've already mentioned that the recoveries in 2025 were business as usual recoveries when compared to 2024 recoveries, which were extraordinary in nature, which is why the profitability of 2024 needs to be normalized when compared to 2025 profits. I also want to highlight the improvement in the bank's coverage ratio.
In 2025, the cash coverage ratio has improved by 23% to 23 percentage points or 230 basis points, and it stands at around 120%, while the total coverage ratio has improved by 22 percentage points, and it stands at 160%. Slide 16 looks at the asset quality in greater detail, and the charts on this slide provide further evidence of the bank's strong credit quality. Now, if you look at the top three charts on this slide, the key message is that the portfolio quality is showing tangible improvement, and this is reflected by 26% year-on-year growth in Stage 1 exposures. So that's good and great underwriting. With 7% year-on-year decline in Stage 2 exposures, and 22% year-on-year decline in Stage 3 exposures.
So all that alludes to very strong credit quality and credit underwriting. As a result, you can see the bank's Stage 2 + Stage 3 assets proportion fell to 6.5%, down by 270 basis points year-on-year, and that is shown in the bottom left chart. So in summary, before I go into the summary for asset quality, at the same time, if you can see the bottom right chart, the ECL coverage for Stage 3 exposures has improved by 240 basis points year-on-year, and it stands at 58.5%. So in summary, the bank's risk trends remain firmly positive with a cleaner book, stronger coverage, and a portfolio that is healthier today than at any point over the last many years.
Slide 17 looks at liquidity. The bank continues to maintain a well-balanced funding profile, supported by strong growth in customer deposits throughout the year. Our deposits have grown 29% year-on-year, and this is driven by both the consumer and the corporate segments, reflecting solid franchise and customers' confidence. On the CASA side, the bank has grown its CASA volumes by a healthy 17% in 2025, and those balances stand at AED 110 billion. As a result, the liquidity position remains comfortable, with both LCR and NSFR ratios well above regulatory requirements, standing at 157% and 109%, respectively. Slide 18 looks at our capital ratios. Obviously, our capital ratios have moderated over the period, primarily reflecting strong balance sheet and risk-weighted asset growth. As of today, the capital levels remain comfortably above the regulatory requirements with adequate buffers in place.
Overall, the bank continues to operate within an optimal capital range, balancing growth, resilience, as well as returns. Now, as we move on through the presentation, we will look at how the bank's key businesses have performed in 2025, and we start with consumer banking on slide 20. The consumer banking business continues to show strong growth momentum with a 10% year-on-year revenue growth to reach AED 4.9 billion, supported by rising financing volumes and resilient fee income levels. The asset yield of 6.6%, as you can see on this chart, reflects disciplined pricing despite competitive dynamics and a lower rate environment. This also allows the bank to grow its consumer portfolio by around 22% year to date, and the overall portfolio stands at AED 77 billion. It was very well-rounded as the business originated around AED 37 billion of gross new financing.
Gross underwriting in the consumer banking has been higher than what we've seen in the years gone by, and that is up by 90% year-on-year when compared to AED 19 billion of origination in 2024. Literally, we have doubled the consumer banking underwriting in 2025, and that has also resulted in the net portfolio to grow healthy and stand at around AED 77 billion at the end of 2025. Now, when you look at certain key products, home finance has been the largest contributor to this business, and that has grown by 23% year-on-year. The bank also continues to dominate in the auto finance business as well as in the personal finance segments, and they've grown by around 22% and 23% respectively.
Our cards business has also seen strong growth, both in issuances as well as spending. Within this business, we continue to gain market share. In the consumer deposits, the growth has been quite strong, with total deposits growing by 17% year-over-year, with CASA balances increasing by 13% year-over-year. The consumer business has also seen successful onboarding of more than 100,000 customers on a net basis. Of course, we've seen more traction towards the latter half of the year, and this brings our total overall customer base to around 1.6 million customers. So on an overall basis, the consumer business is delivering the asset growth with margin resilience while strengthening the deposit base.
On slide 21, look at our local and cross-border corporate business. This business has seen a robust year as the financing portfolio saw a 24% year-on-year rise to reach AED 185 billion. This growth was supported by gross new origination, which more than doubled in 2025 to around AED 67 billion. So similar story as far as gross underwriting is concerned in the wholesale business, if I may. We've seen AED 67 billion dirhams of gross underwriting in this business, and roughly around AED 37 billion of gross underwriting in the consumer business. When we look at key sectors that have been underpinning the growth, these were automobiles, utilities, aviation, as well as some well-rated corporates and GREs within the GCC.
I also want to highlight that our corporate border business—our cross-border business, which has seen strong acceleration over the past year, where the cross-border assets have grown by 83% in 2025. So literally, we have doubled our cross-border business in the last twelve months. The bank's cross-border financing portfolio has obviously been selectively deployed, and over days, we have taken majority of exposures in high-quality counterparties, primarily GREs, as well as well-rated corporates across the GCC. And this reflects a disciplined and risk-focused strategy, and something that I did mention at the beginning of the year when we were talking about our wholesale banking growth ambitions. On the deposit side, our corporate deposits have seen a strong uptick of 36% year-on-year.
They stand at AED 213 billion, and this is up from AED 157 billion in 2024, an increase of more than AED 50 billion of deposits in the year. And our CASA balances have grown by 22% in, the full year, 2025. Slide 22 looks at our treasury business. Our treasury portfolio has now increased to AED 91 billion, witnessing a strong double-digit growth of around 10% year-on-year. In 2025, our gross new Sukuk investments have been close to around AED 120 billion, with most of these new investments within, financial institutions that have issued during the year, or also some secondary market, trade that we have done throughout the year.
Our treasury revenues have grown by 3% year-on-year, and they stand at AED 2.6 billion, with yields continuing to be at very high levels of around 4.9%. In the last quarter of 2025, the bank has successfully issued its debut AED 1 billion sustainability-linked financing Sukuk, and that also introducing a performance-linked structure to our sustainable portfolio. So if you look at all our key businesses and what I have touched upon, each of our businesses have grown by a double digit. We have seen good portfolio traction, but more importantly, gross underwriting across all these three key businesses has grown. So when you add up, we have looked at around AED 128 billion of gross new financing, gross new underwriting across all our three businesses.
and I've alluded to consumer business at AED 37 billion, our wholesale banking business at AED 67 billion, and our treasury business at AED 20 billion. So all of that put together adds up to around AED 128 billion, which has been a historic number in terms of gross underwriting throughout the history of the bank. So that has been a major plus point, and that then exacerbated by the fact that we have not lost any business to competition, i.e., we have guarded our portfolio very closely and seen early settlements to the tune of only AED 7 billion across the entire 2025. That has allowed us to grow our net portfolio.
So when I look at gross underwriting and then normal repayments of about AED 58 billion, and then the extraordinary repayments of about AED 7 billion, that has made sure that our portfolio has ended at around AED 58 billion net growth of about 20%-odd, year-on-year. So look at our businesses has been quite strong. The growth has been quite strong, resulting in our net portfolio growth of about AED 58 billion or 20%.
When I move to slide 23, we look at our digital banking business. And our digital banking business, we've seen our digital transformation journey continuing, and that yields strong results whereby we have accelerated the digital adoption. Some of the key digital metrics are growth in our numbers digitally of active customers by around 15% year-on-year, and 97% of all our transactions have been conducted digitally. 80% new-to-bank customers have also been onboarded digitally. So when we look at our digital ambitions, we continue to invest strategically in our digital infrastructure, in our analytics capability, in our process design, as well as our cloud migration.
Slide 24 looks at sustainability. The bank has made excellent progress on our sustainability agenda, and as you know, this also forms a part of our core strategy. We have achieved some notable improvements across our ESG ratings and more than doubled our sustainable assets. They stand at around AED 19 billion versus AED 9 billion at the beginning of the year. Our new accounts, sustainable finance accounts, now for around 7% of the bank's gross financing portfolio, keeping DIB firmly on track towards our 2030 target, which is at around 15%. The bank has taken major steps by committing to the Carbon Disclosure Project and expanding its sustainability disclosures to include critical areas such as human rights, responsible investment, thereby aligning ourselves to the global best practices. As a result, we've achieved tangible improvement in the ESG rating scores across all rating agencies, as shown on the slide.
When I look at slide 26, we have already spoken about the key achievements that we did at the beginning of the presentation, but these are the eight key metrics that we focus on every year. When you look at these metrics from top to down, you can see that we have bettered our guidance of growth, which was revised to 15% after we had published our first nine months results. We had revised that guidance to around 15%. We have ended the year at 20% like I've mentioned. Our return on tangible equity is at 22%, which is better than guidance of 21%. Our return on assets stands at around 2.4% in line with guidance. We've spoken a lot about asset quality, so the next two metrics of around non-performing financing as well as total coverage ratio is better than our guidance.
And, the interest rate environment has put pressure on NIMs, and that you can see across industry. But we are happy to report a 2.6% net interest margin, which is in line with what we did last quarter. Overall, our cost-to-income ratio is just a reflection of our overall results. That stands at 28.4%, which is slightly higher than our guidance, but better than our start of the year, where we started the year at 28.7%. On page 27, like always, the first call of the year also means that we set guidance for the next year. Our financing guidance for the next year is at 10%. You know, we of course, it's a larger balance sheet.
We have ended the year with a balance sheet of AED 416 billion, and within that, we've seen that our financing and sukuk book has grown substantially. So we want to be cognizant of that. So we are going into the next year, looking at our capital levels, looking at the macroeconomic backdrop, looking at how big our portfolios are and where the growth is on the horizon. We are putting up a guidance of around 10% for 2026. And of course, quarter-on-quarter, we will be measuring ourselves against that guidance, and if need be, we will revise that guidance upwards. So we are entering 2026 again on a strong foot, because it's on a bigger base.
Net profit margins, clearly, you have seen this across our key peers as well. The net profit margin will continue to be under pressure for 2026, and we are setting a guidance of 2.3%. Our cost-to-income ratio, we are confident that we will better it. We are setting it at 28%, but we are confident that we will better it. Return on tangible equity and return on assets would again be at 21% and 2.2% respectively. Our non-performing financing will continue to be strong. We are setting the guidance at 2.5%. We'll try extremely hard to make sure that we better that guidance, and our total coverage ratio stands at around 160% in terms of guidance.
So overall, what we are trying to do is we are trying to carry the momentum of 2025 in terms of growth, and of course, that is supported by healthy demand across the consumer as well as wholesale business. We will make sure that we run our balance sheet efficiently like we've always done, and that would be in terms of our cost-to-income ratio, our return on tangible equity, and return on assets. Asset quality will continue to be a strong point even in 2026. And all of that will make sure that our earnings remain strong and solid, and we ensure that we maintain a sustainable profitability level, as well as manage our balance sheet prudently.
I now pause here. We'll take a slight pause and open the call for questions. I can see that a lot of questions have started to come in, so we'll skim through them and come back to you.
Thank you. As a reminder, if you wish to ask a question, please send them via webcast@dib.ae. Thank you for holding until we have our first question.
So we'll kick off the Q&A session. I'll take the first question, which comes from Janany Vamadeva from Arqaam Capital. She has three questions. First question is on how do we think about dividend payout going forward? Is the lower dividend driven by the new countercyclical buffer requirement? The second question is around margins. How much of the 75 basis points is in 2025 margins? And what are the assumptions going into the NIM guidance going forward? The last question is on Saudi. What sectors will drive growth in 2026? And also which countries, for example, Saudi and any other cross-border business?
Sure. Thank you. Thank you, Janany, for your questions. As always, Janany's questions will set the tone for many other questions, which probably will be repeated. So I'll try to spend some time on these three key questions that she has asked. When we talk about the payout and how should we look at a payout going forward? I think the one thing that the bank has always done is keep shareholders' confidence in mind, as well as make sure that it has adequate leverage to grow and continue the growth momentum in years to come.
So as such, we don't have a dividend policy, but the way we look at dividends is the required capital, and the capital buffers that the bank has to support the growth, which is what the shareholders are generally looking for. What the shareholders generally look for within DIB is its earnings and whether they are sustainable earnings, and the quality of its portfolios, and whether the balance sheet is robust. And then, last but not least, how does that translate into the overall profitability as well as the dividend payouts? So as such, we've never had a dividend policy that we follow. We look at the earnings of a particular year, and in this case, 2025. We look at the capital required from a regulatory perspective. We see the buffers that we have in the capital to maintain the growth momentum.
And if required, you know, we also look at capital enhancements, and in the past, we've done that. So keeping all of this in mind, we definitely look at where the best levels of capital should be to support the growth, and what does that translate to the dividend payout ratio. Of course, for 2025, rightly mentioned by you, there is a countercyclical buffer requirement of 50 basis points that needs to be factored in. And because we have to factor that in, we've got to make sure that the bank has adequate capital and capital buffers to support going forward, and at the same time, keep the shareholders' interest in mind.
So we have to balance all our stakeholders, and that's the reason why the board has, of course, recommended a dividend, and that is obviously subject to the shareholder approval in the general assembly, as well as regulatory approval. So of course, we try to balance everything in order to make sure that shareholders' interests are protected and kept in mind at all times. Your second question around 75 basis point. How much of the 75 basis point rate cut is already factored in the 2025 margins? Most of it that we have seen, the rate cuts that have happened in 2025, have already been factored in the 2025 margins. But the reason why we are alluding to the guidance going downwards is because we are factoring another 3 rate cuts throughout 2026.
Now, of course, if that changes to our benefit, then the net interest margins will probably remain at close to similar levels of 2025. We will also make sure that the right quality assets are booked and our cost of funding is managed downwards. So all of those things put together, we feel that with the anticipated rate cuts of around three rate cuts in 2026, we feel that our guidance of 2.3% is realistic. But of course, this will be monitored quarter-on-quarter and, like always, we will be, you know, apprising you of what happens on net interest margins. Now, the sectors and the countries that we continue to focus on, within obviously our cross-border business.
When you look at our UAE business, you know, the sectors that we focus on would be the same sectors that we've been focusing on in the last five years. So we look at, for example, utilities, aviation, logistics, trading, selective real estate, education, hospitality, healthcare. So these are the sectors that are, like I've always mentioned, vibrant to any economic, you know, backdrop, or any developing economy. So those are the sectors that we focus on in the UAE, as well as when we do cross-border. So within cross-border, for example, the only difference would be we would look at sovereign and the quasi-sovereign space and the GRE space, and not penetrate too much within the corporate stream or the corporate segment within the cross-border business. But sectors predominantly remain the same.
Just a reminder, for any further questions, please send these via email to webcast@dib.ae.
We move on to the next question, which comes from Olga, Bank of America. So first, the first question is, is lower dividend payout a new norm? The next one is outlook on loan growth, NIM, cost of risk, non-funded. And the last one, and also, at what level of CET1 would DIB consider potential capital increase? And lastly, the DIB's exposure to Saudi market.
Thank you, Olga, for your questions, and I take them in the order that you've raised. I think Janany touched upon a part of that question that you're asking about. Your question two is on lower dividend payout, and is it a new norm for the next several years? I've already mentioned that, so that's the easiest question to answer right now because it's a repeat. I don't think so we should be looking at anything as a norm, because we don't have a dividend policy. I've mentioned this many a times, and I don't mind repeating it, that we always try to balance out between our growth ambitions, between our shareholder interest, and between making sure that bank is robust, and has adequate buffers from a capital level.
You will see that throughout 2025, we've grown our balance sheet, and we've grown our quality assets, and that obviously consumes capital. We are standing today at a, you know, a total capital levels of around 15.5%, and they are well above the regulatory requirements. And then when you look at CET1, the CET requirement is about 10%, and then there's a countercyclical that is being added. So that takes the minimum CET1 requirement to 10.5%, and we are sitting comfortably at 12.3%. This is obviously a result of of the growth that we've seen, but also we have generated organic capital by proposing this this dividend payout, which is subject to regulatory approvals as well as general assembly, shareholders approval in the general assembly.
Having said that, we feel that we will always keep looking at our capital mix to see how we can support our growth agenda, and if need be, look at, you know, where the growth is going to come from, which segment should we be targeting. So I think it's a moving engine, and there are a lot of variables in that, but as of now, we are sitting comfortably, you know, at the levels that we want to be in. We've also given you guidance of around 10%. So when you extrapolate that to the capital levels, you will see that we've got adequate capital levels. We don't really need to discuss dividends at this point in time because that's not a norm.
We will always look at, you know, balancing dividends and growth as well as capital levels as we go forward. This is something that is not new to us. This is something that we've done over the last decade or so, and we will continue to follow that. But as of now, you know, we are looking at growth on our horizon. We are looking at balanced growth. And remember, we can also change the mix of that growth to make sure that the growth that we focus on consumes less capital. You know, we can unlock some capital by maybe divesting certain assets that we have on our book and reinvesting that capital into more lucrative assets.
So I think there are a lot of options that are available to the bank, and we'll continue to look at those and also keep appraising you every quarter as we move along. So that answers question one and question two. When we look at the outlook on loan growth, NIM, cost of risk, non-funded income, OpEx growth, all of that has already been shared within the guidance that I've given you. We are looking at a loan growth guidance of around 10%. We are looking at, you know, cost of risk on a normalized basis, if I may, would be around 50 basis points. Of course, 2024 and 2025 have been great years because of some recoveries that we've mentioned.
But I would say that the cost of risk should be on a normalized basis, should be around 50 basis points. And if we have recoveries, then that will obviously be good for the bank. And non-performing financing would be lower than what we ended 2025 at. That is at 2.5%. So overall, you know, we are very positive for 2026 with the macroeconomic backdrop and how the bank has fared in the last couple of years. Remember, 2024 was also a record year for us. And when you look at the operating profit, you know, of 2024, that was very, very strong in 2024.
That operating profit, and then the net profit on a normalized basis, has only become stronger in 2025, right? The 20% growth that we just mentioned just suggests that, you know, we've had a good 2024, but more importantly, an excellent 2025. So I think that is extremely important to understand that on a normalized basis, the bank has done very well in 2025. Your last question is disclose DIB's exposure to Saudi as of 2025. It's around 10% of our balance sheet, if I may, in terms of our loans. Our average net interest margins are close to around on Saudi business. I don't have it on the top of my head.
Naveen and the team will get back to you and, and give you more color on specifically our Saudi business. What sort of business are we looking at from Saudi, specifically in, in, in 2026? Again, we have a meticulously crafted pipeline and a strategy, but allow me to say that on an overall basis, we want to grow by 10%. We also need to make sure, we also need to make sure, our capital consumption in each of these geographies, right? Like I just mentioned, and it's, it's your-- it's the question that you were asking, your, your question number one, and also what Janany was asking.
You know, in terms of capital and in terms of dividends, we want to make sure that in 2026, that the growth that we are going to take on our books consumes less capital, which means it has to be less dense in terms of RWA, so it consumes less capital and becomes more profitable. Of course, easier said than done. That's the challenge, but that's something that we are keeping in mind when we go into 2026. So while we are talking about 10% growth, I can assure you that we are going to focus on quality growth and on sectors, and geographies, and businesses that is going to consume lesser capital.
As another reminder, please email any questions to webcast@dib.ae.
We'll take the next question, which comes from Rahul, Citi. He's asked us four questions. Question one and three have already been sort of covered by Dr. Adnan. Second question, his second question is on tax rate. The expectation of tax rate in 2026. And the other question he has is on the run rate for income from investment properties and what's the reason for slight drop in H2 versus H1, and what is the outlook for 2026?
Thank you. Rahul, thank you for your question. I think question two is on tax rate, but it also allows me to to shed some light on our financial performance, and I wanted to do that in summary. But let me use your question as an opportunity. Like, you know, when you look at the net profit of the bank that the bank has reported, and when you are comparing the net profit after tax, and I've seen this narrative in some of the publications and some of the you know, announcements that have been made, where DIB's profitability has reduced, you know, on after tax, and I think they are referring to around 4%.
So after tax, the comparison is AED 8.1 billion of 2024 profit, versus AED 7.8 billion of 2025 profit, which is after tax. So I think your question allows me to first explain two things. One is the tax rate that was used in 2024 was 9%, and the tax rate in 2025 is 15%. So of course, if you look at the earnings of DIB as well as all the other banks on a net profit after tax level, you will see that everybody has gone down because clearly the tax rate has increased from 9% to 15%. So that's the first point I want to mention.
The second point that I want to mention before I answer your question in detail, but the second point I want to mention is when you look at our 2024 results on a normalized basis, and it's extremely important that everybody understands these normalized, you know, financials. Because in 2025, when you take off that one-off gain, which used to be to the tune of around AED 1.5 billion, when you take that out, our normalized profit before tax for 2024 used to be AED 7.4 billion, and that should be compared to the net profit before tax of 2025, which is AED 9 billion, and that's the 20% increase in net profit before tax that I've already mentioned.
But more importantly, your question allows me to also explain that the same normalized level, when you apply the income tax in of 2024, the net profit used to be at AED 6.6 billion versus the net profit of of 2025 of AED 7.8 billion. So in essence, both these lines on a normalized basis have increased when compared to 2025 and 2024. So tax rate, to answer your question specifically, used to be 9% in 2024, it's become 15% in 2025. But when you normalize those, you will see that the bank has made more net profit before tax as well as after tax, which I feel unfortunately is not being picked up by a few media contingent.
But I'm sure that with my explanation, it is now very clear that the bank has performed very well, whether you look at it on a before-tax basis, and that's a 20% increase, or when you look at it after-tax basis, even though the income tax is higher at 15%, the bank has still performed better. So I think let's not take away the exceptional performance from the bank in the year 2025, whether it is before tax on a normalized basis or after tax on a higher tax rate, also the bank has really done well. So that was your second question. Your third, your fourth question, because your first and third question have been answered. Your fourth question is around investment properties, income from investment properties, and they have declined in the second half versus the first half.
You're absolutely right. But I would want you to look at income from investment properties for the full year. So for the full year, the bank has done very well. And of course, you know, quarter-over-quarter, you know, one quarter might be good, the second quarter might be dry, the third quarter might be good, the fourth quarter might be dry. It's a function of the real estate market and the opportunities that we have to offload our portfolio. And I must say that there is no desperation on the bank to offload the portfolio at a loss. So we try to maximize the opportunity. The real estate market in the UAE is still very, very strong. Of course, we are carrying a legacy portfolio, and we try to maximize the return from that portfolio.
So this would be probably the trend going into 2026 as well. We will keep looking at the market, and there's no desperation for us to exit that portfolio. Albeit, that portfolio has really reduced significantly. We are not carrying a large real estate portfolio on our book. But importantly is if you start focusing on the pure income-generating assets of the bank, which is the core business, financing and Sukuk, or financing across consumer business, across the wholesale business, within the UAE or cross-border, I think that portfolio is growing. So the overall income that we are generating from that portfolio, even in a lower interest rate environment, continues to grow. So if we fix our liability mix, I think that would pay the bank rich dividends.
Having said that, it is--i t has seen an exceptional 2025, and we will definitely go into 2026 with the right foot forward. Now, given that we are coming to the close of the hour, please allow me, and I'm sure that there are some questions. We've skimmed through them, and we have seen that these questions have been pretty much repetitive, and I'm sure you will have some more leading questions after my call. Please reach out to our investor relations team, and they will definitely respond to that and give you some more color. But let me use these last few minutes to kind of summarize the call, and it's extremely important that I take your attention to the performance of the bank in 2025. I have said this in details over many slides, but here is a summary.
When we look at the 2025 performance from two aspects: balance sheet, and then we'll look at the income statement. Balance sheet, extremely strong growth across all our key businesses. When you look at balance sheet growth, and that balance sheet has grown by circa 20%, that is a great achievement when compared to 2024. Now, where is that growth coming from? Is it coming from a particular business or a particular sector or a particular segment? No. It is coming across all our businesses. It is coming across our wholesale banking business. It's coming across our consumer banking business. It's coming across our treasury book also. When you look at our wholesale banking business, both within the UAE as well as cross-border.
So the credits that we are underwriting across all these three businesses are substantial in 2025, to the extent of around AED 128 billion. That's the first part of my key message. The second part of my key message is we've made sure that we've managed to keep our portfolios intact and not lose our portfolio to competition. That means that we have grown our net book by close to around AED 58 billion, which is the 20%, year-on-year growth that we have seen, and which is higher than our guidance of 15% for 2025. So that's the first message. The second message is the quality of our book has continued to improve. You can see the asset quality, not just in the non-performing financing in Stage 3, but also Stage 1 has increased and Stage 2 has gone down, right?
So that actually shows you the quality of our book has improved, and that is only validated by the fact that our cash coverage has gone up to 100%, and our total coverage has gone up to 160%. Of course, the net profit margins will continue to be under pressure, and that's an industry-wide phenomenon. We will just have to navigate that quite well by making sure that we focus our energies on assets that are yielding better returns and bringing in liabilities that are cheaper, thereby bringing our net interest margins in line with what we feel we should be at. So that's the general, general message for balance sheet growth. But the more important message is on our profit and loss.
I think extremely important, and I might be repeating this a few times on this call, but I'm only doing that because I want the market to understand, that the bank has done very well when compared to the net profit before tax, compared to 2024's net profit before tax on a normalized basis. Because these one-offs extraordinary gains that used to—that we have witnessed in 2024 would never, ever be repeated again, right? Because those were things that we had carried on our book for, for almost half a decade, and we always used to promise the market that when we recover that, that would only enhance our P&L, which happened in 2024. So on a normalized basis, when you look at net profit before tax, we have performed 20% better than compared to 2024.
When you look at net profit after tax, again, you should look at net profit after tax on a normalized basis. Even though the net profit after tax in 2025 is on a higher percentage, 15% income tax versus 9% income tax in 2024. Even when I change the variable there, the net profit on a normalized basis is higher, 18% higher. So I think this is extremely important. Keeping all this in mind, a good balance sheet, a robust balance sheet, great growth in 2025, exceptional growth in profitability in 2025 versus 2024 on a normalized basis, adequate levels of capital, good net interest margins, superior asset quality, all this put together makes us confident to go into 2026 and put forward the guidance that we have put forward on slide 27.
With that, I come to the end of this call. I would be happy to take any questions after this call. Please come to our investor relations team. Log into the portal, ask us anything. You also have our direct coordinates. You can get in touch with us. I also know that today on this webcast, we've got friends from the media, you know, for them to understand the performance of the bank better, and happy to take on any questions post this call. But thank you for listening in. 2025 has been a great year for us, and we are expecting to keep up that momentum in 2026 as well. Thank you.
This concludes today's conference call. Thank you for your participation. You may now disconnect.