Management Discussion & Analysis Report

Mashreq Achieves Historical Financial Milestone in 2023, with its net profit soaring by an impressive 130% to reach an unprecedented AED 8.6 billion amidst Exceptional Income Growth and Significantly Reduced Risk Costs

 

• Net Interest Income Skyrockets: Witnessed an impressive 69% surge, fuelled by extraordinary growth in the balance sheet and solid client margins. Concurrently, non-interest income witnessed a robust increase of 13% year-on-year.

• Dynamic Expansion of Balance Sheet: Marked by a significant 25% year-on-year escalation in Loans and Advances, coupled with a substantial 29% boost in customer deposits, showcasing a strong upward trajectory.

• Financial Strength and Efficiency: The Capital Adequacy Ratio stands at a notable 16.5% (excluding proposed dividend), highlighting Mashreq’s robust financial resilience in a competitive market. Moreover, a stellar Return on Equity (ROE) of 34.3% and an efficient Cost-Income Ratio of 30.9% reflect Mashreq’s exceptional financial performance throughout 2023.

 

Dubai, UAE; 29th January 2024: Mashreq proudly announces its financial results for the fiscal year 2023, showcasing an unwavering commitment to and achievement of a robust and sustainable growth trajectory. The company’s dedication to client centrism and operational excellence is evident in the noteworthy Earnings per Share (EPS) of AED 42.82, a testament to its resilience and ability to create substantial value for shareholders.

 

1. Operating Income & Net Profit

• Mashreq’s Net Profit has surged to a record AED 8.6 billion for FY 2023, a substantial increase of 130% year-on-year. The increase in operating income and net profit is primarily attributed to net interest income soaring by 69% year-on-year. The main drivers are significant business growth with robust client margins, the continuation of the prevailing high-interest rate environment as well as positive one-offs relating to loan loss provisioning. Additionally, our non-interest income has reached AED 3.1 billion, marking a notable 13% year-on-year growth in FY 2023.

• The bank has demonstrated positive jaws of 31.4% in FY 2023, and the Cost-to-Income

ratio has improved by over 8% year-on-year. This indicates strong business performance with effective control over operating costs while enabling continued investments in enhancing our client experience, risk management, and supporting business growth.

• Operating profit has surged from AED 4.4 billion to AED 7.5 billion in FY 2023,

representing almost 70% increase compared to the same period in 2022.

• The allowance for impairments has experienced a net release of AED 1.4 billion, driven by prudent risk management, high recoveries from Non-Performing Loans (NPLs) and a one-off release of the General Provision.

• Return on Equity (ROE) at record-high of 34.3% in FY 2023, doubling compared to FY 2022, while the cost-to-income ratio decreased to 30.9%.

 

2. Liquidity & Capital position

• High Liquidity denoted by a Liquid Assets ratio of 33.6% and an efficient Liquidity Coverage Ratio of 134% as of December 2023

• Capitalisation level (excluding proposed dividend) remains robust with the Capital adequacy ratio at 16.5%, Tier 1 Capital ratio at 14.3% and CET1 ratio at 13.7% as of December 2023.

 

3. Credit Environment & Asset Quality

• Overall loan portfolio quality has improved significantly with gross impairments to gross advances at just 0.3% (0.9% in FY 2022)

• The Non-Performing Loans to Gross Loans ratio declined to 1.3% as of end of December 2023 (2.2% as of December 2022) and is one of the lowest in the market.

• The Coverage ratio has improved to 247.5% as on 31st December 2023 (190.8% in December 2022)