Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Emirates NBD PJSC (DFM:EMIRATESNBD, Financial) achieved a record profit before tax of AED27.1 billion and a profit after tax of AED23 billion in 2024.
- The bank experienced a substantial increase in lending, with over AED160 billion of new lending disbursed, resulting in a strong loan growth of 10%.
- The expansion in Saudi Arabia has been successful, with 21 branches now accounting for over 5% of group lending.
- Digital initiatives, including ENBD X and EI+ banking apps, have driven a ninefold increase in digital wealth volumes.
- The bank's balance sheet has strengthened significantly, with lower non-performing loans (NPLs) and high coverage, recognized by positive rating actions from Moody's and Fitch.
Negative Points
- Net interest margins (NIMs) tightened by 31 basis points during 2024 due to higher funding costs and competitive loan pricing.
- Nonfunded income decreased year-on-year, primarily due to DenizBank's variable nonclient income.
- Costs increased by 18% year-on-year, driven by strong volume growth, inflationary impacts, and accelerated depreciation of some IT systems.
- The cost of risk is expected to normalize, with guidance set at 40 to 60 basis points for 2025, indicating potential challenges in maintaining low risk levels.
- The bank's guidance for loan growth in 2025 is high single-digit, reflecting a conservative outlook due to expected sovereign repayments.
Q & A Highlights
Q: What factors are contributing to the expected margin pressure for Emirates NBD in 2025 despite potential improvements in Turkiye?
A: Patrick Sullivan, Group CFO, explained that the margin pressure is due to the 100 basis points cut in the last four months of 2024, which will have a full impact in 2025. Additionally, the bank has set a baseline for potential rate cuts, and even without further cuts, the existing reductions will affect margins. The sensitivity to a 25-basis-point cut is AED450 million for the full year.
Q: What is Emirates NBD's approach to potential M&A, and how would it affect capital management buffers?
A: Shayne Nelson, Group CEO, stated that the bank is looking to grow its market share in key markets like Turkiye, Egypt, Saudi Arabia, and India, both organically and inorganically. The bank maintains a conservative approach to capital management, and any M&A activity would be evaluated based on regulatory minima and risk appetite.
Q: Why is the loan growth guidance for 2025 not more aggressive, and are there other factors affecting it besides sovereign repayments?
A: Patrick Sullivan noted that the main factor is the pace of sovereign repayments, which netted AED14 billion in 2024. Despite strong retail and corporate growth, the bank is being conservative in its guidance due to the base effect of a growing loan book and the uncertainty of sovereign repayments.
Q: What is the rationale behind maintaining the AED1 dividend, and does it relate to M&A potential?
A: Shayne Nelson clarified that the AED1 dividend is consistent with the previous year's base dividend, excluding a special dividend. The decision is not indicative of pending acquisitions but reflects the bank's focus on driving loan growth to offset rate cuts. The dividend decision is ultimately made by the Board.
Q: How does Emirates NBD plan to sustain its strong fee income growth, and which segments are driving this growth?
A: Patrick Sullivan highlighted that the bank's fee income growth is driven by strong performance across all business segments, including investment banking, credit cards, and wealth management. The bank holds a significant market share in UAE credit card spend and continues to leverage its balance sheet for nonfunded income growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
