Emirates NBD Inv nvesto tor Pr Pres esenta tation January 2019 Presentation Title 1
What are we discussing today? 1. Economic Environment 2. Emirates NBD Profile 7 3. Strategy & Business Division Overview 4. Financial & Operating Performance 5. Appendix 2
UAE: Outlook revised higher on oil output Hi Highl hlig ight hts UAE AE oil l pro rodu ductio ion n an and pric rices • UAE crude oil production rose to a record high of 3.35mn b/d in 10.0 100 December 2018, according to Bloomberg estimates, bringing the 9.5 80 average output for last year to 3.0mn b/d, up 2.8% on 2017. • The Emirates NBD Purchasing Managers’ Index (PMI) averaged 9.0 60 USD / b mn b/d 55.5 in 2018, down from 56.1 in 2017, indicating a slightly slower 9.7 8.5 40 9.3 rate of non-oil sector growth last year. 9.1 9.0 8.8 • Our Research team expects real 2018 GDP to grow 2.4% in the 8.8 8.7 8.7 8.6 8.6 8.0 8.5 8.5 20 UAE (previous estimate 2.2%), up from 0.8% in 2017. In 2019, GDP 7.5 0 growth is expected to reach 3.1% (down from a previous forecast of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 3.6%). 2016 2017 2018 UAE oil output (LHS) Brent oil (RHS) UAE AE GDP P gr growth h UAE AE & Du Dubai bai non-oil l priv ivat ate sect ctor ac activ ivit ity 64 6 % y/y growth UAE Headline PMI Dubai Economy Tracker Index 62 60 4 58 56 5.1 4.4 2 54 3.1 3.0 2.4 52 0.8 50 0 2014 2015 2016 2017 2018f 2019f 48 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Source: Bloomberg, IHS Markit, Emirates NBD Research, Emirates NBD Investor Relations 3
Dubai: Expo 2020 to underpin growth Hi Highl hlig ight hts Dubai Du i GDP DP grow growth • 5.0 The average Dubai Economy Tracker Index (effectively a PMI for % y/y growth Dubai), declined to 55.0 in 2018 from 56.0 in 2017. Official data shows Dubai’s economy expanded 2.8% in 2017 and we estimate 4.0 growth in 2018 was the same. • The pressure on firms’ margins and efforts to find costs savings is reflected in almost no job growth in Dubai’s private sector last 3.0 4.6 year: the employment index averaged 50.2, marginally above the 4.1 4.1 3.7 50.0 neutral level. 3.6 3.4 2.0 • 2.8 2.8 The biggest sector of Dubai’s economy is wholesale & retail trade, 1.9 which accounts for more than a quarter of total GDP, but grew less than 1% in 2016 and 2017, sharply slower than in the prior 5 years. 1.0 2010 2011 2012 2013 2014 2015 2016 2017 2018f Dubai Du i busin iness lice cens nses (Jan an-Sep) p) Dubai Du i GDP DP dec ecompo posit itio ion Other 130 20 14.3% Information & % y/y business licenses % of total 15 communication in thousand 4.1% 10 110 Wholesale & 5 Hospitality Retail Trade 4.9% 26.6% 0 90 Social services -5 116.9 115.2 114.8 112.5 5.1% 106.6 -10 98.1 70 88.4 Transportation -15 Construction 82.6 & storage 6.3% -20 11.8% 50 -25 Real estate Financial & insurance 2011 2012 2013 2014 2015 2016 2017 2018 services Manufacturing services 7.1% Total Licences (LHS) % y/y (RHS) 9.4% 10.4% Source: Source: Bloomberg, Haver Analytics, Emirates NBD Research, Emirates NBD Investor Relations 4
Dubai: travel & tourism activity slowed in H2 2018 Hi Highlights DXB pass DX assen enger traffi affic (Jan an-Nov) ) 100 2.6 • Passenger traffic at the Dubai International Airport (DXB) rose to mn people billion tons 81.4 million in Jan-Nov 2018, up 1.3% y/y. Cargo volume was down 80 2.4 -0.8% y/y over the same period. • 60 2.2 Dubai’s hotel occupancy averaged 75.4% in 2018 down from 77.3% in 2017. Revenue per available room (RevPAR) has fallen -8.3% y/y 40 80.4 81.4 2 75.9 over the same period. 71.0 64.0 60.4 • 52.4 46.3 The supply of hotel rooms in Dubai increased by nearly 6% y/y in 20 1.8 2018. The Department of Tourism and Commerce Marketing (DTCM) is targeting 140,000 to 160,000 hotel rooms by 2020. 0 1.6 2011 2012 2013 2014 2015 2016 2017 2018 Passenger traffic (LHS) Freight volumes (RHS) Top p 10 visit itors by nat atio iona nali lity in Jan an-Nov 2018 18 Dubai Du i occu cupan pancy rat ates es an and RevP evPAR 85 200 % of total 14.30mn visitors India 80 170 12.9% Saudi Arabia 9.8% Other 75 140 41.4% USD % UK 70 80.2 110 78.9 7.7% 77.9 77.3 76.8 76.9 75.4 74.7 65 80 China 5.4% Oman 60 50 5.2% 2011 2012 2013 2014 2015 2016 2017 2018 Philippines Russia 2.4% Germany 4.2% Average hotel occupancy rates (LHS) Pakistan USA 3.5% 3.3% Average revenue per available room RevPAR (RHS) 4.1% Source: STR Global, Bloomberg, Dubai Airports, Emirates NBD Investor Relations 5
Real estate: further softness in residential prices is expected in 2019 Hi Highl hlig ight hts Res esid ident ntia ial l property pric rices still ll fal alli ling ng • 50 Increased supply, rising interest rates and little evidence of household % y/y growth Dubai Abu Dhabi income growth also contributed to a further decline in residential real 40 estate prices in Dubai. • 30 The construction sector index of the DET declined to 53.7 in December, signaling the weakest expansion in the sector since March 2018. 20 Output increased sharply, but at a slower rate than in November while new order growth was the weakest since March. 10 • Real estate services and construction together account for 13.4% of 0 Dubai’s GDP. Wholesale & retail trade account for 26.6%; transport, storage & logistics accounts for 11.8% and financial services 10.4%. -10 -20 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Investment in Du Dubai bai real eal estate in USD bn bn Real eal estate serv ervice ces sect ector gr growth h (Dub Dubai ai GDP) P) 12.0 10.0 % y/y growth 2017 Jan-Sep 2018 10.0 8.0 8.0 8.0 6.9 6.0 6.0 4.0 4.4 9.8 4.2 3.8 4.0 7.3 6.9 2.0 2.6 2.3 5.0 1.9 4.5 1.6 0.6 2.0 1.6 0.4 1.4 1.3 0.9 0.8 2.6 0.0 1.6 UAE India Other UK Saudi Pakistan Rest GCC Rest 0.0 MENA Arabia 2012 2013 2014 2015 2016 2017 2018f Source: Bloomberg, Bank of International Settlements, Dubai Land Department, Emirates NBD Research, 6 Emirates NBD Investor Relations
UAE leads MENA in global competitiveness Hi Highl hlig ight hts Compe petit itiv iveness, out of 140 0 coun untri ries • Ranked 27th globally, UAE is the most competitive economy in the US (1) 85.6 MENA region. The economy’s main strength lies in the quality of its Japan (5) 82.5 enabling environment, as companies can operate under stable macroeconomic conditions (1st), make use of good infrastructure (15th) Denmark (10) 80.6 and one of the highest levels of ICT adoption in the world (6th). UAE (27) 73.4 • Ranked 11th in the terms of ease of doing business in 2018, advancing Qatar (30) 71.0 11 places from the 2017 report, UAE ranks 3rd in terms of dealing with Saudi Arabia (39) 67.5 construction permits, 7th for registering property and 9th for enforcing Oman (47) 64.4 rights. Bahrain (50) 63.6 • UAE ranked first in the GCC in the 2018 Global Innovation Index (GII), Kuwai (54) 62.6 according to Cornell University, INSEAD, and the World Intellectual Turkey (61) 61.6 Property Organization (WIPO). 40 50 60 70 80 90 Eas ase e of doin ing busin iness, out of 190 0 coun untries Global al inno novat atio ion, out of 126 6 coun untrie ies Singapore (1) Switzerland (1) 85.3 68.4 Hong Kong (4) Singapore (5) 84.2 59.8 UAE (11) France (16) 81.3 53.1 Germany (24) UAE (38) 78.9 42.6 Turkey (43) 74.3 Turkey (50) 37.4 Bahrain (62) 69.9 Qatar (51) 36.6 Oman (78) 67.2 Kuwait (60) 34.4 Qatar (83) 65.9 Saudi Arabia (61) 34.3 Saudi Arabia (92) 63.5 Oman (69) 32.8 Kuwait (97) 62.2 Bahrain (72) 31.7 50 60 70 80 90 0 10 20 30 40 50 60 70 80 Source: World Economic Forum, World Bank, Cornell University, INSEAD, WIPO, Emirates NBD 7 Investor Relations
UAE: private sector credit growth rebounds in H2 2018 Hi Highl hlig ight hts Brea reakdo down n of UAE AE ban ank cre redi dit by eco cono nomic ic ac activ ivity • 12 110 Private sector credit growth recovered over the course of last year, AD Ratio (RHS) Bank Deposits (LHS) % y/y % reaching 4.4% y/y in November, from 0.8% at the end of 2017. This Bank Loans (LHS) 10 105 was driven largely by loans to business & industry (6.2% y/y in November) with consumer loan growth remaining relatively soft. 8 100 • Government loan growth accelerated through 2018, reaching 8.5% y/y in October and November, although credit to GREs contracted. 6 95 • Bank deposit growth was relatively robust in H2 2018, averaging 4 90 7.3% compared with 3.8% in H1 2018. This was largely due to growth in government deposits and likely reflected the recovery in oil 2 85 revenues in H2 2018. 0 80 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18 Oct-18 GCC bank ankin ing marke market, 2018 18 UAE AE bank ankin ing marke market (AE AED Bn), 2018 18 Banking Assets USD Bn Assets % GDP (1) Gross Loans 328 1326 1654 777 UAE 177 622 KSA 80 Bahrain 510 Deposits 348 1391 1739 198 Qatar 386 167 251 Kuwait Assets 153 500 2354 2854 87 Oman 108 Emirates NBD Other Banks Total Source: UAE Central Bank; National Central Banks, Emirates NBD Investor Relations (1) GDP data is for FY 2019 forecasted. Kuwait and Bahrain as at November, Oman as at October 2018 8
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