National Bank of Umm Al Qaiwain PSC : Financial Results for the Period Ended 30-09-2023

NATIONAL BANK OF

UMM AL-QAIWAIN (PSC)

AND SUBSIDIARY

Review report and condensed consolidated interim financial statements

For the period ended 30 September 2023

NATIONAL BANK OF UMM AL-QAIWAIN (PSC) AND SUBSIDIARY

Review report and condensed consolidated interim financial statements

For the nine months period ended 30 September 2023

Contents	Pages
Report on review of condensed consolidated interim financial statements	1
Consolidated interim statement of financial position	2
Consolidated interim income statement	3
Consolidated interim statement of comprehensive income	4
Consolidated interim statement of changes in equity	5
Consolidated interim statement of cash flows	6
Notes to the condensed consolidated interim financial statements	7 - 23

ERNST & YOUNG - MIDDLE EAST	Tel:	[phone]
(SHARJAH BRANCH)	Fax:	[phone]
P.O. Box 1350	[e-mail]
City Gate Tower, 14th Floor, Office No. 1402	ey.com
Al-Ittihad Street, Emirate of Sharjah
United Arab Emirates	PL No. 2845

REPORT ON REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF NATIONAL BANK OF UMM AL- QAIWAIN PSC AND SUBSIDIARY

Introduction

We have reviewed the accompanying condensed consolidated interim financial statements of National Bank of Umm Al-Qaiwain PSC (the "Bank") and its subsidiary (collectively referred toas the "Group"), which comprise the consolidated interim statement of financial position as at 30 September 2023 and the related consolidated interim income statement, comprehensive income and changes in equity and statement of cash flows for the nine-month period then ended and explanatory notes. Management is responsible for the preparation and presentation of these condensed consolidated interim financial statements in accordance with International Financial Reporting Standard IAS 34, Interim Financial Reporting ("IAS 34"). Our responsibility is to express a conclusion on these condensed consolidated interim financial statements based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial statements are not prepared, in all material respects, in accordance with IAS 34.

For Ernst & Young

Signed by:

Anthony O'Sullivan

Partner

Registration No: 687

18 October 2023

Sharjah, United Arab Emirates

A member firm of Ernst & Young Global Limited

National Bank of Umm Al-Qaiwain (PSC) and Subsidiary

CONSOLIDATED INTERIM INCOME STATEMENT

For the nine months period ended 30 September 2023 (Unaudited)

		Three months period ended	Nine months period ended
		30 September (Unaudited)	30 September (Unaudited)
		──────────────────	─────────────────
		2023	2022	2023	2022
	Notes	AED '000	AED '000	AED '000	AED '000
Interest income		196,230	109,972	546,719	263,033
Income from Islamic financing products		3,368	17,196	10,739	35,407
Total interest income and income		────────	────────	────────	────────
from Islamic financing products		199,598	127,168	557,458	298,440
Interest expense		(42,654)	(14,860)	(109,827)	(37,041)
Distribution to depositors - Islamic products		(13)	(60)	(192)	(209)
Net interest income and income from		────────	────────	────────	────────
Islamic products net of distribution
to depositors		156,931	112,248	447,439	261,190
Net fees and commission income		5,954	8,102	21,628	29,050
Other operating income		53,992	16,671	75,372	54,549
		────────	────────	────────	────────
GROSS INCOME		216,877	137,021	544,439	344,789
Operating expenses		(46,287)	(40,224)	(123,351)	(111,542)
Investment gains		3,294	799	50,230	35,658
		────────	────────	────────	────────
OPERATING INCOME		173,884	97,596	471,318	268,905
Share of results from an associate		(130)	(48)	(168)	60
PROFIT FOR THE PERIOD		────────	────────	────────	────────
	173,754	97,548	471,150	268,965
BEFORE IMPAIRMENT
Net impairment losses	14	(43,417)	(2,916)	(85,690)	(9,037)
		────────	────────	────────	────────
PROFIT FOR THE PERIOD		130,337	94,632	385,460	259,928
		════════	════════	════════	════════
Basic and diluted earnings
per share (AED)	15	0.07	0.05	0.19	0.14
		════════	════════	════════	════════

The attached notes 1 to 25 form an integral part of these condensed consolidated interim financial statements.

The independent auditor's report on review of the condensed consolidated interim financial statements is set out on page 1.

3

National Bank of Umm Al-Qaiwain (PSC) and Subsidiary

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the nine months period ended 30 September 2023 (Unaudited)

	Three months period ended	Nine months period ended
	30 September (Unaudited)	30 September (Unaudited)
	──────────────────	─────────────────
	2023	2022	2023	2022
	AED '000	AED '000	AED '000	AED '000
PROFIT FOR THE PERIOD	130,337	94,632	385,460	259,928
Other comprehensive income	────────	────────	────────	────────
Items that will not be reclassified
subsequently to profit or loss
Net fair value gain on investment	40,350		24,357
securities carried at FVTOCI - equity	22,195	64,763
Other comprehensive income	────────	────────	────────	────────
40,350		24,357
for the period	22,195	64,763
TOTAL COMPREHENSIVE INCOME	────────	────────	────────	────────
170,687	116,827	409,817	324,691
FOR THE PERIOD
	════════	════════	════════	════════

The attached notes 1 to 25 form an integral part of these condensed consolidated interim financial statements.

The independent auditor's report on review of the condensed consolidated interim financial statements is set out on page 1.

4

National Bank of Umm Al-Qaiwain (PSC) and Subsidiary

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the nine months period ended 30 September 2023 (Unaudited)

				Impairment	Cumulative
	Share	Statutory	General	reserve -	change in	Retained
	capital	reserve	reserve	general	fair values	earnings	Total
	AED '000	AED '000	AED '000	AED '000	AED '000	AED '000	AED '000
Balance at 1 January 2023 (unaudited)	2,000,000	1,019,266	6,440	34,586	383,710	1,883,018	5,327,020
Profit for the period	-	-	-	-	-	385,460	385,460
Other comprehensive income for the period	-	-	-	-	24,357	-	24,357
	────────	────────	────────	────────	────────	────────	────────
Total comprehensive income for the period	-	-	-	-	24,357	385,460	409,817
Additional provision under U.A.E Central Bank	────────	────────	────────	────────	────────	────────	────────
requirement over IFRS 9 requirement	-	-	-	34,806	-	(34,806)	-
Dividend paid (Note 16)	-	-	-	-	-	(200,000)	(200,000)
	────────	────────	────────	────────	────────	────────	────────
Balance at 30 September 2023 (unaudited)	2,000,000	1,019,266	6,440	69,392	408,067	2,033,672	5,536,837
	════════	════════	════════	════════	════════	════════	════════
Balance at 1 January 2022 (unaudited)	1,848,000	1,019,266	6,440	35,911	372,617	1,768,501	5,050,735
Profit for the period	-	-	-	-	-	259,928	259,928
Other comprehensive income for the period	-	-	-	-	64,763	-	64,763
	────────	────────	────────	────────	────────	────────	────────
Total comprehensive income for the period	-	-	-	-	64,763	259,928	324,691
Additional provision under U.A.E Central Bank	────────	────────	────────	────────	────────	────────	────────
requirement over IFRS 9 requirement	-	-	-	8,153	-	(8,153)	-
Sale of FVOCI equity	-	-	-	-	(48,516)	48,516	-
Dividend paid (Note 16)	-	-	-	-	-	(147,840)	(147,840)
Bonus shares issued	152,000	-	-	-	-	(152,000)	-
	────────	────────	────────	────────	────────	────────	────────
Balance at 30 September 2022 (unaudited)	2,000,000	1,019,266	6,440	44,064	388,864	1,768,952	5,227,586
	════════	════════	════════	════════	════════	════════	════════

The attached notes 1 to 25 form an integral part of these condensed consolidated interim financial statements.

The independent auditor's report on review of the condensed consolidated interim financial statements is set out on page 1.

5

National Bank of Umm Al-Qaiwain (PSC) and Subsidiary

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the nine months period ended 30 September 2023 (Unaudited)

		Nine months period ended
		30 September (Unaudited)
		───────────────────────
		2023	2022
Cash flows from operating activities	Notes	AED '000	AED '000
	385,460
Profit for the period		259,928
Adjustments for:		85,690
Provision for expected credit losses	14	9,037
Depreciation of property and equipment		10,547	12,434
Depreciation of right of use asset		1,296	1,296
Provision for employee end of service benefits		2,229	2,015
Increase in fair value of investment in securities at FVTPL		(7,876)	(1,675)
Discount amortised on investment securities		(1,094)	1,560
Gain on disposal of Inventory		(18,796)	(3,966)
Dividend income	21	(40,747)	(35,543)
Gain on disposal of property and equipment		(10)	(8)
Share of results from an associate		168	(60)
Finance cost on lease liability		18	77
		────────	────────
Operating cash flows before movements in working capital		416,885	245,095
Decrease /(increase) in certificate of deposits		220,380
with original maturity greater than 3 months		(268,722)
(Increase) / decrease in statutory deposit with CBUAE		(175,990)	11,153
(Increase) / decrease in loans and advances and		(308,453)
Islamic financing receivables		321,232
Proceeds from disposal of inventory		110,356	25,764
(Increase) / decrease in other assets		(43,296)	(6,746)
Payment of employee end of service benefits		(1,082)	(793)
Increase/ (Decrease) in customers' deposits and		563,126
Islamic customers' deposits		(1,491)
Increase in other liabilities		54,406	9,229
		────────	────────
Net cash generated from operating activities		836,332	334,721
		────────	────────
Cash flows from investing activities		(12,775)
Purchase of property and equipment		(4,894)
Proceeds from disposal of property and equipment		14	22
Purchase of investment securities		(176,258)	(264,778)
Proceeds from sale and maturity of investment securities		97,223	124,269
Dividend received from investment securities	21	40,747	35,543
Dividend received from investment in an associate		-	50
		────────	────────
Net cash used in investing activities		(51,049)	(109,788)
Cash flows from financing activity		────────	────────
	(200,000)
Dividend paid	16	(147,840)
Lease payments		(452)	(1,354)
		────────	────────
Net cash used in financing activity		(200,452)	(149,194)
		────────	────────
NET INCREASE IN CASH AND CASH EQUIVALENTS		584,831	75,739
Cash and cash equivalents at the beginning of the period		3,999,860	3,628,046
CASH AND CASH EQUIVALENTS AT THE END		────────	────────
17	4,584,691	3,703,785
OF THE PERIOD
		════════	════════

The attached notes 1 to 25 form an integral part of these condensed consolidated interim financial statements.

The independent auditor's report on review of the condensed consolidated interim financial statements is set out on page 1.

6

National Bank of Umm Al-Qaiwain (PSC) and Subsidiary

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the nine months period ended 30 September 2023 (Unaudited)

1 GENERAL INFORMATION

National Bank of Umm Al-Qaiwain (PSC) (the "Bank") is a Public Shareholding Company incorporated in the Emirate of Umm Al-Qaiwain ("UAQ") in the United Arab Emirates ("U.A.E.") by Amiri Decree Number (1) on 5 January 1982, issued by His Highness, the Ruler of Umm Al-Qaiwain, and commenced its operations with effect from 1 August 1982. National Bank of Umm Al-Qaiwain (PSC), and its subsidiary, Twin Towns Marketing Management L.L.C. are together referred to as the "Group". The address of the Bank's registered Head Office is P.O. Box 800, Umm Al-Qaiwain, United Arab Emirates.

The Bank is engaged in providing retail and corporate banking services through a network of 11 branches in the U.A.E. The Group carries out Islamic banking operations through an Islamic banking window established in 2005 across its branch network.

The condensed consolidated interim financial statements of the Group for the nine months period ended 30 September 2023 were authorised and approved for issue by the Board of Directors on 17 October 2023.

2 CHANGES IN ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

2.1 CHANGES IN ACCOUNTING POLICIES

The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2022, except for the adoption of new standards effective as of 1 January 2023. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Several amendments apply for the first time in 2023, but do not have an impact on the interim condensed consolidated financial statements of the Group.

Standards, amendments and interpretations that are effective for the Group's accounting period beginning on 1 January 2023

The following amendments to existing standards have been applied by the Group in preparation of these condensed consolidated interim financial statements. The adoption of these new standards does not have significant impact on the interim condensed consolidated financial statements

Description	Effective from
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)	1 January 2023
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts	1 January 2023
Definition of Accounting Estimate (Amendments to IAS 8)	1 January 2023
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)	1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to
IAS 12)	1 January 2023

Standard Issued but not yet Effective

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's interim condensed consolidated financial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.

Description	Effective from
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
(Amendments to IFRS 10 and IAS 28)	Deferred
	indefinitely

There are no other applicable new standards and amendments to published standards or IFRS IC interpretations that have been issued but are not effective for the first time for the Group's financial year beginning on 1 January 2023 that would be expected to have a material impact on the Group's consolidated financial statements.

Key accounting estimates and judgments

The preparation of the condensed consolidated interim financial information requires management to make estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty, and actual results may therefore differ resulting in future changes in these estimates. In preparing, the condensed consolidated interim financial information, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation and uncertainty were the same as those that applied to the audited consolidated financial information as at and for the year ended 31 December 2022.

7

National Bank of Umm Al-Qaiwain (PSC) and Subsidiary

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the nine months period ended 30 September 2023 (Unaudited)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 BASIS OF PREPARATION

These condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard No. 34 - Interim Financial Reporting issued by the International Accounting Standard Board and also comply with the applicable requirements of the laws in the U.A.E.

The condensed consolidated interim financial statements are prepared in accordance with the historical cost basis, except for the revaluation of certain financial instruments.

The condensed consolidated interim financial statements are presented in U.A.E. Dirhams (AED) as that is the functional currency in which the majority of the Group's transactions are denominated. All financial information presented in AED has been rounded off to the nearest thousand, unless otherwise stated.

These condensed consolidated interim financial statements do not include all the information required for full annual consolidated financial statements and should be read in conjunction with the Group's annual audited consolidated financial statements as at and for the year ended 31 December 2022. In addition, results for the nine months period ended 30 September 2023 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2023.

Implementation of UAE Corporation Tax law and application of IAS 12 Income Taxes

On 9 December 2022, the UAE Ministry of Finance released Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law or the Law) to enact a Federal corporate tax (CT) regime in the UAE. The CT regime is effective from 1 June 2023 and accordingly, it has an income tax related impact on the financial statements for accounting periods beginning on or after 1 June 2023.

The Cabinet of Ministers Decision No. 116 of 2022 specifies the threshold of income over which the 9% tax rate would apply and accordingly, the Law is now considered to be substantively enacted from the perspective of IAS 12

• Income Taxes. A rate of 9% will apply to taxable income exceeding AED 375,000 and a rate of 0% will apply to taxable income not exceeding AED 375,000 and a rate of 0% on qualifying income of free zone entities.

The Group will be subject to taxation commencing 1 January 2024. Based on the above, the Group assessed the deferred tax implication and concluded it is not expected to be significant as of and for the nine months period ended 30 September 2023. As certain other cabinet decisions are pending as on the date of these interim condensed consolidated financial statements, the Group will continue to assess the impact of these pending cabinet decisions on deferred taxes as and when finalized and published.

3.2 BASIS OF CONSOLIDATION

These condensed consolidated interim financial statements incorporate the financial statements of the Bank and entity controlled by the Bank. Control is achieved when the Bank:

• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns

The condensed consolidated interim financial statements comprise the financial statements of the Bank and of the subsidiary as disclosed in the annual audited financial statements for the year ended 31 December 2022. The financial statements of the subsidiary are prepared for the same reporting period as that of the Bank.

3.3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied by the Group in the preparation of the condensed consolidated interim financial statements are consistent with those applied by the Group in the annual consolidated financial statements for the year ended 31 December 2022, except for changes in accounting policies explained in Note 2.1.

8