Q2 2026 Arab Banking Corp BSC Earnings Call

August 13, 2026

Speaker #2: Good afternoon, ladies and gentlemen, and welcome to Bank ABC's investors call for the period ended 30 June 2026. Today's session is hosted by Suresh Padmanabhan, Bank ABC's Acting Group Chief Financial Officer. Suresh will shortly begin with a presentation on the bank's financial results and strategic progress.

Operator: Good afternoon, ladies and gentlemen, and welcome to Bank ABC's Investors Call for the period ending 30 June 2026. Today's session is hosted by Suresh Padmanabhan, Bank ABC's Acting Group Chief Financial Officer. Suresh will shortly begin with a presentation on the bank's financial results and strategic progress. Following the presentation, I will be moderating the Q&A session. You are, as always, very much welcome to drop us any questions using the questions feature on Zoom, and we will do our best to address both the questions that we have received ahead of our call today and during the session. But before we begin, let us take a moment to watch a short video highlighting the bank's key achievements in the H1 2026. Over to you, Suresh.

Fatema Yusuf: Good afternoon, ladies and gentlemen, and welcome to Bank ABC's Investors Call for the period ending 30 June 2026. Today's session is hosted by Suresh Padmanabhan, Bank ABC's Acting Group Chief Financial Officer. Suresh will shortly begin with a presentation on the bank's financial results and strategic progress. Following the presentation, I will be moderating the Q&A session. You are, as always, very much welcome to drop us any questions using the questions feature on Zoom, and we will do our best to address both the questions that we have received ahead of our call today and during the session. But before we begin, let us take a moment to watch a short video highlighting the bank's key achievements in the H1 2026. Over to you, Suresh.

Speaker #2: Following the presentation, I'll be moderating the Q&A session. You are, as always, very welcome to drop us any questions using the questions feature on Zoom.

Speaker #2: We will do our best to address both the questions we have received ahead of our call today and those that come in during the session. But before we begin, let us take a moment to watch a short video highlighting the bank's key achievements in the first half of 2026.

Speaker #2: Over to you, Suresh.

Speaker #3: Thank you, Fatma. Good afternoon, and thank you for joining our H1 2026 investor call. Today, together with my colleague Fatma, we will talk you through an overview of H1 2026 highlights, covering an update on our resilience, our sustainability program, and the recognition and awards received during this period.

Suresh Padmanabhan: Thank you, Fatema. Good afternoon, and thank you for joining our H1 2026 investor call. Today, together with my colleague, Fatema, we will talk you through an overview of H1 2026 highlights, covering an update on our resilience, our sustainability program, the recognition and awards received during this period. Then I will share a review of our financial performance, followed by Q&A. The H1 2026 was marked by a very challenging operating environment, with heightened regional uncertainty arising from prevailing conflict conditions. Our business continuity capabilities were tested and proved highly effective. We were able to offer uninterrupted service to our clients, and our operations remained stable. This was achieved while prioritizing the safety and wellbeing of our employees.

Speaker #3: And then I will share a review of our financial performance, followed by Q&A. The first half of 2026 was marked by a very challenging operating environment, with heightened regional uncertainty arising from prevailing conflict conditions.

Speaker #3: Our business continuity capabilities were tested and proved highly effective. We were able to offer uninterrupted service to our clients, and our operations remained stable.

Speaker #3: This was achieved while prioritizing the safety and well-being of our employees. Against this backdrop, the strength of our diversified franchise and core businesses helped to deliver solid revenue growth, with total operating income up 5% year on year to reach $697 million.

Suresh Padmanabhan: Against this backdrop, the strength of our diversified franchise and the core businesses helped to deliver solid revenue growth, with the total operating income up 5% year-on-year to reach $697 million. Net profit was $111 million, lower than last year, mainly due to prudent provisioning in response to the evolving macroeconomic environment. Our underlying portfolios remains stable. Our balance sheet remains strong, underpinned by solid capital funding and liquidity. Overall, given the scale of external challenges, we are pleased with the bank's resilience and financial performance in the H1. While business activity has been somewhat affected, we are hopeful of the gradual normalization of geopolitical conditions to support business sentiment through the remainder of 2026. Reflecting more on our experience in H1, Q2 in particular, the group has navigated this period of uncertainty from a position of strength.

Speaker #3: Net profit was $111 million, lower than last year, mainly due to prudent provisioning in response to the evolving macroeconomic environment. Our underlying portfolios remained stable, and our balance sheet remained strong, underpinned by solid capital, funding, and liquidity.

Speaker #3: Overall, given the scale of external challenges, we are pleased with the bank's resilience and financial performance in the first half. While business activity has been somewhat affected, we are hopeful for the gradual normalization of geopolitical conditions to support business sentiment through the remainder of 2026.

Speaker #3: Reflecting more on our experience in the first half of the second quarter in particular, the group has navigated this period of uncertainty from a position of strength.

Speaker #3: This was made possible through a well-established business continuity framework, supported by a dedicated team and strong financial fundamentals. Our focus was on three priorities: protecting our people across impacted locations, which included a full transition to remote working at head office and relocation of critical staff where needed.

Suresh Padmanabhan: This was made possible through a well-established business continuity framework, supported by a dedicated team and strong financial fundamentals. Our focus was on three priorities. Protecting our people across impacted locations. This included a full transition to remote working at head office and relocation of critical staff where needed. Our business continuity capabilities enabled swift moving to remote working. Continued uninterrupted operations, maintaining client services without disruption. Third was preserving financial strength through disciplined risk management and prudent provisioning. In execution, we enabled flexible working arrangements, ensured seamless service delivery, mitigated financial impacts, strengthened our scenario analysis and contingency planning, and adjusted elements of our strategy and transformation roadmap where appropriate. The management and the board remain actively engaged in the bank's crisis response program. We continue to monitor developments closely and stand ready to act decisively as needed.

Speaker #3: Our business continuity capabilities enabled a swift move to remote working. We continued uninterrupted operations, maintaining client services without disruption. Third was preserving financial strength through disciplined risk management and prudent provisioning.

Speaker #3: In execution, we enabled flexible working arrangements, ensured seamless service delivery, mitigated financial impacts, strengthened our scenario analysis and contingency planning, and adjusted elements of our strategy and transformation roadmap where appropriate.

Speaker #3: The management and the Board remain actively engaged in the bank's crisis response program. We continue to monitor developments closely and stand ready to act decisively as needed.

Speaker #3: I will now request Fatma to take us through our progress on sustainability initiatives and the awards during this period, before I give more details on the financial performance.

Suresh Padmanabhan: I will now request Fatema to take us through our progress on sustainability initiatives and the awards during this period before I give more details on the financial performance.

Speaker #2: Thank you very much, Suresh. Turning to sustainability, it remains a key part of our strategic transformation roadmap. During the first half of this year, we have strengthened our ESG framework and reporting capabilities.

Fatema Yusuf: Thank you very much, Suresh. Turning to sustainability, it remains to be a key part of our strategic transformation roadmap. During the H1 of this year, we have strengthened our ESG framework and reporting capabilities. We have published our group sustainability disclosures reports for the year 2025. We have accelerated our environmental impact reduction plan for our global operations and established a five-year environmental reduction target across the group. We have also adopted a new ESG data platform to enhance the quality, consistency, and transparency of our reporting. Of course, looking ahead, we very much remain focused on embedding sustainability further into the business, including alignment with IFRS 1 and 2, and advancing our sustainable finance agenda. We believe that the foundations we have built now position us to deliver measurable business value and long-term stakeholder impact.

Speaker #2: We have published our group sustainability disclosure reports for the year 2025. We have accelerated our environmental impact reduction plan for our global operations and established a five-year environmental reduction target across the group.

Speaker #2: We have also adopted a new ESG data platform to enhance the quality, consistency, and transparency of our reporting. And, of course, looking ahead, we remain very much focused on embedding sustainability further into the business, including alignment with IFRS 1 and 2, and advancing our sustainable finance agenda.

Speaker #2: We believe that the foundations we have built now position us to deliver measurable business value and long-term stakeholder impact. And on the awards, so far in 2026, the group has received more than 15 prestigious awards, reflecting the strength and the breadth of our capabilities. Among them, our Egypt Mobile Banking app was named the Best Mobile Banking App in the Middle East by MEED.

Fatema Yusuf: On the awards, so far in 2026, the group has received more than 15 prestigious awards reflecting the strength and the breadth of our capabilities. Among them, our Egypt mobile banking app was named the best mobile banking app in the Middle East by MEED. We have also received four recognitions from Global Finance for our leadership in cash management, liquidity management, and cross-border payments across the Middle East. In addition, our digital mobile-only ila Bank was named the best retail digital bank in the Middle East by MEED, which is a testimony for its leadership in digital banking and customer experience. Overall, we are very much pleased with the continued industry recognition, which reinforces our position as MENA's international bank of the future.

Speaker #2: We have also received four recognitions from Global Finance for our leadership in cash management, liquidity management, and cross-border payments across the Middle East.

Speaker #2: In addition, our digital, mobile-only ila Bank was named the Best Retail Digital Bank in the Middle East by Neud, which is a testimony to its leadership in digital banking and customer experience.

Speaker #2: So overall, we're very much pleased with the continued industry recognition, which reinforces our position as Mina's international bank of the future. With all of that, I conclude my section, and I'll hand over to Suresh, who will be presenting to you the group's financial performance in greater detail.

Fatema Yusuf: With all of that, I conclude my section, and I will hand over to Suresh, who will be presenting to you the group's financial performance in greater detail.

Speaker #3: Thank you, Fatma. That is quite encouraging—a very wide-ranging set of awards. It's solid recognition of the progress we are making on various fronts.

Suresh Padmanabhan: Thank you, Fatema. That is some quite encouraging, a very wide-ranging set of awards. A solid recognition of the progress we are making in various fronts. With that, I will now present the group's financial performance in more detail. Considering the operating conditions in some of our key markets, our H1 2026 performance was resilient. Our core businesses and the diversified franchise helped to sustain the revenue momentum during the first half of the year. Total operating income grew 5% year on year to reach US$697 million as compared to US$666 million reported at this stage last year. Revenues tracked higher across most of our businesses and markets. Strong performance in Europe and Brazil compensated for somewhat moderated performance, particularly in markets affected by the geopolitical challenges. Our revenues remain well-diversified across the franchise, reducing concentration and supporting more stable earnings.

Speaker #3: With that, I will now present the group's financial performance in more detail. Considering the operating conditions in some of our key markets, our H1 2026 performance was resilient.

Speaker #3: Our core businesses and diversified franchise helped to sustain the revenue momentum during the first half of the year. Total operating income grew 5% year on year, to reach US dollar 697 million, as compared to US dollar 666 million reported at this stage last year.

Speaker #3: Revenues tracked higher across most of our businesses and markets. Strong performance in Europe and Brazil compensated for somewhat moderated performance, particularly in markets affected by geopolitical challenges.

Suresh Padmanabhan: Revenues tracked higher across most of our businesses and markets. Strong performance in Europe and Brazil compensated for somewhat moderated performance, particularly in markets affected by the geopolitical challenges. Our revenues remain well-diversified across the franchise, reducing concentration and supporting more stable earnings.

Speaker #3: Our revenues remain well diversified across the franchise, reducing concentration and supporting more stable earnings. Our international wholesale banking and group treasury businesses contributed 27% of our revenues, Brazil contributed 37%, MENA subsidiaries contributed 19%, and 17% was from other sources of income, including our digital units, ila and Arab Financial Services.

Suresh Padmanabhan: Our international wholesale banking and group treasury businesses contributed 27% of our revenues. Brazil contributed 37%, MENA subsidiaries contributed 19%, and 17% was from other sources of income, including our digital units, ila and Arab Financial Services. Overall, this revenue performance demonstrates the strength of our diversified business model to enable sustained revenue growth across geographies and business segments. Turning on to our cost and efficiency metrics. The bank continues to maintain disciplined cost management while investing as required in its strategic priorities, particularly digital transformation and further developing our bank of the future. Operating expenses increased by 9% year on year to reach US$423 million. Part of the growth also driven by foreign exchange movements. The costs reflect targeted investments in technology, operational resilience, and growth initiatives across the group. As a result, the cost-to-income ratio stands at 60.7%, compared to 58.1% at this stage last year.

Speaker #3: Overall, this revenue performance demonstrates the strength of our diversified business model to enable sustained revenue growth across geographies and business segments. Turning to our cost and efficiency metrics, the bank continues to maintain disciplined cost management while investing as required in its strategic priorities.

Suresh Padmanabhan: The bank continues to maintain disciplined cost management while investing as required in its strategic priorities, particularly digital transformation and further developing our bank of the future. Operating expenses increased by 9% year on year to reach US$423 million. Part of the growth also driven by foreign exchange movements. The costs reflect targeted investments in technology, operational resilience, and growth initiatives across the group. As a result, the cost-to-income ratio stands at 60.7%, compared to 58.1% at this stage last year.

Speaker #3: Particularly, digital transformation and further developing our bank of the future. Operating expenses increased by 9% year-on-year to reach $423 million, part of the growth also driven by foreign exchange movements.

Speaker #3: The costs reflect targeted investments in technology, operational resilience, and growth initiatives across the group. As a result, the cost-to-income ratio stands at 60.7%, compared to 58.1% at this stage last year.

Speaker #3: Adjusting for the ongoing digital investments, the cost-to-income ratio improves to 56.4%. Overall, we continue to strike a balance between investing for future growth and maintaining a disciplined approach to costs and operational performance.

Suresh Padmanabhan: Adjusting for the ongoing digital investments, cost-income ratio improves to 56.4%. Overall, we continue to strike a balance between investing for future growth and maintaining a disciplined approach to costs and operational performance. Moving to asset quality, our business growth is being prudently managed by our robust risk appetite frameworks. We adopted a more cautious provisioning approach during the period, reflecting the elevated macroeconomic and geopolitical uncertainty across our markets. As a result, ECL charges increased to US$84 million as compared to US$44 million reported last year, an increase of US$40 million year on year. Reflecting the above, the cost of risk was at 76 basis points compared to 41 basis points last year. It is important to note that last year benefited from certain one-off recoveries at the H1 stage, and also a very benign provision experience, which contributed to the pronounced year-on-year movement.

Speaker #3: Moving to asset quality, our business growth is being prudently managed by our robust risk appetite frameworks. We adopted a more cautious provisioning approach during the period, reflecting the elevated macroeconomic and geopolitical uncertainty across our markets.

Speaker #3: As a result, ECL charges increased to US dollar 84 million, as compared to US dollar 44 million reported last year, an increase of US dollar 40 million year on year.

Suresh Padmanabhan: As a result, ECL charges increased to US$84 million as compared to US$44 million reported last year, an increase of US$40 million year on year. Reflecting the above, the cost of risk was at 76 basis points compared to 41 basis points last year. It is important to note that last year benefited from certain one-off recoveries at the H1 stage, and also a very benign provision experience, which contributed to the pronounced year-on-year movement.

Speaker #3: Reflecting the above, the cost of risk was at 76 basis points compared to 41 basis points last year. It is important to note that last year benefited from certain one-off recoveries at the H1 stage, and also a very benign provision experience, which contributed to the pronounced year-on-year movement.

Speaker #3: Despite the higher provisions, underlying asset quality remains resilient. The NPL ratio was at 3.5%, and the provision coverage ratio was 85%, both remaining at very healthy levels.

Suresh Padmanabhan: Despite the higher provisions, underlying asset quality remains resilient. The NPL ratio was at 3.5% and provision coverage ratio was 85%, both remaining at very healthy levels. Overall, these metrics reflect our disciplined risk appetite, robust risk management framework, and prudent provisioning approach, which continue to support sustainable growth. In summary, a combination of the factors explained above resulted in the net operating profit before provisions and taxation remaining broadly stable at $274 million as compared to $279 million last year, highlighting the resilience of the underlying business. Higher and more prudent impairment provisioning in the middle of geopolitical and macroeconomic uncertainty for the period resulted in moderation of net profit for H1 2026 to $111 million as compared to $152 million last year, a 27% year-on-year change. Moving on to the balance sheet.

Speaker #3: Overall, these metrics reflect our disciplined risk appetite, robust risk management framework, and prudent provisioning approach, which continue to support sustainable growth. In summary, a combination of the factors explained above resulted in the net operating profit before provisions and taxation remaining broadly stable at $274 million, as compared to $279 million last year, highlighting the resilience of the underlying business.

Speaker #3: Higher and more prudent impairment provisioning in the middle of geopolitical and macroeconomic uncertainty for the period resulted in moderation of net profit for half one 2026 to $111 million, as compared to $152 million last year, a 27% year-on-year change.

Speaker #3: Moving on to the balance sheet, we continue to maintain a strong and diversified asset profile, reflecting disciplined balance sheet management in a dynamic operating environment.

Suresh Padmanabhan: We continue to maintain a strong and diversified asset profile, reflecting disciplined balance sheet management in a dynamic operating environment. Loans grew by 4% during H1 2026 as compared to year-end 2025, demonstrating continued momentum across our core businesses and client franchise. Total assets stood at $46.9 billion, with the movements reflecting normal balance sheet optimization and short-term funding and liquidity management activities. Our balance sheet remains highly liquid, with 58% of total assets maturing within one year, providing significant flexibility to navigate changing market conditions. Our funding profile remains stable with the prudent liquidity levels. As for our balance sheet health, our emphasis has consistently been on maintaining a strong balance sheet with the prudent capital and liquidity metrics. All our ratios are well above regulatory minimum levels. Total capital adequacy ratio was at 16.4%, and the Tier 1 ratio was at 15.5%.

Speaker #3: Loans grew by 4% during H1 2026 as compared to year-end 2025, demonstrating continued momentum across our core businesses and client franchise. Total assets stood at $46.9 billion, with the movements reflecting normal balance sheet optimization and short-term funding and liquidity management activities.

Speaker #3: Our balance sheet remains highly liquid, with 58% of total assets maturing within one year, providing significant flexibility to navigate changing market conditions. Our funding profile remains stable with prudent liquidity levels.

Speaker #3: As for our balance sheet health, our emphasis has consistently been on maintaining a strong balance sheet with prudent capital and liquidity metrics. All our ratios are well above regulatory minimum levels.

Suresh Padmanabhan: As for our balance sheet health, our emphasis has consistently been on maintaining a strong balance sheet with the prudent capital and liquidity metrics. All our ratios are well above regulatory minimum levels. Total capital adequacy ratio was at 16.4%, and the Tier 1 ratio was at 15.5%.

Speaker #3: Total capital acquisition ratio was at 16.4%, and the Tier One ratio was at 15.5%. Core equity Tier One ratio was at 13.2%, which composes the majority of the Tier One ratio.

Suresh Padmanabhan: Core equity Tier 1 ratio was at 13.2%, which composes the majority of Tier 1 ratio. Risk-weighted assets stood at $32 billion, increasing by 4% as compared to year-end 2025. Our core equity Tier 1 ratio remains strong after absorbing the dividend payout and growth in risk-weighted assets. From an overall liquidity and funding perspective, our LCR and NSFR ratios are at healthy levels of 267% and 123%, respectively. In summary, the group delivered resilient performance in the first half of the year, supported by strong execution, effective crisis management, and uninterrupted client service, despite a challenging operating environment. Revenue momentum remained strong, with the total operating income increasing 5% year-on-year to reach $697 million, reflecting the benefits of our diversified business model and broad-based growth across core businesses. Net operating profit before provisions and taxation remained broadly at comparable levels to last year.

Speaker #3: Risk-weighted assets stood at $32 billion, increasing by 4% as compared to year-end 2025. Our core equity Tier 1 ratio remains strong after absorbing the dividend payout and growth in risk-weighted assets.

Speaker #3: From an overall liquidity and funding perspective, our LCR and NSFR ratios are at healthy levels of 267% and 123%, respectively. In summary, the Group delivered resilient performance in the first half of the year, supported by strong execution, effective crisis management, and uninterrupted client service despite a challenging operating environment.

Suresh Padmanabhan: In summary, the group delivered resilient performance in the first half of the year, supported by strong execution, effective crisis management, and uninterrupted client service, despite a challenging operating environment. Revenue momentum remained strong, with the total operating income increasing 5% year-on-year to reach $697 million, reflecting the benefits of our diversified business model and broad-based growth across core businesses. Net operating profit before provisions and taxation remained broadly at comparable levels to last year.

Speaker #3: Revenue momentum remained strong with the total operating income increasing 5% year on year to reach US dollar 697 million, reflecting the benefits of our diversified business model and broad-based growth across core businesses.

Speaker #3: Net operating profit before provisions and taxation remained broadly at comparable levels to last year. We adopted a prudent approach, with the higher provisioning reflecting macroeconomic conditions.

Suresh Padmanabhan: We adopted a prudent approach with the higher provisioning reflecting macroeconomic conditions. Net profit stood at $111 million, absorbing the higher impairment charges, although underlying business momentum across key markets remains resilient. Asset quality, capital, and liquidity metrics remain healthy, underpinned by a disciplined risk management framework and a well-diversified balance sheet. All capital and liquidity ratios remain comfortably above regulatory requirements and providing capacity to support future growth. Looking ahead, we are hopeful of geopolitical conditions to stabilize and improve business sentiment through the remainder of 2026. Overall, the group is well-positioned to navigate the uncertainties while continuing to execute its strategy and deliver sustainable growth. I will now hand over to Fatema, who will be moderating the Q&A session.

Speaker #3: Net profit stood at $111 million, absorbing the higher impairment charges, although underlying business momentum across key markets remains resilient. Asset quality, capital, and liquidity metrics remain healthy, underpinned by a disciplined risk management framework and a well-diversified balance sheet.

Speaker #3: All capital and liquidity ratios remain comfortably above regulatory requirements, providing capacity to support future growth. Looking ahead, we are hopeful that geopolitical conditions will stabilize and improve business sentiment through the remainder of 2026.

Speaker #3: Overall, the Group is well positioned to navigate the uncertainties while continuing to execute its strategy and deliver sustainable growth. I will now hand over to Fatma, who will be moderating the Q&A session.

Speaker #1: Thank you very much, Suresh, for the informative presentation, and congratulations to Bank ABC's colleagues across our 15 countries of presence on the delivery of these resilient results.

Fatema Yusuf: Thank you very much, Suresh, for the informative presentation, and congratulations to Bank ABC's colleagues across our 15 countries of presence on the delivery of these resilient results. Over to Q&As. Let me start with one of the questions that we have received ahead of the session today. Suresh, the question is inquiring on how exactly are we navigating the geopolitical uncertainty in terms of business impact and continuity?

Speaker #1: So, over to Q&As. Let me start with one of the questions that we have received ahead of the session today. Suresh, the question is inquiring about how exactly we are navigating the geopolitical uncertainty in terms of business impact and continuity?

Speaker #3: Thank you. Very topical. The bank's operations have remained uninterrupted across all markets, reflecting the resilience of our technology infrastructure and business continuity capabilities. Enhanced governance through our crisis management team and business continuity framework ensures proactive risk monitoring and swift decision-making.

Suresh Padmanabhan: Thank you. Very topical. The bank's operations have remained uninterrupted across all markets, reflecting the resilience of our technology infrastructure and business continuity capabilities. Enhanced governance through our crisis management team and business continuity framework ensures proactive risk monitoring and swift decision-making. Strong liquidity, diversified funding, and real-time risk oversight position the group to manage evolving geopolitical and market developments. The regional conflict is affecting global markets, trade, and investment flows. There is increased volatility in exchange rates and also commodity prices. These are expected to sustain inflationary pressures and keep interest rates elevated. Our strong capital and liquidity position, robust risk management, strong ownership structure, and healthy portfolio gives us confidence that our business will weather these challenges. Looking ahead, we remain cautiously optimistic and believe our diversified franchise is well-positioned to navigate these uncertainties and also capitalize on opportunities as conditions normalize.

Speaker #3: Strong liquidity, diversified funding, and real-time risk oversight positioned the group to manage evolving geopolitical and market developments. The regional conflict is affecting global markets, trade, and investment flows.

Speaker #3: There is increased volatility in exchange rates and commodity prices. These are expected to sustain inflationary pressures and keep interest rates elevated. Our strong capital and liquidity position, robust risk management, strong ownership structure, and healthy portfolio give us confidence that our business will weather these challenges.

Suresh Padmanabhan: These are expected to sustain inflationary pressures and keep interest rates elevated. Our strong capital and liquidity position, robust risk management, strong ownership structure, and healthy portfolio gives us confidence that our business will weather these challenges. Looking ahead, we remain cautiously optimistic and believe our diversified franchise is well-positioned to navigate these uncertainties and also capitalize on opportunities as conditions normalize.

Speaker #3: Looking ahead, we remain cautiously optimistic and believe our diversified franchise is well positioned to navigate these uncertainties and also capitalize on opportunities as conditions normalize.

Speaker #1: Thank you, Suresh. The second question is about ECL. The question is asking why exactly it has increased in the first half of 2026, and whether this trend will continue through to year-end.

Fatema Yusuf: Thank you, Suresh. The second question is inquiring about ECL, and the question is inquiring why exactly has it increased in the H1 2026, and will this trend continue through to year-end?

Speaker #3: Thank you. So as we discussed earlier in the presentation, the half 1 2026 ECL was US dollar 84 million. That was almost double that of what we saw last year, which was at 44 million.

Suresh Padmanabhan: Thank you. As we discussed earlier in the presentation, the H1 2026 ECL was USD 84 million. That was almost double that of what we saw last year, which was at USD 44 million. It was a USD 40 million year-on-year increase. Two factors I will reflect on. One is the current year approach was a very prudent provisioning thinking, reflecting the geopolitical situation, the macroeconomic outlook. The second one, the year-on-year increases was also amplified by the one-off recoveries, what we experienced last year in H1 2025. That one-off recoveries resulted in a comparatively lower ECL charge of USD 44 million last year. Cost of risk, therefore, increased to 76 basis points as compared to 41 last year. However, underlying asset quality remains resilient. NPL ratios, provision coverage metrics, all remains at healthy levels.

Speaker #3: So, it was a $40 million year-on-year increase. So, two factors I will reflect on: one is the current year's approach was a very prudent provisioning thinking.

Speaker #3: Reflecting the geopolitical situation and the macroeconomic outlook, the second one, the year-on-year increase, was also amplified by the on-off recoveries we experienced last year in H1 2025.

Speaker #3: So that on-off recoveries resulted in a comparatively lower ECL charge of $44 million last year. Cost of risk therefore increased to 76 basis points, as compared to 41 last year.

Speaker #3: However, underlying asset quality remains resilient. NPL ratios and provision coverage metrics all remain at healthy levels. To add one more factor, even in H1, our Q2 provision levels moderated as compared to Q1.

Suresh Padmanabhan: To add one more factor, even in H1, our Q2 provision levels moderated as compared to the Q1. The Q1 took the main impact from the macroeconomics. It was at $46 million for first quarter, whereas for the second quarter, it improved already to $38 million. All I can conclude is that our credit risk fundamentals remain sound. Our risk management practices are robust and conservative. We continue to have vigilance over the evolving credit environment. Our provisioning approach will be balanced. Looking ahead, improving business and economic conditions are expected to support the sentiment, with the ECL charges anticipated to gradually normalize over time.

Speaker #3: Q1 took the main impact from the macroeconomics. It was at $46 million for the first quarter, whereas for the second quarter it improved already to $38 million.

Speaker #3: So, all I can conclude is that our credit risk fundamentals remain sound. Our risk management practices are robust and conservative. We continue to maintain vigilance over the evolving credit environment.

Speaker #3: Our provisioning approach will be balanced, so looking ahead, improving business and economic conditions are expected to support sentiment, with the ECL charges anticipated to gradually normalize over time.

Speaker #1: Thank you, Suresh. I believe we have a question from our audience, which is basically inquiring about the drivers behind the H1 revenues.

Fatema Yusuf: Thank you, Suresh. I believe we have a question from our audience, which is basically inquiring about the drivers behind the H1 revenues.

Speaker #3: Right. So obviously the H1 was a key period where this whole region was impacted by a variety of factors. The bank was still able to deliver a 5% year on year growth on the revenue.

Suresh Padmanabhan: Well, obviously, the H1 was a key period where this whole region was impacted by a variety of factors. The bank was still able to deliver a 5% year-on-year growth on the revenue. It was a pretty resilient performance taken into context of prevailing conditions. The key drivers for this growth, number one was our well-diversified revenues across the franchise, which have reduced the concentration into geographies and also supports more stable earnings. Particularly strong performance in Europe, in Brazil, and also some of the MENA markets compensated for somewhat moderated softer performance in other parts of the group, which were affected by the prevailing geopolitical environment. The revenue mix, what we had discussed previously in the presentation, highlights the strength of our multi-market platform and the effectiveness of our strategy to build balanced revenue streams across geographies and business lines.

Speaker #3: It was a pretty resilient performance, taken into context-providing conditions. The key drivers for this growth: number one was our well-diversified revenues across the franchise.

Speaker #3: This has reduced the concentration in certain geographies and also supports more stable earnings. Particularly strong performance in Europe, Brazil, and some of the main markets compensated for somewhat moderated or softer performance in other parts of the group, which were affected by the prevailing geopolitical environment.

Speaker #3: The revenue mix we had discussed previously in the presentation highlights the strength of our multi-market platform and the effectiveness of our strategy to build balanced revenue streams across geographies and business lines.

Suresh Padmanabhan: The revenue mix, what we had discussed previously in the presentation, highlights the strength of our multi-market platform and the effectiveness of our strategy to build balanced revenue streams across geographies and business lines.

Speaker #3: This gives us confidence in revenue momentum as we navigate this challenging year.

Suresh Padmanabhan: This gives us confidence in revenue momentum as we navigate this challenging year.

Speaker #1: Thank you. Thank you, Suresh. We have also received a question in the chat, congratulating us on the excellent performance notwithstanding the external context. The question is inquiring if there are any views on the forecasted contribution of the MINA units to the group.

Fatema Yusuf: Thank you. Thank you, Suresh. A question as well that we have received on the chat congratulating us for the excellent performance, notwithstanding the external context. The question is inquiring if there are any views on the forecasted contribution of the MENA units to the group.

Speaker #3: Right. So typically as a practice we don't give forecasts or forward looking guidance, but as a revenue composition I think we had indicated in earlier when we spoke about in that I'm going to refer to what we told you before.

Suresh Padmanabhan: Right. Typically, as a practice, we don't give forecasts or forward-looking guidance. As a revenue composition, I think we had indicated earlier when we spoke about impact, I am going to refer to what we told you before. We said the composition of our revenues is MENA subsidiaries contribute about 20% of the group's revenue, and that's one of the key contributors for the group's performance. At this stage, we think that they are pretty steady and will continue based on their history.

Speaker #3: We said our MENA subsidiaries are—the composition of our revenues is, MENA subsidiaries contribute about 20% of the group's revenue, and that's one of the key contributors to the group's performance.

Speaker #3: At this stage, we think that they are pretty steady and will continue based on the history.

Speaker #1: Thank you very much, Suresh. I believe there are no further questions, so it's time to conclude our session. Thank you all for joining us today and for your continued support. For any further questions, feel free to contact our Communications and Investor Relations team at any time.

Fatema Yusuf: Thank you very much, Suresh. I believe there are no further questions, so it's time to conclude our session. Thank you all for joining us today and for your continued support. For any further questions, feel free to contact our communications and investor relations team at any time. Until we meet in the next quarter, goodbye.

Speaker #1: Until we meet in the next quarter, goodbye.

Operator: Goodbye.

Q2 2026 Arab Banking Corp BSC Earnings Call

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