6.3 Liquidity risk
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its obligations from financial liabilities. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
i.Analysis of financial assets and financial liabilities by remaining contractual maturities
The table below summarizes the maturity profile of the Group’s assets and liabilities at 31 December 2020 based on contractual maturities.
| Less than 3 months | 3 months to less than 1 year | 1 year to 5 years | Over 5 years | Total | |||||
| AED’000 | AED’000 | AED’000 | AED’000 | AED’000 | |||||
| ASSETS | |||||||||
| Cash and balances with U.A.E. Central Bank | 33,267 | – | – | – | 33,267 | ||||
| Due from banks and financial institutions | 468,961 | – | – | 6,000 | – | 474,961 | |||
| Loans and advances | 860,286 | 375,287 | 925,771 | 7,009 | 2,168,353 | ||||
| Islamic financing and investing assets | 32,147 | 11,393 | 14,274 | 2,567 | 60,381 | ||||
| Investments, including associate | 174,418 | 48,392 | 94,906 | 19,746 | 337,462 | ||||
| Insurance receivables and contract assets | 69,923 | 35,666 | 6,185 | – | 111,774 | ||||
| Other assets |
19,461————- |
|
13,554————- |
|
–————- |
|
–————- |
|
33,015————- |
| Financial assets | 1,658,463 | 484,292 | 1,047,136 | 29,322 | 3,219,213 | ||||
| Non-financial assets | – | 79,834 | 102,072 | 6,705 | 188,611 | ||||
| Total assets |
1,658,463 |
|
564,126 |
|
1,149,208 |
|
36,027 |
|
3,407,824 |
| LIABILITIES | |||||||||
| Due to banks | 54,577 | – | – | – | 54,577 | ||||
| Customers’ deposits and margin accounts | 922,854 | 569,712 | 431,393 | – | 1,923,959 | ||||
| Short term borrowings and medium-term loans | 95,480 | 227,680 | – | – | 323,160 | ||||
| Unearned premiums | 79,368 | – | – | – | 79,368 | ||||
| Gross claims outstanding | 57,196 | – | – | – | 57,196 | ||||
| Lease liabilities | – | 3,461 | – | – | – | 3,461 | |||
| Other liabilities | 165,992
————- |
4,462
———— |
–
———— |
– | –
———– |
170,454
————- |
|||
| Financial liabilities | 1,375,467 | 805,315 | 431,393 | – | 2,612,175 | ||||
| Non-financial liabilities | 10,988 | – | – | 14,925 | 25,913 | ||||
| Total liabilities |
1,386,455 |
|
805,315 |
|
431,393 |
|
14,925 |
|
2,638,088 |
| Off balance sheet | |||||||||
| Contingent liabilities | 666,967 | 75,628 | 17,011 | 251 | 759,857 | ||||
| Commitments | 4,502 | – | – | – | 4,502 | ||||
| Total |
671,469 |
|
75,628 |
|
17,011 |
|
251 |
|
764,359 |
The maturity profile of the Group’s assets and liabilities at 31 December 2019 was as follows:
| Less than 3 months | 3 months to less than 1 year | 1 year to 5 years | Over 5 years | Total | |||||
| AED’000 | AED’000 | AED’000 | AED’000 | AED’000 | |||||
| ASSETS | |||||||||
| Cash and balances with U.A.E. Central Bank | 93,533 | – | – | – | 93,533 | ||||
| Due from banks and financial institutions | 411,409 | 5,000 | 6,000 | – | 422,409 | ||||
| Loans and advances | 120,526 | 9 | 935,844 | 1,348,899 | 46,761 | 2,452,030 | |||
| Islamic financing and investing assets | 58,763 | 18,248 | 13,839 | – | 90,850 | ||||
| Investments, including associate | 246,205 | 132,939 | 108,057 | 42,222 | 529,423 | ||||
| Insurance receivables and contract assets | – | 104,294 | 6,971 | – | 111,265 | ||||
| Other assets | 59,631
————- |
13,131
————- |
–
————- |
–
———– |
72,762
————- |
||||
| Financial assets | 990,067 | 1,209,456 | 1,483,766 | 88,983 | 3,772,272 | ||||
| Non-financial assets | 34,770 | – | 110,186 | 6,705 | 151,661 | ||||
| Total assets |
1,024,837 |
1,209,456 |
1,593,952 |
95,688 |
3,923,933 |
| LIABILITIES | |||||||||
| Due to banks | 13,459 | – | – | – | 13,459 | ||||
| Customers’ deposits and margin accounts | 707,913 | 1,158,735 | 604,159 | – | 2,470,807 | ||||
| Short term borrowings and medium-term loans | 76,433 | 171,670 | 25,000 | – | 273,103 | ||||
| Unearned premiums | 94,890 | – | – | – | 94,890 | ||||
| Gross claims outstanding | 58,851 | – | – | – | 58,851 | ||||
| Other liabilities | 173,328
————- |
6,713
————- |
8,374
————- |
188,415
————- |
|||||
| Financial liabilities | 1,124,874 | 1,337,118 | 637,533 | – | 3,099,525 | ||||
| Non-financial liabilities | 15,351 | – | – | 14,573 | 29,924 | ||||
| Total liabilities |
1,140,225 |
1,337,118 |
637,533 |
14,573 |
3,129,449 |
| Off balance sheet | |||||||||
| Contingent liabilities | 901,191 | 195,634 | 12,977 | – | 1,109,802 | ||||
| Commitments | 4,200 | – | – | – | 4,200 | ||||
| Total |
905,391 |
195,634 |
12,977 |
– |
1,114,002 |
||||
The amounts in the table above have been compiled as follows:
| Type of financial instrument | Basis on which amounts are compiled |
| Non-derivative financial liabilities and financial assets | Undiscounted cash flows, which include estimated interest payments |
| Issued financial guarantee contracts and Contingent liabilities and commitments. | Earliest possible contractual maturity. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called. |
