5.2.9 Sensitivity analysis of forward-looking factors

Sensitivity analysis of forward-looking factors

The Group has calculated ECL for loans and advances on a segmented portfolio level, wholesale and retail.

Wholesale

The Group has used a scenario-based analysis approach on macroeconomic status to arrive at a forward-looking point-in-time PD, where management have assigned assumed probability weightage to the different scenarios on the state of economy. The Group has performed a sensitivity analysis on how ECL on the wholesale portfolio will change if the scenario probabilities used to calculate ECL change by a certain percentage. The impact on ECL due to a relative change in the assumed scenario by +10% / -10% in each of the base, upside and downside scenarios would result respectively in an ECL increase or decrease of AED 2,244 thousand. These changes are applied simultaneously to each probability-weighted scenario used to compute the expected credit losses. In reality, there will be interdependencies between the various economic inputs and the exposure to sensitivity will vary across the economic scenarios.

Retail

The most significant assumption affecting the ECL allowance in respect of the retail portfolio is Oil Price (% Change, Lag 0 months). The Group has performed a sensitivity analysis on how ECL on the retail portfolio will change if the key assumptions used to calculate ECL change by a certain percentage. The impact on ECL due to a relative change in the oil prices by +10% / -10% in each of the base, upside and downside scenarios would result respectively in an ECL increase or decrease of AED 2,176 thousand. These changes are applied simultaneously to each probability-weighted scenario used to compute the expected credit losses. In reality, there will be interdependencies between the various economic inputs and the exposure to sensitivity will vary across the economic scenarios.