5.2.11 Loss allowance

The loss allowance recognized in the period is impacted by a variety of factors, as described below:

• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month and Lifetime ECL;
• Additional allowances for new financial instruments recognized during the period, as well as releases for financial instruments derecognized during the year;
• Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from regular refreshing of inputs to models;
• Impacts on the measurement of ECL due to changes made to models and assumptions;
• Discounts unwind within ECL due to the passage of time, as ECL is measured on a present value basis; and
• Financial assets derecognized during the period and write-offs of allowances related to assets that were written off during the period. 

  The following table explain the changes in the loss allowance between the beginning and the end of the annual period due to these factors:

  	2023
  	Stage 1		Stage 2		Stage 3
  	12-month ECL		Lifetime ECL		Lifetime ECL		Total
  	AED’000		AED’000		AED’000		AED’000
  Loans and advances
  Loss allowance as at 1 January	22,617		49,365		372,057		444,039
  Transfers
  Transfer from Stage 1 to Stage 2	(2,610)		2,610		–		–
  Transfer from Stage 1 to Stage 3	(250)		–		250		–
  Transfer from Stage 2 to Stage 1	917		(917)		–		–
  Transfer from Stage 2 to Stage 3	–		(871)		871		–
  Transfer from Stage 3 to Stage 1	1,132		–		(1,132)		–
  Transfer from Stage 3 to Stage 2	–		3,082		(3,082)		–
  New financial assets originated	3,900		12,436		21,348		37,684
  Net remeasurement of loss allowance
  Reversal of no longer required impairment charges	(1,848)		(1,733)		(10,687)		(14,268)
  Changes in PDs/LGDs/EADs
  Loss allowance as at 31 December 2023	23,858		63,972		379,625		467,455
  Islamic financing and investing assets
  Loss allowance as at 1 January	193		100		60,323		60,616
  Transfers
  Transfer from Stage 1 to Stage 2	–		–		–		–
  Transfer from Stage 1 to Stage 3	–		–		–		–
  Transfer from Stage 2 to Stage 1	–		–		–		–
  Transfer from Stage 2 to Stage 3	–		–		–		–
  Transfer from Stage 3 to Stage 1	–		–		–		–
  Transfer from Stage 3 to Stage 2	–		–		–		–
  New financial assets originated	–		–		–		–
  Net remeasurement of loss allowance	–		–		–		–
  Reversal of no longer required impairment charges	(31)		(99)		(1,306)		(1,436)
  Loss allowance as at 31 December 2023	162		1		59,017		59,180