Quarterly Report Q4 2024

Contents

Page

Report of the Board of Directors

1 - 2

Independent auditor's report

3 - 9

Consolidated income statement

10

Consolidated statement of comprehensive income

11

Consolidated statement of financial position

12

Consolidated statement of changes in equity

13

Consolidated statement of cash flows

14

Notes to the consolidated financial statements

15 - 105

ABU DHABI ISLAMIC BANK PJSC

1

Key audit matter

How our audit addressed the key audit matter

The assessment of the Group's determination of

We performed the following audit procedures on the

impairment allowances for Islamic financing to

computation and reasonableness/ appropriateness of the ECL

customers measured at amortised cost requires

included in the Group's consolidated financial statements for

management to make significant judgements over

the year ended 31 December 2024:

the staging and measurement of the Expected Credit

We have obtained a detailed understanding of Islamic

Loss (ECL). The audit was focused on this matter

financing to customers origination process, credit risk

due to the materiality and the complexity of the

management process and the estimation process of determining

judgements applied and assumptions and estimates

expected credit losses for Islamic financing to customers

used in the ECL models. As at 31 December 2024,

measured at amortised cost and tested the design,

gross Islamic financing to customers measured at

implementation and operating effectiveness of relevant

amortised cost amounted to AED 147.1 billion

controls within these processes, which included testing:

against which an allowance for impairment of AED

4.5 billion was recorded.

• System-based and manual controls over the timely

Refer to Notes 18 and 19 to the consolidated financial

recognition of impaired Islamic financing to customers;

• Controls over collateral valuation estimates; and

statements for Islamic financing to customers, Note 3

• Controls over governance and approval process related to

for the accounting policy, Note 3.4 for critical

ECL provisions and ECL Models including continuous

judgements and estimations used by management and

reassessment by the management.

Note 44 for the credit risk disclosure.

ECLs are a probability-weighted estimate of the

We understood and evaluated the soundness of the ECL

models by involving our internal specialists to determine if

present value of credit losses. The Group employs

they were in compliance with the requirements of IFRS

statistical models for ECL calculations and the key

Accounting Standards. We tested the mathematical integrity

variables used in these calculations are probability

of the ECL model by performing recalculations on a sample of

of default (PD), loss given default (LGD) and

Islamic financing to customers measured at amortised cost and

exposure at default (EAD), which are defined in

assessed the consistency of the various inputs and assumptions

Note 44.2 to the consolidated financial statements.

used by management to determine ECL provisions.

On a sample basis, we selected individually assessed Islamic

financing to customers and assessed the information for

evaluating credit-worthiness and the staging classification. We

challenged the assumptions underlying the ECL provision

calculations, such as credit risk mitigation through discounted

future cash flows including collateral and estimates of

recovery. We also assessed the consistency of the Group's

application of the requirements of IFRS Accounting Standards

relating to this matter.

Key audit matter

How our audit addressed the key audit matter

The material portion of the non-retail portfolio of Islamic

For Islamic financing to customers

measured

at

amortised

cost not

tested

individually,

we

evaluated

financing

to

customers

measured at

amortised

cost is

controls over the modelling process, including model

assessed individually for the significant increase in credit

monitoring, validation and approval. We tested controls

risk

(SICR)

or

credit

impairment

and

the

related

over model outputs. We challenged key assumptions

measurement of ECL. There is the risk that management

such as thresholds used to determine SICR and forward

does

not

capture

all

qualitative

and

quantitative

looking

macroeconomic

scenarios and

evaluated

reasonable and supportable forward-looking information

management's methodology with the assistance of our

while assessing SICR, or while assessing credit-impaired

internal specialists to determine if it was in compliance

criteria for the exposure. Management bias may also be

with IFRS Accounting Standards.

involved in manual staging override in accordance with

the Group's

policies

and the

requirements

of

IFRS 9

We verified the integrity of data used as input to the

Financial

Instruments.

There is

also the risk

that

models including the transfer of data between source

judgements, assumptions, estimates, proxies and practical

systems and the ECL models.

expedients implemented previously, are not consistently

applied throughout the current reporting period or there

We evaluated post model adjustments and management

are any unjustified movements in management overlays.

overlays in order to assess the reasonableness of these

The measurement of ECL amounts for retail and non-

adjustments.

retail

exposures

classified as

Stage

1

and

Stage 2

are

We assessed the disclosures in the consolidated financial

model-based with limited manual intervention, however,

statements

relating

to

this matter

against

the

it is

important

that

models

(PD,

LGD,

EAD

and

requirements of IFRS Accounting Standards.

macroeconomic adjustments) are valid throughout the

reporting period.

Risk of inappropriate access or changes to information technology systems

Key audit matter

How our audit addressed the key audit matter

The Bank is vitally dependent on its complex information

Our audit approach depends to a large extent on the

technology environment for the reliability and continuity

effectiveness of automated and IT-dependent manual

of its operations and financial reporting process due to the

controls and therefore we updated our understanding of

extensive volume and variety of transactions which are

the Bank's IT-related control environment and identified

processed daily across the Bank's businesses; this includes

IT applications, databases and operating systems that are

cyber risks.

relevant for the financial reporting process and to our

audit.

Key audit matter

How our audit addressed the key audit matter

Inappropriate granting of or ineffective monitoring of

For relevant IT-dependent controls within the financial

access rights to IT systems therefore presents a risk to the

reporting process we identified, with the involvement of

accuracy of financial accounting and reporting.

our internal IT specialists, supporting general IT controls

Appropriate IT controls are required to protect the Bank's

and evaluated their design, implementation and

IT infrastructure, data and applications, ensure transactions

operating effectiveness. We updated our understanding

are processed correctly and limit the potential for fraud and

of applications relevant for financial reporting and tested

error as a result of change to an application or underlying

key controls particularly in the area of access protection,

data.

integrity of system interfaces and linkage of such

controls to the reliability, completeness and accuracy of

Unauthorised or extensive access rights cause a risk of

financial reporting including computer-generated reports

intended or unintended manipulation of data that could

used in financial reporting. Our audit procedures

have a material effect on the completeness and accuracy of

covered, but were not limited to, the following areas

financial statements. Therefore, we considered this area as

relevant for financial reporting:

a key audit matter.

For further information on this key audit matter refer to

• IT general controls relevant to automated controls

and computer-generated information covering

Note 44 of the consolidated financial statements.

access security, program changes, data centre and

network operations;

• Controls regarding initial access granted to IT

systems for new employees or employees changing

roles, whether that access was subject to appropriate

screening and was approved by authorised persons;

• Controls regarding removal of employee or former

employee access rights within an appropriate period

of time after having changed roles or leaving the

Bank;

• Controls regarding the appropriateness of system

access rights for privileged or administrative

authorisations (superuser) being subject to a

restrictive authorisation assignment procedure and

regular review thereof;

• Password protection, security settings regarding

modification of applications, databases and

operating systems, the segregation of department

and IT users and segregation of employees

responsible for program development and those

responsible for system operations;

• Program developers approval rights in the

modification process and their capability to carry out

any modifications in the productive versions of

applications, databases and operating systems; and