CBI Reports and Consolidated Financial Statements - December 2024

Commercial Bank

International P.J.S.C.

REPORTS AND THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

These audited consolidated financial statements are subject to approval of the Central Bank of the UAE and adoption by shareholders at the annual general meeting.

The content is classified as Public

Saif Al Shehhi (Jan 14, 2025 12:08 GMT+4)

Independent Auditor's Report to the Shareholders of Commercial Bank International P.J.S.C (continued)

Report on the Audit of the Consolidated Financial Statements (continued)

Key Audit Matters (continued)

1. Measurement of expected credit losses (continued)

The measurement of ECL amounts for retail and non-retail exposures classified as Stage 1 and Stage 2 are carried out by the models with limited manual intervention. It is important that the models and key variables probability of default (PD), loss given default (LGD), exposure at default (EAD) and macroeconomic adjustments are valid throughout the year and are subject to a validation process by an independent reviewer.

For the defaulted exposures, management applies judgements to estimate the expected future cash flows related to individual exposures including the value of collateral.

Measurement of ECL is considered a key audit matter as the Group applies significant judgments and makes a number of assumptions in developing ECL models.

How our audit addressed the key audit matter

We performed the following audit procedures on the computation and reasonableness of the ECL included in the Group's consolidated financial statements for the year ended 31 December 2024:

• Obtained an understanding of the credit risk management process and the estimation process of determining impairment allowances for loans and advances and tested the operating effectiveness of relevant controls within these processes.
• For a sample of exposures, checked the appropriateness of the Group's application of the staging criteria, including the basis for movement between stages.
• Tested the completeness and accuracy of the data used in the calculation of ECL.
• We involved our IFRS 9 experts to assess:

• • the conceptual framework used for developing the Group's impairment policy in the context of its compliance with the requirements of IFRS 9 - Financial Instruments.
  • ECL modelling methodology and calculations used to compute the probability of default (PD), loss given default (LDG), and exposure at default (EAD) including reasonableness of the assumptions.
  • the appropriateness of the macro-economic variables, multiple economic scenarios chosen and scenario weightings.
• Tested the calculation methodology and traced a sample back to source data for a sample of wholesale and retail exposures.
• Evaluated post model adjustments and management overlays in order to assess the reasonableness of these judgements.
• The Group performed an external validation of key variables i.e. probability of default and loss given default, including macroeconomic, used in calculating the ECL during the year. We considered the process of this external validation of the models and its impact on the results of the impairment estimate.
• Performed an independent credit assessment for a sample of non-retail customers, including Stage 3 customers, by assessing the quantitative and qualitative factors including assessment of financial performance of the customer, source of repayments and its history, discounted future cash flows of the borrower, credit risk mitigation through collateral and other relevant risk factors.
• Assessed the disclosure in the consolidated financial statements relating to ECL against the requirements of IFRS Accounting Standards.

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Independent Auditor's Report to the Shareholders of Commercial Bank International P.J.S.C (continued)

Report on the Audit of the Consolidated Financial Statements (continued)

Key Audit Matters (continued)

2. IT systems and controls over financial reporting

We identified IT systems and controls over the Bank's financial reporting as an area of focus due to the extensive volume and variety of transactions which are processed daily by the Bank and reliance on the effective operation of automated and IT dependent manual controls. There is a risk that automated accounting procedures and related internal controls are not accurately designed and operating effectively. In particular, the incorporated relevant controls are essential to limit the potential for fraud and error as a result of change to an application or underlying data.

How our audit addressed the key audit matter

Our audit approach relied on automated controls and therefore the following procedures were performed to test access and control over IT systems:

• Obtained an understanding of the applications relevant to financial reporting and the infrastructure supporting these applications.
• We involved our IT experts to:

• • test IT general controls (ITGC) relevant to automated controls and computer-generated information covering access, security, program changes, data centre and network operations.
  • perform testing on the key automated controls on significant IT systems relevant to business processes.
• Examined computer generated information used in financial reports from relevant applications and key controls over their report logics.

Other Information

The Board of Directors is responsible for the other information. The other information comprises the annual report of the Group. We obtained the Board of Directors' report that forms part of the annual report prior to the date of our auditor's report, and the remaining information of the annual report is expected to be made available to us after that date. The other information does not include the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of our auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements

The Directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards as issued by International Accounting Standards Board ("IASB") and their preparation in compliance with the applicable provisions of the UAE Federal Decree Law No. (32) of 2021, and for such internal control as Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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Independent Auditor's Report to the Shareholders of Commercial Bank International P.J.S.C (continued)

Report on the Audit of the Consolidated Financial Statements (continued)

Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements (continued)

In preparing the consolidated financial statements, Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities of the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

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Independent Auditor's Report to the Shareholders of Commercial Bank International P.J.S.C (continued)

Report on the Audit of the Consolidated Financial Statements (continued)

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements (continued)

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

As required by the UAE Federal Decree Law No. (32) of 2021, we report that for the year ended 31 December 2024:

• We have obtained all the information we considered necessary for the purposes of our audit;
• The consolidated financial statements have been prepared and comply, in all material respects, with the applicable provisions of the UAE Federal Decree Law No. (32) of 2021;
• The Bank has maintained proper books of account;
• The financial information included in the Board of Directors' report is consistent with the books of account and records of the Bank;
• Notes 12 and 13 to the consolidated financial statements disclose the Bank purchases or investments in shares during the year ended 31 December 2024;
• Note 42 to the consolidated financial statements discloses material related party transactions and the terms under which they were conducted;
• Based on the information that has been made available to us nothing has come to our attention which causes us to believe that the Bank has contravened during the year ended 31 December 2024 any of the applicable provisions of the UAE Federal Law No. (32) of 2021 or its Articles of Association which would materially affect its activities or its financial position as at 31 December 2024; and
• Note 30 to the consolidated financial statements discloses social contributions made during the year ended 31 December 2024.

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Independent Auditor's Report to the Shareholders of Commercial Bank International P.J.S.C (continued)

Report on Other Legal and Regulatory Requirements (continued)

Further, as required by UAE Federal Law No. (14) of 2018, as amended, we report that we have obtained all the information and explanations we considered necessary for the purpose of our audit.

GRANT THORNTON UAE

Farouk Mohamed

Registration No: 86

Abu Dhabi, United Arab Emirates

Date: 14 January 2025

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