Burgan Group - Investor Presentation 2010 · Long range plan • Substantially increase its market...
Transcript of Burgan Group - Investor Presentation 2010 · Long range plan • Substantially increase its market...
Burgan BankMarch 2010
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The information contained in this document has been provided on the basis of current knowledge, assumptions and expectations. In the event that any information is incorrect or any party misrepresented, Burgan Bank and its consultants cannot be held responsible forthis. Various factors could cause future results, performance or events to differ materially from those given in this document. No obligation is undertaken to update this document or the statements / information contained in it. The information contained in this documentshould by no means be interpreted as an invitation to making any investment decision based on the same. Our continuous advice is that every investor must rely on his/her own advisor and resources to ensure the correctness of the information presented to him/her andthenmakes his/her investment decision accordingly.
Content
About Burgan Bank 1
Activities & Strategy
The region & the group2
3 gy
Financials &Challenges ahead4
Conclusion5
2
About Burgan Bank1
About Burgan Bank
Burgan Bank restructured Burgan Bank
1977 1984 1997 2002 2003 - 04
Incorporated as a Listed on the Kuwait Burgan Bank Privatized. goperations which laid emphasis on best practice, organizational capabilities and increased profitability
Burgan Bank underwent major management reshuffle, focusing on its growth strategy
ppublic shareholding company in the State of Kuwait. Named after first and largest oil field
Listed on the Kuwait Stock Exchange
gGovernment of Kuwait divested it’s 61.0% stake; KIPCO acquired major stake.
oil field
2005 2007 2007 2008 2009
Burgan Bank adopts a long-term strategic plan ‘Bright Future’ to be implemented over 5 years (2006-2011)
Burgan Bank completed transfer of 43.86% stake in JKB from UGB,
Burgan Bank completed transfer of AGB (60% stake) and BoB (45.3% stake) from UGB ( dditi l 5% i d
Was acknowledged as the ‘Best Local Private Bank’ in Kuwait in the Fourth Annual Euro
Became a subsidiary of KIPCO during the year. Announced its new identity. Launched years (2006 2011)
taking its total stake to 51.1%
(additional 5% acquired in 2010 to make it a subsidiary)
money Private Banking Survey 2007.
expansion strategy –‘Bright Destiny’. Wins regional corporate governance award. 4
Overview (contd…)About Burgan Bank
O Mi i & Vi i
Our Vision Our Goals
Our Mission & Vision
To be the best of class financial service
provider in the MENA region through
t i d ti f b t ti
Our Goals
To maximize value for all oursustained execution of best practice,
innovation and reliable stakeholder care.
Our Mission
To maximize value for all our stakeholders, clients, personnel and shareholders by building on Burgan Bank’s three pillars f li d li h dOur Mission
Burgan Bank is your financial partner,
forming a relationship with you based on
of client delight and care, leveraging its operational and technological capabilities and nurturing our staff. Our
integrity and trust, providing innovative
banking services that understand and
support your different needs at every
nurturing our staff. Our stakeholder’s value must be consistent, growth oriented and accomplished in the spirit of the corporate governance
5
pp y y
stage of life.of the corporate governance framework.
5
About Burgan Bank
Regulated by the CBK and Listed on the Kuwait Stock Exchange
Burgan Bank
the Kuwait Stock Exchange
Majority shareholder
• KIPCO: 56.03% • Shareholder Equity at USD 1,135m,
market capitalization USD 1,199mand total balance sheet size of
Other shareholders
• Wafra Int. Investment Company: 5.73%
• Others (less than 5% ): 38 24%
and total balance sheet size of USD14,275m (as on 31 Dec 2009).
• Basel II capital adequacy 16.86 % (as on 31 Dec 2009)
• Market share of 10% for loans & • Others (less than 5% ): 38.24%
Corporate Governance
One of the first banks in the region to initiate and to
11% for deposits (Sep 2009).• The Group has four business areas
and is active in all market segments across 6 countries in the MENA region
publish its policy leading to…..
• Transparency of operations and activities
• Network of management committees
region.• Retail Banking: 300,000+ clients,
over 110 branches, 300+ ATMs, phone & Internet banking. Rollout of additional branches & ATMs.
• Code of conduct
…and resulting in the raising of standards. 6
Overview…About Burgan Bank
R ti ( f 31 t D b 2009)Ratings (as of 31st December 2009)
Burgan Bank Ratings Country ratings
S & P: ST : A-2 ST : A-1+LT : BBB+ LT : AA-
Moody’s: ST : P-1 ST : P-1LT : A2 (FSR: D+) LT : Aa2LT : A2 (FSR: D+) LT : Aa2
C.I.: ST : A2 ST : A1+LT : A (FSR: BBB+) LT : AALT : A- (FSR: BBB+) LT : AA-
7
About the region & Burgan Bank
Burgan Bank Group2
About the region & Burgan Bank
Th A i iti
United Gulf Bank and Burgan Bank are subsidiaries of Kuwait Projects Company (Holding) or KIPCO. KIPCO is listed on the Kuwait Stock Exchange and is part of a large business house
The Acquisition
with varied interests across the MENA Region in a number of business sectors.
The acquisition involved the transfer of the shareholdings from one subsidiary of KIPCO to another in a reorganization of the financial services business of KIPCO. Thus, the transaction led to the transfer of the controlling shares held by United Gulf Bank in AGB, BoB and JKB to Burgan Bank (See below for details on t ti )transaction).
The objective behind the transaction was to restructure KIPCO’s banking portfolio and to give a clear mandate to Burgan to drive the commercial banking activities.
+
Pre-Transaction Post-Transaction
60.
45.
43.8
76.
60
50 51 86
5.3
7.2
10.
+
.00%
31%
86%
56%
.00
% *
.61
%
.10
%
.56
%
30%
*
24%
.00%
* BB’s effective stake in AGB would be 91.8% 9
About the region & Burgan Bank
E titi h t 2009Entities snapshot 2009
Equity: USD 164.4M Equity: USD 97.2M Equity: USD 393.2M Equity: USD 82.0M
Assets: USD 622.4M
Revenue: USD 61.0M
Net profit: USD 20.8M
Assets: USD 680.7M
Revenue: USD 28.8M
Net profit: USD 16.1M
Assets: USD 3,011.1M
Revenue: USD 168.4M
Net profit : USD 67.5M
Assets: USD 491.0M
Revenue: USD 30.9M
Net Profit: USD 13.33MNet profit: USD 20.8M
ROE: 18.9% (after tax)
Branches: 13
15 000+ retail clients
Net profit: USD 16.1M
ROE: 17.6% (after tax)
Branches: 32
80 000+ retail clients
p
ROE: 18.3% (after tax)
Branches: 51
ROE: 17.04% (after tax)
Branches: 3
15,000+ retail clients
Acquired: April 09
80,000+ retail clients 100,000+ retail clients
Acquired: April 09 Acquired: July 08 Deal under
consideration 10
About the region & Burgan Bank
MENA i GDP thMENA region GDP growth
11
About the region & Burgan Bank
O i t i kOverview on country risk
12
About the region & Burgan Bank
B B k G bitiBurgan Bank Group ambition
13
Our Activities & Strategy3
Our Activities & Strategy
Reposition Burgan Bank with active encouragement of major shareholder into unique MENA wide commercial banking platform…
1. Create greater shareholder value through expanded MENA f hi
Strategy ambition
franchise2. Sustainable growth in core banking profits3. Best of class financial services provider consistently across the
MENA region (Recognized expertise and adapted best practices)
Drivers1. Redeploy capital 2. Strengthen & develop current operations for
sustainable cost effective growth3. Acquire commercial banking assets on self
funded basis
Impact
1. Diversify risk – Widen geographical reach on prudent basis
2 Diversify sources of income
funded basis
Impact 2. Diversify sources of income3. Create unique MENA
franchise value
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Our Activities & Strategy
L l
Presently, Burgan Bank is committed through its
Long range plan
• Substantially increase its market share and revenuesfrom its client facing business with a major focus on
y, g gLong Range Plan (2010– 2014) to:
from its client facing business with a major focus onRetail Banking and Private Banking through theexecution of Project Bright Future.
• Significantly expand the Bank’s market presence andfootprint through the introduction of new products inTreasury Operations and substantially increasey p yinternational trade and financing activities.
• Create a regional platform and widen the scope ofg p pbanking activities through its affiliation and acquisitionof other KIPCO Group banks in the MENA region.
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Our Activities & Strategy
O ill
Three Pillars for Profitable Growth
Our pillars
Cli D li h
Ranked in the top 10% of world banks (Customer Satisfaction Index
Client Delight & Care
Research by TNS / TRIM Analysis 07/08)
Implemented assessment & appraisal
Very close to achieving a
system to measure values & principles.
h
Nurturing Staff
Very close to achieving a T3R Ratio of 3:1
Enhancing Process & Leveraging IT 17
Financials & Challenges Ahead4
Pric
e m
ance
anci
al
w a
nd
ngth
s
g th
e en
ges
Shar
e Pe
rfor
m
Fina
Revi
ewst
ren
Mee
tinCh
alle
*USD 1 = KD 0.2868
Balance SheetFinancial Review and
strengthsstrengths
Loans & Advances Customer Deposits
7,437 7,835
6 500
7,500
8,500
9,500
5,748
8,424
8,455
6500
7500
8500
9500
m2,619 2,789
3,300
4,955
2 500
3,500
4,500
5,500
6,500
USD
m
3,655
4,068 4,316
,
2500
3500
4500
5500
USD
m2,500
2004 2005 2006 2007 2008 2009
25002004 2005 2006 2007 2008 2009
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Profit & LossFinancial Review and
strengthsstrengths
Operating Profit Net Profit
387 6
222.7
271.3305.5
387.6
250
300
350
400
194.3
260.9
200
250
300
127.4
170.9
50
100
150
200
m
103.2
147.8 129.2
21.7 50
100
150
m
02004 2005 2006 2007 2008 2009
USD
02004 2005 2006 2007 2008 2009
USD
'
20
Financial StrengthFinancial Review and
strengthsstrengths
NPL’s to Loans Provision Coverage
245%
200%
240%
280%
10.0%10%
12%
78%
109%130%
166%
57%80%
120%
160%6.1%
4.1% 3.5%
1 7%
4%
6%
8%
57%
0%
40%
2004 2005 2006 2007 2008 2009
1.7%1.4%
0%
2%
2004 2005 2006 2007 2008 2009
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Financial StrengthFinancial Review and
strengths
Capital Adequacy Ratio of 16.86%.
S d Li idit ith 10% f t t l t i T Bill & B d
strengths
Sound Liquidity with 10% of total assets in T Bills & Bonds.
Investments account for only around 3% of total assets.
Investment company exposure represents less than 4 % of total credit exposure.
Periodic stress testing of loan portfolio undertaken since early 2008 to anticipate potential problems.Periodic stress testing of loan portfolio undertaken since early 2008 to anticipate potential problems.
Prudential aggressive Provision Coverage
Total provision of USD 624.6 m , out of which about half in general provisions (Statutory and voluntary).
2004 2005 2006 2007 2008 2009
Total Assets (USD M) 6 063 6 589 7 706 9 929 13 748 14 275Total Assets (USD M) 6,063 6,589 7,706 9,929 13,748 14,275
Return on Assets 1.6% 2.5% 2.84% 2.8% 1.2% 0.2%
Return on Equity 13.8% 19.2% 24.1% 24.7% 11.5% 2.0%
Capital Adequacy Ratio* 17.8% 18.4% 16.5% 16.5% 13.8% 16.9%p q y
(Minimum 12% required by Central Bank of Kuwait)*Full compliance with Basel II “standardized approach” since December 2005. 22
Financial Strength 2008 - 2009Financial Review and
strengths
Operating Expense and Cost-to-income Total Income
strengths
ratioUSD million
Total Income
116.3
151.8
27 7%
28.1%
24%
26%
28%
30%
120
160
539 4 27.7%
16%
18%
20%
22%
24%
0
40
80422.2 539.4
USD
m
Net ProfitOperating Profit before provisions
2008 2009Operating Cost C:I Ratio
2008 2009
USD million
305.5387.6
SD m
129 2D m
2008 2009
US 129.2
21.7
2008 2009
USD
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Share Price Performance
January 2009 to December 2009
Financial Review and
strengths ystrengths
BB Share Price : 17% down*General Index : 3% up Banking Index : 3% up
10000
8,134 8,298
9,253 9,136
8,370 8,080
7,817 8000
0.420
0.380
0.4300.370
0 350
0.400
0.500
6,765 6,745 6,987
6000
0.350
0 100
0.200
0.300
KD F
ils
4000Jan-09 Mar-09 Jun-09 Sep-09 Dec-09
Banking Index General Index
0.000
0.100
Jan-09 Mar-09 Jun-09 Sep-09 Dec-09BB
* Sh i i h dj f B I* Share price without adjustment for Bonus Issue
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Why Invest in Burgan BankShare Price Performance
Redeployed capital into strategic core banking operating subsidiaries
Managing downturn through systematic acquisitions & provisions
Diversification of risks and sustainable sources of income
Zero dilution of capital
Additional financial strength through voluntary general provisions and retained earnings
Sh i b f l
Conventional Banking Sector P/B as of Dec 2009
Short-term returns in abeyance for long-term return
Attractive valuation price
g /Bank Market Price ( USD) P/B
Ahli Bank Of Kuwait 1.818 1.87
Bank Of Kuwait & Middle East 1.783 2.06
Bank Market Price ( USD) P/B
Ahli Bank Of Kuwait 1.818 1.87
Bank Of Kuwait & Middle East 1.783 2.06
Burgan Bank 1.189 0.89
Commercial Bank Of Kuwait 3.252 2.66
Gulf Bank 1.049 1.76
NBK 3.916 1.91
Burgan Bank 1.189 0.89
Commercial Bank Of Kuwait 3.252 2.66
Gulf Bank 1.049 1.76
NBK 3.916 1.91
Average P/B 1.86
Note: P/B is based on 31 st Dec price and book value as of 30 th Sept 09
Average P/B 1.86
Note: P/B is based on 31 st Dec price and book value as of 30 th Sept 09
25Source: KAMCO research
Dividend Policy and Dividend PaidShare Price Performance
Dividend Policy
Statutory Requirement
• 10% of Net profits towards Statutory Reserves• 10% of Net profits towards Voluntary Reserves
BB PolicyBB Policy
• 10% minimum additional voluntary Reserves.
Dividend PaidDividend Paid
2004 : Cash 25 fils = 9 cents
2005 : Cash 40 fils = 14 cents
2006 : Cash 50 fils = 17 cents
2007 : Cash 60 fils + 10% bonus = 21 cents + 10% bonus share
2008 : Cash NIL, Bonus Shares 10%
2009 : Cash NIL*USD 1 = KD 0.286826
Meeting Challenges: 2010 Meeting the Challenges
• Government support to investment sector & fiscal actions will be key determinants of the dynamics of the banking sector.
• Local economic developments dependent on State Budget and Spending along with international economic developmentsSpending, along with international economic developments.
• State of Kuwait has already announced a 5 year InfrastructureState of Kuwait has already announced a 5 year Infrastructure Spending Plan of over US$ 130 Billion.
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Meeting Challenges: 2010 Meeting the Challenges
• Investment portfolio constitutes around 4 % of total balance sheet size, given the minimal trading portfolio, BB is well insulated from further market volatility.
• Group core operating income expected to grow by around 7 %.
• The acquisitions are in fast growing economies, isolated from global
economic trends and will strengthen the position of the bank.
G o p net p ofit g idance E pected s bstantial inc ease• Group net profit guidance : Expected substantial increase.
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Integration of Subsidiaries after AcquisitionMeeting the Challenges
Working closely with Internationally well known consultantsWorking closely with Internationally well known consultants.
Integration to be in three waves
Wave 1: Risk Mgmt., Accounts / MIS, Treasury, Internal Audit & Corp. Communications: CompletedCommunications: Completed.
Wave 2: IT, Human Resources & Operations : In progress
Wave 3: Client Facing Business Lines
Steering Committee represented by the head of each bank to oversee the process and take decisions.
Discussion on the Group Concept and set up of a Group Management structureManagement structure.
Brain storming for a Group Vision and Strategy under progress.
Group Vision and Strategy to guide the future business plansGroup Vision and Strategy to guide the future business plans of all the entities.
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Financial Strength Financial Review and strengths
BB Group Profile as on 31st December 09
Loans & Advances USD 7,835m
Total Assets USD 14,275m
Customer Deposits USD 8,455m
Equity USD 1,135m
Net Interest Income USD 355m
Operating Income USD 539mOperating Income USD 539m
Operating Profit USD 388m
Net Profit USD 22m
30
5 Conclusion
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ConclusionFinancial Review and strengths
A history of sound performance, healthy financials and sustained growth
B d t d ti b tBased on core competence, adapting best practices, committed to established corporate values and sound corporate governance
In the context of solid macroeconomics of the i f t t d l t ith MENA idregion, future strong development with MENA wide
diversification leading to substantial enhancement of both franchise and shareholder value
Robust and enterprising support from the majorRobust and enterprising support from the major shareholder KIPCO
Currently very attractive valuations
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Q&AQBurgan Bank, P.O. Box 5389, Al Safat 12170, State of Kuwait – Kuwait. Telephone: +965 2298 8000 Fax +965 22988419 www.burgan.com