Islamic Finance Driving ForcesThe Management Team Perspective

March 2010, Dead Sea, Jordan

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of Al Rajhi Bank is strictly prohibited

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Contents

▪ Islamic Banking Trends & Challenges

▪ Al Rajhi in Jordan

Islamic Finance represents 1% of global assets. The market has been growing over 30% annually since 2000 and is set for continued strong growth.

3

470

50

175

20

22%

Retail

1,000

60

420

28

34%

Corporate

Source: Oliver Wyman; Figures are in Billions

▪ Advanced treasury services

▪ Innovative asset management

▪ Investment Banking

Future

▪ Project finance & Syndication

▪ Capital Markets

▪ Leasing

2000s

▪ Commercial Banking

1990s

▪ Mostly Retail Banking

Prior to 1990

▪ Financiers in the Islamic world as early as the 8th century

Sarrafs

Islamic banks outperform market growth in core geographies

Source: Bankscope, CIA Fact Book and Oliver Wyman analysis 4

Notes: * Malaysia at 16%, Indonesia at 2% ; ** Estimated total (including Islamic windows) around 40 - 50%

% in 2003

% in 2008

17%20%

30%

10%

17%

12% 12%16%

13%

*

4%

Top ten largest Muslim populations

5 Source: CIA Factbook and Oliver Wyman Analysis

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Islamic banking players increasing interest to become global NOT EXHAUSTIVE

2007- Oct 2009

FranceIslamic banks from Bahrain and Qatar reportedly applied for licensesKuwait Finance House, Al-Baraka, Gatehouse also reported to be interested

Indonesia2008: Asian Finance Bank of Malaysia announces investment, operations to commence in 2010

Morocco2007: Government authorizes segments of Islamic finance; 10 banks reported to have express interest

Turkey3 out of 4 Turkish Islamic Banks (Turkiye Finans, AlBaraka, Kuveyt Turk) have a strategic GCC partner

Egypt2008: Abu Dhabi Islamic Bank buys 51% of Egypt’s National Bank for Development

Bangladesh2009: Sonali and Janata banks, state players, to open Islamic windows.

Malaysia2005-7: New Entrants: KFH, Al-Rajhi Bank, AFB (QIB)2009: Two new foreign players reportedly shortlisted for licenses & takaful license available

This year’s report will discuss potential expansion opportunities in North Africa

Azerbaijan2008: International Investment Bank (Bahrain) bought 49% of Amrahbank and converting it to an Islamic bank

India2009: Government issues its first Islamic banking license; operations to commence in 2010.

Pakistan2009: Unicorn increases stake in Dawood Islamic Bank to 37%. Dubai Islamic banks have started operations. (Emirates Global Islamic Bank, Dubai Islamic Bank)

Al-Baraka Group (12 countries): Jordan, Egypt, Tunisia, Sudan, Turkey, Bahrain, Pakistan, South Africa, Algeria, Lebanon, Syria, IndonesiaKFH Group (4 countries): Kuwait, Malaysia, Bahrain, Turkey

Jordan2 new entrants: Dubai Islamic Bank and Al-Rajhi Bank.

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Reported profitability remains higher for Islamic banksespecially in the GCC region

1 Top 3 Islamic banks by assets considered for all countries except the UAE (top 5) Malaysia and Indonesia (top 4). Source: Central banks; annual reports; Bankscope; McKinsey

GCC Non-GCC

0

0.5

1.0

1.5

2.0

2.53.0

3.5

4.0

4.5

5.0

5.5

6.0

Indonesia Malaysia UAE Saudi Arabia

Qatar Kuwait

Return on Average Assets for Top 5 banks versus Islamic banks1

Percent , 2008 SELECTED MARKETS

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There are still four main priority areas which Islamic banks should focus on going forward

Potential actions for Islamic banksPriority area

▪ Make efforts to lower cost of operation and improve service quality in order to improve competitivenessEfficiency in

operations Efficiency in operations 2

▪ Well positioned Islamic banks can consider international growth opportunities in countries with– Sufficient target population and strong un-met demand– Feasible market entry based on competitive environment and regulatory

climate

Explore global growth optionsExplore global growth options3

▪ Upgrade risk management systems and capabilities in anticipation of required capability to manage in crisis environments, i.e. focus on– Credit risk as an important area of focus given high real estate

concentration and potential for increased non-performing loans.– Liquidity risk via improved sources of funding, new hedging tools and

enhanced infrastructure. Critical to manage liquidity in light of limited sources of funding for Islamic banks.

Risk managementRisk management4

▪ Change business mix in product areas where Islamic banks have not been traditionally focused or where there is growth potential such as – Credit cards / Personal Loans– Fee-based businesses such as Asset Management, Treasury

operations, Capital Market– Islamic Investment Banking(as an upcoming growth area)

Enhanced and diversified business mix

Enhanced and diversified business mix

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Performance Measures

Robust RiskManagement

Stable ITinfrastructure

Efficient Processes

GoodGovernance

TalentBrandCustomerChannelsProducts

& Services

Robust Business Model is a prerequisite to success in any business

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Contents

▪ Islamic Banking Trends & Challenges

▪ Al Rajhi in Jordan

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The Islamic market in Jordan is smaller than peer countries, but is growing quickly

SOURCE: Company annual reports; Zawya; Association of banks in Jordan

Total Jordanian Islamic assets $m

553

812838

1,279

1,867

2,420

2005

2,066

2,878

06

2,253

3,091

07

2,607

3,886

2008

IIAB

JIB

+17%

Share of total market; %

8.98.9 8.88.8 8.88.8 10.710.717

4

66

61

23

42

25

Size of Islamic banking market based on assets, 2008 $b

9.89.8

29.329.3

20.320.3

15.915.9

16.916.9

3.53.5

10.710.7

Bahrain

Turkey

Jordan

Kuwait

Qatar

Malaysia

UAE

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Al Rajhi Bank in Jordan

▪ Our expansion to Jordan is an integral part of our regional strategy

▪ We estimate that 700K Jordanian expatriates will be residing in GCC by 2012 (out of which 350K are in KSA / Kuwait)

▪ Trade between KSA / Jordan is increasing with export flows reaching approximately 3.5 Billion $ in 2008

▪ Seats on flights between KSA / Jordan are increasing by 12% YoY

▪ Jordanian government continuously shows significant progress by reducing debt to GDP, increasing privatizations & public investment as well as opening trade routes.

▪ Central Bank of Jordan has significantly upgraded banking regulations in recent years

▪ Increasing bankable population

Regional Presence

KSA / Jordan ties

Regulation / Macro Climate

Installation of innovative Islamic Banking solutions and products already proven successful in KSA and Malaysia

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We are on track to launch operation in Jordan by end of 2010

Business / Operating Model Design

Registration with CBJ

Systems development kick-off

HO / Main Branch location finalization

CEO in place

Launch of Commercial Operations

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3

4

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Sep 2009

Nov 2009

Jan 2010

Mar 2010

Apr 2010

Nov 2010