National Commercial Bank Investor Presentation 2Q 2018 Results › en-us › Investor_Relation ›...

NCB Investor Relations2Q 2018 Investor Presentation 1

National Commercial Bank Investor Presentation2Q 2018 Results


Disclaimer

The National Commercial Bank (NCB) prepared this presentation on a proprietary basis as general background information about the activities of NCB. The information contained herein is given in summary form and for discussion purposes only. Some of the information that is relied upon by NCB is obtained from sources believed to be reliable, but NCB (nor any of its directors, officers, employees, agents, affiliates or subsidiaries) does not guarantee the accuracy or completeness of such information, and disclaims all liability or responsibility for any loss or damage caused by any act taken as a result of the information. This presentation including the information covered therein is not intended either to be relied upon or construed as an advertisement for, or an offer, solicitation or invitation to sell or issue, or to subscribe, underwrite or otherwise acquire any securities in any jurisdiction. It should and must not be treated as giving tax, legal, investment or other specialist advice or a recommendation to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Neither shall any part of this information nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision or commitment relating thereto, nor does it constitute a recommendation regarding the subject of this presentation.

All statements included in this presentation other than statements of historical facts, including, without limitation, those regarding financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives) are forward-looking statements and may thus include words like "anticipate", "believe", "intend", "estimate", "expect", "will", "may", "project", "plan" and such other words of similar meaning. Such forward-looking statements are based on numerous assumptions regarding present and future business strategies and the relevant future business environment. Any forward-looking statements speak only as of the date of this presentation and NCB expressly disclaims to the fullest extent permitted by law any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. Due to rounding, numbers and percentages presented throughout this presentation may not add up precisely to the totals provided.

NCB is not under any obligation to update, complete, amend, revise or keep current the information contained herein, and any opinions expressed herein are subject to change materially without notice. Accordingly, no representation or warranty, express or implied, is or will be made by NCB, their respective advisors or any such persons’ directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, and any reliance you place on them will be at your sole risk. Investors must rely solely on their own examinations of the Offering and relevant documentation in making a determination as to whether to invest in the securities described. An investor should seek independent professional advice when deciding if an investment is appropriate. Securities that may be discussed herein may not be suitable for all investors. Investors are required to make their own independent investigation and appraisal of the business and financial condition of NCB and its subsidiaries, the nature of the securities and the merits or suitability of the securities or any transaction to any investor’s particular situation and objectives, including the possible risks and benefits of purchasing any securities. Any such determination should involve an assessment of the legal, tax, accounting, regulatory, financial, credit or other related aspects of the offering or the securities. Without prejudice to the foregoing, NCB, their advisors and any such persons’ directors, officers or employees expressly disclaim any liability whatsoever, in negligence or otherwise, for any loss howsoever arising, directly or indirectly, from use of, or reliance on, this presentation or its contents or otherwise arising in connection therewith.


Investor Presentation

Contents

04

12

18

29

51

59

NCB – The leading KSA bank

Grow with KSA. Grow with NCB

Strategy Overview

Financial Results Highlights

Segmental Overview

Additional Information

37 Financial Results Details


The leading KSA bank2Q 2018 Results

National Commercial Bank


NCB is the leading banking group in Saudi Arabia (1)

Established in 1953; IPO in 2014

NCB Snapshot (FY 2017)

Jeddah HQ

>8m Clients13,436Employees*

SAR

444bn Assets

SAR

309bn Deposits

SAR

>100bn Market Cap

Wholesale branch in BahrainOffices: Singapore, Seoul, Shanghai

Subsidiary in Turkey:Türkiye Finans Katılım Bankası

Subsidiary in KSA:NCB Capital

*Includes Alahli Esnad (1,381 employees) - fully owned subsidiary engaged in recruitment services within KSA



NCB has a strong market and financial position (FY 2017)

444

343

228 216 193

050

100150200250300350400450500

NCB Rajhi Samba Riyad BSF

Assets (SARbn)

249 234

139 122 118

0

50

100

150

200

250

300

NCB Rajhi Riyad BSF Samba

Financing (SARbn)

309 273

168 154 151

0

50

100

150

200

250

300

350

NCB Rajhi Samba Riyad BSF

Deposits (SARbn)

Market Position by KSA

Overall banking Assets #1

Corporate banking Financing #1

Retail banking Financing #2

Treasury Investments #1

Asset Management AUMs #1

Brokerage Value Traded #3

Financial Position KSA GCC

Assets #1 #4

Financing #1 #4

Deposits #1 #3

Investments #1 #1

Total Operating Income #1 #3

Net Income #1 #3

NCB Investor Relations2Q 2018 Investor Presentation

SR (bn)

8.7 9.8

+4%

0

2

4

6

8

10

12

14

16

18

20

2014 2017

16 18

+4%

0

5

10

15

20

25

30

35

40

2014 2017

221 249

+4%

0

100

200

300

400

500

2014 2017

7


Key KPIs compared to Saudi Arabian banking peers (FY 2017)

CAGR

Industry Peers(ex NCB)

Total operating income

Net income attributable to equity holders

206 234

+4%

0

50

100

150

200

250

300

350

400

450

2014 2017

133 139

+1%

0

50

100

150

200

2014 2017

117 122

+2%

0

50

100

150

200

2014 2017

124 118

-2%

0

50

100

150

200

2014 2017

1,045 1,129

+3%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2014 2017

14 16 +5%

0

5

10

15

20

25

30

35

2014 2017

8 8 +0%

0

2

4

6

8

10

12

14

16

18

20

2014 2017

6 7

+4%

0

2

4

6

8

10

12

14

2014 2017

14 8

-17%

0

5

10

15

20

25

30

35

40

2014 2017

60 68

+5%

0

20

40

60

80

100

120

2014 2017

6.8 9.1

+10%

0

2

4

6

8

10

12

14

16

18

20

2014 2017

4.4 3.9

-3%

0

1

2

3

4

5

6

7

8

9

10

2014 2017

32.8 35.2

+2%

0

10

20

30

40

50

60

70

2014 2017

3.5 3.5 +0%

0

2

4

6

8

10

12

2014 2017

5.0 5.0

+0%

0

2

4

6

8

10

12

14

2014 2017

Financing and advances, net


NCB has a well-diversified business model

Total operating income contribution (FY 2017)

Capital Markets

NCB CapitalLargest Asset Manager in KSA

Largest Shariah-compliant Asset Manager worldwide

Top 3 Broker15 locations

297 Employees

SAR 16.1bn88%

NCB

400 branches, 3,488 ATMs150 Remittance centers

7,991 Employees96% Saudization

100% Saudi Top Management

7.9bn43%

4.5bn25%

3.8bn20%

RETAIL

CORPORATE

TREASURY

1.6bn9%

636mn3%

International

Türkiye Finans Katılım Bankası (TFKB)287 branches, 587 ATMs

3,767 employees

Note: KSA based recruitment services firm Alahli Esnad (fully owned subsidiary) employs 1,381 persons


NCB has a strong financial position

Key KPIs

CAGR CAGR

LCR is based on 4Q average numbersLCR was not reported before 2015

Capital ratios are based on Pillar I RWA

377 435 449 443 444

+4%

0

100

200

300

400

500

600

700

800

2013 2014 2015 2016 2017

Total Assets (SARbn)

43 47 56 60 64

+11%

0

20

40

60

80

100

120

2013 2014 2015 2016 2017

Total Equity (SARbn)

17.1% 17.2% 17.2%

19.2%20.0%

15.1%

16.9%17.7%

16.2%

14.7%13.5%

15.3% 15.7%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

2013 2014 2015 2016 2017

Capital Ratios (%)

TC ratio T1 ratio CET1 ratio

152.3%172.5% 177.3%

62.4% 66.3%78.1% 80.3% 80.7%

0

0

0

1

1

1

1

1

2

2

2

2013 2014 2015 2016 2017

Liquidity Ratios (%)

Liquidity coverage ratio (LCR) Financing to customer deposit ratio


NCB has a strong performance track record

Key KPIs

CAGR CAGR

10.1 11.4 12.6 13.5 13.7

4.8 4.8 4.9 5.1 4.7 14.9 16.2 17.5 18.6 18.3

+5%

0

5

10

15

20

25

30

35

2013 2014 2015 2016 2017

Total Operating Income (SARbn)

Net special commission incomeFee and other income

7.9 8.7 9.1 9.3 9.8

+6%

0

2

4

6

8

10

12

14

16

18

2013 2014 2015 2016 2017

Net Income Attributed To Equity Holders (SARbn)

2.99% 2.91% 3.04%3.35% 3.48%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

2013 2014 2015 2016 2017

Net Special Commission Margin (%)

39.0% 39.0% 37.4% 37.7%35.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

2013 2014 2015 2016 2017

Cost to Income Ratio (%)

20.0% 20.1%19.2%

17.8% 17.4%

2.2% 2.2% 2.1% 2.1% 2.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0

0

0

0

0

0

0

2013 2014 2015 2016 2017

Returns (%)

ROE common shares (%) ROA (%)


NCB Group listed on Tadawul in November 2014

Ranked third in Tadawul, S&P Pan Arab and MSCI Indices with significant weightings

MSCI Saudi Arabia Index Float Adj. Mcap (USDb) Weighting (%)

SABIC 25.24 17.62Al Rajhi Bank 18.32 12.79National Commercial Bank 15.55 10.85Saudi Telecom (STC) 9.57 6.68Samba Financial Group 8.49 5.93Saudi Arabian Mining Co (Maaden) 6.24 4.35Riyad Bank 5.20 3.63Saudi Electricity Co (SEC) 4.63 3.23Yanbu Natl Petrochem Co (Yansab) 4.47 3.12Alinma Bank 4.20 2.93

Ratings LT ST Outlook

National Commercial BankS&P BBB+ A-2 StableFitch A- F1 StableMoody’s* A1 P-1 StableCapital Intelligence A+ A1 NegativeGovernment of Saudi ArabiaS&P A- StableFitch A+ StableMoody’s A1 StableCapital Intelligence A+ Negative

*Moody’s rating is unsolicited

[Source: MSCI, 29 June 2018]Source: NCB, Bloomberg

Source: Bloomberg

Share parameters 30 Jun 2018

Closing Price (SAR) 48.652 week range (SAR) 31-49Free Float 36%Shares issued (mn) 3,000Tangible Book Value (SARmn) 56.756Tangible BVPS 18.92P/TBV Ratio 2.6xP/E Ratio (FY 2017 earnings) 15.38xDiv Yield (FY 2017 dividends) 2.33%3m Avg Daily Volume (shares) 956,579

05

10152025303540455055

Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18

Share price performance since IPO (SAR)(Adj price)

Trading commenced 12/11/2014. Day 1 at SAR 33


National Commercial Bank Grow with KSA. Grow with NCB2Q 2018 Results


Moving towards economic inflectionGrowth and fiscal indicators point to a positive inflection point in the Saudi EconomyHeadwinds including international trade tension persist

Source: Thomson Reuters, Ministry of Finance, SAMA, Tadawul, and NCB Economics Forecasts

718 725 610 529 490

36 43

60 39 39

754 768 670

568 529

0

100

200

300

400

500

600

700

800

900

2013 2014 2015 2016 2017

Foreign Reserves (USDbn)

SAMA

Banks

0

20

40

60

80

100

120

140

0

2

4

6

8

10

12

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018USD/bblMMBD

Oil Market

Saudi Oil Production, LHSArabian Light Spot Price,…

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17

Stock Market

Tadawul Index

6.4%

-2.3%

-14.8% -12.9%-9.3%

-1.3%

18.1%

9.7%

-8.7%-3.7%

2.2%9.6%

-25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%

2013 2014 2015 2016 2017P 2018F

Twin Balances (%)

Budget Balance / GDPCurrent Account Balance / GDP


Saudi banking sectorBanking profitability likely to remain resilient on the back of rising rates, as well as ongoing and upcoming government stimuli in support of private sector and individuals

Source: Thomson Reuters, SAMA, Banks’ Annual Reports, and NCB Economics Estimates

37.6 41.5 43.7 41.3 45.0

7.2%

10.2%

5.4%

-5.4%

8.7%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

10

20

30

40

50

60

70

80

90

100

2013 2014 2015 2016 2017

Profits (SARbn)

ProfitsAnnual Growth (%)

1,402 1,576 1,605 1,617 1,619

11.2% 12.4%

1.9% 0.8% 0.1%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2013 2014 2015 2016 2017

Bank Deposits (SARbn)

DepositsDeposit Growth Rate (YoY%)

69 76 80 83 87

6.8%9.1%

5.7%3.8% 4.3%

-9.9%

-7.9%

-5.9%

-3.9%

-1.9%

0.1%

2.1%

4.1%

6.1%

8.1%

10.1%

0

20

40

60

80

100

120

140

160

180

2013 2014 2015 2016 2017


Profits (FY)Annual Growth (%)

0.99%

2.59%

0.30%

2.34%

(0)

(0)

0

0

0

0

0

0

0

2013 2014 2015 2016 2017 2018

Interbank Rates (%)

3M SAR SAIBOR 3M USD LIBOR

1,121 1,251 1,362 1,400 1,387

12.0% 11.6%8.9%

2.9%-1.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2013 2014 2015 2016 2017

Bank Lending (SARbn)

Bank credit, private and public sectorsCredit Growth Rate (YoY%)


Vision 2030

Saudi Arabia’s vision 2030 establishes a clear roadmap to accelerate economic growth

A Thriving Economy

An Ambitious

Nation

A Vibrant Society

Pillars Selected Goals & KPIsObjectives

Strengthen Islamic values & national identity

Offer a fulfilling & healthy life

Grow & diversify the economy

Increaseemployment

Enhance government effectiveness

Enable social responsibility

Vision Realization Programs

Enriching the Hajj and Umrah Experience

National Transformation Program

PIF Program

National Industrial Development and Logistics Program

Financial Sector Development Program

Lifestyle Improvement Program

National Companies Promotion Program

Strategic Partnerships Program

The Housing Program

Privatization Program

Saudi Character Enrichment Program

Fiscal Balance Program

Lower the rate of unemployment from 11.6% to 7%

Increase the Public Investment Fund’s assets to over SAR 7 trillion

Increase the private sector’s contribution from 40% to 65% of GDP

Raise the share of non-oil exports in non-oil GDP from 16% to 50%

Increase the localization of oil and gas sectors from 40% to 75%

Increase SME contribution to GDP from 20% to 35%

Increase FDI from 3.8% to the international level of 5.7% of GDP

Raise non-oil government revenue from SAR 163 billion to SAR 1 trillion

Increase women’s participation in the workforce from 22% to 30%


NCB is aligned with Government prioritiesNCB is a key contributor to economic transformation and the Financial Sector Development Program (FSDP) objectives

NCB leverages competitiveness and scale

to deliver value to its stakeholders and support

the national agenda

Vision 2030 Objectives Directly Related to the

FSDP

Enabling financial institutions to support private sector growth

Developing an advanced capital market

Promoting and enabling financial planning

Leading lender for KSA companies with a portfolio of SAR 128bn; 14% Corporate market share (1Q 2018)

Supporting +70,000 SMEs across KSA; a leading SME lender and participant in the relaunched Kafalah guarantee program

Appointed as a Primary Dealer in local government securities

Large investor in Saudi Government Bonds with a portfolio SAR 48bn

Major advisor to Government and GRE sukukissuances and debt refinancing (KSA Government, Aramco, Ma’aden Aluminum, SEC, ACWA power, Ma’aden Phosphate)

Provided home financing for more than 30,000 Saudi families with a portfolio of SAR 21bn

Driving inclusive financial services access in KSA through extensive branch network as well as digitization and mobile penetration

Expanding participation in the financial services sector with 6 million KSA based customers, large POS network and full suite of Takaful protection and savings products


Projected economic upturn progressionBudgetary pro-growth measures, growing CAPEX, and additional stimuli point to continuing economic and banking growth despite the non-oil private sector adjusting to structural shifts

Source: Ministry of Finance, Fiscal Balance Program, and NCB Economics Forecasts

60 44 142

317 443

555 673

749

2% 2%6%

13%17% 19%

22%25%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

0

200

400

600

800

1,000

1,200

2013 2014 2015 2016 2017 2018F 2019F 2020F

Government Debt (SARbn)

Domestic Public Debt

Debt to GDP Ratio (%)

(

312 370 264 134 208 205 218 228

664 740

714 696

722 773 789 822

976 1,110

978 830

930 978 1,007 1,050

0

200

400

600

800

1,000

1,200

2013 2014 2015 2016 2017P 2018F 2019F 2020F

Government Expenditure (SARbn)

CapexCurrent Expenditure (Opex)

1,035 913 446 334 436 650 661 579

121 131

169 186 256

289 326 368

1,156 1,044

616 519 692

939 987 947

106 97

50 4152

68 65 56

-70

-50

-30

-10

10

30

50

70

90

110

0

500

1,000

1,500

2,000

2013 2014 2015 2016 2017P 2018F 2019F 2020F

Government Revenue (SARbn)

Oil RevenuesNon-oil RevenuesAverage Oil Price (USD)

15451729 1773 1787 1791 1821 1902 1995

10.9%11.9%

2.5%0.8% 0.2%

1.7% 4.4% 4.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

500

1,000

1,500

2,000

2,500

3,000

2013 2014 2015 2016 2017 2018F 2019F 2020F

Money Supply (SARbn)

Money SupplyMoney Supply Growth Rate (YoY%)

1,121 1,251 1,362 1,400 1,387 1,397 1,460 1,543

12.0% 11.6% 8.9%2.9%

-1.0% 0.7%4.5% 5.7%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2013 2014 2015 2016 2017 2018F 2019F 2020F

Bank Lending (SARbn)

Bank credit, private and public sectors Credit Growth Rate (YoY%)

917 967 999 1,000 1,012 1,023 1,046 1,084

7.0% 5.4%

3.4%0.1%

1.2%

1.1% 2.2%

3.6%

2.7% 3.7%

4.1%1.7%

-0.9%

2.6% 2.7%

1.2%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

(100)

400

900

1,400

1,900

2,400

2,900

3,400

2013 2014 2015 2016 2017 2018F 2019F 2020F

GDP - Real vs. non-oil private sector (SARbn)

Non-Oil Private GDPNon-Oil private sector Annual GrowthReal GDP


National Commercial Bank Strategic Overview2Q 2018 Results


NCB’s strategic plan is about execution

Our strategic objectives are supported by productivity enablers

Retail Banking Expand share of retail profits

Corporate Banking Grow in Vision 2030 targeted sectors and resilient SME’s

TFKB Increase profit contribution

TreasuryDiversify funding, sustain investment returns and cross-sell

NCBC Generate AUMs and cater to GRE’s growing needs

Lean Distribution

Digitization

Expand reach with lean branches

Anywhere, anytime, instant banking

Strategic objectives

Strategic enablers


NCB continues to deliver on its strategic plan

1H 2018 Highlights

Retail portfolio increased by 3% mainly on growth in mortgageAchieved growth in deposits

Grew Corporate lending 9%Launched Alahli E-Corp app, KSA’s first comprehensive mobile app for companies

Resumed branch expansion and expanded digital channelsGrew lending and deposit base

NCB was appointed as a Primary Dealer in local government securitiesSurge in recurring revenue, resulting in YoY NSCI growth of 25%

Continued expanding net income through increasing AUMs and maintaining cost discipline

Optimized branch network for productivity with 6 FTEs at newest branches

Continued to drive digital migration: digital channel transactions up 39%

Retail Banking

Corporate Banking

TFKB

Treasury

NCBC

Lean Distribution

Digitization


Lean distributionWe accelerated expansion of our distribution platform in Saudi Arabia and are streamlining branch formats to enhance productivity gains

Strategic Imperatives

Continue expanding our distribution reach to acquire customers and grow market share

Expand with smaller branches that are headcount efficient

Optimize costs of existing branch network

Equip branches with self-service/assisted-service technologies

Enhance the in-branch sales and service model to improve customer experience

39.0%35.2%

-10%

0

0

0

0

0

1

1

1

2014 2017

Cost to Income Ratio (%)

342 400

+17%

0

100

200

300

400

500

600

700

2014 2017

Number of Branches

8,021 7,991

-0%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2014 2017

Bank Headcount (NCB employees)

12.1 11.0

-9%

0

5

10

15

20

2014 2017

FTE / branch

60%71%

+18%

0

0

0

1

1

1

1

1

2014 2017

Front / Back Office Ratio (%)

1.65 2.02

+22%

0

1

1

2

2

3

3

4

2014 2017

Operating Income / FTE (SARmn)


10%

37%

+54%

0

0

0

0

0

1

1

1

2014 2017

Digital Transactors (% of total base)

22

Digitization

Migrate customers to digital through superior user experiences

Strategic Focus Areas

Mobile first - anytime, anywhere

Consistently lead KSA banks in functionality and user-experience

Expand end-to-end digital sales capability

Expand subscription base and incentivize usage

Leverage data and analytics to drive sales effectiveness

CAGR CAGR CAGR

13.0 30.7 2.8

19.4

15.8

50.1

+47%

0

10

20

30

40

50

60

70

80

90

2014 2017

Digital Transactions (mn)

OnlineMobile

8%

4%

-21%

0

0

0

0

0

0

0

2014 2017

Branch Financial Transactions (% of total)


Retail Banking

We are transforming retail distribution to increase share of profits


Grow market share in consumer finance

Grow deposits in key segments (Mass/ Affluent/ GRE)

Expand and optimize branch network

Drive digital migration

Continue improving customer satisfaction

CAGR CAGR CAGR

23

5.7

8.3

+13%

0

2

4

6

8

10

12

14

16

2014 2017

Operating Income (SARbn)

74 89

17.4%19.5%

+6%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

20

40

60

80

100

120

140

160

2014 2017

Consumer Financing & Advances, net (SARbn)

Market Share (%)

1.6

4.0

+38%

0

1

2

3

4

5

6

7

8

2014 2017

Net Income (SARbn)


Corporate Banking

Grow selectively and increase risk-adjusted returns


Build a deal pipeline in V2030 target sectors

Cross sell treasury and cash management

Focus on portfolio quality and proactively manage risk

Drive migration to digital channels

Expand collection capacity and increase recoveries

CAGR CAGR CAGR

108 124

+5%

0

50

100

150

200

2014 2017

Corporate Financing & Advances, net (SARbn)

3.7 4.5

+6%

0

1

2

3

4

5

6

7

8

2014 2017


3.2

2.3

-10%

0

1

2

3

4

5

2014 2017

Net Income (SARbn)


Treasury

Broaden and deepen liquidity access while sustaining investment returns and cross-sell


Execute international hubs strategy

Expand wholesale funding program

Maintain the high quality/liquidity and profitability of the investment book

Support the development of the sukuk capital markets

Underpin Islamic product innovation

CAGR CAGR

HQLA is group-wide 4Q averageLCR shows 4Q average

94% 91%

-1%

0

0

0

1

1

1

1

1

2

2

2

2014 2017

Saudi Government and Investment Grade Investments as % of Total

35%

26%

-10%

0

0

0

0

0

1

1

2014 2017

Investments as % of Total Assets

100 95

152.3%177.3%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

200.0%

0

20

40

60

80

100

120

140

160

180

2015 2017

HQLA and Liquidity Coverage (SARbn/%)

High quality liquid assets (HQLA)Liquidity coverage ratio (LCR)


10.1%

17.6%

+7.5ppt

0

0

0

0

0

0

0

0

0

0

1

2014 2017

NCBC Share of Sector Net Income (%) (SARbn)

490

198

11.4% 11.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

100

200

300

400

500

600

700

800

900

1,000

2014 2017

NCBC Traded Value (SARbn) & Market Share (%)

NCBC Traded ValueMarket Share (%)

26

NCB Capital

KSA’s leading investment bank and asset manager; well positioned to capture future growth


Grow recurring revenues by gathering more AUMs, launching new products, growing Corporate Savings business

Set the stage for future market upturn by growing brokerage market share and continuing to invest in NCBC capabilities

Build on market leadership, landmark IB mandates to support GREs as well as local and foreign institutional clients

Continue to focus on increasing efficiency, improving productivity to bolster resilience

2,147

836

8,333 7,226

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2014 2017

Tadawul Traded Value (SARbn) & TASI Index

Tadawul Traded ValueTASI Index

55

129

+134%

0

50

100

150

200

250

2014 2017

NCBC Assets under Management (SARbn)


34 39

+5%

0

10

20

30

40

50

60

70

2014 2017

Total Assets (TRYbn)

1,446

1,914

+10%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2014 2017

Total Operating Income (TRYmn)

334 375

+4%

0

100

200

300

400

500

600

700

2014 2017

Net Income (TRYmn)

2.9% 3.2%

+3%

0

0

0

0

0

0

0

0

2014 2017

TFKB Contribution to NCB Net Income (%) (TRYmn)

27

Türkiye Finans Katılım Bankası

We are executing a transformation program to grow TFKB’s net income


Resume branch expansion and expand digital channels to drive customer acquisition

Strengthen underwriting and improve collections

Increase automation and drive capacity optimization

Instill NCB’s principles (Customer excellence, robust governance, best-in-class technology)

CAGRCAGRCAGRCAGR

Note: Figures according to BRSA accounting standards


Grew Corporate loan portfolio by 9%

28

Three Strategic Priorities for 2018

NCB’s strategy continues to be about execution

Grow Residential Finance

Current Account and Capital Base

Focus

Position Corporate Banking

for growth

Position NCB as the preferred funding partner

Leverage National housing initiatives

Leverage branch expansion for customer acquisition

Drive focus on current account growth to maintain funding advantage

Sustain capital base to support credit growth

Win mandates in vision 2030 targeted sectors

Resume growth in SMEs by targeting resilient sectors

Optimize operating model to improve platform productivity

Reduce cost of credit through proactive remedial management and recoveries

2.

3.

1.

1 H 2018 Update

Grew mortgage portfolio by 9%

Grew Current Accounts by 6%


National Commercial Bank Financial Results Highlights2Q 2018 Results


Key messages

2Q 2018 Results

Income Statement

BalanceSheet

Asset Quality, Capital

& Liquidity

2% increase in total assets. Strong financing growth of 7% driven by domestic. Investment levels stable with ongoing portfolio re-balancing and participation in

Saudi Government debt issuance. Customer’s deposits mix improved, CASA ratio up at 79%. Balance sheet growth limited by ~1.6% from Turkish Lira depreciation.

8.7% YoY growth of net income in 1H 2018, depressed by ~29bps from Turkish Lira depreciation.

2% NSCI growth in 1H 2018 as NSCI margin improved by 9bps. 2% decline in fee and other income in 1H 2018. 5% Operating Expenses increase in 1H 2018 from VAT & Cost of living

allowances. 63% less impairment charges for financing and advances losses, and CoR 26bps.

Group NPL ratio at 1.7% at 2Q 2018 and higher NPL coverage at 161.4%. Capital position comfortably above regulatory minima with CET1 of 16.2% and T1

of 18.1% at 2Q 2018. Strong liquidity with LTD ratio of 83.8%, average 2Q 2018 LCR of 211.9% and

Leverage Ratio of 13.1% at 2Q 2018.

Financing (SARbn) Deposits (SARbn)

Net Income Attributable to Equity Holders Movement (SARbn)

NPL & CoR (%) CET1 and LTD (%)

249 266

+7%

0

100

200

300

400

500

600

4Q 17 2Q 18

309 318

+3%

0

100

200

300

400

500

600

700

800

4Q 17 2Q 18

1.9% 1.7%

0.7%

0.3%

-0.1%

0.1%

0.3%

0.5%

0.7%

0.9%

1.1%

1.3%

1.5%

0

0

0

0

0

0

4Q 17 2Q 18Group NPL ratioGroup CoR YTD

15.7% 16.2%

81% 84%

20%

30%

40%

50%

60%

70%

80%

90%

0

0

0

0

0

0

0

0

4Q 17 2Q 18CET1LTD

5.12 0.16

(0.06)

(0.16)0.48 0.02 5.57

0

1

1

2

2

3

3

1H 1

7

NSC

I

Non

-NSC

I

Expe

nses

Impa

ir-m

ents

Oth

er

1H 1

8


Income Statement

Profitability Trends

SAR (mn) 2Q 2018 1Q 2018 2Q 2017 YoY % change 1H 2018 1H 2017 YoY %

change

Net special commission income 3,573 3,419 3,473 +3% 6,992 6,832 +2%

Fee and other income 1,087 1,361 1,005 +8% 2,448 2,506 -2%

Total operating income 4,661 4,779 4,478 +4% 9,440 9,338 +1%

Operating expenses (1,692) (1,673) (1,516) +12% (3,366) (3,205) +5%

Total impairment charge (340) (78) (479) -29% (418) (902) -54%

Income from operations, net 2,628 3,028 2,483 +6% 5,656 5,232 +8%

Net income attributed to equity holders 2,579 2,987 2,417 +7% 5,566 5,120 +9%

2Q 2018 Net income growth from higher operating income and lower impairments, partly offset by higher operating expenses

2,647 2,352 2,063 2,431 2,908 2,496

55 66

62 125

78 83

2,703 2,417 2,126 2,556

2,987 2,579

+7%

0

1,000

2,000

3,000

4,000

5,000

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Net income attributed to equity holders (SARmn)

International net incomeDomestic net income

4,472 4,085 4,083 4,111 4,407 4,234

388 393 409 405 372 427

4,860 4,478 4,492 4,516 4,779 4,661

+4%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Total operating income (SARmn)

International Operating IncomeDomestic Operating Income


309 318

0

50

100

150

200

250

300

350

400

450

500

4Q 17 2Q 18

Domestic Deposits94%

International Deposits6%

Customers' Deposits Mix (SARbn)

32

Balance Sheet

Balance Sheet Trends

SAR (mn) 2Q 2018 1Q 2018 2Q 2017 YoY % change FY 2017 YTD %

change

Investments, net 114,978 113,555 114,634 +0% 114,578 +0%

Financing and Advances, net 266,043 252,777 256,901 +4% 249,234 +7%

Total assets 454,374 437,506 450,486 +1% 443,866 +2%

Due to banks and other financial institutions 50,024 37,968 51,303 -2% 48,558 +3%

Customers' deposits 317,653 309,001 314,690 +1% 308,942 +3%

Debt securities issued 8,754 10,528 9,926 -12% 10,250 -15%

Total liabilities 389,342 372,645 389,334 +0% 379,590 +3%

Equity attributable to shareholders 57,007 56,684 52,876 +8% 56,041 +2%

Total equity 65,032 64,861 61,152 +6% 64,276 +1%

Growth indicating signs of economic recovery

133 135 135 124 126 135

86 87 88 89 90 92 9 8 8 10 12 16 27 27 27 26 25 24

254 257 257 249 253 266

+7%

0

50

100

150

200

250

300

350

400

450

500

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Financing & Advances, net (SARbn)

CorporateConsumer and credit cardOthersInternational

236 248 232 238 237 251

66 55 59 58 61 53 12 12 12 13 11 13 314 315 303 309 309 318

+3%

0

100

200

300

400

500

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Customers' Deposits (SARbn)

CASATimeOthers


Retail44%

Corporate19%

Treasury24%

Capital Market4%

International9%


Retail42%

Corporate20%

Treasury25%

Capital Market4%

International9%


33

Segmental Information (1/3) 2Q 2018 Total operating income higher due to Retail and Treasury income, partly offset by Corporate

9,338 103

(388)

273 96 18 9,440

0

500

1,000

1,500

2,000

2,500

1H 17 Retail Corporate Treasury Capital Market International 1H 18

1H 18 Total Operating Income Movement (SARmn)

4,478 100

(148)

164 32 34 4,661

0

200

400

600

800

1,000

1,200

2Q 17 Retail Corporate Treasury Capital Market International 2Q 18

2Q 18 Total Operating Income Movement (SARmn)

9.3 9.4

0

2

4

6

8

10

1H 17 1H 18

4.5 4.7

0

1

2

3

4

5

2Q 17 2Q 18


2.4 2.6

0

1

1

2

2

3

3

4

2Q 17 2Q 18

Retail35%

Corporate21%

Treasury38%

Capital Market3%

International3%

Net Income attributed to equity holders (SARbn)

Retail33%

Corporate23%

Treasury36%

Capital Market4%

International4%

Net Income attributed to equity holders (SARbn)

34

Segmental Information (2/3)2Q 2018 net income attributable to equity holder growth mainly driven by Treasury and Capital market segment

5,120 118 15

184 89 41 5,566

0

200

400

600

800

1,000

1,200

1,400

1H 17 Retail Corporate Treasury Capital Market International 1H 18

1H 18 Net Income attributed to equity holders Movement (SARmn)

2,417

(6) (26)

146 31 17 2,579

0

100

200

300

400

500

600

2Q 17 Retail Corporate Treasury Capital Market International 2Q 18

2Q 18 Net Income attributed to equity holders Movement (SARmn)

5.2 5.7

0

1

2

3

4

5

6

7

1H 17 1H 18


Segmental Information (3/3)

2Q 2018 financing growth mainly driven by Corporate and Retail segments

Management Commentary

2Q 2018 Total Assets increased by 2% due to high Corporate financing (+11%) and Retail financing (+3%) while investments remained stable.

Customers’ Deposits increased by 3% from retail segment.

Deposits’ mix improved toward CAs: CASA balances at 79%

109 104 113

133 141 147

163 154 158 38 36 34

444 438 454

+2%

0

100

200

300

400

500

600

700

800

4Q 17 1Q 18 2Q 18


Retail Corporate Treasury Capital Market International

89 90 92

124 126 135 26 25 24

249 253 266

+7%

0

100

200

300

400

500

600

4Q 17 1Q 18 2Q 18

Financing and Advances, net (SARbn)

Consumer and credit card Corporate International Other

207 209 219

72 71 70 8 9 9 22 21 20 309 309 318

+3%

0

100

200

300

400

500

600

4Q 17 1Q 18 2Q 18


Retail Corporate Treasury Capital Market International


Outlook

Improved macroeconomic environment expected to drive growth

• Average Arabian light oil price of USD 67 per barrel

• A total of four US Fed rate hikes of 25bps are expected in 2018 (Mar, Jun, Sep, Dec)

• Government’s expansionary budget for 2018 drives corporate lending activity

• Residential financing drives consumer lending growth

• Budget deficit narrows toSAR 46bn

• Real GDP growth of 2.6%

• VAT and increased tariffs on utilities increases inflation to around 3%

2018 Macroeconomic Outlook

BalanceSheet

Capitalization and Asset

Quality

Profitability

Financing growth -2% +6.7% +5% to 8% Upper end of the

range

FY 2017Reported

2Q 2018Reported

FY 2018Guidance

FY 2018 Outlook

NSCI margin 3.48% 3.61% +5 to 15bps Upper end of the range

Cost to income 35.2% 35.7% Below 35% Similar level to 1H

Tier 1 CAR 17.7% 18.1% 16% to 18% On target

Group Cost of Risk 0.7% 0.3% 0.6% to 0.8% Lower end of the

range


National Commercial Bank Financial Results Details2Q 2018 Results


Operating Income Highlights


2Q 2018 total operating income increased 4% YoY from a 3% improvement in net special commission income, higher investment-related income (8%), Fees revenue (2%) and Other operating expenses (36%)

Excluding the International business, 2Q 2018 total operating income was 4% higher YoY.

International operating income increased despite 11% depreciation of average Turkish Lira rate as compared with 2Q 2017.

1H 2018 total operating income increased by 1% YoY from 2% higher net special commission income.

Higher 2Q 2018 total operating income largely attributable to net special commission income

3.47 3.42 3.57

1.01 1.36 1.09 4.48 4.78 4.66

+4%

0

1

2

3

4

5

6

7

8

2Q 17 1Q 18 2Q 18


Fee and other income

Net special commission income

6.83 6.99

2.51 2.45

9.34 9.44

+1%

0

2

4

6

8

10

12

14

16

1H 17 1H 18

4.48 0.10 0.05 0.03 4.66

4.23

0.43

4.09

0.39

0

1

1

2

2

3

3

2Q 17 NSCI Fee and other income InternationalNOR

2Q 18

2Q 18 Total Operating Income Movement (SARbn)

9.34 0.17

(0.09)

0.02 9.44

8.64

0.80

8.56

0.78

0

1

2

3

4

5

6

1H 17 NSCI Fee and other income InternationalNOR

1H 18

1H 18 Total Operating Income Movement (SARbn)

Domestic

International

Domestic

International


2.97%3.25%

3.50% 3.46% 3.38% 4.15%

0

0

0

0

0 Net Special Commission Margin (%)International

39

Net special commission income trends

2Q 2018 net special commission income growth of 3% partly limited by Turkish Lira depreciation


The 2Q 2018 net special commission margin increased by 16bps YoY to 3.62% due to improved yields (+25bps).

Special commission expense for 2Q 2018 was 19% higher due to higher SAIBOR/LIBOR rates.

1H 2018 NSCI improved by 2% on higher SCI, despite 13% increase in cost of fund due to higher SAIBOR/LIBOR.

Net Special Commission Income

SAR (mn) 2Q 2018 1Q 2018 2Q 2017 YoY % change 1H 2018 1H 2017 YoY %

change

Special commission income 4,519 4,342 4,267 +6% 8,862 8,488 +4%

Special commission expense (946) (924) (794) +19% (1,870) (1,655) +13%

Net special commission income 3,573 3,419 3,473 +3% 6,992 6,832 +2%

Commission yield (%) 4.57% 4.56% 4.32% +6% 4.53% 4.37% +4%

Funding cost (%) 1.03% 1.04% 0.93% +11% 1.03% 0.95% +8%

Net special commission margin (%) 3.62% 3.59% 3.46% +5% 3.61% 3.49% +3%

1.15% 1.30% 1.33%1.69%

2.31%

2.34%1.74% 1.78% 1.79% 1.90%2.27%

2.59%

0

0

0

0

0

0

0

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

SAIBOR and LIBOR Rates (%)

3M USD LIBOR (%) 3M SAR SAIBOR (%)

4.08% 3.94% 3.92% 3.94% 4.06% 4.10%

0.61% 0.49% 0.52% 0.51% 0.51% 0.58%

7.76% 8.30% 8.44%9.48% 9.85% 10.29%

5.12% 5.37% 5.24%6.31% 6.80% 6.45%

(0)

0

0

0

0

0

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Commission Yield and Funding Cost (%)

Domestic Yields Domestic COFInternational Yields International COF

3.52% 3.46% 3.45% 3.49% 3.59% 3.62%0

0

0

0

0

Group

3.52% 3.42% 3.43% 3.46% 3.59% 3.56%

0

0

0

0

0

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Domestic


1,592 1,661

610 551 540 444

(236) (209)

2,506 2,448

-2%

(500)

500

1,500

2,500

3,500

4,500

5,500

1H 17 1H 18

40

Fee and other income trends


2Q 2018 fee and other income increased 8% YoY due to 2% growth in fees from banking services, 8% higher in investment-related income and 36% lower other operating expenses.

The higher fees from banking services in 2Q 2018 were mainly driven by higher fees from investment management services, partly offset by lower financing and lending and trade fees.

1H 2018 lower fee and other income due to lower investment income, as well as FX income.

Higher 2Q 2018 Fee income and lower other operating expenses

Fee IncomeSAR (mn) 2Q 2018 1Q 2018 2Q 2017 YoY %

change 1H 2018 1H 2017 YoY % change

Finance and lending 358 358 373 -4% 716 755 -5%Trade finance 121 137 134 -10% 258 269 -4%Investment management services 133 164 106 +25% 297 195 +53%

Shares brokerage 39 60 32 +22% 99 101 -2%Credit cards 50 38 37 +33% 87 74 +19%Others 109 96 106 +2% 205 198 +3%Fee income from banking services, net 809 852 790 +2% 1,661 1,592 +4%

790 852 809

285 262 289 80

359 86

(149) (113) (96)

1,005 1,361

1,087

+8%

(200)

300

800

1,300

1,800

2,300

2Q 17 1Q 18 2Q 18

Fee and Other Income (SARmn)

Other operating income (expenses), netInvestment-related incomeExchange Income, netFee income from banking services, net

1,592 100

(39)

14

(11)

6 1,661

1,539

122

1,448

144

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1H 17 Brokerage& invmnt.Mngmnt.

Finance &lending

Credit cards Tradefinance

Other 1H 18

1H 18 Drivers of Fee Income from Banking Services Movement (SARmn)

Domestic

International


Expense highlights


2Q 2018 operating expenses increased by 12% YoY.

The cost to income ratio for 1H 2018 was 35.7%, higher by 134bps compared to 1H 2017.

The cost base incremental was relatively broad-based, reflecting growing business, cost of living allowances to employees announced this year and the impact of VAT. These were partly offset by the continued strides made in digitization and productivity initiatives, and lower depreciation.

887 919 899 188 193 196 154 156 155 288 405 443

1,516 1,673 1,692

+12%

(400)

100

600

1,100

1,600

2,100

2,600

3,100

3,600

2Q 17 1Q 18 2Q 18

Operating Expenses (SARmn)

Other G&ADepreciation & amortizationRent & premisesEmployee-related

34.7%34.3%

34.8%35.2% 35.0%

35.7%

32.9%32.3%

31.2%

33.3% 33.1%

34.1%

0

0

0

0

0

0

0

0

0

1Q 17 1H 17 9M 17 FY 17 1Q 18 1H 18

Cost to Income Ratio (YTD %)

Group (%) Excluding International (%)

3,205 58 17

(38)

123 3,366

2,945

420

2,766

439

0

500

1,000

1,500

2,000

2,500

1H 17 Employee-related Rent & premises Depreciation &amortization

Other G&A 1H 18

1H 18 Operating Expenses Movement Drivers (SARmn)

Domestic

International

1,760 1,818

371 389 349 311 724 848

3,205 3,366

+5%

0

1,000

2,000

3,000

4,000

5,000

6,000

1H 17 1H 18

VAT, Cost of living allowances and support growth plans largely contributed to higher expenses in 2Q 2018


Financing and Advances, net59%

Investments, net25%

Cash, bank and SAMA balances12%

Other assets, net4%

Total Assets Mix (SARbn)

Retail25%

Corporate32%

Treasury35%

Capital Market0%

International8%

Total Assets by Segment (SARbn)

42

Asset highlights and composition2% growth in Balance sheet as a result of increase in financing, partially offset by Turkish Lira depreciation


Total assets increased 2% due to increase in financing.

7% financing increase mainly due to 9% increase in domestic financing partially offset by 10% decline in international financing impacted by 17% Turkish Lira depreciation.

Overall financing trends were reflective of early signs of economic recovery but further muted by Turkish Lira depreciation.

Investments relatively stable while portfolio re-balancing and participation in Saudi Government debt issuance continued.

249 253 266

115 114 115 60 49 54 444 438 454

+2%

0

100

200

300

400

500

600

700

800

900

4Q 17 1Q 18 2Q 18


Financing and Advances, netInvestments, netCash, bank and SAMA balancesOther assets, net

444 454

0

100

200

300

400

500

600

4Q 17 2Q 18

444 454

0

100

200

300

400

500

600

4Q 17 2Q 18


Consumer financing & credit cards

35%

Commerce15%

Manufacturing13%

Services9%

Utilities & health7%

Building & construction6%

Others, across 6 sectors15%

Financing and Advances, gross by Economic Sector (SARbn)

43

Financing and advances

Financing growth driven by Corporate and Consumer & Credit Cards segments


Domestically, financing grew for the Corporate Segment (+9%) and Consumer & Credit Cards segment (+3%) since 4Q 2017.

Growth in Corporate segment comes from all sectors apart from Commerce.

International financing declined 10% in 2Q 2018 due principally to weakened Turkish Lira.

89 90 92

124 126 135 26 25 24 10 12 16

249 253 266

+7%

0

100

200

300

400

500

600

4Q 17 1Q 18 2Q 18


Consumer and credit cardCorporateInternationalOther

256 274

0

50

100

150

200

250

300

350

4Q 17 2Q 18

256

5.0 2.0

1.9 3.7

3.7

(1.3)

2.7 274

0

5

10

15

20

25

30

35

4Q 17 Banking &financial

Manufacturing Services Building &construction

Commerce Consumerfinancing &credit cards

Other 2Q 18

Movement Financing, Gross by Economic Sector (SARbn)


Financing and advances credit quality (1/2)

Stable credit quality across the board

2.12 2.34 2.63 2.84 2.80 2.94 0.50 0.49 0.52 0.53 0.52 0.53 1.48 1.50 1.52 1.40 1.40 1.26 4.10 4.33 4.67 4.77 4.72 4.75

-0%

0

1

2

3

4

5

6

7

8

9

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

NPL (SARbn)

CorporateConsumer and credit cardInternationalOthers

4.77

0.12

(0.04)(0.03)(0.04)

0.01 0.00

(0.04)

4.75

0

0

0

0

0

1

1

1

4Q 17 Manufacturing Commerce Services Building &construction

Consumerfinancing &credit cards

Transport &comms

Other 2Q 18

Movement NPLs by Economic Sector (SARbn)

3.68 3.92 3.99 4.18 4.79 4.87 1.16 1.24 1.29 1.30 1.50 1.48 1.27 1.29 1.33 1.26 1.38 1.21 6.15 6.50 6.65 6.80

7.77 7.66

+13%

0

2

4

6

8

10

12

14

16

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Impairment Allowances (SARbn)


0.26 0.25 0.47

0.14 (0.04)

0.11

0.08 0.17

0.15

0.05

(0.04)

0.12

0.08 0.05

0.08

0.08

0.06

0.11

0.42 0.48

0.69

0.28

(0.01)

0.34

-29%

(0)

0

0

1

1

1

1

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Impairment Charge (SARbn)



Financing and advances credit quality (2/2)

Improved NPL ratio and higher NPL coverage


NPL ratio declined in 2Q 2018 driven by proactive remedial management and write offs of fully provided loans.

NPL coverage was higher at 161% as at 2Q 2018 because of the write offs as well as higher provision stock as a result of IFRS 9 adoption adjustments.

1.1% 1.2% 1.3% 1.5% 1.4% 1.4%

5.3% 5.4% 5.4% 5.1% 5.3% 5.1%

1.6% 1.6% 1.8% 1.9% 1.8% 1.7%

(0)

0

0

0

0

0

0

0

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

NPL Ratios (%)

Domestic International Group NPL ratio

186% 184%169% 164%

192% 185%

86% 86% 87% 90%99% 96%

150% 150% 142% 143%

165% 161%

0

1

1

1

1

1

2

2

2

2

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

NPL Coverage Ratios (%)

Domestic International Group NPL coverage ratio

0.6% 0.6%0.8%

0.7%

-0.1% 0.1%

1.2%1.0% 1.0% 1.1%

1.0%

1.4%

0.6% 0.7% 0.8% 0.7%

0.0%

0.3%

(0)

0

0

0

0

0

0

0

0

0

1Q 17 1H 17 9M 17 FY 17 1Q 18 1H 18

CoR Ratios (YTD %)

Domestic International Group CoR ratio


Domestic Financing and advances credit quality

Consumer NPLs stable while Corporate NPLs decreased


Corporate NPL ratio declined in 1H 2018, in part due to increase in gross financing.

Corporate NPL coverage ratio improved due to write offs and proactive remedial management as well as higher provision stock as a result of IFRS9 adoption adjustments.

1.5% 1.7%1.9%

2.2% 2.1% 2.1%

0.6% 0.6% 0.6% 0.6% 0.6% 0.6%

(0)

(0)

0

0

0

0

0

0

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

NPL Ratios (%)

Corporate Consumer and credit card

174% 168%152% 147%

171% 166%

232%

254% 246% 245%

290%279%

1

1

1

2

2

2

2

2

3

3

3

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

NPL Coverage Ratios (%)


0.8% 0.7%

0.9% 0.9%

-0.1%

0.1%0.4%

0.6% 0.6%0.5%

-0.2%

0.2%

(0)

(0)

0

0

0

0

0

0

0

1Q 17 1H 17 9M 17 FY 17 1Q 18 1H 18

CoR Ratios (YTD %)



Saudi Government securities42%

Other investment grade48%

Non-investment grade5%

Unrated5%

Investments by Credit Grade (SARbn)

115 115

0

20

40

60

80

100

120

140

4Q 17 2Q 18

Saudi Arabia58%

GCC and Middle East18%

Europe0%

Turkey3%

Other countries21%

Investments by Geography (SARbn)

Investments trends and compositionStable Investments and quality remains strong; ~90% of the investment portfolio remains Saudi Government and investment grade


The investment portfolio is built on high quality securities with ~90% being Saudi governments and investment grade.

Since the resumption of KSA government debt issuance, NCB has actively participated in issues of longer term debt securities.

The portfolio has been re-balancing towards floating rate securities in light of the rising interest-rate environment.

47

67 67 63

43 43 46 5 5 5

115 114 115

+0%

0

50

100

150

200

4Q 17 1Q 18 2Q 18

Investments (SARbn)

Equity instruments, Mutual Funds, Hedge Funds and OthersFloating rate securitiesFixed rate securities

115 115

0

20

40

60

80

100

120

140

4Q 17 2Q 18


Due to banks and other financial institutions

13%

Customers' deposits82%

Debt securities issued2%

Other liabilities3%

Total Liabilities Mix (SARbn)

48

Liabilities trends and composition

Higher total liability base and a high deposit mix towards CASA balances (79%)


Customers’ deposits are the main source of funding and improved in 2Q 2018.

CASA balances account for 79% of customers’ deposits.

Domestically, CASA balances grew (+6%) and lower time deposits (-7%) since 4Q 2017.

309 309 318

49 38 50 10 11 9 380 373 389

+3%

0

100

200

300

400

500

600

700

4Q 17 1Q 18 2Q 18

Total Liabilities (SARbn)

Customers' depositsDue to banks and other financial institutionsDebt securities issuedOther liabilities

380 389

0

50

100

150

200

250

300

350

400

450

500

4Q 17 2Q 18

231 231 244

7 6 7 43 46 40 15 15 13 13 11 13 309 309 318

+3%

0

100

200

300

400

500

600

4Q 17 1Q 18 2Q 18


CASA - DomesticCASA - InternationalTime - DomesticTime - InternationalOthers


Liquidity

NCB maintained a strong liquidity profile


As at 2Q 2018, the financing to customers’ deposit ratio was 83.8% and comfortably below the regulatory guidelines.

HQLA balances risen by 4% compared to 4Q 2017.

The average quarterly LCR improved to 211.9% from 177.3% in 4Q 2017.

Basel III leverage ratio improved to 13.1% from 13.0% in 4Q 2017.

Quarterly averages

102 96 91 95 97 99

163.8% 166.1% 172.5% 177.3%198.6% 211.9%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

0

50

100

150

200

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

HQLA and Average Liquidity Coverage (SARbn/%)

High quality liquid assets (HQLA)

Liquidity coverage ratio (LCR)

81.0% 81.6%84.9%

80.7% 81.8% 83.8%

1

1

1

1

1

1

1

1

1

1

1

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Financing to Customer Deposit Ratio (%)

12.4% 12.2% 12.7% 13.0% 13.5% 13.1%

0

0

0

0

0

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Basel III leverage Ratio (%)


72 73

0

10

20

30

40

50

60

70

80

90

100

4Q 17 2Q 18 Common equity tier 1 capital (CET1)

80%

Additional tier 1 capital (AT1)9%

Tier 2 capital (T2)11%

Total Capital Composition (SARbn) Management Commentary

Capitalization remained strong and comfortably above the regulatory minima.

Pillar I risk weighted assets remained stable in 1H 2018 despite growth in financing, which was offset by lower charge on residential real estate financing as recently allowed by SAMA, and Turkish Lira depreciation.

Common equity Tier 1 capital (CET1) is impacted by one time IFRS9 adjustment adoption.

50

Capital

Capital position comfortably above regulatory minima

Capital ratios are based on Pillar I RWA

57 58 58

7 7 7 8 8 8 72 73 73

+2%

0

20

40

60

80

100

120

140

4Q 17 1Q 18 2Q 18

Capitalisation (SARbn)

Tier 2 capital (T2)Additional tier 1 capital (AT1)Common equity tier 1 capital (CET1)

318 311 315

34 34 35 9 12 12 361 358 361

-0%

0

100

200

300

400

500

600

700

4Q 17 1Q 18 2Q 18

Pillar I Risk Weighted Assets (SARbn)

Credit riskOperational riskMarket risk

14.6%14.1% 14.5%

15.7% 16.2% 16.2%

16.1% 16.0% 16.4%

17.7%18.2% 18.1%18.2% 18.2% 18.5%

20.0% 20.4% 20.3%

0

0

0

0

0

0

0

0

0

0

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18

Capital Ratios (%)

CET1 ratioT1 ratioTC ratio


National Commercial Bank Segmental Review2Q 2018 Results


NCB Bank (standalone)Strong 2Q 2018 net income growth 5% resulting from operating income growth and lower impairment charge


2Q 2018 net income rose 5% YoY driven principally by 3% operating income growth and a 46% improvement in impairment charge.

NSCI for 2Q 2018 improved by 3% YoY due to increase in average earning assets, better margins, and higher CAs growth.

1H 2018 operating expenses increased by 7%, mainly due to VAT, Cost of living allowances and business growth.

Summary Financial PerformanceSAR (mn) 2Q 2018 1Q 2018 2Q 2017 YoY %


Total assets 426,577 407,869 418,135 +2% 426,577 418,135 +2%

Total operating income 4,056 4,180 3,938 +3% 8,237 8,249 -0%Net special commission income 3,224 3,111 3,122 +3% 6,335 6,166 +3%Fee income from banking services, net 582 568 576 +1% 1,150 1,148 +0%

Operating expenses (1,400) (1,369) (1,203) +16% (2,769) (2,595) +7%Total impairment charge (228) (14) (425) -46% (243) (763) -68%Other non-operating income (expenses), net (17) (24) (13) +34% (40) (26) +55%

Net income for the period 2,411 2,774 2,298 +5% 5,185 4,865 +7%

% of total assets 93.9% 93.2% 92.8% +1% 93.9% 92.8% +1%Cost to income (%) 34.5% 32.7% 30.6% +13% 33.6% 31.5% +7%NCL (%) 0.4% -0.1% 0.7% -49% 0.1% 0.6% -80%ROA (%) 2.4% 2.8% 2.2% +5% 2.5% 2.4% +5%

NIM (%) 3.6% 3.6% 3.4% +4% 3.6% 3.5% +2%

NPL (%) 1.4% 1.4% 1.2% +16% 1.4% 1.2% +16%NPL Coverage Ratio (%) 185% 192% 184% +1% 185% 184% +1%

223 228 242

+9%

0

100

200

300

400

500

600

4Q 17 1Q 18 2Q 18

Financing & advances (SARbn)

287 288 298

+4%

0

100

200

300

400

500

600

700

4Q 17 1Q 18 2Q 18

Customers' deposits (SARbn)


Retail Banking

2Q 2018 net income slightly lower


2Q 2018 net income slightly dropped 1% YoY driven principally by 17% higher operating expenses, which was partially offset by operating income growth of 5%, and a 31% improvement in impairment charges.

NSCI for 2Q 2018 improved by 2% YoY due to a 3% increase in retail financing, better margins and higher current account growth.

Fee income increased by 10% in 2Q 2018 YoY, mainly from financing-related activity.

2Q 2018 operating expenses increased YoY and the cost to income ratio reached 50.8% from 45.4% a year earlier.



Total assets 113,479 104,445 110,187 +3% 113,479 110,187 +3%

Total operating income 2,070 1,896 1,970 +5% 3,966 3,863 +3%Net special commission income 1,683 1,571 1,642 +2% 3,254 3,203 +2%Fee income from banking services, net 343 310 311 +10% 653 591 +11%

Operating expenses (1,051) (978) (894) +17% (2,028) (1,874) +8%Impairment charge (118) 45 (171) -31% (73) (250) -71%Other income (expenses) (7) (6) (4) +73% (13) (6) +104%Net income 894 956 901 -1% 1,851 1,733 +7%

Cost to income (%) 50.8% 51.6% 45.4% +12% 51.1% 48.5% +5%% of total assets 25.0% 23.9% 24.5% +2% 25.0% 24.5% +2%ROA (%) 3.3% 3.6% 3.3% -2% 3.3% 3.2% +4%

207 209 219

+5%

0

50

100

150

200

250

300

350

400

450

500

4Q 17 1Q 18 2Q 18


89 90 92

+3%

0

50

100

150

200

250

4Q 17 1Q 18 2Q 18



Corporate Banking2Q 2018 net income dropped by 5% due to lower operating income, offset by improvement in impairment charges


2Q 2018 net income decreased 5% YoY contributed by lower operating income (-14%) and higher operating expenses (+22%) despite improvements in impairments (-54%).

NSCI for 2Q 2018 declined 12% YoY as a result of repayments in 4Q 2017 that reduced the average balance by 5% compared with 2Q 2017.

Fee income decreased by 17% YoY mainly on lower lending and trade fees.

2Q 2018 operating expenses higher by 22% and the cost to income ratio increased by 43% YoY to 30.5%.

The 2Q 2018 impairment charge declined 54% YoY due mainly to a significant recovery and one-time IFRS 9 adoption adjustment to retained earnings permissible by IFRS 9.



Total assets 147,389 141,465 143,589 +3% 147,389 143,589 +3%

Total operating income 891 1,000 1,039 -14% 1,891 2,279 -17%Net special commission income 745 724 843 -12% 1,469 1,769 -17%

Fee income from banking services, net 201 222 243 -17% 423 510 -17%

Operating expenses (271) (231) (222) +22% (503) (478) +5%Impairment charge (115) 40 (247) -54% (75) (507) -85%Other income (expenses) 34 (47) (5) -823% (13) (8) +65%Net income 539 761 565 -5% 1,300 1,285 +1%

Cost to income (%) 30.5% 23.1% 21.4% +43% 26.6% 21.0% +27%% of total assets 32.5% 32.3% 31.9% +2% 32.5% 31.9% +2%ROA (%) 1.5% 2.2% 1.6% -6% 1.9% 1.8% +2%

124 126 135

+9%

0

50

100

150

200

250

300

4Q 17 1Q 18 2Q 18


72 71 70

-2%

0

20

40

60

80

100

120

140

160

180

4Q 17 1Q 18 2Q 18



Treasury

Strong 2Q 2018 net income growth from operating income


2Q 2018 net income increased 18% YoY driven by higher operating income (18%).

2Q 2018 NSCI improved 25% YoY due to net interest margin expansion.



Total assets 157,626 153,884 155,851 +1% 157,626 155,851 +1%

Total operating income 1,096 1,284 932 +18% 2,380 2,107 +13%Net special commission income 797 815 638 +25% 1,612 1,194 +35%Fee income from banking services, net 37 37 23 +64% 74 48 +54%

Other operating income 262 432 272 -3% 695 865 -20%Operating expenses (118) (119) (86) +37% (237) (239) -1%Impairment charge 5 (99) (6) -177% (95) (7) +1282%Other income (expenses) (4) (10) (7) -40% (14) (12) +20%Net income for the period 979 1,056 833 +18% 2,034 1,850 +10%

Cost to income (%) 10.8% 9.3% 9.2% +17% 10.0% 11.3% -12%% of total assets 34.7% 35.2% 34.6% +0% 34.7% 34.6% +0%ROA (%) 2.5% 2.7% 2.1% +19% 2.5% 2.4% +7%

115 114 115

+0%

0

50

100

150

200

250

300

4Q 17 1Q 18 2Q 18

Investments (SARbn)

550

815 797

+45%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

4Q 17 1Q 18 2Q 18

Net Special Commission Income (SARmn)


Capital Markets

Robust 2Q 2018 net income growth, driven by assets management and brokerages fees


2Q 2018 net income increased by 62% YoY due to higher operating income (22%) and improved operating efficiency.

Operating income in 2Q 2018 rose 22% YoY due to higher AUM and brokerages related fee income.

Cost to income improved to 50.1% in 2Q 2018 from 63.2% in 2Q 2017.



Assets Under Management 143,850 136,780 142,330 +1% 143,850 142,330 +1%Brokerages Volume 48,510 46,990 47,980 +1% 48,510 47,980 +1%

Total operating income 176 228 144 +22% 404 308 +31%AUM Related Fee Income 120 155 98 +22% 120 98 +22%Brokerage Related Fee Income 38 38 31 +22% 38 31 +22%Other fee income 9 29 11 -19% 231 170 +36%

Fee income, net 167 222 140 +19% 389 300 +30%Operating expenses (88) (89) (91) -3% (177) (175) +1%Other income (expenses) (0) 0 1 -100% (0) 1 -100%Net income 88 139 54 +62% 227 134 +69%Non-controlling interests (4) (4) (1) +208% (7) (3) +109%Net income attributed to equity holders 84 135 53 +59% 220 131 +68%

Cost to income (%) 50.1% 39.0% 63.2% -21% 43.8% 56.7% -23%ROA (%) 22.8% 38.3% 15.2% +50% 30.6% 19.3% +59%

129 137 144

+11%

0

50

100

150

200

250

300

4Q 17 1Q 18 2Q 18

Assets Under Management (SARbn)

49 47 49

-1%

0

20

40

60

80

100

120

4Q 17 1Q 18 2Q 18

Brokerages Volume (SARbn)


International (in SAR)2Q 2018 net income higher by 26% YoY due to higher operating income, and lower operating expenses


1H 2018 net income rose by 34% YTD driven by 2% operating income growth, despite a higher NPL coverage.

2Q 2018 operating expenses improved by 9% YoY, and the cost to income ratio improved to 47.8% from 56.7% a year earlier.

10.7% drop YoY in YTD average TRY/SAR rate, and 17.2% decline in the TRY/SAR spot rate since 4Q 2017.



Total assets 34,306 36,199 39,395 -13% 34,306 39,395 -13%

Total operating income 427 372 393 +9% 799 782 +2%Net special commission income 347 306 350 -1% 653 666 -2%Fee income from banking services, net 60 62 73 -18% 122 144 -15%

Operating expenses (204) (216) (223) -9% (420) (439) -4%Impairment charge (112) (63) (54) +105% (175) (139) +26%Other income (expenses) 13 24 (17) -178% 38 (22) -274%Net income 124 117 99 +26% 241 182 +32%Non-controlling interests (41) (38) (33) +26% (80) (61) +30%Net income attributed to equity holders 83 78 66 +26% 162 121 +34%

% of total assets 7.6% 8.3% 8.7% -14% 7.6% 8.7% -14%Cost to income (%) 47.8% 58.1% 56.7% -16% 52.6% 56.1% -6%NCL (%) 1.8% 1.0% 0.8% +130% 1.4% 1.0% +42%ROA (%) 1.4% 1.3% 1.0% +40% 1.3% 1.8% -27%

NIM (%) 4.2% 3.4% 3.3% +28% 3.8% 3.3% +15%NPL (%) 5.1% 5.3% 5.4% -5% 5.1% 5.4% -5%NPL Coverage Ratio (%) 96% 99% 86% +11% 96% 86% +11%

26 25 24

-10%

0

10

20

30

40

50

60

4Q 17 1Q 18 2Q 18


22 21 20

-9%

0

5

10

15

20

25

30

35

40

45

50

4Q 17 1Q 18 2Q 18

Customers' deposits (SARbn)


International (in TRY)2Q 2018 net income grew by 39% YoY due to higher operating income and lower impairment charge


2Q 2018 total operating income increased by 20% YoY, due to higher NSCI by 10%, and income increased by 39% YoY.

2Q 2018 operating expenses higher by 2%, the impairment charge for 1H 2018 increased by 41%.

2Q 2018 cost to income ratio improved to reach 47.8% from 56.0% in 2Q 2017

Summary Financial PerformanceTRY (mn) 2Q 2018 1Q 2018 2Q 2017 YoY %


Total assets 41,867 38,202 36,945 +13% 41,867 36,945 +13%

Total operating income 452 378 378 +20% 867 758 +14%Net special commission income 367 311 334 +10% 709 645 +10%Fee income from banking services, net 63 63 70 -10% 133 139 -5%

Operating expenses (216) (220) (212) +2% (456) (422) +8%Impairment charge (118) (64) (52) +130% (190) (134) +41%Other income (expenses) 14 25 (20) -172% 41 (21) -295%Net income 132 118 95 +39% 262 181 +45%Non-controlling interests (44) (39) (31) +40% (87) (60) +45%Net income attributed to equity holders 88 79 64 +38% 175 121 +45%

Cost to income (%) 47.8% 58.2% 56.0% -15% 52.6% 55.7% -5%ROA (%) 1.3% 1.2% 1.0% +30% 1.3% 1.0% +36%

Note: Figures according to IFRS accounting standards

26 26 29

+9%

0

10

20

30

40

50

60

4Q 17 1Q 18 2Q 18

Financing and advances, net (TRYbn)

22 22 24

+10%

(9)

1

11

21

31

41

51

4Q 17 1Q 18 2Q 18

Customers' deposits (TRYbn)


National Commercial Bank Additional Information2Q 2018 Results


Additional Information

Please don’t hesitate to contact NCB Group Investor Relations

More information

Download copies of National Commercial Bank’s:

Financial statements

Earnings release

Investor presentation

Financial data pack (Excel)

Visit: http://www.alahli.com/en-us/Investor_Relation

Mr. Abdulbadie Alyafi

Head, Investor Relations

P: +966 12 646 3988

E: [email protected]

National Commercial Bank

P.O. Box 3555

21481 Jeddah, Kingdom of Saudi Arabia

http://www.alahli.com/en-us/Investor_Relation

National Commercial Bank Investor Presentation 2Q 2018 Results › en-us › Investor_Relation ›...

Documents

Transcript of National Commercial Bank Investor Presentation 2Q 2018 Results › en-us › Investor_Relation ›...