National Commercial Bank Investor Presentation FY … · the date of this presentation and NCB...

NCB Investor RelationsFY 2017 Investor Presentation 1

National Commercial Bank

Investor Presentation

FY 2017 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

11

17

28

50

56

NCB – The leading KSA bank

Grow with KSA. Grow with NCB.

Strategy Overview

Financial Results Highlights

Segmental Overview

Additional Information

35 Financial Results Details



The Leading KSA Bank

FY 2017 Results


NCB is the leading banking group in Saudi Arabia

Established in 1953; IPO in 2014

NCB Snapshot

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 is the leading banking group in Saudi Arabia

NCB has a strong market and financial position (3Q 2017)

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

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 #4

445

338

229 218 202

050

100150200250300350400450500

NCB Rajhi Samba Riyad BSF

Assets (SARbn)

257 233

142 129 121

0

50

100

150

200

250

300

NCB Rajhi Riyad BSF Samba

Financing (SARbn)

303 270

167 156 155

0

50

100

150

200

250

300

350

NCB Rajhi Samba Riyad BSF

Deposits (SARbn)


NCB has a well-diversified business model

Total operating income contribution (FY 2017)

Capital Markets

Largest Asset Manager in KSALargest Shariah-compliant Asset Manager worldwide

Top 3 Broker15 locations

297 Employees

SAR 16.1bn88%

NCB

400 branches, 3,488 ATMs150 Remittance centers

7,991 Employees

8.3bn45%

4.5bn25%

3.3bn18%

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

43 47 56 60 64

+11%

0

20

40

60

80

100

2013 2014 2015 2016 2017

Total Equity (SARbn)

377 435 449 443 444

+4%

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017

Total Assets (SARbn)

CAGR CAGR

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

Capital ratios are based on Pillar I RWA

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

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


NCB has a strong performance track record

Key KPIs

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

2013 2014 2015 2016 2017

Total Operating Income (SARbn)

Net special commission incomeFee and other income

2.99% 2.91% 3.04%3.35% 3.48%

0

0

0

0

0

0

0

0

0

0

0

2013 2014 2015 2016 2017

Net Special Commission Margin (%)

CAGR CAGR

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 (%)

39.0% 39.0% 37.4% 37.7% 35.2%

0

0

0

0

0

1

1

2013 2014 2015 2016 2017

Cost to Income Ratio (%)

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)


NCB Group listed on Tadawul in November 2014

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

MSCI GCC Index Float Adj. Mcap (USDb) Weighting (%)

Al Rajhi Bank 20.94 8.63SABIC 20.38 8.40National Commercial Bank 11.44 4.71Etisalat 8.29 3.41Qatar National Bank 8.05 3.32 Saudi Telecom 7.32 3.02 National Bank of Kuwait 6.99 2.88 Samba Financial Group 6.84 2.82 Emaar Properties 6.63 2.73 Almarai 6.47 2.67

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- Stable Fitch A+ Stable Moody’s A1 Stable Capital Intelligence A+ Negative *Moody’s rating is unsolicited

[Source: MSCI, 29 December 2017]Source: NCB, Bloomberg

Source: Bloomberg

Share parameters 31 Dec 2017

Closing Price (SAR) 55.0552 week range (SAR) 37-56Free Float 36% Shares issued (mn) 2,000Tangible Book Value (SARmn) 55,738 Tangible BVPS 27.87 P/TBV Ratio 2.0 x P/E Ratio 11.61x Div Yield (%) 3.08 3m Avg Daily Volume (Shares) 780,297

0

10

20

30

40

50

60

70

80

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

Share price performance since IPO (SAR)

NCB Investor RelationsFY 2017 Investor Presentation


Grow with KSA. Grow with NCB.

FY 2017 Results


Economic headwindsChallenges persist, but three-year high oil prices and rising non-oil revenues reduced the overall fiscal deficit in 2017 from double to single digits

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

0

20

40

60

80

100

120

140

0

2

4

6

8

10

12

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

Oil Market

Saudi Oil Production, LHSArabian Light Spot Price, RHS

718 725 610 529 489

36 43 60

39 39

754 768 670

568 528

0

100

200

300

400

500

600

700

800

900

2013 2014 2015 2016 2017

Foreign Reserves (USDbn)

SAMABanks

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Stock Market

Tadawul Index

6.4%

-2.3%

-14.8% -12.9%-9.0%

18.1%

9.7%

-8.7%-3.7%

1.5%

-2 5. 0%

-15 .0%

-5 .0%

5 .0%

15 .0%

25 .0%

2013 2014 2015 2016 2017P

Twin Balances (%)

Budget Balance / GDPCurrent Account Balance / GDP


1.0%

1.9%

0.3%

1.7%

(0)

(0)

0

0

0

0

0

0

2013 2014 2015 2016 2017

Interbank Rates (%)

3M SAR SAIBOR3M USD LIBOR

Dec-17

13

Saudi banking sectorBanking profit growth is expected to rebound on the back of recent government stimuli in support of private sector and individuals

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

63 65

69 76 80 83

6.8%9.1%

5.7%3.8% 3.1%

-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 9M 2017

Net Operating Income (SARbn)

Profits (9M)Profits (FY)Annual Growth (%)

33 34

38 41 44 41

7.2%

10.2%

5.4%

-5.4%

3.3%

-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

2013 2014 2015 2016 9M 2017

Profits (SARbn)

Profits (9M)Profits (FY)Annual 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%)

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

12.0% 11.6%8.9%

2.9%-1.0%

-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 2030The Kingdom of Saudi Arabia established a clear direction to accelerate economic growth through vision 2030 and its programs

A Thriving Economy

An Ambitious

Nation

A Vibrant Society

Pillars Selected Goals & KPIsObjectives

Strengthen Islamic values & national

identity

Offer a fulfil l ing & 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 ProgramNational Industrial

Development and Logistics Program

Financial Sector Development ProgramLifestyle Improvement

ProgramNational 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 tril l ion

§ 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 SME contribution to GDP from 20% to 35%

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

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

§ Raise non-oil government revenue from SAR 163 bill ion to SAR 1 tril l ion

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


2.7%3.6% 4.1%

1.7%

-0.8%

2.5% 2.3%3.1%

(0)

(0)

0

0

0

0

0

0

0

0

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

Real GDP Growth (%)

15

Economic upturnBudgetary pro-growth measures, growing CAPEX, and additional stimulus point to 2018 economic and banking sector growth

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

60 44 142

317 438

555 673

749

2% 2%6%

13%17%

20%24% 25%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

0

200

400

600

800

1,000

1,200

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

Government Debt (SARbn)

Domestic Public DebtDebt to GDP Ratio (%)

1,035 913 446 334 440 509 526 554

121 131

169 186 256 289 326 368

1,156 1,044

616 519 696 798 852 923

108 99

51 41 53 55 55 55

(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)

1,545 1,729 1,773 1,787 1,791 1,910 2,052

2,225 10.9%11.9%

2.5%0.8% 0.2%

6.6% 7.5%8.4%

-2.0%

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%)

312 370 264 134 180 205 218 228

664 740

714 696 746 773 789 822

976 1,110

978 831

926 978 1,006 1,050

0

200

400

600

800

1,000

1,200

2013 2014 2015 2016 2017 2018F 2019F 2020F

Government Expenditure (SARbn)

CapexCurrent Expenditure (Opex)

1,121 1,251 1,362 1,400 1,387 1,473 1,575 1,698

12.0% 11.6%8.9%

2.9%-1.0%

6.2% 7.0% 7.8%

-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 2018F 2019F 2020F

Bank Lending (SARbn)

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


NCB is aligned with Government priorities

NCB has already made significant contributions to the economic welfare of Saudi Arabia

Government aims to mobilize capital and channel to target

sectors

NCB plans to target sectors where we have

competitiveness and scale

NCB supports +70,000 SME across Saudi Arabia with leading

market share

Preferred local partner for Government and GRE sukukissuances (KSA Government, Aramco, Ma’aden Aluminum refinancing and SEC Sukuk

extension)

NCB is a large investorin Saudi Government Bonds with a portfolio SAR 44bn.

NCB has provided home financing for more than 28,000 Saudi families with a portfolio of

SAR 20bn

Achieving fiscalsustainability

Opening up the Saudi economy

Increase SME contribution to GDP

Increase homeownership

Reduce Saudi unemployment

Diversify economyNCB is the leading lender for

KSA companies with a portfolio of SAR 136bn; 15% market share

NCB is the leading financial institution in Saudization

(95%) and has a 100% Saudi top management team



Strategic overview

FY 2017 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 continued to deliver on its strategic plan

2017 Achievements

Continued growing market share across majority of consumer lending products

Sustained our leadership position in corporate lending and continued growing revenues

Delivered improvement in net income through effective cost and recoveries management

Completed issuance of Tier I Sukuk program (totaling SAR 7bn) and expanded suite of liability products including Shariah compliant CD’s and call accounts

Delivered net income growth by increasing AUMs and maintaining cost discipline

Expanded our branch network by 26 with no increment in head count driven by digital migration

Deployed digital functionality which enabled a 20% decline in branch financial transactions

Retail Banking

Corporate Banking

TFKB

Treasury

NCBC

Lean Distribution

Digitization

2017Achievements


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

12.1 11.0

-9%

0

2

4

6

8

10

12

14

16

18

20

2014 2017

FTE / Branch

39.0%35.2%

-10%

0

0

0

0

0

1

1

1

2014 2017

Cost / Income Ratio (%)

342 400

+17%

0

100

200

300

400

500

600

700

2014 2017

Number of branches

60%71%

+18%

0

0

0

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)

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)


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

10%

37%

+54%

0

0

0

0

0

1

1

1

2014 2017

Digital Transactors (% of total base)

13.0 30.7 2.8

19.4

15.8

50.1

+47%

0

10

20

30

40

50

60

70

80

90

100

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

22

74 89

17.4% 19.5%

+6%

0.0%

5 .0%

10.0%

15 .0%

20. 0%

25 .0%

3 0. 0%

3 5. 0%

4 0. 0%

4 5. 0%

50. 0%

0

20

40

60

80

100

120

140

160

2014 2017

Consumer Financing & Advances, net (SARbn)

Consumer Financing & Advances, net (SARbn)Market Share (%)

Market share as at 3Q 2017 based on performing loans

5.7

8.3

+13%

0

2

4

6

8

10

12

14

2014 2017


1.6

4.0

+38%

0

1

2

3

4

5

6

7

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

250

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

6

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

London

Bahrain

Singapore

Jeddah

Established

Under consideration

FrankfurtNew York

Hong Kong

94% 90%

-2%

0

0

0

1

1

1

1

1

2

2

2014 2017

Saudi Government and Investment Grade Investments as % of Total

35%

26%

-10%

0

0

0

0

0

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

200

2015 2017

HQLA and Liquidity Coverage (SARbn/%)

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


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

55

129

+133%

0

50

100

150

200

250

2014 2017

NCBC Assets under Management (SARbn)

10.1%

22.0%

+11.9ppt

0

0

0

0

0

0

0

0

0

2014 2017

NCBC Share of Sector Net Income (%)

2017 share as at 3Q 2017

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

2014 2017

Tadawul Traded Value (SARbn) & TASI Index

Traded ValueTASI Index

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

2014 2017

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


34 39

+5%

0

10

20

30

40

50

60

70

2014 2017

Thou

sand

s

Total Assets (TRYbn)

1,446 1,914

+10%

0

500

1,000

1,5 00

2, 000

2, 500

3 ,000

3 ,500

4 ,000

2014 2017

Total Operating Income (TRYmn)

334 375

+4%

0

100

200

300

400

500

600

2014 2017

Net Income (TRYmn)

2.9% 3.2%

+3%

0

0

0

0

0

0

0

2014 2017

TFKB Contribution to NCB Net Income (%)

26

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


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.



Financial Results Highlights

FY 2017 Results


Key messages

FY 2017 Results

Income Statement

BalanceSheet

Asset Quality, Capital

& Liquidity

§ Stable total assets and 2% financing decline mainly due to corporate repayments (domestic financing -1%; international -8% impacted by Turkish Lira depreciation)

§ 3% investments growth through Saudi Government debt issuance participation and portfolio re-balancing

§ 2% decline in deposits as the funding mix was optimized by reducing time deposits, but CASA growth of 6%

§ 1% NSCI growth in 2017 as NSCI margin improved by 13bps while average earning assets declined by 1% compared with FY 2016 attributable to international

§ 8% decline in fee and other income in 2017 due to lower investment-related income and fees from financing, trade finance and credit cards

§ Expenses for FY 2017 improved 8% due to ongoing digitization and productivity initiatives

§ 5% growth in 2017 net income

§ Impairment charge for FY 2017 improved 9% on lower retail & international charges§ Group NPL ratio at 1.9% at 4Q 2017 and adequate NPL coverage at 143%§ Capital position comfortably above regulatory minima with CET1 of 15.7% and T1 of

17.7% at 4Q 2017§ Strong liquidity with LTD ratio of 81%, average 4Q 2017 LCR of 177% and Leverage

Ratio of 13.0% at 4Q 2017§ The initial implementation of IFRS 9 on 1 January 2018 is not expected to have a

material impact on NCB's capital position.

Financing (SARbn) Deposits (SARbn)

316 309

-2%

0

100

200

3 00

4 00

500

600

700

800

4Q 16 4Q 17

9.32 0.11

(0.41)

0.59 0.20

0.00

9.80

0

0

0

1

1

1

1

1

2

2016

NSCI

Non-

SCI

Expe

nses

Impa

ir-m

ents

Othe

r

2017

Net income attributable to equity holdersmovement (SARbn)

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

1.5%1.9%

0.7% 0.7%

0.0%

0.2%

0.4%

0.6%

0.8%

1. 0%

1. 2%

1. 4%

0

0

0

0

0

0

4Q 16 4Q 17

NPL CoR (YTD)

15.3% 15.7%80% 81%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

0

0

0

0

0

0

0

4Q 16 4Q 17

CET1 LTD

254 249

-2%

0

100

200

3 00

4 00

500

600

4Q 16 4Q 17


Profitability

Profitability Trends

SAR (mn) 4Q 2017 3Q 2017 4Q 2016 YoY % change FY 2017 FY 2016 YoY %

change

Net special commission income 3,378 3,449 3,324 +2% 13,661 13,550 +1%

Fee and other income 1,138 1,042 1,277 -11% 4,684 5,098 -8%

Total operating income 4,516 4,492 4,600 -2% 18,345 18,647 -2%

Operating expenses (1,642) (1,602) (1,816) -10% (6,453) (7,038) -8%

Total impairment charge (347) (695) (439) -21% (1,939) (2,137) -9%Income from operations, net 2,526 2,195 2,345 +8% 9,953 9,472 +5%

Net income attributed to equity holders 2,556 2,126 2,287 +12% 9,802 9,317 +5%

2017 Net income growth from improved impairments and efficiency, partly offset by lower fee and other income

18.6 18.3

-2%

0

5

10

15

20

25

30

2016 2017

9.3 9.8

+5%

0

2

4

6

8

10

12

14

16

2016 2017

4.72 4.66 4.66 4.60 4.86 4.48 4.49 4.52

-2%

0

1

2

3

4

5

6

7

8

9

10

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17


2.63 2.44 1.96

2.29 2.70 2.42 2.13

2.56

+12%

0

1

2

3

4

5

6

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Net Income Attributed to Equity Holders (SARbn)


Balance Sheet

Balance Sheet Trends

SAR (mn) 4Q 2017 3Q 2017 4Q 2016 YoY % change

Investments, net 114,578 116,900 111,509 +3%

Financing and advances, net 249,234 256,852 253,592 -2%Total assets 443,866 444,679 442,657 +0%

Due to banks and other financial institutions 48,558 57,800 45,474 +7%

Customers' deposits 308,942 302,593 315,618 -2%Debt securities issued 10,250 10,166 9,918 +3%Total liabilities 379,590 381,944 382,731 -1%

Equity attributable to shareholders 56,041 54,433 53,038 +6%

Total equity 64,276 62,736 59,926 +7%

Growth constrained by economic environment

231 220 217 224 236 248 232 238

81 81 78 79 66 55 59 58

326 315 311 316 314 315 303 309

-2%

0

100

200

300

400

500

600

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Customers' Deposits (SARbn)

CASATimeOthers

136 137 135 132 134 135 135 124

80 83 84 85 85 87 88 89 38 37 33 28 27 27 27 26

265 265 260 254 254 257 257 249

-2%

0

50

100

150

200

250

300

350

400

450

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Financing and Advances, net (SARbn)

CorporateConsumer and credit cardInternationalOthers


Retail45%

Corporate25%

Treasury18%

Capital Market3%

International9%

Total Operating Income by Segment (SARbn)

32

Segmental Information 2017 Total operating income lower due to depreciation of Turkish Lira and lower Treasury income, partly offset by higher Retail operating income

18.6 18.3

0

5,000

10,000

15 ,000

20, 000

25 ,000

2016 2017

4,600

439

(346)

(95)

14

(97)

4,516

0

100

200

300

400

500

600

700

800

900

1,000

4Q 16 Retail Corporate Treasury Capital Market International 4Q 17

4Q 17 Total Operating Income Movement by Segment (SARbn)

18,647

599 91

(412)

55

18,345

(636)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2016 Retail Corporate Treasury Capital Market International 2017

2017 Total Operating Income Movement by Segment (SARbn)

105 107 109

139 143 133

156 154 163

41 39 38 443 445 444

+0%

0

100

200

300

400

500

600

700

4Q 16 3Q 17 4Q 17

Total Assets by Segment (SARbn)

RetailCorporateTreasuryCapital MarketInternational

85 88 89

132 135 124

28 27 26

254 257 249

-2%

0

50

100

150

200

250

300

350

400

450

4Q 16 3Q 17 4Q 17

Financing and Advances, net by Segment (SARbn)

RetailCorporateInternationalOther


Retail41%

Corporate23%

Treasury28%

Capital Market3%

International5%

Net Income by Segment* (SARbn)

33

Segmental Information2017 net income growth mainly driven by Retail segment, partly offset by Corporate and Treasury declines

9.4 10.0

0

2

4

6

8

10

12

2016 2017

2,326

485

(274)

(17) 29 72 2,621

0

100

200

300

400

500

600

700

800

900

1,000

4Q 16 Retail Corporate Treasury Capital Market International 4Q 17

4Q 17 Net Income Movement by Segment* (SARmn)

9,416

997

(414)(283)

69 9,965 180

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2016 Retail Corporate Treasury Capital Market International 2017

2017 Net Income Movement by Segment* (SARmn)

Management Commentary

§ 2017 Total operating income declined 2% due to depreciation of the Turkish Lira impacting International income (-28% ) and lower Treasury income (-11% ), partly offset by growth in Retail (+8% ) and Corporate (+2% ) income.

§ 2017 Net income improved 5% due to growth in Retail (+33% ) and International (+64% ), partly offset by a decline in Corporate net income (-15% ) due to higher impairments and Treasury (-9% ) from lower operating income.

*Net income for the period, before deduction of non-controlling interests


Outlook

Improved macroeconomic environment expected to drive growth

BalanceSheet

Capitalisationand Asset

Quality

Financing growth -2% +5% to 8%• Average Arabian light oil

price of USD 55 per barrel

• Three US Fed rate hikes of 25bps each in March, June and December.

• Government’s expansionary budget for 2018 will drive corporate lending activity

• Residential financing will drive consumer lending growth

• Budget deficit narrows to SAR 180bn

• Real GDP growth of 2.5%

• VAT and increased tariffs on utilities will increase inflation to around 5%

NSCI margin 3.48% +5 to 15bps

Cost to income 35.2% Below 35%

Tier 1 CAR 17.7% 16% to 18%

Cost of Risk 0.7% 0.6% to 0.8%

2018 Macroeconomic Outlook

FY 2017Reported

FY 2018Guidance

Profitability



Financial Results Details

FY 2017 Results


Income Highlights


§ 4Q 2017 total operating income declined 2% YoY despite a 2% improvement in net special commission income due to lower investment-related income.

§ FY 2017 total operating income declined 2% despite 1% growth in net special commission income due to lower fee and other income and average Turkish Lira depreciation of 17% .

§ Excluding the International business, 4Q 2017 total operating income was marginally higher YoY.

Lower FY 2017 and 4Q 2017 total operating income largely attributable to lower fee and other income and Turkish Lira depreciation

3.32 3.45 3.38

1.28 1.04 1.14

4.60 4.49 4.52

-2%

0

1

2

3

4

5

6

7

8

4Q 16 3Q 17 4Q 17



13.5 13.7

5.1 4.7

18.6 18.3

-2%

0

5

10

15

20

25

30

2016 2017

18.65

0.52

(0.18)

18.98

(0.64)

18.35

0

1

1

2

2

3

3

4

4

2016 NSCI Non-NSCIIncome

Excl. Intn'l International 2017

2017 Total Operating Income Movement (SARbn)

4.60 0.05

(0.04)

4.61

(0.10)

4.52

0

0

0

1

1

1

1

4Q 16 NSCI Non-NSCIIncome

Excl. Intn'l International 4Q 17

4Q 17 Total Operating Income Movement (SARbn)


Net special commission income trends2017 commission income growth limited as domestic margin improvement partly offset by Turkish Lira depreciation


§ The 4Q 2017 net special commission margin increased by 20bps YoY to 3.49% due to improved funding costs (+13bps to 3.48% FY 2017).

§ Special commission expense for 4Q 2017 was 9% lower YoY (-12% FY 2017) due to lower SAIBOR rates and a more optimal funding mix.

§ Excluding the International business, domestic NSCI grew by 2% in 4Q 2017 (+4% FY 2017).

Net Special Commission Income

SAR (mn) 4Q 2017 3Q 2017 4Q 2016 YoY % change

FY 2017 FY 2016 YoY % change

Special commission income 4,373 4,282 4,416 -1% 17,145 17,519 -2%

Special commission expense (996) (833) (1,092) -9% (3,484) (3,969) -12%

Net special commission income 3,378 3,449 3,324 +2% 13,661 13,550 +1%

Net special commission margin (%) 3.49% 3.45% 3.29% +6% 3.48% 3.35% +4%

3.40% 3.28%3.44% 3.29%

3.49% 3.49% 3.45% 3.49%

0

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Net Special Commission Margin (%)

4.35% 4.24% 4.37% 4.37% 4.42% 4.33% 4.31% 4.41%

1.02% 1.03% 0.99% 1.15% 1.01% 0.90% 0.91% 0.99%

(0)

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Commission Yield and Funding Cost (%)

Commission yield (%) Funding cost (%)

1.80%

2.22% 2.36%2.04%

1.74% 1.78% 1.79% 1.90%

0.63%0.65%0.85% 1.00%

1.15% 1.30% 1.33%1.69%

0

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

SAIBOR and LIBOR Rates (%)

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


Fee and other income trends


§ 4Q 2017 fee and other income declined 11% YoY as 5% growth in fees from banking services was more than offset by a 51% decline in investment-related income.

§ The higher fees from banking services in 4Q 2017 were mainly driven by higher fees from investment management services and financing activity.

§ FY 2017 fee and other income declined 8% from reduced income from banking services (-5% ) and investment-related income (-22% ).

§ The lower fees from banking services in 2017 were driven by lower financing, trade finance and credit card fees, partly offset by higher fees from investment management services.

Lower FY 2017 fees and investment related income

3,363 3,205

1,143 1,156

1,024 802

5,098 4,684

(433) (479)

-8%

(400)

600

1,600

2,600

3,600

4,600

5,600

6,600

7,600

8,600

2016 2017

3,363 107

(86)(66)

(63)(49)

3,205

0

100

200

300

400

500

600

700

800

900

2016 Invmnt.Mgmnt.

Financing TradeFinance

CreditCards

Others 2017

2017 Key Drivers of Fee Income from Banking Services Movement (SARmn)

Fee & Other IncomeSAR (mn) 4Q 2017 3Q 2017 4Q 2016 YoY %

changeFY 2017 FY 2016 YoY %

change

Shares brokerage 50 32 59 -16% 183 219 -17%Investment management services 128 117 90 +43% 440 333 +32%Financing and advances, net 409 373 366 +12% 1,537 1,623 -5%Credit cards 8 41 15 -46% 120 183 -35%Trade finance 137 131 154 -11% 537 604 -11%Others 89 99 96 -8% 389 401 -3%Fee income from banking services 820 793 779 +5% 3,205 3,363 -5%Exchange Income, net 266 280 287 -7% 1,156 1,143 +1%Other operating income (expenses) (113) (132) (126) -10% (479) (433) +11%Fee income, excl. investment-related income

973 941 940 +4% 3,882 4,074 -5%

Investment-related income 165 101 337 -51% 802 1,024 -22%Fee and other income 1,138 1,042 1,277 -11% 4,684 5,098 -8%

779 793 820

287 280 266 337 101 165

(126) (132) (113)

1,277 1,042 1,138

-11%

(200.00)

300.00

800.00

1,300.00

1,800.00

2,300.00

2,800.00

4Q 16 3Q 17 4Q 17

Fee and Other Income (SARmn)

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


Expense highlights

Digitization and productivity enhancement delivered expense savings in 2017


§ 2017 operating expenses improved by 8% YoY.§ The FY 2017 cost to income ratio improved by 2.5% YoY to 35.2% . § The cost base improvement was relatively broad-based, reflecting

the continued strides made in digitisation and productivity initiatives, and further benefited from the cessation of intangible assets amortisation as well as currency depreciation in the Turkish subsidiary.

7,038

(167) (3)(107)

(309)

6,453

0

200

400

600

800

1,000

1,200

1,400

1,600

2016 Employee-related

Rent & premises Depreciation &amortisation

Other G&A 2017

Operating Expenses Movement Drivers (SARmn)

3,433 3,266

774 771 761 654

2,070 1,761

7,038 6,453

-8%

0

2,000

4,000

6,000

8,000

10,000

12,000

2016 2017

881 797 794

196 197 203 113 153 153

626 455 492

1,816 1,602 1,642

-10%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4Q 16 3Q 17 4Q 17

Operating Expenses (SARmn)

Employee-relatedRent & premisesDepreciation & amortisationOther G&A

36.0%37.5% 37.2% 37.7%

34.7% 34.4% 34.8% 35.2%

33.2%35.1% 34.9%

36.2%

32.9% 32.4% 32.9% 33.3%

0

0

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Cost to Income Ratio (YTD %)

Group (%) Excluding International (%)


Retail24%

Corporate30%

Treasury37%

Capital Market0%

International9%

Total Assets by Segment (SARbn)

40

Asset highlights and compositionBalance sheet growth reflective of a more subdued economic environment and Turkish Lira depreciation

254 257 249

112 117 115 63 52 60

443 445 444

+0%

0

100

200

300

400

500

600

700

800

4Q 16 3Q 17 4Q 17

Total Assets (SARbn)

Financing and advances, netInvestments, netCash, bank and SAMA balancesOther assets

Financing and advances, net56%

Investments, net26%

Cash, bank and SAMA balances13%

Other assets5%

Total Assets Mix (SARbn)


§ Total assets were stable during 2017 due to limited decline in financing (-2% ) and moderate growth in investments (+3% ).

§ Overall balance sheet and financing trends were reflective of a more subdued economic environment domestically, and further muted by Turkish Lira depreciation.

443 444

0

100

200

3 00

4 00

500

600

4Q 16 4Q 17

443 444

0

100

200

3 00

4 00

500

600

4Q 16 4Q 17


Consumer financing & credit cards

37%

Commerce17%Manufacturing

13%

Services8%

Utilities & health services7%

Building & construction5%

Others across 6 sectors13%

Financing and Advances, gross by Economic Sector (SARbn)

41

Financing and advances

Financing decline driven by Corporate segment and Turkish subsidiary


§ Domestically, financing grew for the Consumer segment (+5% ) but declined for the Corporate segment (-6% ) during 2017.

§ The decline in 2017 Corporate financing occurred during 4Q 2017 (-8% QoQ) due to repayments, particularly in the building & construction and commerce sectors.

§ International financing declined 8% in 2017 due principally to weakened Turkish Lira.

260 3

2 1

2 (6)

(6) (0)

256

0

5

10

15

20

25

4Q 16

Consu

mer

Utilities

& hea

lth

Servi

ces

Buildi

ng & co

nstruc

tion

Commerc

e

Mining &

…

Others

4Q 17

Movement in Financing, gross by Economic Sector (SARbn)

260 256

0

50

100

150

200

250

3 00

3 50

4 00

4Q 16 4Q 17

Thou

sand

s

132 135 124

85 88 89 28 27 26 254 257 249

-2%

0

100

200

300

400

500

600

4Q 16 3Q 17 4Q 17

Financing and Advances, net (SARbn)



Financing and advances credit quality (1)

Rise in Corporate NPLs and impairment but stable Retail and International credit quality

2.88 2.93 3.13 3.40 3.68 3.92 3.99 4.18 1.38 1.27 1.45 1.23 1.16 1.24 1.29 1.30 1.49 1.32 1.50 1.26 1.27 1.29 1.33 1.26 5.79 5.56 6.12 5.93 6.15 6.50 6.65 6.80

+15%

0

2

4

6

8

10

12

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Impairment Allowances (SARbn)


0.12 0.04

(0.01) (0.01)

3.93

0.45 0.27

(0.00)

4.77

0

0

0

1

1

1

1

1

2

4Q 16

Buildi

ng & co

nstruc

tion

Manufa

cturin

g

Commerc

e

Servi

ces

Transp

ort & co

mms

Agricu

lture

& fishin

gOthe

rs4Q

17

Movement in NPLs by Economic Sector (SARbn)

1.57 1.65 1.73 1.92 2.13 2.34 2.63 2.84 0.53 0.56 0.63 0.52 0.49 0.49 0.52 0.53 1.86 1.62 1.82 1.48 1.48 1.50 1.52 1.40 3.96 3.83 4.17 3.93 4.10 4.33 4.67 4.77

+21%

0

1

2

3

4

5

6

7

8

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

NPL (SARbn)


0.08 0.15 0.19 0.19 0.26 0.25 0.47

0.14 0.11 0.02

0.41 0.08 0.17

0.15

0.05 0.15 0.21

0.24

0.21 0.08 0.05

0.08

0.08

0.35 0.38

0.84

0.36 0.42 0.47

0.69

0.28

-24%

0

0

0

1

1

1

1

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Impairment Charge (SARbn)




Rise in NPL ratio but continued strong NPL coverage


§ Rising NPL ratio driven by the Corporate segment.§ Consumer and International credit quality remained stable during

2017.§ NPL coverage was comfortable at 143% as at 4Q 2017.

0.9% 1.0% 1.0% 1.1% 1.1% 1.2% 1.3% 1.5%

4.7%4.3%

5.3% 5.0% 5.3% 5.4% 5.4% 5.1%

1.5% 1.4% 1.6% 1.5% 1.6% 1.6% 1.8% 1.9%

(0)

(0)

0

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

NPL Ratios (%)

Domestic International Total NPL ratio

205%192% 196% 191% 186% 184%

169% 164%

80% 81% 83% 85% 86% 86% 87% 90%

146% 145% 147% 151% 150% 150% 142% 143%

(0)

0

1

1

2

2

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

NPL Coverage Ratios (%)

Domestic International Total NPL coverage ratio

0.3% 0.3%0.6% 0.5% 0.6% 0.6% 0.8% 0.7%

1.5%1.9%

2.3%2.7%

1.2%1.0% 1.0% 1.1%

0.5% 0.5%0.8% 0.7%

0.6% 0.7% 0.8%0.7%

(0)

(0)

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

CoR Ratios (YTD %)

Domestic International Total CoR ratio



Consumer NPLs stable while Corporate NPLs increased


§ Rising Corporate NPL ratio, in part due to repayments during 4Q 2017, but coverage remains strong at 147% as at 4Q 2017.

§ Consumer NPL ratio and coverage remain stable.

1.1% 1.2% 1.3%1.4%

1.5%1.7%

1.9%

2.2%

0.7% 0.7% 0.7%0.6% 0.6% 0.6% 0.6% 0.6%

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

NPL Ratios (%)

Corporate Consumer and credit card

184% 177% 181% 177% 173% 168%152% 147%

260%

229% 232% 234% 238%254% 246% 245%

1

1

1

2

2

2

2

2

3

3

3

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

NPL Coverage Ratios (%)


0.2%

0.3%

0.4% 0.5%

0.8% 0.7%0.9% 0.9%

0.6%

0.3%

0.8%0.6%

0.4%0.6% 0.6% 0.5%

(0)

(0)

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

CoR Ratios (YTD %)



IFRS 9The initial implementation of IFRS 9 on 1 January 2018 is not expected to have a material impact on NCB's capital position

Impact

Implementation

§ Overall impact on the classification of financial assets and liabilities is not expected to be significant.

§ NCB anticipates an increase in allowance for credit losses in respect of financial assets and as a result, the Bank’s Tier 1 ratio may be impacted primarily from potential increase in credit impairment provisions, net of tax.

§ IFRS 9 day 1 impact expected to reduce total equity as at 1 January 2018 by ~1% to 1.4% i.e. the T1 capital ratio by ~20bps to 27bps.

§ NCB will implement IFRS 9 with effect from 1 January 2018.

§ It plans to categorizes its financial assets into the following three stages in accordance with the IFRS 9 methodology:o Stage 1 – Performing assetso Stage 2 – Underperforming assetso Stage 3 – Impaired assets

§ The Group will also consider forward-looking information in its assessment of significant deterioration in credit risk since origination as well as the measurement of Expected Credit Loss.

§ NCB expects to exercise the accounting policy choice to continue IAS 39 hedge accounting.


Saudi Arabia54%

GCC and Middle East18%

Europe1%

Turkey3%

Other countries24%

Investments by Geography (SARbn)

Investments trends and compositionInvestments rose through participation in Saudi Government debt issuance and ~90% of the investment portfolio remains Saudi Government or investment grade

112 115

0

20

4 0

60

80

100

120

14 0

160

4Q 16 4Q 17


§ The investment portfolio is built on high quality securities with ~90% being 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 during the year in light of the rising interest-rate environment.

Saudi Government Securities

39%

Other investment grade51%

Non-investment grade6%

Unrated4%

Investments by Credit Grade (SARbn)

46

71 66 67

35 44 43

112 117 115

+3%

0

50

100

150

200

250

4Q 16 3Q 17 4Q 17

Investments (SARbn)

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

112 115

0

20

4 0

60

80

100

120

14 0

160

180

4Q 16 4Q 17


Liabilities trends and composition

Stable total liability base and improving deposit mix towards CASA balances


§ Customers’ deposits are the main source of funding and declined by 2% during 2017 as the funding mix was optimized by reducing time deposits.

§ CASA balances grew by 6% during 2017 and account for 77% of customers’ deposits.

218 231

6 7 79 58

316 309

-2%

0

100

200

300

400

500

600

4Q 16 4Q 17

Customers' Deposits (SARbn)

CASA - DomesticCASA - InternationalTimeOthers

316 303 309

45 58 49

383 382 380

-1%

0

100

200

300

400

500

600

700

4Q 16 3Q 17 4Q 17

Total Liabilities (SARbn)

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

383 380

0

100

200

3 00

4 00

500

600

4Q 16 4Q 17

Due to banks and other financial institutions

13%

Customers' deposits81%

Debt securities issued3%

Other liabilities3%

Total Liabilities Mix (SARbn)


Liquidity

NCB maintained a strong liquidity profile


§ As at 4Q 2017, the financing to customer deposit ratio was 80.7% and comfortably below the regulatory guidelines.

§ HQLA balances declined compared to 4Q 2016 due to a decline in reverse repo balances placed temporarily with SAMA at the end of 2016.

§ The average quarterly LCR improved to 177.3% from 172.5% in 4Q 2016.

§ Basel I I I leverage ratio improved to 13.0% from 12.2% in 4Q 2016.

Quarterly averages

81.4%84.1% 83.5%

80.3% 81.0% 81.6%84.9%

80.7%

1

1

1

1

1

1

1

1

1

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Financing to Customer Deposit Ratio (%)

11.5% 11.6%

12.1% 12.2%12.4%

12.2%

12.7%

13.0%

0

0

0

0

0

0

0

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Basel III Leverage Ratio (%)

94 101 97 104 102 96 91 95

145.3%156.1% 159.8%

172.5% 163.8% 166.1% 172.5% 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

50

100

150

200

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

HQLA and Liquidity Coverage (SARbn/%)

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



§ As at 4Q 2017, capitalization remained strong and comfortably above the regulatory minima.

§ Pillar I risk weighted assets increased by 2% in 2017 principally by an increase during 1Q 2017 due to revised regulatory requirements for the calculation of certain credit risk-weighted assets and was partially offset by reduction during 4Q 2017 from corporate loans repayments.

§ During 2Q 2017, additional Tier 1 Sukuk of SAR 1.3bn were issued, taking the total to SAR 7bn as at 31 December 2017.

§ On 28 December 2017, NCB announced an increase in the Bank’s paid-up share capital through a 1 for 2 bonus shares issue which, subject to AGM approval, will increase paid-up share capital to SAR 30bn (3,000mn shares) from SAR 20bn (2,000mn shares).

Common equity tier 1 capital (CET1)79%

Additional tier 1 capital (AT1)10%

Tier 2 capital (T2)11%

Total Capital Composition (SARbn)

49

Capital

Capital position comfortably above regulatory minima

68 72

0

10

20

3 0

4 0

50

60

70

80

90

100

4Q 16 4Q 17

Capital ratios are based on Pillar I RWA

54 55 57

6 7 7 8 8 8 68 70 72

+6%

0

20

40

60

80

100

120

4Q 16 3Q 17 4Q 17

Capitalisation (SARbn)

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

15.5%16.1% 16.5% 16.9%

16.1% 16.0% 16.4%17.7%17.5%

18.2%18.7% 19.2%

18.2% 18.2% 18.5%

20.0%

13.9%14.5% 14.9% 15.3%

14.6% 14.1% 14.5%15.7%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

21.0%

1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Capital Ratios (%)

T1 ratioTC ratioCET1 ratio

312 336 318

33 34 34 353 380 361

+2%

0

100

200

300

400

500

600

700

4Q 16 3Q 17 4Q 17

Pillar I Risk Weighted Assets (SARbn)

Credit riskOperational riskMarket risk



Segmental Review

FY 2017 Results


Retail BankingStrong FY 2017 and 4Q net profit growth resulting from operating income growth and improved efficiency


§ 4Q 2017 net income rose 68% YoY driven principally by 25% operating income growth, a 12% improvement in operating efficiency and improvement in collections.

§ NSCI for 4Q 2017 improved by 20% YoY due to a 5% increase in retail financing and higher current account growth.

§ Fee income increased by 32% in 4Q 2017 YoY, mainly from financing-related activity. § 4Q 2017 operating expenses improved by 12% and the cost to income ratio improved

29% YoY to 43.8% , reflecting continued digitisation and productivity initiatives.§ 4Q 2017 impairments improved by SAR 98mn QoQ but rose by SAR 91mn YoY.§ FY 2017 net income improved by 33% to SAR 4,045mn on rising operating income

(+8% ) and improved cost productivity (-8% ).

1,584 1,722 1,905 198 404 316 1,782

2,126 2,221

+25%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

4Q 16 3Q 17 4Q 17

Total Operating Income (SARmn)


711 1,022 1,196

+68%

0

500

1,000

1,500

2,000

2,500

3,000

4Q 16 3Q 17 4Q 17

Net Income (SARmn)

Summary Financial PerformanceSAR (mn) 4Q 2017 3Q 2017 4Q 2016 YoY %


change

Total assets 108,503 106,939 104,972 +3% 108,503 104,972 +3%

Total operating income 2,221 2,126 1,782 +25% 8,304 7,705 +8%Net special commission income 1,905 1,722 1,584 +20% 6,883 6,268 +10%Fee income from banking services, net

265 307 201 +32% 1,163 1,240 -6%

Operating expenses (973) (951) (1,108) -12% (3,799) (4,149) -8%Impairment charge (50) (148) 41 -222% (447) (501) -11%Other income (expenses) (2) (6) (4) -60% (13) (6) +106%Net income 1,196 1,022 711 +68% 4,045 3,048 +33%

Cost to income (%) 43.8% 44.7% 62.2% -29% 45.7% 53.9% -15%% of total assets 24.4% 24.0% 23.7% +3% 24.4% 23.7% +3%ROA (%) 4.4% 3.8% 4.1% +9% 3.8% 3.0% +27%


Corporate Banking4Q 2017 net profits declined due to lower NSCI on account of repayments, while FY 2017 net profits deteriorated due to higher impairments


§ 4Q 2017 net income declined 2% YoY as improvements in operating expenses (-9% ) and impairments (-25% ) were more than offset by lower operating income (-8% ).

§ NSCI for 4Q 2017 declined 11% YoY from both a 6% decline in corporate financing balances and lower commission resulting from lower SAIBOR rates.

§ Fee income decreased by 6% YoY.§ 4Q 2017 operating expenses improved by 9% and the cost to income ratio decreased

1% YoY to 23.5% . § The 4Q 2017 impairment charge declined 25% YoY and 69% QoQ due to higher NPL

inflow during 3Q 2017.§ FY 2017 net income fell 15% to SAR 2,350mn, primarily due to higher impairment

charges (+83% ) more than offsetting growth in operating income (+2% ).

834 761 741

353 281 351

1,187 1,042 1,092

-8%

0

500

1,000

1,500

2,000

2,500

4Q 16 3Q 17 4Q 17



708

311

691

-2%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

4Q 16 3Q 17 4Q 17

Net Income (SARmn)



change

Total assets 133,051 143,378 139,274 -4% 133,051 139,274 -4%

Total operating income 1,092 1,042 1,187 -8% 4,477 4,387 +2%Net special commission income 741 761 834 -11% 3,251 3,182 +2%Fee income from banking services, net

293 243 313 -6% 1,046 1,066 -2%

Operating expenses (257) (260) (283) -9% (998) (1,007) -1%Impairment charge (143) (465) (191) -25% (1,115) (609) +83%Other income (expenses) (1) (6) (5) -75% (14) (8) +88%Net income 691 311 708 -2% 2,350 2,763 -15%

Cost to income (%) 23.5% 25.0% 23.8% -1% 22.3% 23.0% -3%% of total assets 30.0% 32.2% 31.5% -5% 30.0% 31.5% -5%ROA (%) 2.0% 0.9% 1.7% +15% 1.7% 2.0% -12%


Treasury

Lower NSCI and investment gains impacted profitability


§ Treasury reported a 38% YoY drop in net income in 4Q 2017 due to a 36% reduction in operating income, partly offset by a 32% improvement in operating expenses.

§ Operating income in 4Q 2017 declined 36% YoY mainly due to lower NSCI and a reduction in gains on non-trading investments from repositioning the investment portfolio.

§ Investment impairments were at similar levels to 4Q 2016 at SAR 71mn.§ FY 2017 net income was 9% lower than the previous year, largely attributable to lower

NSCI on investments and a reduction of investment related income from repositioning the investment portfolio, partially offset by lower impairment charges.

663 607 482

307 156 142

970 763

624

-36%

0

500

1,000

1,500

2,000

4Q 16 3Q 17 4Q 17



729 656

455

-38%

0

200

400

600

800

1,000

1,200

4Q 16 3Q 17 4Q 17

Net Income (SARmn)



change

Total assets 162,709 153,802 156,288 +4% 162,709 156,288 +4%

Total operating income 624 763 970 -36% 3,333 3,745 -11%Net special commission income 482 607 663 -27% 2,251 2,421 -7%Fee income from banking services, net

24 26 33 -28% 97 113 -14%

Other operating income 118 130 274 -57% 985 1,210 -19%Operating expenses (108) (97) (158) -32% (445) (433) +3%Impairment charge (71) (2) (75) -5% (76) (214) -65%Other income (expenses) 10 (8) (9) -205% (9) (12) -25%Net income / (loss) 455 656 729 -38% 2,804 3,087 -9%

Cost to income (%) 17.3% 12.7% 16.2% +6% 13.3% 11.6% +16%% of total assets 36.7% 34.6% 35.3% +4% 36.7% 35.3% +4%ROA (%) 1.1% 1.7% 1.2% -4% 1.8% 2.0% -12%


Capital Markets

Growth driven by asset management


§ 4Q 2017 net income increased by 46% (SAR 29mn) YoY due to higher operating income and improved operating efficiency.

§ Operating income in 4Q 2017 rose 9% (SAR 14mn) YoY due to higher fee and other income, mainly resulting from asset management.

§ NCB Capital increased its full year net income to SAR 303 million (+29% ) by growing its net operating revenue that increased to SAR 636 million (+9% ).

63 76

92

+46%

0

20

40

60

80

100

120

140

160

180

4Q 16 3Q 17 4Q 17

Net Income (SARmn)



change

Total assets 1,388 1,562 1,314 +6% 1,388 1,314 +6%

Total operating income 174 154 160 +9% 636 581 +9%Net special commission income 1 1 1 +138% 4 1 +191%Fee income, net 172 148 149 +15% 619 561 +10%

Operating expenses (90) (79) (98) -8% (344) (351) -2%Impairment charge 0 0 0 0 0 Other income (expenses) 8 1 1 +482% 11 4 +161%Net income 92 76 63 +46% 303 234 +29%

Cost to income (%) 51.7% 51.4% 61.4% -16% 54.1% 60.4% -11%% of total assets 0.3% 0.4% 0.3% +5% 0.3% 0.3% +5%ROA (%) 25.0% 20.2% 17.5% +43% 22.4% 14.7% +52%

159 153 172

160 154 174

+9%

0

50

100

150

200

250

300

4Q 16 3Q 17 4Q 17


Fee and other incomeNet special commission income


InternationalOperating income impacted by depreciating Turkish currency but strong net income growth from lower impairment charges


§ 4Q 2017 net income increased 62% YoY on improving credit quality, despite declining operating income and higher expenses.

§ 4Q 2017 operating expenses rose 26% YoY. This resulted from legislative inflationary increases in staff costs more than offsetting the ongoing progress made in cost-optimisation initiatives as well as the cessation of intangible assets amortisation from the start of 2017.

§ The impairment charge for 4Q 2017 declined 61% due to limited new NPL formation in the Turkish subsidiary during the year, further aided by the Turkish Lira depreciation.

§ FY 2017 net income rose by 64% to SAR 463 million as lower impairment charges (-63% ) and operating expenses (-21% ) more than offset a 28% decline in operating income from higher foreign exchange trading losses.



change

Total assets 38,214 38,998 40,809 -6% 38,214 40,809 -6%

Total operating income 405 406 501 -19% 1,595 2,230 -28%Net special commission income 248 358 242 +3% 1,272 1,677 -24%Fee income from banking services, net

67 70 84 -20% 281 384 -27%

Operating expenses (214) (214) (169) +26% (867) (1,099) -21%Impairment charge (83) (80) (214) -61% (301) (813) -63%Other income (expenses) 79 (17) (2) -4161% 37 (35) -206%Net Income 187 94 116 +62% 463 283 +64%

Cost to income (%) 52.9% 52.8% 33.8% +56% 54.4% 49.3% +10%% of total assets 8.6% 8.8% 9.2% -7% 8.6% 9.2% -7%ROA (%) 1.9% 1.0% 1.1% +83% 1.2% 0.6% +87%

242 358 248

259 48 156

501 406 405

-19%

0

200

400

600

800

1,000

1,200

4Q 16 3Q 17 4Q 17



116 94

187

+62%

0

50

100

150

200

250

300

4Q 16 3Q 17 4Q 17

Net Income (SARmn)




FY 2017 Results



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]


P.O. Box 3555

21481 Jeddah, Kingdom of Saudi Arabia

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