Saudi National Bank · TADAWUL:1180
Saudi National Bank — National Commercial Bank — FY2017 Earnings Presentation
57 slides from Saudi National Bank's earnings presentation, 2018
Slide 1: Investor Presentation FY 2017 Results
National Commercial Bank Investor Presentation FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation 1
Slide 2: Disclaimer
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 NC
Slide 3: Contents
Investor Presentation Contents 04 NCB – The leading KSA bank 11 Grow with KSA. Grow with NCB. 17 Strategy Overview 28 Financial Results Highlights 35 Financial Results Details 50 Segmental Overview 56 Additional Information NCB Investor Relations FY 2017 Investor Presentation 3
Slide 4: The Leading KSA Bank
National Commercial Bank The Leading KSA Bank FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation 4
Slide 5: NCB is the leading banking group in Saudi Arabia
NCB is the leading banking group in Saudi Arabia Established in 1953; IPO in 2014 NCB Snapshot SAR SAR SAR >8m Clients 13,436 444bn 309bn >100bn Employees* Assets Deposits Market Cap Wholesale branch in Bahrain Offices: Singapore, Seoul, Shanghai Subsidiary in KSA: NCB Capital Subsidiary in Turkey:
Slide 6: NCB is the leading banking group in Saudi Arabia
NCB is the leading banking group in Saudi Arabia NCB has a strong market and financial position (3Q 2017) Market Position by KSA Financial Position KSA GCC Overall banking Assets #1 Assets #1 #4 Corporate banking Financing #1 Financing #1 #4 Retail banking Financing #2 Deposits #1 #3 Treasury Invest
Slide 7: NCB has a well-diversified business model
NCB has a well-diversified business model Total operating income contribution (FY 2017) 3.3bn 18% TREASURY SAR 16.1bn 88% 1.6bn 636mn 9% 3% 4.5bn 25% Capital Markets CORPORATE International Largest Asset Manager in KSA NCB Largest Shariah-compliant 8.3bn Türkiye Finans Katılım Bankası (TFKB) Asset M
Slide 8: NCB has a strong financial position
NCB has a strong financial position Key KPIs Total Assets (SARbn) Total Equity (SARbn) 700 +4% +11% 100 600 435 449 443 444 500 377 80 60 64 56 400 60 43 47 300 40 200 20 100 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 CAGR CAGR Capital Ratios (%) Liquidity Ratios (%) 22.0% 2 172.5% 177.3%
Slide 9: NCB has a strong performance track record
NCB has a strong performance track record Key KPIs Total Operating Income (SARbn) Net Income Attributed to Equity Holders (SARbn) +6% 18 30 +5% 16 25 14 17.5 18.6 18.3 9.8 16.2 12 8.7 9.1 9.3 20 14.9 7.9 4.9 5.1 4.7 10 15 4.8 4.8 8 10 6 11.4 12.6 13.5 13.7 5 10.1 4 2 0 0 2013 2014 2015 2016 2017 201
Slide 10: NCB Group listed on Tadawul in November 2014
NCB Group listed on Tadawul in November 2014 Ranked third in Tadawul, S&P Pan Arab and MSCI Indices with significant weightings Share parameters 31 Dec 2017 MSCI GCC Index Float Adj. Mcap (USDb) Weighting (%) Closing Price (SAR) 55.05 Al Rajhi Bank 20.94 8.63 52 week range (SAR) 37-56 SABIC 20.38 8.
Slide 11: Grow with KSA. Grow with NCB.
National Commercial Bank Grow with KSA. Grow with NCB. FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation
Slide 12: Economic headwinds
Economic headwinds Challenges persist, but three-year high oil prices and rising non-oil revenues reduced the overall fiscal deficit in 2017 from double to single digits Oil Market Twin Balances (%) 12 140 10 120 25 .0 % 18.1% 100 9.7% 8 6.4% 15 .0 % 80 6 50 . % 1.5% 60 4 40 -5 .0 % -2.3% -3.7% 2 20
Slide 13: Saudi banking sector
Saudi banking sector Banking profit growth is expected to rebound on the back of recent government stimuli in support of private sector and individuals Bank Lending (SARbn) Interbank Rates (%) Bank Deposits (SARbn) 3,500 0 4,000 3,000 12.0% 11.6% 15.0% 0 1.9% 3,500 11.2% 12.4% 15.0% 8.9% 3,000 2,500
Slide 14: Vision 2030
Vision 2030 The Kingdom of Saudi Arabia established a clear direction to accelerate economic growth through vision 2030 and its programs Pillars Objectives Selected Goals & KPIs Vision Realization Programs Enriching the Hajj and Grow & diversify the § Lower the rate of unemployment from Umrah Experi
Slide 15: Economic upturn
Economic upturn Budgetary pro-growth measures, growing CAPEX, and additional stimulus point to 2018 economic and banking sector growth Government Revenue (SARbn) Government Expenditure (SARbn) Government Debt (SARbn) 108 99 110 1,110 1,200 24% 25% 30% 1,006 1,050 2,000 1,200 976 978 978 20% 25% 926
Slide 16: NCB is aligned with Government priorities
NCB is aligned with Government priorities NCB has already made significant contributions to the economic welfare of Saudi Arabia Government aims to mobilize NCB plans to target sectors capital and channel to target where we have sectors competitiveness and scale NCB has provided home NCB is a large
Slide 17: Strategic overview
National Commercial Bank Strategic overview FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation
Slide 18: NCB's strategic plan is about execution
NCB’s strategic plan is about execution Our strategic objectives are supported by productivity enablers Lean Distribution Expand reach with lean branches Strategic enablers Digitization Anywhere, anytime, instant banking Retail Banking Expand share of retail profits Grow in Vision 2030 targeted sect
Slide 19: NCB continued to deliver on its strategic plan
NCB continued to deliver on its strategic plan 2017 Achievements Expanded our branch network by 26 with no increment Lean Distribution in head count driven by digital migration Deployed digital functionality which enabled a 20% Digitization decline in branch financial transactions Continued growing
Slide 20: Lean distribution
Lean distribution We accelerated expansion of our distribution platform in Saudi Arabia and are streamlining branch formats to enhance productivity gains Strategic Imperatives Cost / Income Ratio (%) Number of branches § Continue expanding our distribution reach to acquire customers 1 and grow marke
Slide 21: Digitization
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 § Leve
Slide 22: Retail Banking
Retail Banking We are transforming retail distribution to increase share of profits Strategic Focus Areas § 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 satisfa
Slide 23: Corporate Banking
Corporate Banking Grow selectively and increase risk-adjusted returns Strategic Focus Areas § 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 cap
Slide 24: Treasury
Treasury Broaden and deepen liquidity access while sustaining investment returns and cross-sell Strategic Focus Areas § Execute international hubs strategy London § Expand wholesale funding program Frankfurt New York § Maintain the high quality/liquidity and profitability of the Bahrain Hong Kong in
Slide 25: NCB Capital
NCB Capital KSA’s leading investment bank and asset manager; well positioned to capture future growth Strategic Focus Areas § Grow recurring revenues by gathering more AUMs, launching new products, growing Corporate Savings business § Set the stage for future market upturn by growing brokerage marke
Slide 26: Türkiye Finans Katılım Bankası
Türkiye Finans Katılım Bankası We are executing a transformation program to grow TFKB’s net income Strategic Focus Areas § Resume branch expansion and expand digital channels to drive customer acquisition § Strengthen underwriting and improve collections § Increase automation and drive capacity opti
Slide 27: Three Strategic Priorities for 2018
Three Strategic Priorities for 2018 NCB’s strategy continues to be about execution § Win mandates in vision 2030 targeted sectors Position § Resume growth in SMEs by targeting resilient sectors 1. Corporate Banking § Optimize operating model to improve platform productivity for growth § Reduce cost
Slide 28: Financial Results Highlights
National Commercial Bank Financial Results Highlights FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation
Slide 29: Key messages
Key messages FY 2017 Results Financing (SARbn) Deposits (SARbn) § Stable total assets and 2% financing decline mainly due to corporate repayments 600 800 -2% -2% 700 (domestic financing -1%; international -8% impacted by Turkish Lira depreciation) 5 00 600 Balance 4 00 § 3% investments growth throug
Slide 30: Profitability
Profitability 2017 Net income growth from improved impairments and efficiency, partly offset by lower fee and other income Profitability Trends YoY % YoY % SAR (mn) 4Q 2017 3Q 2017 4Q 2016 FY 2017 FY 2016 change change Net special commission income 3,378 3,449 3,324 +2% 13,661 13,550 +1% Fee and oth
Slide 31: Balance Sheet
Balance Sheet Growth constrained by economic environment Balance Sheet Trends YoY % SAR (mn) 4Q 2017 3Q 2017 4Q 2016 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 i
Slide 32: Segmental Information
Segmental Information 2017 Total operating income lower due to depreciation of Turkish Lira and lower Treasury income, partly offset by higher Retail operating income 2017 Total Operating Income Movement by Segment Total Operating Income by Segment (SARbn) (SARbn) 91 599 International 1,800 1,600 9%
Slide 33: Segmental Information
Segmental Information 2017 net income growth mainly driven by Retail segment, partly offset by Corporate and Treasury declines 2017 Net Income Movement by Segment* (SARmn) Net Income by Segment* (SARbn) 997 4,000 International 3,500 180 9,965 5% Retail 69 10.0 41% Capital Market 9.4 9,416 3,000 12 (
Slide 34: Outlook
Outlook Improved macroeconomic environment expected to drive growth 2018 Macroeconomic FY 2017 FY 2018 Outlook Reported Guidance • Average Arabian light oil price of USD 55 per barrel Balance Financing growth -2% +5% to 8% Sheet • Three US Fed rate hikes of 25bps each in March, June and December. •
Slide 35: Financial Results Details
National Commercial Bank Financial Results Details FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation
Slide 36: Income Highlights
Income Highlights Lower FY 2017 and 4Q 2017 total operating income largely attributable to lower fee and other income and Turkish Lira depreciation Total Operating Income (SARbn) 30 -2% Management Commentary 8 -2% 25 § 4Q 2017 total operating income declined 2% YoY despite a 2% 7 18.6 18.3 improveme
Slide 37: Net special commission income trends
Net special commission income trends 2017 commission income growth limited as domestic margin improvement partly offset by Turkish Lira depreciation Management Commentary Net Special Commission Income § The 4Q 2017 net special commission margin YoY % YoY % increased by 20bps YoY to 3.49% due to SAR
Slide 38: Fee and other income trends
Fee and other income trends Lower FY 2017 fees and investment related income Fee and Other Income (SARmn) Management Commentary 8,600 -8% 2,800.00 -11% 7,600 § 4Q 2017 fee and other income declined 11% YoY as 5% growth in 2,300.00 6,600 5,098 4,684 fees from banking services was more than offset by
Slide 39: Expense highlights
Expense highlights Digitization and productivity enhancement delivered expense savings in 2017 Operating Expenses (SARmn) 12,000 Management Commentary -8% 3,500 10,000 § 2017 operating expenses improved by 8% YoY. -10% 7,038 § The FY 2017 cost to income ratio improved by 2.5% YoY to 35.2% . 3,000 8,
Slide 40: Asset highlights and composition
Asset highlights and composition Balance sheet growth reflective of a more subdued economic environment and Turkish Lira depreciation Total Assets (SARbn) Management Commentary 800 +0% § Total assets were stable during 2017 due to limited decline in 700 financing (-2% ) and moderate growth in invest
Slide 41: Financing and advances
Financing and advances Financing decline driven by Corporate segment and Turkish subsidiary Financing and Advances, net (SARbn) Management Commentary 600 § Domestically, financing grew for the Consumer segment (+5% ) but 500 declined for the Corporate segment (-6% ) during 2017. -2% 400 § The declin
Slide 42: Financing and advances credit quality (1)
Financing and advances credit quality (1) Rise in Corporate NPLs and impairment but stable Retail and International credit quality NPL (SARbn) Movement in NPLs by Economic Sector (SARbn) +21% 0.04 8 2 0.12 4.77 7 1 0.27 6 4.67 4.77 1 0.45 (0.01) (0.01) (0.00) 4.17 4.10 4.33 5 3.96 3.83 3.93 1 1.52 1
Slide 43: Financing and advances credit quality (2)
Financing and advances credit quality (2) Rise in NPL ratio but continued strong NPL coverage NPL Ratios (%) NPL Coverage Ratios (%) 5.3% 5.3% 5.4% 5.4% 5.1% 0 5.0% 2 4.7% 205% 4.3% 192% 196% 191% 0 186% 184% 0 2 169% 164% 1.9% 0 1.5% 1.6% 1.5% 1.6% 1.6% 1.8% 1 1.4% 151% 0 146% 145% 147% 150% 150% 1
Slide 44: Financing and advances credit quality (3)
Financing and advances credit quality (3) Consumer NPLs stable while Corporate NPLs increased NPL Ratios (%) NPL Coverage Ratios (%) 0 2.2% 3 260% 254% 1.9% 3 246% 245% 0 1.7% 3 232% 234% 238% 1.5% 229% 1.4% 2 0 1.2% 1.3% 2 1.1% 184% 177% 181% 177% 173% 2 168% 0 0.7% 0.7% 0.7% 2 152% 0.6% 0.6% 0.6%
Slide 45: IFRS 9
IFRS 9 The initial implementation of IFRS 9 on 1 January 2018 is not expected to have a material impact on NCB's capital position § 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
Slide 46: Investments trends and composition
Investments trends and composition Investments rose through participation in Saudi Government debt issuance and ~90% of the investment portfolio remains Saudi Government or investment grade Investments (SARbn) Management Commentary +3% § The investment portfolio is built on high quality securities w
Slide 47: Liabilities trends and composition
Liabilities trends and composition Stable total liability base and improving deposit mix towards CASA balances Total Liabilities (SARbn) Management Commentary 700 § Customers’ deposits are the main source of funding and declined -1% by 2% during 2017 as the funding mix was optimized by reducing 600
Slide 48: Liquidity
Liquidity NCB maintained a strong liquidity profile HQLA and Liquidity Coverage (SARbn/%) Management Commentary 172.5% 172.5% 177.3% 200.0% § As at 4Q 2017, the financing to customer deposit ratio was 80.7% 159.8% 163.8% 166.1% 200 156.1% and comfortably below the regulatory guidelines. 180.0% 145.3
Slide 49: Capital
Capital Capital position comfortably above regulatory minima Capitalisation (SARbn) Pillar I Risk Weighted Assets (SARbn) Capital Ratios (%) +6% 700 21.0% 20.0% 120 +2% 19.2% 18.7% 18.2% 18.2% 18.5% 20.0% 600 18.2% 100 19.0% 17.5% 17.7% 68 70 72 500 380 361 16.9% 353 18.0% 8 16.1% 16.5% 16.1% 16.0%
Slide 50: Segmental Review
National Commercial Bank Segmental Review FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation
Slide 51: Retail Banking
Retail Banking Strong FY 2017 and 4Q net profit growth resulting from operating income growth and improved efficiency Summary Financial Performance Total Operating Income (SARmn) YoY % YoY % SAR (mn) 4Q 2017 3Q 2017 4Q 2016 FY 2017 FY 2016 change change 5,000 4,500 +25% Total assets 108,503 106,939
Slide 52: Corporate Banking
Corporate Banking 4Q 2017 net profits declined due to lower NSCI on account of repayments, while FY 2017 net profits deteriorated due to higher impairments Summary Financial Performance Total Operating Income (SARmn) YoY % YoY % SAR (mn) 4Q 2017 3Q 2017 4Q 2016 FY 2017 FY 2016 change change 2,500 -8
Slide 53: Treasury
Treasury Lower NSCI and investment gains impacted profitability Summary Financial Performance Total Operating Income (SARmn) YoY % YoY % SAR (mn) 4Q 2017 3Q 2017 4Q 2016 FY 2017 FY 2016 change change 2,000 -36% Total assets 162,709 153,802 156,288 +4% 162,709 156,288 +4% 1,500 Total operating income
Slide 54: Capital Markets
Capital Markets Growth driven by asset management Summary Financial Performance Total Operating Income (SARmn) YoY % YoY % SAR (mn) 4Q 2017 3Q 2017 4Q 2016 FY 2017 FY 2016 change change +9% 300 Total assets 1,388 1,562 1,314 +6% 1,388 1,314 +6% 250 160 174 200 154 Total operating income 174 154 160
Slide 55: International
International Operating income impacted by depreciating Turkish currency but strong net income growth from lower impairment charges Summary Financial Performance Total Operating Income (SARmn) YoY % YoY % SAR (mn) 4Q 2017 3Q 2017 4Q 2016 FY 2017 FY 2016 change change 1,200 -19% 1,000 Total assets 38
Slide 56: Additional Information
National Commercial Bank Additional Information FY 2017 Results NCB Investor Relations FY 2017 Investor Presentation
Slide 57: Additional Information
Additional Information Please don’t hesitate to contact NCB Group Investor Relations Mr. Abdulbadie Alyafi More information Head, Investor Relations Download copies of National Commercial Bank’s: § Financial statements P: +966 12 646 3988 E: investorrelations@alahli.com § Earnings release § Investor
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