Saudi National Bank · TADAWUL:1180

Saudi National Bank — National Commercial Bank — Q3 2018 Earnings Presentation

60 slides from Saudi National Bank's earnings presentation, 2018

  1. Slide 1: National Commercial Bank Investor Presentation 3Q 2018 Results

    National Commercial Bank Investor Presentation 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation 1

  2. 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

  3. Slide 3: Contents

    Investor Presentation Contents 04 NCB – The leading KSA bank 12 Grow with KSA, Grow with NCB 18 Strategy Overview 29 Financial Results Highlights 37 Financial Results Details 51 Segmental Overview 59 Additional Information NCB Investor Relations 3Q 2018 Investor Presentation 3

  4. Slide 4: The leading KSA bank

    National Commercial Bank The leading KSA bank 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation 4

  5. Slide 5: NCB is the leading banking group in Saudi Arabia (1)

    NCB is the leading banking group in Saudi Arabia (1) Established in 1953; IPO in 2014 NCB Snapshot (9M 2018) SAR SAR SAR 7mn Clients 13,293 459bn 325bn >130bn Employees* Assets Deposits Market Cap Wholesale branch in Bahrain Offices: Singapore, Seoul, Shanghai Subsidiary in KSA: NCB Capital Subsidia

  6. Slide 6: NCB is the leading banking group in Saudi Arabia (2)

    NCB is the leading banking group in Saudi Arabia (2) NCB has a strong market and financial position (FY 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 In

  7. Slide 7: NCB is the leading banking group in Saudi Arabia (3)

    NCB is the leading banking group in Saudi Arabia (3) Key KPIs compared to Saudi Arabian banking peers (FY 2017) Industry Peers SR (bn) (ex NCB) CAGR 500 +4% 500 +4% 500 500 500 2,000 +3% 400 400 400 +1% 400 +2% 400 -2% 1,129 249 234 1,500 1,045 300 221 300 206 300 300 300 Financing and 133 139 117 1

  8. Slide 8: NCB has a well-diversified business model

    NCB has a well-diversified business model Total operating income contribution 3.8bn 20% TREASURY SAR 16.1bn 88% 1.6bn 636mn 9% 3% 4.5bn 25% Capital Markets CORPORATE International NCB Capital NCB Largest Asset Manager in KSA 7.9bn Türkiye Finans Katılım Bankası (TFKB) Largest Shariah-compliant 401 b

  9. Slide 9: NCB has a strong financial position

    NCB has a strong financial position Key KPIs Total Assets (SARbn) Total Equity (SARbn) 120 800 +4% +11% 700 100 600 435 449 443 444 80 60 64 500 377 56 60 43 47 400 300 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

  10. Slide 10: 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) 35 +5% 18 +6% 30 16 14 18.6 25 17.5 18.3 9.3 9.8 16.2 12 8.7 9.1 20 14.9 7.9 4.9 5.1 4.7 10 15 4.8 4.8 8 6 10 11.4 12.6 13.5 13.7 5 10.1 4 2 0 0 2013 2014 2015 2016 2017

  11. Slide 11: 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 30 Sep 2018 MSCI Saudi Arabia Index Float Adj. Mcap (USDb) Weighting (%) Closing Price (SAR) 45.05 52 week range (SAR) 31-49 SABIC 24.72 18.10 Free Float 3

  12. Slide 12: Grow with KSA, Grow with NCB

    National Commercial Bank Grow with KSA, Grow with NCB 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation

  13. Slide 13: Improving economic conditions

    Improving economic conditions Domestic economic and fiscal indicators continue to improve Global macro headwinds persist Oil Market Twin Balances (%) 12 140 10 120 25.0% 18.1% 100 9.7% 11.3% 8 6.4% 15.0% 80 2.2% 6 5.0% 60 4 -5.0% 40 -2.3% -3.7% -3.5% 2 20 -15.0% -8.7% -9.2% 0 0 -14.8% -12.9% -25.0%

  14. Slide 14: Saudi banking sector

    Saudi banking sector Banking 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 Bank Lending (SARbn) Interbank Rates (%) Bank Deposits (SARbn) 12.0% 11.6% 2.72% 8.9% 0 4,000 3,500 15.0%

  15. Slide 15: Vision 2030

    Vision 2030 Saudi Arabia’s vision 2030 establishes a clear roadmap to accelerate economic growth Pillars Objectives Selected Goals & KPIs Vision Realization Programs Enriching the Hajj and Grow & diversify the  Lower the rate of unemployment from Umrah Experience economy 11.6% to 7% National Transf

  16. Slide 16: NCB is aligned with Government priorities

    NCB is aligned with Government priorities NCB is a key contributor to economic transformation and the Financial Sector Development Program (FSDP) objectives  Leading lender for KSA companies with a portfolio of Enabling financial SAR 133bn; 15% Corporate market share (2Q 2018) institutions to  A l

  17. Slide 17: Projected economic upturn

    Projected economic upturn Rising government expenditure is expected to offset a higher interest rate environment Ongoing expansion of non-oil private GDP should reflect positively on banking growth Government Revenue (SARbn) Government Expenditure (SARbn) Government Debt (SARbn) 106 97 1,106 1,143 2

  18. Slide 18: Strategy Overview

    National Commercial Bank Strategy Overview 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation

  19. Slide 19: NCB's strategic plan is all about execution

    NCB’s strategic plan is all 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 Corporate Banking Grow in Vis

  20. Slide 20: NCB continues to deliver on its strategic plan

    NCB continues to deliver on its strategic plan 9M 2018 Highlights Optimization of branch network for productivity on going, 3 new format branches Lean Distribution added year to date at 6 FTEs Sustain increase in active digital users, with digital channels capturing 97% of branch Digitization financ

  21. Slide 21: 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 to Income Ratio (%) Number of Branches  Continue expanding our distribution reach to acquire customers and 1 grow mark

  22. Slide 22: 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  Lev

  23. Slide 23: 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

  24. Slide 24: 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

  25. Slide 25: Treasury

    Treasury Broaden and deepen liquidity access while sustaining investment returns and cross-sell Strategic Focus Areas  Execute international hubs strategy  Expand wholesale funding program  Maintain the high quality/liquidity and profitability of the investment book  Support the development of t

  26. Slide 26: 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

  27. Slide 27: 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

  28. Slide 28: Three Strategic Priorities for 2018

    Three Strategic Priorities for 2018 NCB’s strategy continues to be all about execution 9M 2018 Update  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 Grew C

  29. Slide 29: Financial Results Highlights

    National Commercial Bank Financial Results Highlights 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation

  30. Slide 30: Key messages

    Key messages 9M 2018 Results Financing (SARbn) Deposits (SARbn)  3% increase in total assets 600 +8% 800 +5% 700 500  Strong financing growth of 8% 600 268 400 249 500 309 325 Balance  2% investments growth 300 400 Sheet 200 300  5% growth in customers’ deposits 100 200 100  Deposit mix improve

  31. Slide 31: Income Statement

    Income Statement Higher 9M 2018 net income derived from higher operating income and lower impairments, partly offset by higher operating expenses Profitability Trends SAR (mn) 3Q 2018 2Q 2018 3Q 2017 YoY % change 9M 2018 9M 2017 YoY % change Net special commission income 3,637 3,573 3,453 +5% 10,629

  32. Slide 32: Balance Sheet

    Balance Sheet 3% increase in total assets; excluding 38% Turkish Lira depreciation the growth would have been 8% Balance Sheet Trends SAR (mn) 3Q 2018 2Q 2018 3Q 2017 YoY % change FY 2017 YTD % change Investments, net 116,504 114,978 116,900 -0% 114,578 +2% Financing and Advances, net 268,245 266,04

  33. Slide 33: Segmental Information (1/3)

    Segmental Information (1/3) 9M 2018 Total operating income growth mainly from retail and treasury. 9M 18 Total Operating Income Movement (SARmn) 3Q 18 Total Operating Income Movement (SARmn) 620 3,500 161 97 13 14,171 1,400 452 13,830 1 3,000 1,200 4,732 2,500 (95) 1,000 (549) 4,492 2,000 800 (112)

  34. Slide 34: Segmental Information (2/3)

    Segmental Information (2/3) 9M 2018 Net income growth driven by retail. 9M 18 Net Income Attributed to Equity Holders 3Q 18 Net Income Attributed to Equity Holders Movement (SARmn) Movement (SARmn) 486 2,000 800 82 43 8,020 1,800 671 104 700 2 2,454 1,600 600 1,400 (126) 500 (74) 7,246 1,200 1,000 4

  35. Slide 35: Segmental Information (3/3)

    Segmental Information (3/3) 9M 2018 financing growth mainly driven by Corporate and Retail segments Total Assets (SARbn) Financing and Advances, net (SARbn) +3% 500 800 +8% 700 400 600 444 454 459 266 268 249 500 38 34 31 300 160 26 24 20 400 163 158 300 200 120 131 133 200 128 143 143 100 100 113 1

  36. Slide 36: Outlook

    Outlook Improved macroeconomic environment expected to drive growth 2018 Macroeconomic FY 2017 9M 2018 FY 2018 FY 2018 Outlook Reported Reported Guidance Outlook  Average Arabian light oil price Balance Financing Upper end of the of USD 73 per barrel -2% +7.6% +5% to 8% Sheet growth range  A total

  37. Slide 37: Financial Results Details

    National Commercial Bank Financial Results Details 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation

  38. Slide 38: Operating Income Highlights

    Operating Income Highlights Higher 9M 2018 total operating income driven by net special commission income growth Total Operating Income (SARbn) Management Commentary 10  9M 2018 total operating income increased by 2% YoY from 3% 9 25 +2% 8 +5% higher net special commission income, while fee and oth

  39. Slide 39: Net special commission income trends

    Net special commission income trends 9M 2018 net special commission income growth of 3%. Management Commentary Net Special Commission Income YoY % YoY %  9M 2018 NSCI improved by 3% on higher SCI SAR (mn) 3Q 2018 2Q 2018 3Q 2017 change 9M 2018 9M 2017 change (+5%), despite 13% increase in cost of f

  40. Slide 40: Fee and other income trends

    Fee and other income trends Higher 9M 2018 fee and exchange income, offset by lower Investment income Fee and Other Income (SARmn) Fee Income YoY % YoY % SAR (mn) 3Q 2018 2Q 2018 3Q 2017 change 9M 2018 9M 2017 change +5% 6,500 -0% 2,300 Finance and lending 5,500 400 358 373 +7% 1,115 1,128 -1% 1,800

  41. Slide 41: Expense highlights

    Expense highlights VAT, cost of living allowances and growth plans largely contributed to higher expenses in 9M 2018 Operating Expenses (SARmn) 9,000 8,000 +4% Management Commentary 3,500 7,000  9M 2018 expenses grew by 4% YoY, while 3Q 2018 operating +1% 3,000 6,000 4,792 4,972 expenses increased

  42. Slide 42: Asset highlights and composition

    Asset highlights and composition 3% growth in balance sheet as a result of increase in financing Total Assets (SARbn) Management Commentary  Total assets increased 3% due to increase in financing. 800 +3% 700  8% Financing increase driven by 11% increase in domestic 600 444 454 459 financing, desp

  43. Slide 43: Financing and advances

    Financing and advances Financing growth driven by Corporate and Consumer segments Financing and Advances, net (SARbn) Management Commentary 500 +8%  Domestically, financing grew for the Corporate Segment (+11%) and 450 400 Consumer segment (+7%) from 4Q 2017. 350 249 266 268  Growth in the Corpora

  44. Slide 44: Financing and advances credit quality (1/2)

    Financing and advances credit quality (1/2) Rise in Corporate NPLs and impairment allowances partly offset by lower International NPL (SARbn) Movement NPLs by Economic Sector (SARbn) 9 +6% 0.01 8 1 0.15 0.03 1 7 4.67 4.77 4.72 4.75 5.06 0.29 5.06 4.33 6 1 4.10 (0.08) 5 1.03 (0.05) 1.52 1.40 1.40 1.2

  45. Slide 45: Financing and advances credit quality (2/2)

    Financing and advances credit quality (2/2) Stable NPL ratio and higher NPL coverage NPL Ratios (%) NPL Coverage Ratios (%) 5.3% 5.4% 5.4% 5.3% 186% 192% 185% 2 0 5.1% 5.1% 184% 4.8% 0 2 169% 164% 170% 2 0 165% 2 161% 0 1 150% 150% 154% 1.6% 1.8% 1.9% 1.8% 1.7% 1.8% 142% 143% 0 1.6% 1 1 0 1.5% 1.6%

  46. Slide 46: Domestic financing and advances credit quality

    Domestic financing and advances credit quality Corporate NPLs increased while Consumer NPLs were stable NPL Ratios (%) NPL Coverage Ratios (%) 0 2.5% 4 2.2% 2.2% 2.2% 301% 0 1.9% 290% 1.7% 3 279% 0 1.6% 254% 0 232% 237% 236% 3 0 0 2 174% 168% 171% 166% 0.6% 0.5% 0.6% 0.6% 0.5% 0.5% 153% 148% 149% 0

  47. Slide 47: Investments trends and composition

    Investments trends and composition Investments increased 2% and quality remains strong; ~91% of the investment portfolio remains Saudi Government and investment grade Investments (SARbn) Management Commentary 200 +2%  The investment portfolio is built on high quality securities with ~91% being Saud

  48. Slide 48: Liabilities trends and composition

    Liabilities trends and composition Higher total liability base and a improving deposit mix towards CASA balances (79%) Total Liabilities (SARbn) Management Commentary 700 +4%  4% Increase in total liabilities; excluding Turkish Lira depreciation, 600 the growth would have been 13%. 500 380 389 396

  49. Slide 49: Liquidity

    Liquidity NCB maintained a strong liquidity profile HQLA and Average Liquidity Coverage (SARbn/%) Management Commentary 211.9% 250.0%  As at 3Q 2018, the financing to customers’ deposit ratio was 82.4% 200 198.6% 177.3% 184.4% and comfortably below the regulatory guidelines. 163.8% 166.1% 172.5% 20

  50. Slide 50: Capital

    Capital Capital position comfortably above regulatory minima Capitalisation (SARbn) Pillar I Risk Weighted Assets (SARbn) Capital Ratios (%) 20.4% 20.3% 20.0% 140 700 0 20.0% +0% -0% 18.2% 18.2% 18.5% 0 120 600 18.2% 18.1% 17.8% 100 500 0 17.7% 72 73 72 361 361 361 0 80 8 400 9 12 12 16.1% 16.0% 16.

  51. Slide 51: Segmental Review

    National Commercial Bank Segmental Review 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation

  52. Slide 52: NCB Bank (standalone)

    NCB Bank (standalone) Strong 9% 9M 2018 net income growth resulting from operating income growth and lower impairment charge Summary Financial Performance Financing and Advances, net (SARbn) YoY % YoY % SAR (mn) 3Q 2018 2Q 2018 3Q 2017 9M 2018 9M 2017 change change +11% 450 400 Total assets 426,410

  53. Slide 53: Retail Banking

    Retail Banking Higher 9M 2018 net income from higher operating income and lower impairment charge Summary Financial Performance Financing & Advances, net (SARbn) YoY % YoY % SAR (mn) 3Q 2018 2Q 2018 3Q 2017 9M 2018 9M 2017 change change +7% 160 140 Total assets 123,856 118,068 111,565 +11% 123,856 1

  54. Slide 54: Corporate Banking

    Corporate Banking 9M 2018 net income reduced by 9% mainly on volume as average balances declined 5% Summary Financial Performance Financing & Advances, net (SARbn) YoY % YoY % SAR (mn) 3Q 2018 2Q 2018 3Q 2017 9M 2018 9M 2017 250 change change +11% 200 Total assets 142,725 142,800 139,843 +2% 142,725

  55. Slide 55: Treasury

    Treasury Higher 9M 2018 net income driven by operating income growth Summary Financial Performance Investments, net (SARbn) YoY % YoY % SAR (mn) 3Q 2018 2Q 2018 3Q 2017 9M 2018 9M 2017 change change 200 +2% Total assets 159,829 157,626 154,259 +4% 159,829 154,259 +4% 150 115 115 117 Total operating

  56. Slide 56: Capital Markets

    Capital Markets Higher 9M 2018 net income growth, driven by asset management Summary Financial Performance Assets Under Management (SARbn) YoY % YoY % SAR (mn) 3Q 2018 2Q 2018 3Q 2017 9M 2018 9M 2017 change change 250 +9% Assets Under Management 140,269 143,850 139,660 +0% 140,269 139,660 +0% 200 Br

  57. Slide 57: International (in SAR)

    International (in SAR) 9M 2018 net income improved 23% YoY due to slightly higher operating income and improved operating efficiency Summary Financial Performance Financing & Advances, net (SARbn) YoY % YoY % SAR (mn) 3Q 2018 2Q 2018 3Q 2017 9M 2018 9M 2017 50 change change 45 40 -22% Total assets 3

  58. Slide 58: International (in TRY)

    International (in TRY) 9M 2018 net income grew by 50% YoY due to higher operating income despite higher credit costs % in foreign currency xx% Financing & Advances, net (TRYbn) Summary Financial Performance YoY % YoY % TRY (mn) 3Q 2018 2Q 2018 3Q 2017 9M 2018 9M 2017 +5% +24% change change 5.2 32.9

  59. Slide 59: Additional Information

    National Commercial Bank Additional Information 3Q 2018 Results NCB Investor Relations 3Q 2018 Investor Presentation

  60. Slide 60: 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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