Saudi National Bank · TADAWUL:1180

Saudi National Bank — National Commercial Bank — Q2 2018 Earnings Presentation

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

  1. Slide 1: National Commercial Bank Investor Presentation 2Q 2018 Results

    National Commercial Bank Investor Presentation 2Q 2018 Results NCB Investor Relations 2Q 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 2Q 2018 Investor Presentation 3

  4. Slide 4: The leading KSA bank

    National Commercial Bank The leading KSA bank 2Q 2018 Results NCB Investor Relations 2Q 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 (FY 2017) 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 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 450 +4% +1% +2% -2% 2,000 +3% +4% 500 200 200 400 1,800 124 200 139 1,129 1,600 400 350 234 133 117 122 118 1,045 300 221 249 300 206 150 150 150 1,400

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

    NCB has a well-diversified business model Total operating income contribution (FY 2017) 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-compl

  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 Jun 2018 MSCI Saudi Arabia Index Float Adj. Mcap (USDb) Weighting (%) Closing Price (SAR) 48.6 SABIC 25.24 17.62 52 week range (SAR) 31-49 Al Rajhi Bank

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

    National Commercial Bank Grow with KSA. Grow with NCB 2Q 2018 Results NCB Investor Relations 2Q 2018 Investor Presentation

  13. Slide 13: Moving towards economic inflection

    Moving towards economic inflection Growth and fiscal indicators point to a positive inflection point in the Saudi Economy Headwinds including international trade tension persist Oil Market Twin Balances (%) 12 140 10 120 25.0% 18.1% 100 9.7% 8 15.0% 6.4% 9.6% 80 6 5.0% 2.2% 60 4 40 -5.0% -2.3% -3.7%

  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% 3,500 8.9% 15.0% 0 2.59% 4,000

  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 Umrah Experience Grow & diversify the economy  Lower the rate of unemployment from 11.6% to 7% A Thriving Nati

  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 Enabling financial portfolio of SAR 128bn; 14% Corporate market institutions to support share (1Q 201

  17. Slide 17: Projected economic upturn progression

    Projected economic upturn progression Budgetary pro-growth measures, growing CAPEX, and additional stimuli point to continuing economic and banking growth despite the non-oil private sector adjusting to structural shifts ( Government Revenue (SARbn) Government Expenditure (SARbn) Government Debt (SA

  18. Slide 18: Strategic Overview

    National Commercial Bank Strategic Overview 2Q 2018 Results NCB Investor Relations 2Q 2018 Investor Presentation

  19. Slide 19: 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

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

    NCB continues to deliver on its strategic plan 1H 2018 Highlights Lean Distribution Optimized branch network for productivity with 6 FTEs at newest branches Continued to drive digital migration: digital channel transactions up 39% Digitization Retail portfolio increased by 3% mainly on growth in mor

  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 about execution 1 H 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 Corp

  29. Slide 29: Financial Results Highlights

    National Commercial Bank Financial Results Highlights 2Q 2018 Results NCB Investor Relations 2Q 2018 Investor Presentation

  30. Slide 30: Key messages

    Key messages 2Q 2018 Results Financing (SARbn) Deposits (SARbn)  2% increase in total assets. 600 +7% 800 700  Strong financing growth of 7% driven by domestic. 500 600 +3% Balance 400  Investment levels stable with ongoing portfolio re-balancing and participation in 249 266 500 318 300 400 309 S

  31. Slide 31: Income Statement

    Income Statement 2Q 2018 Net income growth from higher operating income and lower impairments, partly offset by higher operating expenses Profitability Trends YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 change change Net special commission income 3,573 3,419 3,473 +3% 6,992 6,832 +2

  32. Slide 32: Balance Sheet

    Balance Sheet Growth indicating signs of economic recovery Balance Sheet Trends YoY % YTD % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 FY 2017 change change Investments, net 114,978 113,555 114,634 +0% 114,578 +0% Financing and Advances, net 266,043 252,777 256,901 +4% 249,234 +7% Total assets 454,374 437,506

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

    Segmental Information (1/3) 2Q 2018 Total operating income higher due to Retail and Treasury income, partly offset by Corporate 1H 18 Total Operating Income Movement (SARmn) 2Q 18 Total Operating Income Movement (SARmn) 2,500 1,200 103 96 18 9,440 32 34 4,661 9,338 273 1,000 100 164 4,478 2,000 800

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

    Segmental Information (2/3) 2Q 2018 net income attributable to equity holder growth mainly driven by Treasury and Capital market segment 1H 18 Net Income attributed to equity holders Movement 2Q 18 Net Income attributed to equity holders Movement (SARmn) (SARmn) 1,400 600 31 17 2,579 89 41 5,566 146

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

    Segmental Information (3/3) 2Q 2018 financing growth mainly driven by Corporate and Retail segments Total Assets (SARbn) Financing and Advances, net (SARbn) 600 800 +2% 500 700 +7% 454 600 444 400 438 500 38 34 249 253 266 36 300 400 163 154 158 26 25 24 135 300 200 147 124 126 200 133 141 100 100 1

  36. Slide 36: Outlook

    Outlook Improved macroeconomic environment expected to drive growth 2018 Macroeconomic FY 2017 2Q 2018 FY 2018 FY 2018 Outlook Reported Reported Guidance Outlook • Average Arabian light oil Balance Financing Upper end of the Sheet -2% +6.7% +5% to 8% price of USD 67 per barrel growth range • A total

  37. Slide 37: Financial Results Details

    National Commercial Bank Financial Results Details 2Q 2018 Results NCB Investor Relations 2Q 2018 Investor Presentation

  38. Slide 38: Operating Income Highlights

    Operating Income Highlights Higher 2Q 2018 total operating income largely attributable to net special commission income Total Operating Income Management Commentary (SARbn) 8 +4% +1%  2Q 2018 total operating income increased 4% YoY from a 3% 16 7 14 improvement in net special commission income, hig

  39. Slide 39: Net special commission income trends

    Net special commission income trends 2Q 2018 net special commission income growth of 3% partly limited by Turkish Lira depreciation Management Commentary Net Special Commission Income  The 2Q 2018 net special commission margin YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 change 1H 2018 1H 2017 chan

  40. Slide 40: Fee and other income trends

    Fee and other income trends Higher 2Q 2018 Fee income and lower other operating expenses Fee and Other Income Fee Income (SARmn) SAR (mn) 2Q 2018 1Q 2018 2Q 2017 YoY % 1H 2018 1H 2017 YoY % 2,300 +8% 5,500 change change 1,800 1,361 4,500 -2% Finance and lending 358 358 373 -4% 716 755 -5% 1,005 1,08

  41. Slide 41: Expense highlights

    Expense highlights VAT, Cost of living allowances and support growth plans largely contributed to higher expenses in 2Q 2018 Operating Expenses (SARmn) 6,000 Management Commentary +5% 3,600 +12% 5,000  2Q 2018 operating expenses increased by 12% YoY. 3,100 3,205 3,366 2,600 4,000  The cost to inco

  42. Slide 42: Asset highlights and composition

    Asset highlights and composition 2% growth in Balance sheet as a result of increase in financing, partially offset by Turkish Lira depreciation Total Assets (SARbn) Management Commentary 900  Total assets increased 2% due to increase in financing. 800 +2% 700  7% financing increase mainly due to 9

  43. Slide 43: Financing and advances

    Financing and advances Financing growth driven by Corporate and Consumer & Credit Cards segments Financing and Advances, net (SARbn) Management Commentary 600  Domestically, financing grew for the Corporate Segment (+9%) and 500 Consumer & Credit Cards segment (+3%) since 4Q 2017. +7% 400  Growth

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

    Financing and advances credit quality (1/2) Stable credit quality across the board NPL (SARbn) Movement NPLs by Economic Sector (SARbn) 9 8 -0% 1 0.12 0.01 0.00 4.77 7 1 4.75 6 4.67 4.77 4.72 4.75 (0.04) 4.10 4.33 1 (0.04) 5 (0.03) 1.52 1.40 1.40 1.26 (0.04) 1.50 0 1.48 4 0.52 0.53 0.52 0.53 3 0.50

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

    Financing and advances credit quality (2/2) Improved 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% 0 2 169% 164% 2 0 165% 2 161% 0 1 150% 150% 1.6% 1.8% 1.9% 1.8% 1.7% 142% 143% 0 1.6% 1 1 0 1.5% 99% 96% 1.2% 1.3% 1.4%

  46. Slide 46: Domestic Financing and advances credit quality

    Domestic Financing and advances credit quality Consumer NPLs stable while Corporate NPLs decreased NPL Ratios (%) NPL Coverage Ratios (%) 2.2% 290% 0 2.1% 2.1% 3 279% 1.9% 254% 3 1.7% 246% 1.5% 0 3 245% 0 232% 2 2 0 174% 2 0 168% 171% 166% 2 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 152% 147% 2 0 1 (0) 1 Corpor

  47. Slide 47: Investments trends and composition

    Investments trends and composition Stable Investments and quality remains strong; ~90% of the investment portfolio remains Saudi Government and investment grade Investments (SARbn) Management Commentary  The investment portfolio is built on high quality securities with ~90% 200 +0% being Saudi gove

  48. Slide 48: Liabilities trends and composition

    Liabilities trends and composition Higher total liability base and a high deposit mix towards CASA balances (79%) Total Liabilities (SARbn) Management Commentary 700 +3%  Customers’ deposits are the main source of funding and improved in 600 2Q 2018. 500 380 373 389  CASA balances account for 79%

  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 2Q 2018, the financing to customers’ deposit ratio was 83.8% 200 198.6% 177.3% and comfortably below the regulatory guidelines. 163.8% 166.1% 172.5% 200.0% 15

  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% 140 700 0 20.0% +2% -0% 0 120 600 18.2% 18.2% 18.5% 18.2% 18.1% 17.7% 0 100 500 72 73 73 361 358 361 0 80 400 9 12 16.1% 16.4% 8 8 8 34 34 12 35 0

  51. Slide 51: Segmental Review

    National Commercial Bank Segmental Review 2Q 2018 Results NCB Investor Relations 2Q 2018 Investor Presentation

  52. Slide 52: NCB Bank (standalone)

    NCB Bank (standalone) Strong 2Q 2018 net income growth 5% resulting from operating income growth and lower impairment charge Summary Financial Performance Financing & advances (SARbn) YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 600 change change 500 Total assets 426,577 407,869 418,

  53. Slide 53: Retail Banking

    Retail Banking 2Q 2018 net income slightly lower Summary Financial Performance Financing & advances (SARbn) YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 250 change change 200 Total assets 113,479 104,445 110,187 +3% 113,479 110,187 +3% +3% 150 Total operating income 2,070 1,896 1,970

  54. Slide 54: Corporate Banking

    Corporate Banking 2Q 2018 net income dropped by 5% due to lower operating income, offset by improvement in impairment charges Summary Financial Performance Financing & advances (SARbn) YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 300 change change 250 +9% Total assets 147,389 141,465

  55. Slide 55: Treasury

    Treasury Strong 2Q 2018 net income growth from operating income Summary Financial Performance Investments (SARbn) YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 300 change change 250 Total assets 157,626 153,884 155,851 +1% 157,626 155,851 +1% +0% 200 Total operating income 1,096 1,284

  56. Slide 56: Capital Markets

    Capital Markets Robust 2Q 2018 net income growth, driven by assets management and brokerages fees Summary Financial Performance Assets Under Management (SARbn) YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 300 change change +11% 250 Assets Under Management 143,850 136,780 142,330 +1%

  57. Slide 57: International (in SAR)

    International (in SAR) 2Q 2018 net income higher by 26% YoY due to higher operating income, and lower operating expenses Summary Financial Performance Financing and Advances, net (SARbn) YoY % YoY % SAR (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 60 change change 50 Total assets 34,306 36,199 39,39

  58. Slide 58: International (in TRY)

    International (in TRY) 2Q 2018 net income grew by 39% YoY due to higher operating income and lower impairment charge Summary Financial Performance Financing and advances, net (TRYbn) YoY % YoY % TRY (mn) 2Q 2018 1Q 2018 2Q 2017 1H 2018 1H 2017 60 change change +9% 50 Total assets 41,867 38,202 36,94

  59. Slide 59: Additional Information

    National Commercial Bank Additional Information 2Q 2018 Results NCB Investor Relations 2Q 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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