Saudi National Bank · TADAWUL:1180
Saudi National Bank — National Commercial Bank — Q2 2017 Earnings Presentation
52 slides from Saudi National Bank's earnings presentation, 2017
Slide 1: National Commercial Bank Investor Presentation 2Q 2017 Results
National Commercial Bank Investor Presentation 2Q 2017 Results NCB Investor Relations 2Q 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 12 Grow with KSA. Grow with NCB. 18 Strategy Overview 28 Financial Results 43 Segmental Overview 51 Additional Information NCB Investor Relations 2Q 2017 Investor Presentation 3
Slide 4: The Leading KSA Bank
National Commercial Bank The Leading KSA Bank 2Q 2017 Results NCB Investor Relations 2Q 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 >8m Clients 12,310 441bn 316bn >100bn Employees Assets Deposits Market Cap Wholesale branch in Bahrain Offices: Singapore, Seoul, Shanghai Subsidiary in KSA: NCB Capital Subsidiary in Turkey: Türkiye Finan
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 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 tied Treasury Investments
Slide 7: NCB has a well-diversified business model
NCB has a well-diversified business model Total operating income contribution FY2016 3.7bn TREASURY 15.8 SR bn 2.2bn 581mn 4.6bn Capital Markets CORPORATE International Largest Asset Manager in KSA NCB Largest Shariah-compliant Türkiye Finans Katılım Bankası (TFKB) Asset Manager worldwide 7.5bn 286
Slide 8: NCB has a strong financial position
NCB has a strong financial position Key KPIs Total Assets (SRbn) Total Equity (SRbn) 700 +6% +11% 100 600 435 449 441 500 377 80 56 60 345 400 43 47 60 39 300 40 200 20 100 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 CAGR CAGR Capital Ratios (%) Liquidity Ratios (%) 19.2% 20.0% 2 172.5% 19
Slide 9: NCB has a strong performance track record
NCB has a strong performance track record Key KPIs Total Operating Income (SRbn) Net Income attributable to equity holders (SRbn) 18 30 +8% +10% 16 25 18.6 14 16.2 17.5 9.3 14.9 12 8.7 9.1 7.9 20 13.5 5.1 4.9 10 4.8 6.5 15 4.5 4.8 8 6 10 11.4 12.6 13.6 5 9.0 10.1 4 2 0 0 2012 2013 2014 2015 2016 201
Slide 10: NCB has outperformed the Saudi banking sector
NCB has outperformed the Saudi banking sector Key KPIs compared to Saudi Arabian banking peers Industry Peers SR (bn) (ex NCB) CAGR 500 +12% 500 +7% 500 500 500 +5% +6% +5% 2,500 400 400 400 400 400 +8% 254 225 2,000 Financing and 300 163 300 172 300 300 300 1,141 117 143 129 125 1,500 842 advances,
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 31 July 2017 MSCI GCC Index Float Adj. Mcap (USD) Weighting (%) Closing Price 49.55 Al Rajhi Bank 22.67 9.28 52 week range (SR) 32-58 SABIC 20.46 8.38 Free
Slide 12: Grow with KSA. Grow with NCB.
National Commercial Bank Grow with KSA. Grow with NCB. 2Q 2017 Results NCB Investor Relations 2Q 2017 Investor Presentation
Slide 13: Saudi banking sector
Saudi banking sector The Saudi banking sector has been maneuvering challenges Liquidity (%) Cost of Funds (%) 0 20.0% 0 1.01% 13.6% 0 0 15.0% 0 1.8% 0 10.0% 0 0.52% 0.49% 0.48% 1.1% 0 0.47% 00.9% 5.0% 0 0.1% 0 0.5% 0 0.0% 0 3M SAR SAIBOR 3M USD LIBOR Money Supply Growth Cost of Funds (0) -5.0% 0 201
Slide 14: Economic headwinds
Economic headwinds The oil market decline impacted the Kingdom financially Oil Market Twin Balances (%) 12 140 22.4% 10 120 25.0% 18.1% 13.6% 100 9.7% 8 15.0% 6.4% 80 6 5.0% 60 4 -5.0% 40 -2.0% 2 20 -15.0% -7.9% -8.3% -12.4% 0 0 -25.0% -15.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2012 2013 20
Slide 15: Vision 2030
Vision 2030 The Kingdom of Saudi Arabia has responded with a bold vision to reduce oil dependency… Areas of Focus Selected Commitments / KPIs § Lower the rate of unemployment from 11.6% to 7% Productivity Leverage our young population, § Increase SME contribution to GDP from 20% to 35% 50% being you
Slide 16: Economic upturn
Economic upturn …leading to an expected economic rebound in 2018F ( Fiscal Discipline (SRbn) Utilizing Untapped Debt Markets (SRbn) 1,100 17% 18% 17% 1,250 976 978 928 950 953 70.0% 800 14.2% 20% 873 245 825 890 60.0% 700 13% 1,050 156 118 15% 183 50.0% 600 471 469 850 820 855 860 840 6% 432 419 10%
Slide 17: 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 18: Strategic overview
National Commercial Bank Strategic overview 2Q 2017 Results NCB Investor Relations 2Q 2017 Investor Presentation
Slide 19: NCB's strategic plan is about execution
NCB’s strategic plan is about execution Domestic leadership position drives strategic priorities Lean Distribution Expand reach with lean branches Digitization Anywhere, anytime, instant banking Retail Banking Expand share of retail profits Corporate Banking Grow selectively and increase risk-adjust
Slide 20: Distribution expansion
Distribution expansion We accelerated expansion of our distribution platform in Saudi Arabia… Number of branches Remittance Centers 700 +6% 250 +52% 600 500 352 374 200 138 148 322 342 400 299 97 150 300 100 57 28 200 50 100 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 CAGR CAGR Number of A
Slide 21: Lean distribution
Lean distribution …and are streamlining branch formats to enhance productivity gains Strategic Imperatives Cost / Income Ratio (%) § Continue expanding our distribution reach to acquire customers 1 +3% and grow market share 1 § Expand with smaller branches that are headcount efficient 1 39.0% 37.7%
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 § Leve
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 in high deposit segments (Affluent/ HNW / GRE) § Expand and optimize branch network § Drive digital migration § Continue improving customer satisfa
Slide 24: Corporate Banking
Corporate Banking Grow selectively and increase risk-adjusted returns Strategic Focus Areas § Focus on portfolio quality and proactively manage risk § Build a deal pipeline in V2030 target sectors § Cross sell treasury and cash management § Drive migration to digital channels § Expand collection cap
Slide 25: 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 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
Slide 27: Türkiye Finans Katılım Bankası
Türkiye Finans Katılım Bankası We are executing a transformation program to grow TFKB’s net income Long-term strategic investment in TFKB § High-growth and profitable banking sector § Strong position in participation banking and scalable platform § Large, young and skilled workforce Strategic Focus
Slide 28: Financial Results Highlights
National Commercial Bank Financial Results Highlights 2Q 2017 Results NCB Investor Relations 2Q 2017 Investor Presentation
Slide 29: Profitability and balance sheet drivers
Profitability and balance sheet drivers Net income stable as improved efficiency offset lower fee income Balance sheet growth reflective of a more subdued economic environment Total Assets (SRbn) Management Commentary 800 +2% § Growth in total assets (+2%) and financing (+1%) year to date was 700 in
Slide 30: Income Highlights
Income Highlights Lower total operating income largely attributable to capital gains and TRY depreciation Total Operating Income (SRbn) Management Commentary 8 -4% § Q2 total operating income declined 4% YoY as a healthy 4% 7 growth in net special commission income was more than offset by 4.66 4.86
Slide 31: Net special commission income trends
Net special commission income trends Commission income grew 4% on domestic margin improvement Management Commentary Net Special Commission Income § The Q2 net special commission margin improved YoY % YoY % by 0.17% YoY to 3.40% due to the higher interest SR (mn) 2Q 2017 1Q 2017 2Q 2016 change 1H 201
Slide 32: Fee and other income trends
Fee and other income trends Lower fees and investment related income Fee and Other Income (SRmn) Management Commentary 2,800 § 2Q fee and other income declined 23% YoY primarily resulting from -23% a 13% decline in fees from banking services and a 60% drop in investment-related income. 2,300 1,499 1
Slide 33: Expense highlights
Expense highlights Digitization and productivity enhancement delivered expense savings in 2Q 2017 Operating Expenses (SRmn) Management Commentary 3,500 § 2Q Group operating expenses improved by 17% YoY. 3,000 -17% § The Group cost to income ratio improved by 2.5% YoY to 34.0%. 2,500 1,822 1,688 § Th
Slide 34: Asset highlights and composition
Asset highlights and composition Balance sheet growth reflective of a more subdued economic environment Total Assets (SRbn) Management Commentary 800 +2% § Total assets grew by 2% during the first half of 2017 due to limited 700 growth in financing (+1%) and investments (+3%). 600 441 449 450 500 40
Slide 35: Financing and advances
Financing and advances Financing growth diluted by decline in Turkish subsidiary Financing and Advances, net (SRbn) Management Commentary 500 +1% § Domestically, advances grew for the Corporate (+3%) and 450 400 Consumer (+2%) segments. 350 254 254 257 § International advances declined 6% due to bot
Slide 36: Financing and advances credit quality (1)
Financing and advances credit quality (1) Rise in Corporate NPLs and impairment allowances partly offset by Retail and International NPL (SRbn) Impairment Charge (SRbn) 8 7 +13% 1 +24% 6 1 0.84 4.17 4.10 4.33 3.96 3.83 3.93 0.24 5 1 4 1.48 1.50 0.42 0.47 1.86 1.62 1.82 1.48 1 0.38 0.36 0.49 0.35 0.0
Slide 37: Financing and advances credit quality (2)
Financing and advances credit quality (2) Rise in NPL ratio but strong NPL coverage NPL Ratios (%) NPL Coverage Ratios (%) 5.3% 5.3% 5.4% 0 5.0% 2 4.7% 205% 4.3% 192% 196% 191% 0 186% 184% 2 0 0 1 1.5% 1.4% 1.6% 1.5% 1.6% 1.6% 0 146% 145% 147% 151% 150% 150% 1 0 1.0% 1.0% 1.1% 1.1% 1.2% 0 0.9% 0 80%
Slide 38: Financing and advances credit quality (3)
Financing and advances credit quality (3) Consumer NPLs declined while Corporate NPLs increased NPL Ratios (%) NPL Coverage Ratios (%) 0 3 260% 254% 0 229% 234% 237% 238% 0 1.7% 2 1.5% 0 1.4% 2 1.3% 0 1.1% 1.2% 184% 1 177% 181% 177% 173% 0 168% 0 1 0.7% 0.7% 0.7% 0.6% 0.6% 0 0.6% 0 0 Corporate Consu
Slide 39: 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 (SRbn) Management Commentary § The investment portfolio is built on high quality securities with 2
Slide 40: Liabilities trends and composition
Liabilities trends and composition NCB maintained a strong liquidity profile HQLA and Liquidity Coverage (SRbn/%) Management Commentary 172.5% 163.8% 166.1% 200.0% § As at 2Q 2017, the loan to customer deposits ratio was 81.6% and 200 156.1% 159.8% comfortably below the regulatory guidelines. 180.0%
Slide 41: Liabilities trends and composition
Liabilities trends and composition 2% growth in total liability base and improving deposit mix towards CASA balances Total Liabilities (SRbn) Management Commentary 700 § Customers’ deposits are the main source of funding and remained +2% 600 broadly stable during 1H 2017. 500 381 387 389 § CASA bala
Slide 42: Capital
Capital Capital position comfortably above regulatory minima Capitalisation (SRbn) Pillar I Risk Weighted Assets (SRbn) Capital Ratios (%) 800 20.0% 19.0% 19.2% 120 +2% 18.2% 18.2% 18.2% 700 19.0% +8% 17.5% 100 600 18.0% 16.7% 16.9% 68 70 69 380 16.1% 16.1% 16.0% 353 80 500 17.0% 8 8 8 15.5% 6 6 7 4
Slide 43: Segmental Review
National Commercial Bank Segmental Review 2Q 2017 Results NCB Investor Relations 2Q 2017 Investor Presentation
Slide 44: Segmental Information
Segmental Information Total operating income lower on trading, dividend income and currency translation Total Operating Income Growth by Segment (SRmn) Total Operating Income by Segment (SRbn) International 9% Retail 600 45 Capital Market 14 9.4 9.3 42% 3% 12 33 10 8 4,660 Treasury 6 4 500 21% 2 (63
Slide 45: Segmental Information
Segmental Information Net income was stable due to higher provisions and cost of funds Net Income Growth by Segment (SRmn) Net Income by Segment (SRbn) International 3% Retail 35% Capital Market 5.1 5.2 8 300 7 21 3% 6 5 2,459 4 33 2,451 3 250 Treasury 2 33% 1 (20) 0 1H 2016 1H 2017 200 (36) (6) Cor
Slide 46: Retail Banking
Retail Banking 2% net profit growth resulting from NSCI growth and improved efficiency, partly offset by reduced fee income and increased collective impairments Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 2Q 2017 1Q 2017 2Q 2016 1H 2017 1H 2016 change change 4,500
Slide 47: Corporate Banking
Corporate Banking Good NSCI growth and improved efficiency offset by lower fee income and higher impairments Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 2Q 2017 1Q 2017 2Q 2016 1H 2017 1H 2016 change change 3,000 2,500 Total assets 143,320 145,282 142,694 +0% 143,
Slide 48: Treasury
Treasury Stable NSCI offset by lower trading gains Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 2Q 2017 1Q 2017 2Q 2016 1H 2017 1H 2016 change change 2,500 Total assets 156,203 157,120 145,916 +7% 156,203 145,916 +7% 2,000 -7% Total operating income 820 1,126 883 -
Slide 49: Capital Markets
Capital Markets Market-driven decline in brokerage activity offset by AUM growth Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 2Q 2017 1Q 2017 2Q 2016 1H 2017 1H 2016 change change 300 -2% 250 Total assets 1,465 1,394 1,528 -4% 1,465 1,528 -4% 164 147 200 144 Total
Slide 50: International
International Operating income impacted by depreciating Turkish currency but strong net income growth from declining expenses and lower impairment charges Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 2Q 2017 1Q 2017 2Q 2016 1H 2017 1H 2016 change change 1,200 -33%
Slide 51: Additional Information
National Commercial Bank Additional Information 2Q 2017 Results NCB Investor Relations 2Q 2017 Investor Presentation
Slide 52: 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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