Banque Saudi Fransi · TADAWUL:1050
Banque Saudi Fransi — Q2 2020 Earnings Presentation
45 slides from Banque Saudi Fransi's earnings presentation, 2020
Slide 1: Banque Saudi Fransi Investor Presentation 2Q 2020
3 Column Slides Banque Saudi Fransi Investor Presentation 2Q 2020
Slide 2: Contents
INVESTOR PRESENTATION 2Q 2020 Contents BSF Profile 3 Operating Environment 6 Strategy 12 Financial Performance 19 Outlook & Guidance 34 Segmental Performance 36 Performance Track Record 42
Slide 3: BSF Profile
INVESTOR PRESENTATION 2Q 2020 BSF Profile
Slide 4: We are a leading banking group in Saudi Arabia with a strong focus on domestic operations
PROFILE | PRESENCE We are a leading banking group in Saudi Arabia with a strong focus on domestic operations Retail Clients Branches Employees (Million) 1.1 87 2,952 +1.9% year-to-date +0 year-to-date -1.6% year-to-date FY19 Operating Income Diversity (SAR Mn) 6,873 Headquartered in Riyadh: Su
Slide 5: Market parameters impacted by Covid-19 disruption, but credit ratings remain solid
PROFILE | SHARE PROFILE AND CREDIT RATINGS Market parameters impacted by Covid-19 disruption, but credit ratings remain solid Share Parameters 30 Jun 2020 Total Shareholder Return (TSR) 50 Closing price (SAR) 28.55 40 52 weeks range (SAR) 22.3 - 43.7 30 Shares issued (million) 1,205 20 10 Market cap
Slide 6: Operating Environment
INVESTOR PRESENTATION 2Q 2020 Operating Environment
Slide 7: Covid-19 severely disrupted financial markets and economic activity in 1Q 2020, but moderated in 2Q 2020
OPERATING ENVIRONMENT | COVID-19 DISRUPTION Covid-19 severely disrupted financial markets and economic activity in 1Q 2020, but moderated in 2Q 2020 Brent Oil Price / Barrel (USD) Tadawul Index Oil prices dropped sharply in 1Q 2020 as the Covid-19 pandemic spread, with a moderate recovery to USD 4
Slide 8: Saudi Arabia responded strongly to contain the pandemic and support the economy
OPERATING ENVIRONMENT | SAUDI ARABIA’S RESPONSE TO COVID-19 Saudi Arabia responded strongly to contain the pandemic and support the economy Social measures and local cases Support and stimulus programs The KSA government acted decisively and quickly to suspend: SAMA Programs Other Measures - Domes
Slide 9: The economic outlook for 2020 remains uncertain
OPERATING ENVIRONMENT | ECONOMIC OUTLOOK The economic outlook for 2020 remains uncertain Real GDP growth (%) Brent Oil Price Average / Barrel (USD) GDP for Saudi Arabia is expected to contract by -6.8% in 2020 (IMF) due to the deterioration of the global economic outlook, resulting from -6.80% 37
Slide 10: Saudi banking sector is well positioned to absorb the impact
OPERATING ENVIRONMENT | KSA BANKING SECTOR Nevertheless, in this challenging environment, the Saudi banking sector is well positioned to absorb the impact Bank Credit (SAR Bn) Capitalization: T1|CAR (%) NPL Ratio (%) 1,648 18.0%|19.3% 1.9% +6% 19.5% 20.4% 20.3% 19.3% 18.1% 1,501 1,552 1,634 1,648 2.
Slide 11: BSF's response to Covid-19 has been effective and executed against a robust plan
OPERATING ENVIRONMENT | BSF RESPONSE TO COVID-19 BSF’s response to Covid-19 has been effective and executed against a robust plan Putting the safety of our people first Supporting customers Digital enablement Initiated and expanded flexible and remote Waived payments on mortgages and personal
Slide 12: Strategy
INVESTOR PRESENTATION 2Q 2020 Strategy
Slide 13: In 2018 we redefined our purpose to build a dynamic, energized and modern culture
STRATEGY | MISSION AND VAUES In 2018 we redefined our purpose to build a dynamic, energized and modern culture… OUR MISSION OUR VALUES To become the TRUE TO OURSELVES, ALWAYS most modern, We are honest with one another, even at the risk of temporary disharmony. It is never personal. innovative and U
Slide 14: …and set out to build a cohesive, best-in-class executive management team
STRATEGY | MANAGEMENT TEAM …and set out to build a cohesive, best-in-class executive management team… Rayan Mohammed Fayez Abdullah Alkhalifa Ravishanker Visvanathan Managing Director & Chief Chief Financial Officer Chief Risk Officer Executive Officer Mazen Altamimi Mohammed Abdulrahman Abdulmohsen
Slide 15: …who implemented a comprehensive 5-year strategic plan called 'LEAP'
STRATEGY | 5-YEAR STRATEGIC PLAN …who implemented a comprehensive 5-year strategic plan called ‘LEAP’ to modernize and re-imagine the bank 2018 2023 POSITIONED TO ‘LEAP’ Baseline Aspiration STRATEGIC PILLARS ASSET MARKET SHARE ASSET MARKET SHARE 8.3% Solidify our Scale up in 10% leadership position
Slide 16: We are clearly focused on delivering strategic outcomes
STRATEGY | 5-YEAR STRATEGIC PLAN We are clearly focused on delivering strategic outcomes STRATEGIC OUTCOMES Shareholder darling Resilience KPI #1 KPI #2 KPI #3 KPI #4 Total shareholder Return on average equity Basic earnings per Dividends per share (DPS) return (TSR) (ROAE) share(EPS) Generate top-q
Slide 17: 2019 saw improvements across all strategic outcomes
STRATEGY | 2019 PROGRESS | STRATEGIC OUTCOMES As a result of progress made on strategy implementation, 2019 saw improvements across all strategic outcomes STRATEGIC OUTCOME Shareholder darling Resilience KPI #1 KPI #2 KPI #3 KPI #4 Total shareholder Return on average equity Basic earnings per share
Slide 18: Initiatives completed in 1H 2020 despite the Covid-19 impact
STRATEGY | UPDATE 14 Initiatives completed in 1H 2020, despite the Covid-19 impact, which led to the suspension of 19 and cancellation of 4 initiatives Initiatives 1H 2020 Progress 2H 2020 Direction Completed Progress impacted by Covid-19, but Corporate Digital Platform selection Corporate clear
Slide 19: Financial Performance
INVESTOR PRESENTATION 2Q 2020 Financial Performance
Slide 20: While our balance sheet witnessed strong growth, net income declined on higher impairments
FINANCIAL PERFORMANCE | HIGHLIGHTS While our balance sheet witnessed strong growth, net income declined on higher impairments BALANCE SHEET Loans & Advances Investments Non Interest Bearing Deposits Strong loan growth Strong NIB deposit growth from flight to quality and as customers 135.7 +8.0%
Slide 21: Strong balance sheet growth from lending and investments
FINANCIAL PERFORMANCE | BALANCE SHEET HIGHLIGHTS Strong balance sheet growth from lending and investments Total Assets Movement (SAR Bn) Growth in total assets of 13% YTD driven by strong 8% loan growth and 17% investment growth. Liabilities grew by 16% from increased interbank funding, includin
Slide 22: Net income declined year-on-year due to higher credit costs
FINANCIAL PERFORMANCE | INCOME STATEMENT HIGHLIGHTS Net income declined year-on-year due to higher credit costs Net Income After Zakat & Tax Movement (SAR Mn) Net income for 1H 2020 declined 35% YoY to SAR 1,119mn as 3% income growth was more than offset by 246% rise in impairments and 7% increase
Slide 23: Strong loan growth in 1H 2020
FINANCIAL PERFORMANCE | LOANS AND ADVANCES Strong loan growth in 1H 2020 Total Loans & Advances (SAR Bn) Commercial Loans Movement (SAR Bn) Loans & Advances Composition (SAR Mn) 135.7 115.6 135,749 Consumer +8% +7% 14.9% Commercial 125.7 134.9 135.7 1.9 1.0 1.3 115.6 85.1% 2.2 2.0 17.9 19.2 20.2 107
Slide 24: Strong growth in investment portfolio from increased Saudi Government bond holdings
FINANCIAL PERFORMANCE | INVESTMENTS Strong growth in investment portfolio from increased Saudi Government bond holdings Investments Movement by Type (SAR Bn) Investments Composition by Type Investments rose 17% during 1H (SAR Mn) 2020 as the bank increased Saudi Government bond 36.9 36,916 holding
Slide 25: Strong NIBD deposit growth as customers shore up liquidity
FINANCIAL PERFORMANCE | CUSTOMERS’ DEPOSITS Strong NIBD deposit growth as customers shore up liquidity in response to Covid-19 disruption Customers' Deposits (SAR Bn) Customers' Deposits Movement (SAR Bn) Deposits grew 4% during 1H 2020 from strong growth in NIBDs (+15%), partly offset by lower IB
Slide 26: Stable NII as improved funding costs offset by lower loan yields
FINANCIAL PERFORMANCE | NET INTEREST INCOME Stable NII as improved funding costs offset by lower loan yields Net Interest Income Movement (SAR Mn) NII was stable YoY at SAR 2,584mn in 1H 2020 as a 11% decline in interest income was offset by a 38% improvement in funding costs. 2,584 NII for 1H 2
Slide 27: Improved balance sheet mix and funding costs offset yield pressure from lower rates
FINANCIAL PERFORMANCE | NET INTEREST MARGIN Improved balance sheet mix and improved funding costs offset by yield pressure from lower rates Net Interest Margin Trend (%) Net Interest Margin Movement (SAR Bn) The NIM improved by 3bps to 2.97% YoY but declined 4bps QoQ. 2.97% 2.97% The margin was
Slide 28: Lower banking-related fee income offset by increase in other income
FINANCIAL PERFORMANCE | FEE & OTHER INCOME Lower banking-related fee income reflective of market conditions, offset by increase in other income from one-off gain Fee & other income for 1H 2020 improved 9% YoY to SAR 993mn from Fee & Other Income Movement (SAR Mn) other income, which benefitted fro
Slide 29: Higher operating expenses from improvements of talent pool
FINANCIAL PERFORMANCE | OPERATING EXPENSES Higher operating expenses from improvements of talent pool Operating Expenses Movement (SAR Mn) Operating expenses increased 7% YoY to SAR 1,116mn in 1H 2020, due to one-off accrual reversal in 1Q 2019 of SAR 37mn. Excluding this one-off, expenses rose
Slide 30: Rising impairment charge and cost of risk from higher commercial provisions
FINANCIAL PERFORMANCE | IMPAIRMENT CHARGE Rising impairment charge and cost of risk from higher commercial provisions, mainly due to stage movements Impairment Charge (SAR Mn) Credit Losses (SAR Mn) Cost of Credit Risk (SAR Bn) Commercial COR 650 634 1.52% 1.7% +121 bps year-on-year +230% +217% 1.
Slide 31: Rise in NPLs from commercial book; NPL coverage declined
FINANCIAL PERFORMANCE | CREDIT QUALITY Rise in NPLs from commercial book; NPL ratio increased 31bps YTD and NPL coverage declined 6.9ppts YTD Non Performing Loans & Allowance For Impairment NPL Ratio (%) Commercial NPL Ratio (%) Advances (SAR Bn) (SAR Bn) 4.1 4.2 2.95% 3.2% +35 bps year-to-date +2
Slide 32: Capital ratios declined, but remain comfortable
FINANCIAL PERFORMANCE | CAPITALIZATION Capital ratios declined, but remain comfortable Total Capital (SAR Bn) RWA (SAR Bn) Total capital increased by SAR 0.6bn (+2% YTD) during 1H 2020 from net income generation of SAR 1.1bn, increased reserves 34.9 194.5 of SAR 0.7bn, partly offset by the SAR1.2b
Slide 33: Liquidity remains strong and comfortably within regulatory limits
FINANCIAL PERFORMANCE | LIQUIDITY Liquidity remains strong and comfortably within regulatory limits LCR Average (%) HQLA (SAR Bn) LCR declined 156ppts during 1H 2020 due to a decline in HQLA of 14% from balance sheet optimization but remains comfortable at 168%; NSFR declined modestly by 5.0ppts d
Slide 34: Outlook and Guidance
INVESTOR PRESENTATION 2Q 2020 Outlook and Guidance
Slide 35: Guidance revised for loan growth, NIM and COR
GUIDANCE & OUTLOOK | GUIDANCE Guidance revised for loan growth, NIM and COR Previous 2020 Guidance 2Q 2020 Outcome New 2020 Guidance 1H 2020 growth of 8% YTD. Loans & Advances SAR Billion In 2H 2020 further growth in 125.7 125.7 LOANS & ADVANCES, NET commercial and strong mortgage growth is expe
Slide 36: Segmental Performance
INVESTOR PRESENTATION 2Q 2020 Segmental Performance
Slide 37: Healthy profit growth in Treasury, while Corporate impacted by lower margins and higher impairments
SEGMENTAL PERFORMANCE | SUMMARY Healthy profit growth in Treasury, while Corporate impacted by lower margins and higher impairments Operating Income Movement (SAR Mn) Net Income Before Zakat & Tax Movement (SAR Mn) 3,517 1,353 +3% -35% 3,429 149 3 3,517 2,082 159 1,353 (59) (5) (95) (789) (3) Operat
Slide 38: Retail: decline in profits driven by lower income and higher operating expenses
SEGMENTAL PERFORMANCE | RETAIL Decline in profits driven by lower income and higher operating expenses Net Income Before Zakat & Income Tax Movement (SAR Mn) Total Operating Income (SAR Mn) Net Interest Income 237 422 379 -5.4% year-on-year SAR Million -29% -12% 480 459 422 333 80 74 Fee & other i
Slide 39: Higher impairments and lower income drive decline in Corporate profitability
SEGMENTAL PERFORMANCE | CORPORATE Higher impairments and lower income drive decline in Corporate profitability Net Income Before Zakat & Income Tax Movement (SAR Mn) Total Operating Income (SAR Mn) Net Interest Income 216 773 608 +6.8% year-on-year SAR Million -78% +5% 738 741 773 1,005 18 169 168
Slide 40: Strong profit growth driven by increased fee income
SEGMENTAL PERFORMANCE | TREASURY Strong profit growth driven by increased fee income Net Income Before Zakat & Income Tax Movement (SAR Mn) Total Operating Income (SAR Mn) Net Interest Income 838 490 297 -4.8% year-on-year SAR Million +23% +19% 475 490 8 838 411 135 1 679 14 160 193 Fee & other in
Slide 41: Decline in profitability from lower corporate finance income and increased impairments
SEGMENTAL PERFORMANCE | INVESTMENT BANKING AND BROKERAGE Decline in profitability from lower corporate finance income and increased impairments Net Income Before Zakat & Income Tax Movement (SAR Mn) Total Operating Income (SAR Mn) 62 75 -3% -4% 77 82 75 65 7 0 62 61 68 62 -9% (5) (5) QoQ 16 14 13 Ne
Slide 42: Performance Track Record
INVESTOR PRESENTATION 2Q 2020 Performance Track Record
Slide 43: Balance Sheet Metrics
PERFORMANCE TRACK RECORD Balance Sheet Metrics Loans & Advances (SAR Bn) Total Assets (SAR Bn) Customers' Deposits (SAR Bn) CAR (%) 125.7 178.1 132.8 19.2% +0% -1% -2% 19.4% 19.8% 19.2% 17.8% 123.8 129.5 121.9 120.6 125.7 203.4 192.9 190.3 158.5 151.0 17.2% 183.7 178.1 141.9 148.4 132.8 18.3% 17.5%
Slide 44: Income Statement Metrics
PERFORMANCE TRACK RECORD Income Statement Metrics Operating Income (SAR Mn) Net Interest Margin (%) Cost To Income Ratio (%) Cost Of Risk (%) 6,873 3.04% 33.3% 0.79% +2% 0.79% 0.72% 36.3% 0.59% 6,799 6,873 3.04% 33.6% 33.7% 6,291 6,400 6,576 2.85% 33.3% 33.3% 2.35% 2.38% 2.50% 0.38% +1% 0.15% YoY 20
Slide 45: Disclaimer
INVESTOR PRESENTATION 2Q 2020 Disclaimer This presentation is being provided to you for general information purposes. The information contained in the presentation has been obtained from sources believed by Banque Saudi Fransi (“BSF") to be up to date, correct and reliable, but BSF does not make any