Saudi National Bank · TADAWUL:1180
Saudi National Bank — National Commercial Bank — Q3 2017 Earnings Presentation
55 slides from Saudi National Bank's earnings presentation, 2017
Slide 1: National Commercial Bank Investor Presentation 3Q 2017 Results
National Commercial Bank Investor Presentation 3Q 2017 Results NCB Investor Relations 3Q 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 Highlights 34 Financial Results Details 48 Segmental Overview 54 Additional Information NCB Investor Relations 3Q 2017 Investor Presentation 3
Slide 4: The Leading KSA Bank
National Commercial Bank The Leading KSA Bank 3Q 2017 Results NCB Investor Relations 3Q 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 (FY2016) 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 In
Slide 7: NCB has a well-diversified business model
NCB has a well-diversified business model Total operating income contribution FY2016 3.7bn 20% TREASURY SR 15.8bn 85% 2.2bn 581mn 12% 3% 4.6bn 25% Capital Markets CORPORATE International Largest Asset Manager in KSA NCB Largest Shariah-compliant 7.5bn Türkiye Finans Katılım Bankası (TFKB) Asset Mana
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 39 60 300 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 14 17.5 18.6 16.2 12 8.7 9.1 9.3 20 13.5 14.9 7.9 4.9 5.1 10 6.5 15 4.8 4.8 8 4.5 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 30 Sept 2017 MSCI GCC Index Float Adj. Mcap (USD) Weighting (%) Closing Price 51.42 Al Rajhi Bank 21.42 8.80 52 week range (SR) 32-58 SABIC 20.56 8.44 Free
Slide 12: Grow with KSA. Grow with NCB.
National Commercial Bank Grow with KSA. Grow with NCB. 3Q 2017 Results NCB Investor Relations 3Q 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 0.88% 1.8% 15.0% 0 0 10.0% 0.52% 0 0 0.49% 0.47% 0.48% 0.9% 0 1.3% 5.0% 0 0 0.5% 0 2.4%0.0% 0 3M SAR SAIBOR 3M USD LIBOR M3 YoY 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 2.3% 6 5.0% 60 4 -5.0% 40 -2.3% -4.3% -5.8% 2 -8.7% -15.0% 20 -14.8% -12.8% 0 0 -25.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
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 23% 21% 1,250 976 978 70.0% 1,200 21% 25% 928 950 953 873 245 825 890 60.0% 17% 118 1,050 20% 156 1,000 13% 850 183 50.0% 15% 820 855 860 840 40.0% 800 631 612 65
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 3Q 2017 Results NCB Investor Relations 3Q 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% 600 500 352 374 200 138 148 322 342 400 299 150 97 300 100 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 3Q 2017 Results NCB Investor Relations 3Q 2017 Investor Presentation
Slide 29: Key messages
Key messages 3Q 2017 Results Financing (SRbn) Deposits (SRbn) § 1% total assets and financing growth YTD reflective of 600 800 subdued environment (domestic financing +2%; +1% 700 500 -4% international -6%) 600 Balance § 5% YTD investments growth through Saudi Government 400 254 257 500 316 303 Shee
Slide 30: Profitability
Profitability YTD Net income growth from improved impairments and efficiency, partly offset by lower fee and other income Profitability Trends YoY % YoY % SR (mn) 3Q 2017 2Q 2017 3Q 2016 3Q 2017 YTD 3Q 2016 YTD change change Net special commission income 3,449 3,473 3,442 +0% 10,283 10,226 +1% Fee a
Slide 31: Balance Sheet
Balance Sheet Growth constrained by economic environment Balance Sheet Trends YoY % YTD % SR (mn) 3Q 2017 2Q 2017 3Q 2016 FY 2016 change change Investments, net 116,900 114,634 111,487 +5% 111,509 +5% Financing and advances, net 256,852 256,901 259,915 -1% 253,592 +1% Total assets 444,679 449,776 43
Slide 32: Segmental Information
Segmental Information YTD Total operating income lower due to depreciation of Turkish Lira, partly offset by higher Retail and Corporate operating income YTD Total Operating Income Growth by Segment (SRbn) Total Operating Income by Segment (SRbn) 1,200 185 41 International 1,000 161 9% Retail 14,047
Slide 33: Segmental Information
Segmental Information 3Q YoY and YTD net income growth in most segments, except Corporate which was impacted by rising impairments YTD Net Income Growth by Segment (SRmn) Net Income by Segment (SRbn) 1,200 363 108 7,344 International 40 4% Retail 1,000 180 32% 7,089 Capital Market 12 7.1 7.3 3% 10 8
Slide 34: Financial Results Details
National Commercial Bank Financial Results Details 3Q 2017 Results NCB Investor Relations 3Q 2017 Investor Presentation
Slide 35: Income Highlights
Income Highlights Lower YTD and QTR total operating income largely attributable to lower fee and other income and Turkish Lira depreciation Total Operating Income (SRbn) Management Commentary 8 -4% 25 -2% § 3Q 2017 total operating income declined 4% YoY despite stable 7 net special commission income
Slide 36: Net special commission income trends
Net special commission income trends YTD and QTR commission income stable as domestic margin improvement offset by Turkish Lira depreciation Management Commentary Net Special Commission Income § The 3Q 2017 net special commission margin was YoY % YoY % stable at 3.43% as improved funding costs were
Slide 37: Fee and other income trends
Fee and other income trends Lower YTD and QTR fees and investment related income Fee and Other Income (SRmn) Management Commentary 2,800 § 3Q 2017 fee and other income declined 15% YoY as 5% growth in -15% 7,600 -7% fees from banking services was more than offset by a 70% decline 2,300 6,600 in inve
Slide 38: Expense highlights
Expense highlights Digitization and productivity enhancement delivered expense savings in 3Q 2017 YTD Operating Expenses (SRmn) Management Commentary 3,500 10,000 § 3Q YTD operating expenses improved by 8% YoY. -8% -6% 9,000 § The YTD cost to income ratio improved by 2.4% YoY to 34.8%. 3,000 8,000 2
Slide 39: Asset highlights and composition
Asset highlights and composition Balance sheet growth reflective of a more subdued economic environment and Turkish Lira depreciation Total Assets (SRbn) Management Commentary 800 +1% § Total assets grew by 1% during 3Q 2017 YTD due to limited growth 700 in financing (+1%) and moderate growth in inv
Slide 40: Financing and advances
Financing and advances Financing growth diluted by decline in Turkish subsidiary Financing and Advances, net (SRbn) Management Commentary 600 § Domestically, financing grew for the Corporate (+3%) and 500 Consumer (+4%) segments during 3Q 2017 YTD. +1% 400 § International financing declined 6% YTD d
Slide 41: 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 +12% 1 -17% 7 0.84 6 4.33 4.67 1 3.96 4.17 3.93 4.10 0.69 5 3.83 1 0.24 1.52 0.47 0.08 4 1.82 1.48 1.50 0.36 0.42 0.15 1.86 1.62
Slide 42: 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% 0 5.0% 2 4.7% 205% 4.3% 192% 196% 191% 0 186% 184% 0 2 169% 0 1.6% 1.5% 1.6% 1.6% 1.8% 1 1.5% 1.4% 0 146% 145% 147% 151% 150% 150% 142% 1 0 1.1% 1.
Slide 43: 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 0 3 260% 254% 1.9% 246% 0 3 232% 237% 238% 1.7% 229% 0 2 1.5% 0 1.4% 2 1.3% 184% 177% 181% 177% 0 1.1% 1.2% 2 173% 168% 152% 0 2 0 2 0.7% 0.7% 0 0.7% 0.6% 0.6% 1
Slide 44: 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 45: Liabilities trends and composition
Liabilities trends and composition Stable 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 +0% stable during 1H 2017 but declined by 4% during 3Q 2017 as the 600 3
Slide 46: Liquidity
Liquidity NCB maintained a strong liquidity profile HQLA and Liquidity Coverage (SRbn/%) Management Commentary 172.5% 166.1% 172.5% 200.0% § As at 3Q 2017, the financing to customer deposits ratio was 84.9% 200 156.1% 159.8% 163.8% and comfortably below the regulatory guidelines. 180.0% 145.3% 160.0
Slide 47: 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% +4% 120 700 19.0% 18.2% 18.2% 18.2% 18.5% +8% 17.5% 16.7% 16.9% 100 600 18.0% 69 70 68 500 380 16.1% 16.1% 16.0% 16.4% 353 80 17.0% 8 8 8 1
Slide 48: Segmental Review
National Commercial Bank Segmental Review 3Q 2017 Results NCB Investor Relations 3Q 2017 Investor Presentation
Slide 49: Retail Banking
Retail Banking Strong YTD and QTR net profit growth resulting from operating income growth, improved efficiency and lower impairments Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 3Q 2017 2Q 2017 3Q 2016 3Q 2017 YTD 3Q 2016 YTD change change 5,000 +8% 4,500 4,000 To
Slide 50: Corporate Banking
Corporate Banking YTD and QTR Net profit impacted by higher impairments Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 3Q 2017 2Q 2017 3Q 2016 3Q 2017 YTD 3Q 2016 YTD change change 2,500 -6% Total assets 143,378 143,320 141,459 +1% 143,378 141,459 +1% 2,000 Total ope
Slide 51: Treasury
Treasury Higher NSCI and lower investment impairments partly offset by lower investment gains Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 3Q 2017 2Q 2017 3Q 2016 3Q 2017 YTD 3Q 2016 YTD change change 2,500 Total assets 153,802 156,203 139,529 +10% 153,802 139,529
Slide 52: Capital Markets
Capital Markets Growth driven by asset management Summary Financial Performance Total Operating Income (SRmn) YoY % YoY % SR (mn) 3Q 2017 2Q 2017 3Q 2016 3Q 2017 YTD 3Q 2016 YTD change change 300 +35% Total assets 1,562 1,465 1,568 -0% 1,562 1,568 -0% 250 200 144 154 Total operating income 154 144 1
Slide 53: 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) 3Q 2017 2Q 2017 3Q 2016 3Q 2017 YTD 3Q 2016 YTD change change 1,2
Slide 54: Additional Information
National Commercial Bank Additional Information 3Q 2017 Results NCB Investor Relations 3Q 2017 Investor Presentation
Slide 55: 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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