Saudi National Bank · TADAWUL:1180
Saudi National Bank — National Commercial Bank — Q1 2018 Earnings Presentation
59 slides from Saudi National Bank's earnings presentation, 2018
Slide 1: National Commercial Bank 1Q 2018 Results
National Commercial Bank 1Q 2018 Results wy NCB Wail 2k
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 NCB Investor Relations 10 2018 Investor Presentation IN) w GR N oO uw NCB - The leading KSA bank Grow with KSA. Grow with NCB. Strategy Overview Financial Results Highlights Financial Results Details Segmental Overview Additional Information NCB Wail YY
Slide 4: National Commercial Bank
National Commercial Bank 1Q 2018 Results | Nail | NCB
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) 13,436 Employees* >100:n Market Cap 309rn Deposits Wholesale branch in Bahrain Offices: Singapore, Seoul, Shanghai | Subsidiary in KSA: NCB Capital Subsidiary in Turkey: Turkiye Finans Katili
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
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) “J Industry Peers SR (bn) nee gia YY Sinpreea weet somba® Low lex NCB) FoaaR | sad 4% oes | pe 6% os H% ms pon 4% : ee i : : Pol : i H 139 7 124 2 249 | 206 234 133 117 122 Financing and a
Slide 8: NCB has a well-diversified business model
NCB has a well-diversified business model Total operating income contribution (FY 2017) 3.3bn 18% TREASURY SAR 16.1bn 88% er CORPORATE International NCB eo 8.3bn Turkiye Finans Katlim Bankasi (TFKB) 400 branches. 3.488 ATMs 45% 287 branches, 587 ATMs 150 Remittance centers 3,767 employees 7,991 Empl
Slide 9: NCB has a strong financial position
NCB has a strong financial position Key KPls Total Assets (SARbn) Total Equity (SARbn) 4% > 44% 435 449 443 444 64 377 a 56 60 43 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 CAGR CAGR Capital Ratios (%) Liquidity Ratios (%) " 1725% W773% 19.2% 200% se OO 171% 17.2% 77% 78.1% 80.3% 80.7% 16.2%
Slide 10: NCB has a strong performance track record
NCB has a strong performance track record Key KPls Total Operating Income (SARbn) Net Income Attributed To Equity Holders (SARbn) +5% 46% > 75 183 93 98 149 16.2 79 87 91 2013 2014 2015 2017 2013 2015 2016 2017 Net special commission income CAGR CAGR Fee and other income Net Special Commission Margi
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 Mar 2018 MSCI GCC Index Float Adj. Mcap (USDb) — Weighting (%) Closing Price (SAR) 65.14 Al Rajhi Bank 2453 9.45 52 week range (SAR) 37-65 SABIC 23.28 8
Slide 12: National Commercial Bank
NA ~~ National Commercial Bank ~ N = {* Grow with KSA. Grow with NCB. / S Ss 1Q 2018 Results NCB Wail
Slide 13: Economic headwinds
Economic headwinds Elevated oil prices and rising non-oil revenues will reduce fiscal deficits during the medium- term Oil Market Twin Balances (%) 2 140 10 120 18.1% 8 100 97% : ; Oo am 60 ‘ # a 2 -23% 20 -9.0% ) ty 2009 2010 «202012, «2013S 2014S 2015 2016S 2017S (2018 MBO USD/bbI 2013 2014 2015 2
Slide 14: Saudi banking sector
Saudi banking sector Banking profitability will remain resilient on the back of the ongoing government stimuli in support of private sector and individuals Bank Lending (SARbn) Interbank Rates (%) Bank Deposits (SARbn) 231% 120% 116% ° 12% 124% 8.9% 6 099% 227% 1121 1387 1402 1576 \U60S 16171619 ro
Slide 15: Vision 2030 programs
Enriching the Hajj and Umrah Experience Grow & diversify the economy Lower the rate of unemployment from 11.6% to 7% National Transformation Program Increase the Public Investment Fund’s assets to over SAR 7 trillion PIF Program Increase employment National Industrial Development and Increase
Slide 16: Economic upturn
Economic upturn 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) 106 97 Government Expenditure (SARbn) 1110 " 1,050 978 926 978 1.007 830 9
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 iment lai NCB has provided home financing for more than 29,000 Saudi families with a portfolio of SAR 21bn NCB supports +70,000 SME across Saudi Arabia with leading market
Slide 18: Strategic overview
National Commercial Bank Strategic overview 1Q 2018 Results | Z NCB Wail
Slide 19: NCB's strategic plan is about execution
NCB's strategic plan is about execution Our strategic objectives are supported by productivity enablers NCB Investor Relations 1Q 2018 Investor Presentation Strategic enablers Strategic objectives Expand reach with lean branches Anywhere, anytime, instant banking Expand share of retail profits Grow
Slide 20: NCB continued to deliver on its strategic plan
NCB continued to deliver on its strategic plan 2017 Achievements Expanded our branch network by 26 with no increment Leen bhsterantitane in head count driven by digital migration Deployed digital Functionality which enabled a 20% decline in branch financial transactions Digitization Treas Continued
Slide 21: Distribution reach and smaller branches
Continue expanding our distribution reach to acquire customers and grow market share Expand with smaller branches that are headcount efficient Optimize costs of existing branch network Equip branches with self-service/assisted-service technologies Enhance the in-branch sales and service mo
Slide 22: Mobile first digital strategy
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 Leverage data and analytics to drive sales effectiveness
Slide 23: Retail banking priorities
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 satisfaction
Slide 24: Corporate banking priorities
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 capacity and increase recoveries
Slide 25: Treasury priorities
Execute international hubs strategy Expand wholesale funding program Maintain the high quality/liquidity and profitability of the investment book Support the development of the sukuk capital markets Underpin Islamic product innovation
Slide 26: Capital markets priorities
Grow recurring revenues by gathering more AUMs, launching new products, growing Corporate Savings business Set the stage for future market upturn by growing brokerage market share and continuing to invest in NCBC capabilities Build on market leadership, landmark IB mandates to support GREs as
Slide 27: International priorities
Resume branch expansion and expand digital channels to drive customer acquisition Strengthen underwriting and improve collections Increase automation and drive capacity optimization Instill NCB’s principles (Customer excellence, robust governance, best-in-class technology)
Slide 28: Three Strategic Priorities for 2018
Three Strategic Priorities for 2018 NCB Ii stor Relations stor Pres nve Position Corporate Banking for growth Grow Residential Finance Current Account and Capital Base Focus Win mandates in vision 2030 targeted sectors Resume growth in SMEs by targeting resilient sectors Optimize operating model to
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Slide 30: Key messages
Key messages 1Q 2018 Results Asset . Quality, . Capital & . Liquidity NCB Investor Relations 1Q 2018 Investor Presentation 1% total assets decline due to optimization of balance sheet mix 1% financing increase mainly on 2% increase in domestic financing, partially offset by 5% decline in internation
Slide 31: Profitability
Profitability 1Q 2018 Net income growth from lower impairments and efficiency, partly offset by lower fee and other income Profitability Trends YoY % SAR (mn) 1 2018 AQ 2017 10 2017 change Net special commission income 3,419 3,378 3,359 +2% Fee and other income 1361 1138 1500 -9% Total operating inc
Slide 32: Balance Sheet
Balance Sheet Growth constrained by economic environment Balance Sheet Trends SAR (mn) Investments, net Financing & advances, net Total assets Due to banks & other financial institutions Customers’ deposits Debt securities issued Total liabilities Equity attributable to shareholders Total equity Fin
Slide 33: Segmental Information
Segmental Information 1Q 2018 Total operating income lower due to lower Corporate and Treasury incomes, partly offset by higher Retail income 10 18 Total Operating Income Movement by Segment Total Operating Income by Segment (SARbn) (SARmn) 339 International = 4.860 [] e% Retail , ] ‘a 64 4773 Capit
Slide 34: Segment income and net income commentary
1Q 2018 Total operating income declined 2% due to lower Corporate (-20%) and Treasury (-20%), partly offset by growth in Retail (+18%) and Capital Market (+39%) income. 1Q 2018 Net income improved 10.5% due to growth in Retail (+52%) and Capital Market (+75%), partly offset by a decline in Treas
Slide 35: Outlook
Outlook Improved macroeconomic environment expected to drive growth 18 Macroeconomic tlook * — Average Arabian light oil price of USD 60 per barrel * Three US Fed rate hikes of 25bps each in March, June and December. + Government's expansionary budget for 2018 drives corporate lending activity * — R
Slide 36: National Commercial Bank
~ National Commercial Bank wy NCB wail JL
Slide 37: Total operating income commentary
1Q 2018 total operating income declined 2% YoY despite a 2% improvement in net special commission income due mainly to lower investment-related income (-22%) and FX revenue (-19%), partly offset by higher fees from banking services income (+6%). Excluding the International business, 1Q 2018 tota
Slide 38: Net special commission margin commentary
The 1Q 2018 net special commission margin increased by 7bps YoY to 3.59% due to improved yields (+12bps). Special commission expense for 1Q 2018 was 7% higher due to higher SAIBOR/LIBOR rates. Excluding the International business, domestic NSCI grew by 2% in 1Q 2018.
Slide 39: Fee and other income commentary
1Q 2018 fee and other income declined 9% YoY as 6% growth in fees from banking services was more than offset by a 22% decline in investment-related income and 19% lower FX revenue. The higher fees from banking services in 1Q 2018 were mainly driven by higher fees from investment management servi
Slide 40: Operating expenses and cost to income
1Q 2018 operating expenses improved by 1% YoY. The cost to income ratio for 1Q 2018 was 35.0%, higher by 28bps compared to 1Q 2017. The cost base improvement was relatively broad-based, reflecting the continued strides made in digitization and productivity initiatives, lower depreciation as we
Slide 41: Total assets and financing commentary
Total assets declined 1% due to optimization of assets and funding mix. 1% financing increase mainly due to 2% increase in domestic financing partially offset by 5% decline in international financing impacted by 4% Turkish Lira depreciation. Overall financing trends were reflective of early si
Slide 42: Domestic and international financing
Domestically, financing grew for the Corporate Segment (+2%) and Consumer segment (+1%) since 4Q 2017. Growth in Corporate segment comes from Services and Banking & financial sectors International financing declined 5% in 1Q 2018 due principally to weakened Turkish Lira.
Slide 43: Financing and advances credit quality (1)
Financing and advances credit quality (1) Stable credit quality across the board NPL (SARbn) Movement NPLs by Economic Sector (SARbn) § 415% 0.12 ; 477 [| Dee ey 467 477 472 (0.05) Ba ey 472 ° (0.03) (9.92) (0.02) = 152 140 140 we (0.02) (9.02) 1017 2017 3017 4017 1018 Corporate Consumer and credit
Slide 44: NPL ratio and coverage
NPL ratio declined in 1Q 2018 driven by proactive remedial management and write offs of fully provided loans. NPL coverage was higher at 165% as at 1Q 2018 because of the write offs as well as higher provision stock as a result of IFRS 9 adoption adjustments. Domestic CoR ratio significantly i
Slide 45: Corporate and consumer NPL ratios
Corporate NPL ratio declined in 1Q 2018, in part due to write offs and proactive remedial management. Corporate NPL coverage ratio improved due to the above as well as higher provision stock as a result of IFRS 9 adoption adjustments. Consumer NPL ratio and coverage remain stable.
Slide 46: IFRS 9 adoption
IFRS 9 NCB implemented the expected credit loss (ECL) computation framework in accordance with the International Financial Reporting Standards (IFRS) 9 and as per the guidance provided by the Saudi Arabian Monetary Authority (SAMA) Significant components of the IFRS 9 ECL implementation included the
Slide 47: Investment portfolio quality
The investment portfolio is built on high quality securities with ~91% being investment grade. Since the resumption of KSA government debt issuance, NCB has actively participated in issues of longer term debt securities. The portfolio has been re-balancing towards floating rate securities in l
Slide 48: Customers' deposits and CASA
Customers’ deposits are the main source of funding and remained stable in 1Q 2018. CASA balances account for 77% of customers’ deposits.
Slide 49: Liquidity ratios
As at 1Q 2018, the financing to customers’ deposit ratio was 81.8% and comfortably below the regulatory guidelines. HQLA balances risen by 2% compared to 4Q 2017. The average quarterly LCR improved to 198.6% from 177.3% in 4Q 2017. Basel III leverage ratio improved to 13.5% from 13.0% in 4Q
Slide 50: Capitalization
Capitalization remained strong and comfortably above the regulatory minima. Pillar I risk weighted assets decreased by 1% in 1Q 2018 principally by lower charge on residential real estate financing as recently allowed by SAMA. Common equity Tier 1 capital (CET1) is impacted by one time IFRS9 a
Slide 51: National Commercial Bank 1Q 2018 Results
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Slide 52: Retail segment results
1Q 2018 net income rose 52% YoY driven principally by 18% operating income growth and a 158% improvement in impairment charge. NSCI for 1Q 2018 improved by 21% YoY due to a 5% increase in retail financing, better margins and higher current account growth. Fee income increased by 11% in 1Q 2018
Slide 53: Corporate segment results
1Q 2018 net income increased 5% YoY as lower operating income (-20%) were more than offset by improvements in impairments (-115%). NSCI for 1Q 2018 declined 22% YoY as a result of repayments in 4Q 2017 that reduced the average balance by 8% compared with 1Q 2017. Fee income decreased by 17% Yo
Slide 54: Treasury segment results
30% YoY drop in net income in 1Q 2018 due to a 20% reduction in operating income and higher impairments partly offset by a 22% improvement in operating expenses. Operating income in 1Q 2018 declined 20% YoY mainly due to lower NSCI and a reduction in investment income. Investment impairments w
Slide 55: Capital Market segment results
1Q 2018 net income increased by 75% YoY due to higher operating income (+39%) and improved operating efficiency. Operating income in 1Q 2018 rose 39% YoY due to higher fee and other income, mainly resulting from asset management. Cost to income improved to 39% in 1Q 2018 from 51% in 1Q 2017.
Slide 56: International segment results
1Q 2018 net income increased 42% YoY on improving credit quality, despite declining operating income. 1Q 2018 operating expenses remains flat despite legislative inflationary increases in staff costs which was offset by the ongoing progress made in cost-optimization initiatives. The impairment
Slide 57: Turkiye Finans results
1Q 2018 net income increased 39% YoY on improving credit quality, despite declining operating income. 1Q 2018 operating expenses higher by 5% due to legislative inflationary increases in staff costs which was partly offset by the ongoing progress made in cost-optimization initiatives. The impa
Slide 58: NCB
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Slide 59: Financial statements, earnings release, investor presentation
Financial statements Earnings release Investor presentation Financial data pack (Excel)
National Commercial Bank — Q1 2018 Earnings Presentation on 6ix