Al Rajhi BankTADAWUL: 1120

2025 Annual

Feb 4, 2026 at 5:13 PM UTC · Issued by Al Rajhi Bank

AL RAJHI BANKING AND INVESTMENT CORPORATION

(A SAUDI JOINT STOCK COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS AND THE INDEPENDENT AUDITORS' REPORT

AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2025

Confidential - ﺩﻱﻕﻡ

592,398,619

CONTENTS OF THE CONSOLIDATED FINANCIAL STATEMENTS Page

Number

Auditors' Report

Consolidated Statement of Financial Position 1

Consolidated Statement of Income 2

Consolidated Statement of Comprehensive Income 3

Consolidated Statement of Changes in Equity 4-5

Consolidated Statement of Cash Flows 6-7

Notes to the Consolidated Financial statements

General 8-10
Basis of preparation 10-13
Material accounting policies 13-34
Cash and balances with Central Banks 35
Due from banks and other financial institutions, net 35
Investments, net 36-38
Shariah compliant derivatives 39-43
Financing, net 44-51
Other Assets, net 52
Investment in associate 52
Investment properties, net 52
Property, equipment, right of use and software assets, net 53
Disposal group classified as held for sale 54
Due to banks, Saudi Central Bank and other financial institutions 54
Customers' deposits 55
Debt securities and term financing 55-56
Other liabilities 56
Share capital 57
Statutory and other reserves 57-58
Equity Sukuk 58
Commitments and contingencies 59-60
Net financing and investment income 61
Fee from banking services, net 61
Other operating income, net 62
Salaries and employees' related benefits 62-63
Other general and administrative expenses 63
Zakat 64
Earnings per share 64
Employees' end of service benefits liabilities 65-66
Operating segments 66-68
Financial risk management 69-90
Dividends 91
Cash and cash equivalents 91
Geographical concentration 92-94
Fair values of financial assets and liabilities 95-98
Related party transactions 99
Special commissions excluded from the consolidated statement of income 99
Investment management services 100
Capital risk management 100
Capital adequacy 100
Mudarabah and Wakala based profit sharing investment accounts 101-102
Subsequent Event 102
Comparative Figures 102
Approval of the Board of Directors 102

Deloitte and Touche & Co. Chartered Accountants (Professional Simplified Joint Stock Company)

Paid up capital SR 5,000,000

Metro Boulevard - Al-Aqiq King Abdullah Financial District

P.O Box 213

Riyadh 11411

Kingdom of Saudi Arabia

C.R. No. 1010600030

Tel: +966 11 5089001

https://www.deloitte.com

ERNST & YOUNG PROFESSIONAL SERVICES (PROFESSIONAL LLC)

Paid-Up Capital:

5,500,000 (Five Million Five Hundred Thousand Saudi Riyals)

Head Office

Financial Boulevard 3126, Al Aqeeq Dist. 6717, Riyadh 13519

KAFD 1.11 B, South Tower, 8th Floor

P.O. Box 2732, Riyadh 11461 Kingdom of Saudi Arabia

C.R. No. 1010383821

Unified No. 7000117205

Tel: +966 11 215 9898

+966 11 273 4740

Fax: +966 11 273 4730

ey.ksa@sa.ey.com ey.com

Independent Auditors' Report To the Shareholders of Al Rajhi Banking and Investment Corporation (A Saudi Joint Stock Company) Report on the Audit of the Consolidated Financial Statements Opinion

We have audited the consolidated financial statements of Al Rajhi Banking and Investment

Corporation (the "Bank") and its subsidiaries ("the Group"), which comprise the consolidated statement of financial position as at 31 December 2025, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2025, and its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards ("IFRSs") that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements that are endorsed by the Saudi Organization for Chartered and Professional Accountants.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) as endorsed in the Kingdom of Saudi Arabia ("the Code"), as applicable to audits of financial statements of public interest entities, and we have fulfilled our other ethical responsibilities in accordance with the requirements of the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independent Auditors' Report to the Shareholders of Al Rajhi Banking and Investment Corporation (A Saudi Joint Stock Company) Report on the Audit of the Consolidated Financial Statements (continued) Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in

our audit of the consolidated financial statements for the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our auditors' opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How our audit addressed the key audit matter

Expected credit loss allowance 'ECL' against financing

As at 31 December 2025, the Group's gross financing amounted to

761,442.74 million (2024: 701,915.04 million), against which an expected credit loss ("ECL") allowance of 8,682.89 million (2024: 8,505.32 million) was recorded.

In accordance with the requirements of IFRS 9, the Group measures ECL based on the credit losses expected to arise over the next twelve months ('12-month ECL'), except for financing which have undergone a significant increase in credit risk ("SICR") since origination, or those which are in default or those that are classified as Purchased or Originated Credit Impaired "POCI" assets, in which case, the allowance is based on the ECL expected to arise over the life of the financing ('Lifetime ECL').

Additional judgements are applied by the Group when identifying and assessing exposures meeting SICR criteria.

We considered this as a key audit matter, as the determination of ECL involves significant estimation and management judgment, and this has a material impact on the consolidated financial statements of the Group. The key areas of judgment include:

Categorisation of financing into Stages 1, 2 and 3 based on the identification of:
1. exposures that have a significant increase in credit risk ("SICR") since their origination; and
2. individually impaired / defaulted exposures.

We obtained an understanding of management's assessment of the determination of the ECL allowance in respect of financing, including the Group's internal risk rating models, accounting policy and methodology, as well as any key changes made during the year.
We assessed the Group's accounting policy and methodology for ECL allowance against the requirements of IFRS 9: 'Financial Instruments'.
We assessed the design and implementation, and tested the operating effectiveness, of the key controls (including relevant IT general and application controls) in relation to:
- the ECL model (including governance over the model, its validation and any model updates performed during the year);
- the classification of financing into Stages 1, 2 and 3, timely identification of SICR, and the determination of default / individually impaired exposures;
- the IT systems and applications supporting the ECL model; and
- the integrity of data inputs into the ECL model.

We assessed the governance process implemented by management in relation to customer specific provision post ECL model output including the appropriateness of qualitative factors considered in management's assessment.

Key Audit Matters (continued)

Key audit matter	How our audit addressed the key audit matter
Expected credit loss allowance against financing (continued)
2. Assumptions used in the ECL model for determining probability of default ("PD"), loss given default ("LGD") and exposure at default ("EAD"), including, but not limited to, assessment of the financial condition of the counterparties, expected future cash flows, and developing and incorporating forward looking assumptions, macroeconomic factors and the associated scenarios. The application of these judgments continues to result in heightened estimation uncertainty around ECL calculations, and therefore affected the associated audit risk thereon as at 31 December 2025.	For a sample of customers, we tested the internal risk ratings determined by management based on the Group's internal models. We also compared whether these were consistent with the ratings used as inputs in the ECL model. For a selected sample of customers, we tested management's assessment of recoverable cash flows, including the impact of collateral, and other sources of repayment, if any. We assessed the Group's criteria for the determination of definition of default and SICR, and the identification of individually impaired exposures. Furthermore, for a sample of exposures, we tested the corresponding staging classification of financing facilities to determine if it was appropriate.
Refer to the summary of material accounting policies note 3(c)(5) for the impairment of financial assets; note 2(f)(1) which contains the disclosure of critical accounting judgments, estimates and assumptions relating to impairment losses on financial assets and the impairment assessment methodology used by the Group; note 8(e) which contains the disclosure of impairment against financing; and note 31(1)(a) for details of credit quality analysis and key assumptions and factors considered in determination of ECL.	We assessed the underlying assumptions used by the Group in the ECL models, including forward looking assumptions. We tested the completeness and accuracy of input data supporting the ECL calculations as at 31 December 2025. Where required, we involved our specialists to assist us in reviewing the ECL models' calculations, evaluating interrelated inputs (including EAD, PDs and LGDs) and assessing the reasonableness of assumptions used in the ECL models, particularly around macroeconomic variables and forecasted macroeconomic scenarios.
	We evaluated the adequacy of the disclosures in the consolidated financial statements against the requirements of IFRS.

Other Matter

The consolidated financial statements of the Group for the year ended 31 December 2024 were audited by other joint auditor who expressed an unmodified opinion on those statements on 6 February 2025 (corresponding to 7 Sha'ban 1446H).

Other Information included in the Group's 2025 Annual Report

Other information consists of the information included in the Group's 2025 annual report, other than the consolidated financial statements and our auditors' report thereon. Management is responsible for the other information in the Group's annual report. The Group's 2025 annual report is expected to be made available to us after the date of this auditors' report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the Group's 2025 annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the IFRSs that are endorsed in Kingdom of Saudi Arabia and other standards and pronouncements that are endorsed by the Saudi Organization for Chartered and Professional Accountants and the applicable provisions of the Regulation for Companies, the Banking Control Law in the Kingdom of Saudi Arabia and the Bank's By-Laws, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, i.e. the Audit Committee is responsible for overseeing the Group's

financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia will always detect a material misstatement when it exists.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements (continued)

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of the internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purpose of the group audit. We remain solely responsible for our audit opinion.

Deloitte.

Shape the future with confidence

Independent Auditors' Report to the Shareholders of AI Rajhi Banking and Investment Corporation (A Saudi Joint Stock Company) Report on the Audit of the Consolidated Financial Statements (continued) Auditors' Responsibilities for the Audit of the Consolidated Financial Statements (continued)

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate to them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were ofmost significance in the audit of the consolidated financial statements for the current year and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Based on the information that has been made available to us, nothing has come to our attention that causes us to believe that the Bank was not in compliance, in all material respects, with the applicable requirements of the Regulation for Companies, the Banking Control Law in the Kingdom of Saudi Arabia and the Bank's By-Laws in so far as they affect the preparation and presentation of the consolidated financial statements for the year ended 31 December 2025.

Deloitte and Touche & Co. Chartered Accountants

Mazen A. Al-Omari Certified Public Accountant License no. 480

Ernst & Young Professional Services

Hesham A. Alatiqi Certified Public Accountant License no. 523

16 Sha'ban 1447 H

(04 February 2026)

AL RAJHI BANKING AND INVESTMENT CORPORATION {A SAUDI ROIRR STOCK COMPANY)

Consolidated Statement of Financial Position (*'000)

As at	Note	31 December ZOZ S	31 December 2024
Assets
Cash and balances with Central Banks	4	54,004,876	53,244,710
Due from banks and other financial institutious, net	5	26,940,586	19,529,727

Investmeo ts, net

6 *74,304,596

17 5,033,587

Positive fair value of derivatives	7	Z,066,981	1,905,903
Financing, net	8	7SZ,7S9,851	6ss, o9,723
Othe r assets, net	9	13,390,634	10,650,60S
Investment in associate	10	1,157,24S	1,034,262
Investment properties, net	11	1,350,021	1,358,638
Property, equipmen t, right of use and software, net	12	1 S,740,17B	t5,274,749
Disposal group classified as held for sale Total assets	13	l,S53,3Z9 1,043,268, 29T	1.002,4S 0 972,444,354
Liabilities and equity
Liabilities
Due to banks, Saudi Central Bank and other financt al institutions	14	117,283,797	I 17,677,378
Customers' deposits	7 S	d67,287,500	654,988,507
Negative fair value of derivatives	7	2,276,668	1,679,043
Debt securities and term financing	t6	79,866,G2S	37,457,972
Other liabilities	17	32,628,115	36,655,8S 3
Liabilities of disposal group classified as held for sale	t3	1,O13,z50	846,3 76
To cal liabilities		900,355,952	849_, 3 05,123
Equity
Share capital		40,000,000	40,00fi,0 00
Statutory reserve	S9	40,000,000	3B,373,547
Other reserves	19	s8i,422	(311,814)
Retained earnings		34,272,747	21,417,282
Equity attributable to the Banff's shareholders		114,854,169	99,479,0t5
F quitys non k	ZO	27,907B79	2?,SS3,Pt?
Equity attributable to the Banli's equity noiaers		i42,762048	123,032,830
Non-controlling interests		150,297	106,401
		142,912,345	tZ3,139,231
Total liabilities ana equity		1,043,Z68,297	972,444,35 4

The accompanying notes from l to A4 form an integral part of these consolidate d financial statements.

Chief Execu tive Offi cer

(*'000]
For the year ende d 31 December	Notes	2025	2024
Income
Gross financing and investment income	22	ss,a4s,s is	47,018, 123
Gross financing and investment return	22	(26,003,8*5)	(22,t7S,077)
Net financing ana investment income	22	29,845,671	24,843,046
Fee from banking services, income	Z3	12,686,142	10,768,382

Fee from banking services, expenses

(6,B16,935) 6,07S,65S)

Fee from banking services, net Exchange Income, net

Other operating income, net

5,869,207

i,ssa,sso

1,820,13 7

4,692,727

1,292,866

1,226,b64

Total operating income	39,093,965	32,055,303
Expenses
Salaries and employees' related benefits	25	3,723,809
Depreciation and amorti Zation	11,lZ 2,J69,0S7	1,9B1,914
Other general and administrative expenses	26 2,732,360	2,264,941
Total operating expenses before credit impairment charge	9,126,988	7,970,664
Impairment charge for financing and other financial assets, net	2,3Z0,981	2,116,744
	1 £,447_ 6g	0,087,408
Net income for the year before Zakat	27,6#6d96	21,967,895
Zakat Expense	27 (2821,986)	(2,236,709j
Netincomefortbeyear	24,82#,SIO	19,731,1B6
NeC income for the year attributable to:
Bank's shareholders	2#,791,754	19,722,206
Non-controlling interests	32,756	8,980
Net income for the year	24,824,510	19,731,186

Bas ie and dixu ted earnings per shave (

4.b7

The accompanying notes from 1 to 44 form an integra1 part of these consolid ated financial stateme nts.

Chief Execu tive Offi cer

(*'000]

For the year ended 31 December

Net income for the year

OCher comprehensive incozzte:

Items tlaat wilt not be reclasstfied to tJae consolidated statement of

income in subsequene periods:

Net change in fair value of FVOCI equity investments

Actuarial gain on re-ineasurement of employees' end of service benefits liabilities "E 05B"

Share in OCI from associate

ttems What may be reclassified co the consolidated statement of

FVOCI ins trument:

Notes

19,29

2025

761,S4-6	(46,180)
56,990	56,421
s,oso	1,3 60

24,824,510

2024

19,73 1,186

Net change investments		in fair va1ue of FVOC	I	Sukuk and Structured producta g	152,824	(278,101j
Net ain ounts transfer red to the cons oli dated statement of income Exchange di fference on translating foreign operatious 19					{163,388] 128,809	3 0,3 Z3 55,984
Cash flow hedge effective portion			of	change in the fair value		2,465
Employee	s' share plan reserve					(37,110)
Total other com in equity	prehensive income /		(loss) for the year recognized			(214,838)
Total comprehensive income for the			year		25,716,835	19,516,348
Total comprehensive Bank's shareholders		incorzze For the	year Attributable to:		25,684,990	19,506,998
Non-controlIink interests					31,845	9,350
					25,716,835	19,516,348

Total cozzzprehensive income For ch e year

The accompanying notes from 1 to 44 torm an integral part of these cousolidated financiat sta tements.

Chairma n ChieF Executive OFFicer

AL RAJHI BANKING AND INVESTMENT CORPORATION (A SAUDI }OâNT STOCK COMPANY)

Consolidated Statement of Changes in Equity (*'000)

Total equity

Total equity anributable

For the year ended 3t December 2025

Ba1ance aE 31 December 2024 Net income for the year

Net change in fair value of FVOCI equity investment

Actuarial gain on re-measurement of employees' end of service benefits liabilities "EOSB"

Share in OCI from associate

Net change in fair value of FVOCI Suhuk and Structured products

Note

t9 t9

Statutory Other

Share capital reserve reserves

+o,ooo,ooo 3a,aza,s+7 taM,s1+j

anributable to

Retained the Bank's

earnings shareholders

152,024 152,82+

‹is3,3aaj tcs3,zesj

130,094 (2,085) 128,B09

{49,506] (49,506)

130,894

49,506§

- {49,506)

152,824

S6,99O

s,oss

1,174

SS,816

&,0S0

55,816

s,oso

55,816

5,0S0

761,S4e

761,5+6

761,546

- 761,S46

24,79£,754 24,791,7S4

to the Bank's Non-equity controlling

Equity sukuk hoIders interests Total equity

z3,sss,eis iz3,osz,sso ios,+of tzs,i39,zst

24,791,7S4 32,756 24,824,510

investments 19

Net amounts I:ransferred to the consolidated statement of income t9 Exchange difference on translation of foreign operations 19

Cash flow hedge effecfive portion of change in the fair value 19

Total other comprehensive loss recognized in equity

891,236

(911)

8P2,328

Employee share plan reserve 19

Total comprehensive tacozae for tfie year

25,684,990 J1,84S 25,716,8J5

Equity Sukuk issued, net

Equity Sukuk costs

Transfer to statutory reserve

Interim dividend for the first half of 202S Dividend for annual year 2024

Ba}aoce At 31 December 202S

4O,O0O,OOO 40,OO0,O00 S81,422

z7,soz,avs s+z,vsz,o‹a 1so,zs7 i+z,stz,s+s

DisposeI of FVOCI equity instruments Other consolidation adjustments

t9 *,626,4S1

t1,376,946} {1,376,946]

{1,626,4S3]

(s,s+o,oooj ‹s,s+0,oooj

4,354,06+ 4,354,064

- - 12,051

4,354,064

{3,O00,0O0]

{5,840,000)

1z,os1

AL RAJHI BANKING AND INVESTMENT CORPORATION (A SAUDI JOINT STOCK COMPANY}

Consolidated Statement of Changes in Equity

(*'000]

Note

Total equity attributabIe

Total equity attributable

For the year ended 31 December 2024

Statutory 0 ther Retained to the Bank'r equity

to the Bank's

equity

Non-

controlling Total

	Share capical	reserve	reserves	earnings	sharebolders	sukuk	holders	interests	equity
Balance at 31 December 2023	40,000,000	33,442,996	(96,606)	16,913,041	90,259,431	16,50 0,000	t 06,7 S9,43I	-	t06,759,431
Net income for the year				I 9,722,206	t9,722,206		19,722,2 06	8,980	19,731,t8f'
Net change in fair value of FVOCI Equity investments 19			(46,180)	-	(46,180)	-	[46,180)		(46,180)
Actuarial gain on re-measurement of employees' "EOSB" 19			57,481	-	57,481	-	57,481	(t,060]	56,421
Share in OCI from associate T9	-		1,360	-	1,360		1,360	-	1,360
Net change in fair value of FVOCI Sukuk investm ents and Struclured products investments 19			(278,101)		(278,t01]		(278,101)	-	(278,J01}
Net amounts rransferrcd to the consolidated statement of income 19			30,323		30,323	-	30,323	-	30,323
Exchange difference on translation of foreign operations 19			54,5S4		S 4,554		S4,5S4	t,430	55,984
Cash flow hedge effective portion of change in the fair value 19	-		2,465		2,465		2,46 S	-	2,465
Employee share plan reserve 19			(37,110)		{37,110)		(37, 410)	-	(37,110]
Total other comprehensive loss recognized in equity			(21S,208)		(21S,208		(215,208)	370	(214,838)
Tntal comprehensive income for rfie year			(215,y08]	19,722,206	I 9,506,998		i9506,998	9,350	19,516,348
Equity Sukuk issued 2						7,053,8 IS	7,053,8t5		7,053,815
Equity Sukuk costs				(1,035,867]	(1,035,867]		(,038,867]	-	(I,038,86Q
Transfer to statutory reserve		4,930,551		(4,930,55 I]
Dividend for annual year 2023 32				(4,600,0 00)	(4,600, 000)	-	(4,600,000]		(4,600,0 00)
Interim dividend for the first half of 2024				{S,000,0 00)	(5,000,0 00)		(5,000,0 00)	-	(5,000,000]
Other consolidation adjustments							348,4 53	97,0S1	445,504
Balance at 31 December 2024	40,000,000	38,373,547	(3tJ,814j	21, 417,282	99,479,015	23,553,815	123,032,830	106,401	123,139,231

AL RAJHI BANKI NG AND INVESTMENT CORP ORAT I ON (A SAUDI JOINT STOCK COMPANY)

Consolidated Statement of Cash Flows

( 1'000)

For the year endcd 3 l December

Note 202 S

2024

Cash Flows from operating activities Net Income before Zakat

Adjustments to reconcile net income before zakat to net cash from operating

activi ties:

Gain on investments held at fair value through statement of incoiue (FVIS) 24

Depreciati on on pro perty, equip ment, right oI use and software , net Depreciation on investment properties

Gain on sale of property and equipmen t, net

Impairment charge for financing and other financial assets, net

Share in profi t of associate 24

Dividend income 24

Accretion/amortisation relating to Sukuk investmcnts, net Profit charge against tease obligations

Fair value adjustment for derivatives

Rental income from investment proparties 24

Employees' share p1an reserve 19

(Increase) / decrease in operating assets Statutory deposit with SA JVtA and other central banks Due from banks and other financial institutions Financing, net

FIIN investments, net

Other assets, net

Disposal group classified as held for sale

Increase / tdecrease) in operating liabilities

Due to banks, Saudi Cen tra1 Bank and other financi at i ustitutions Custoin ers' deposits

OEher lia b iliries

Liabilities associated with disposal group classified as he1d tor sat e

27,646,496

ll8,7Z3

2,348,144

20,913

(8866]

2,3Z0,481

(l 17,93 3)

{226,866]

163,316

22,024

436,544

(EO6,175]

ZS4,67Z

3,439, 112

(61,670,609)

328,307

(2, 6â 1,220)

(550,879)

(393,581)

12,298,999

166,874

zi,g67,89s

(66,803)

1,961.180

20,734

(5,217]

2,116,744

(137,344)

(303,162)

(160,360)

22,904

(142,72S)

(98,543)

(37,110)

(5,250, 2 16)

(4,585,138)

(101,321,661)

(2,B60,673)

1,063,304

62,308,769

50,079,426

3 3,827,ii 15

Profit payment agatnst lease obligations (22,024) (22,904)

Net cash (used inJ / generateA from operating activities hefore Zakat (20,lZ9,915] 36,3 76,615

Zakat pai d

Net cash (used in) / generated from operating activities

27 (2,Z43157]

t22,373,O73)

(2,725,225)

33,651,390

The accom panying notes from 1 to 44 form an integral part of these consolidated financial statements.

ChieF Executive Offi cer

AL RAJHI BANKING AND IN VESTMENT COR P ORAT I ON (A SAUDI }OINT STOCK COMPANY}

Consolidated Statement of Cash Flows

(1'000]

For the year ended 31 December

Note 2025

2024

Cash flows from investing activities
Purchase of property and equipment	12	(3,523,379)	[3,557,124)
Proceeds from disposal of property and equipment		1,1S3,5SG	340,971

Purchase of FVOCI in vestments

(2,B46,00 1)

t11,809,6t7)

Proceeds from dis poas I of FVOCI invest ments		4,220,084
Proceeds from ma turities of he1d at ana ortized cost investments		26,969,3 i4	6,850,80B
Purchase of investments held at amortised cost		{27,858,7B3)	(33,952,745)
Purchase of in vestment pro per ties		(12,299)	(16,714)
Dividend fncome received	24	226,866	303,162
Renta1 income from investment properties	24	106,175	98,543
Net cash used in investing activities		(1,564,467j	4t,742,716j
Cash fiows from financing activities
Dividends paid	32	(8,840,000)	(9,600,000)
Equity Sukuk costs		t*.376,946)	(1,035,867)
Equity Sukuk issued/called	20	4,354,064	7,0S3,815
Payments against lease obligation		(243,4ZZ)	(260,896)
Debt securities and term financing	16 42,408,653		2 3,S99,043
Net cash generatea rrorn financing activities	36,3OZ,349		19,7 S6,09S
Net increase in cash and cash equivalents	12,364,8$0		T1,664,769
Cash and cash equivalents at the beginning of the year	24,100,41t		32,435,642
Cash ana cash equivaTenCs at end o£che year	33 36,465,2 Z1		24,10 0,411
financing and investment income received during Che year	s3,477,774		45,188,022

Financing ana investment return paid during the year

SupglemencaT Non-cash cransactions:

Z5,I58,828 21,890213

ROU assets	15Z,125	89,069
Le as e L iob iII ty		111,2 17
Ned change in fair value oF hVOCI investments	914,37O	(3 24,28I)
Remeasurement gain on EOSB	55,816	57,481
Disposal group classified as Held for sale		1,002,450
Non-current liabilities associated with disposa1 group classified as held for sale		846,376

The accompanying notes from 1 to 44 form an integral part of these consolidated financi at statemenCs.

Chairman Chief Executive Officer Chief Fin ancia fficer

AL RAJHI BANKING AND INVESTMENT CORPORATION (A SAUDI JOINT STOCK COMPANY)

Notes tothe Consolidated FinancialStatements

For the years ended 31 December 2025 and 2024 ($'000)

General

a) Incorporation and operation

Al Rajhi Banking and Investment Corporation, a Saudi Joint Stock Company, (the "Bank"), was formed and licensed pursuant to Royal Decree No. M/59 dated 3 Dhul Qadah 1407H (corresponding to 29 June 1987) and in accordance with Article 6 of the Council of Ministers' Resolution No. 245, dated 26 Shawal 1407H (corresponding to 23 June 1987).

The Bank operates under Commercial Registration No. 1010000096, Unified National No. 7000102744 and its Head Office is located at the following address:

Al Rajhi Bank

8467 King Fahd Road - Al Muruj Dist. Unit No 1 Riyadh 12263 - 2743 Kingdom of Saudi Arabia.

The objectives of the Bank are to carry out banking and investment activities in accordance with its Articles of Association and By-laws, the Banking Control Law and the Council of Ministers Resolution referred to above. Bank is engaged in banking and investment activities inside and outside the Kingdom of Saudi Arabia through 545 branches (2024: 550) including the branches outside the Kingdom and 24,712 employees (2024: 23,437 employees). The Bank has established certain subsidiary companies (together with the Bank hereinafter referred to as the "Group") in which it owns all of their shares as set out below [Also see Note 2(b)]:

Name of subsidiary Functional Currency

Al Rajhi Capital Company - KSA $

Management and Development for Human Resources Company - KSA

Shareholding Description

2025 2024

100% 100% A Saudi Closed Joint Stock Company authorized by the Capital Market Authority to carry on securities business in the activities of Dealing/brokerage, Managing assets, Advising, Arranging, and Custody.

100% 100% A limited liability company registered in Kingdom of Saudi Arabia to provide recruitment

services.

Al Rajhi Bank - Kuwait KWD 100% 100% A foreign branch registered with the Central

Bank of Kuwait.

Al Rajhi Bank - Jordan JOD 100% 100% A foreign branch operating in Hashemite

Kingdom of Jordan, providing all financial, banking, and investments services and importing and trading in precious metals and stones in accordance with Islamic Shari'a' rules and under the applicable banking law.

General (Continued)

Incorporation and operation (Continued)
Name of subsidiaries Functional Currency
Tuder Real Estate Company - KSA $
Shareholding Description
2025 2024
100% 100% A limited liability company registered in Kingdom of Saudi Arabia to support the mortgage programs
Al Rajhi Corporation Limited -
Malaysia
of the Bank through transferring and holding the title deeds of real estate properties under its name on behalf of the Bank, collection of revenue of certain properties sold by the Bank, provide real estate and engineering consulting services, provide documentation service to register the real estate properties and overseeing the evaluation of real estate properties.

MYR 100% 100% A licensed Islamic Bank under the Islamic
Financial Services Act 2013, incorporated and domiciled in Malaysia.
Emkan Finance Company - KSA $
Tawtheeq Company - KSA $
100% 100% A closed joint stock company registered in the Kingdom of Saudi Arabia providing micro consumer financing, finance lease and small and medium business financing.
100% 100% A closed joint stock company registered in Kingdom of Saudi Arabia providing financial
Al Rajhi Financial Markets Ltd -
Cyman Islands
leasing contracts registration to organize contracts data and streamline litigation processes.
USD 100% 100% A Limited Liability Company registered in the
Cayman Islands with the objective of managing certain treasury related transactions on behalf of the Bank.
International Digital Solutions Co. (Neoleap) - KSA
Ejada Systems Company Limited -
KSA
New Technology Company for Software Solutions (Neotek) - KSA
Drahim Holdings - Cayman Islands*
100% 100% A closed joint stock company owned by
$
the Bank for the purpose of practicing technical work in financial services, digital payment systems, financial settlements and related services.
$
90% 90% A Saudi Closed Joint Stock Company owned by the Bank for the purpose of providing professional, scientific, technological activities, information communication services, and system analysis and senior management consultation services.
$
100% 100% A limited company authorized by the Saudi Central Bank to operate in financial technology solutions and open banking services.
USD 65% 65% A holding company with the objective of offering
Open Banking, investment, and financial technology services.
General (Continued)

* During June 2024, the Group acquired 65% shareholding in "Drahim Holdings". The subsidiary is based in Cayman Island with the objective of offering open banking, investment and financial technology services. The Group has completed the Purchase Price Allocation exercise and consolidated the subsidiary in these Consolidated Financial statements. The Group completed the process and legal formalities of the acquisition of the shares in Drahim Holding Company for a cash consideration of $ 83.4 million. As part of the acquisition, the Group has received Drahim Treasury Shares presenting 3.1% shareholding. The acquisition has been accounted for using the acquisition method under IFRS 3 - Business Combinations (the 'Standard')."
Shari'a Authority

As a commitment from the Bank for its activities to be in compliance with Islamic Shari'a legislations, since its inception, the Bank has established a Shari'a Authority to ascertain that the Bank's activities are subject to its approval and control. The Shari'a Authority has reviewed the Bank's activities and issued the required decisions thereon.
The Bank is regulated by the Saudi Central Bank (SAMA).

Basis of preparation
1. Statement of compliance
  The consolidated financial statements of the Group have been prepared
  - in accordance with the IFRS as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements endorsed by the Saudi Organization for Chartered and Professional Accountants ("SOCPA"), and
  - in compliance with the Banking Control Law and the Regulations for Companies in the Kingdom of Saudi Arabia and by-laws of the Bank.
    The new Companies Law issued through Royal Decree M/132 on 1/12/1443H (corresponding to June 30, 202 3) (hereinafter referred as "the Law") came into force on 26/6/1444H (corresponding to January 19, 2023). For certain provisions of the Law, full compliance is expected not later than two years from 26/6/1444H (corresponding to January 19, 2023). The management has amended its Articles of Association / By-Laws in its recent annual General Assembly meeting.
2. Basis of measurement and preparation
  The consolidated financial statements have been prepared on a going concern basis under the historical cost convention except for the following items in the consolidated statement of financial position:
  - Derivatives are measured at fair value;
  - Financial instruments designated as Fair Value through Profit or Loss ("FVIS") are measured at fair value;
  - Investments designated as Fair Value through Other Comprehensive Income ("FVOCI") are measured at fair
    value;
  - Employee defined benefit obligations are recognized at the present value of future obligations using t he Projected Unit Credit Method, and
  - Financial assets or liabilities that are hedged through a fair value hedging relationship, are adjusted to record changes in fair value attributable to the risks that are being hedged.
    The Group presents its consolidated statement of financial position in order of liquidity.
3. Going concern
  The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business.
  
  Basis of preparation (Continued)
4. Basis of consolidation
  These consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as identified in (note 1). The financial statements of subsidiaries are prepared for the same reporting year as that of the Bank, using consistent accounting policies.
  Subsidiaries are investees controlled by the Group. The Group controls an investee when it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date that control ceases.
  
  The control indicators set out below are subject to management's judgements that can have a significant effect in the case of the Group's interests in securitisation vehicles and investments funds.
  Specifically, the Group controls an investee if and only if the Group has:
  - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
  - Exposure, or rights, to variable returns from its involvement with the investee; and
  - The ability to use its power over the investee to affect amount of its returns.
    When the Group has less than majority of the voting or similar substative rights of an investee entity, the Group considers all relevant facts and circumstances in assessing whether it has power over the investee, including:
  - The contractual arrangement with the other vote holders of the investee;
  - Rights arising from other contractual arrangements; and
  - The Group's voting rights and potential voting rights granted by equity instruments such as shares.
    The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Assets, liabilities, income and expenses of a subsidiary acquired or disposed o f during the year are included in the consolidated statement of income from the date the Group gains control until the date the Group ceases to control the subsidiary. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
  - Derecognises the assets (including goodwill) and liabilities of the subsidiary;
  - Derecognises carrying amount of any non-controlling interests;
  - Derecognises the cumulative translation differences recorded in equity;
  - Recognises the fair value of the consideration received;
  - Recognises the fair value of any investment retained;
  - Recognises any surplus or deficit in the consolidated statement of income; and
  - Reclassifies the parent's share of components previously recognised in OCI to the consolidated statement of income or retained earnings, as appropriate as would be required if the Group had directly disposed of the related assets or liabilities.
    All intra-group balances, transactions, income, and expenses are eliminated in full in preparing these consolidated financial statements.
    The consolidated financial statements have been prepared using uniform accounting policies and valuation methods for like transactions and other events in similar circumstances. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.
    
    Basis of preparation (Continued)
5. Functional and presentation currency
  These consolidated financial statements are presented in Saudi Arabian Riyals ( $), which is the Bank's functional currency.
  Except as otherwise indicated, financial information presented in $ has been rounded off to the nearest thousand.
6. Critical accounting judgments, estimates and assumptions
The preparation of the consolidated financial statements in conformity with IFRS as endorsed in KSA and other standards and pronouncements issued by SOCPA, requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires management to exercise its judgments in the process of applying the Group's accounting policies. Such estimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including obtaining professional advice and expectations of future events that are believed to be reasonable under the circumstances.
The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expected credit losses, fair value measurement, and the assessment of the recoverable amount of non-financial assets.
Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and in future periods if the revision affects both current and future periods.
Significant areas where management has used estimates, assumptions or exercised judgments is as follows:
1. Expected Credit Losses on financial assets
  The measurement of impairment losses under IFRS 9 across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
  The Group's ECL calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models such as Probability of Default ("PD"), Exposure at Default ("EAD") and Loss Given Default rate ("LGD"), that are considered accounting judgements and estimates include selection of an estimation technique or modelling that are considered accounting Judgements as follows:
  - The Group's internal credit grading model, which assigns Probability of Default ('PDs') to the individual grades,
  - The Group's criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a Lifetime ECL basis and the qualitative assessment,
  - The segmentation of financial assets when their ECL is assessed on a collective basis,
  - Development of ECL models, including the various formulas and the choice of inputs,
  - Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models.
2. Judgement of equity vs liability for Tier I Sukuk
  The determination of equity classification of Tier I Sukuk requires significant judgement as certain clauses of the Offering Circular require interpretation. The Group classifies as part of equity the Tier I Sukuk issued with no fixed redemption/maturity dates (Perpetual Sukuk) and not obliging the Group for payment of profit upon the occurrence of a non-payment event or non-payment election by the Bank subject to certain terms and conditions that are under the control of the Group. The related initial costs and distributions thereon are recognized directly in the consolidated statement of changes in equity under retained earnings.
  
  Basis of preparation (Continued)
3. Determination of control and significant influence over investees
  The control indicators are subject to management's judgements, and are set out in (notes 3.c and 6). Investment funds management:
  The Group acts as Fund Manager to a number of investment funds. Determining whether the Group controls such investment fund usually focuses on the assessment of the aggregate economic interests of the Group in the Fund (comprising any carried profits and expected management fees) and the investor's rights to remove the Fund Manager the Group has concluded that it acts as an agent for the investors in all cases, and therefore has not consolidated these funds.
4. Employees' end of service benefits liabilities
  
  The Group operates an End of Service Benefit scheme for its employees based on the prevailing Saudi Labor laws. The liability is being accrued based on projected unit credit method in accordance with the periodic actuarial valuation. For details of assumptions and estimate refer to (note 30).
5. Other significant areas where management has used estimates, assumptions or exercised judgments are referd as follows:
  - Fair value Measurement (note 35)
  - Credit Risk Management (note 31.1.a)
  - Credit Risk Measurement (note 31.1.a)
  - Classification of Investments at Amortised Cost (note 3. d.1)
  - Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources (note 21)
  - Judgement of equity vs liability for Tier I Sukuk(note 2.2)
  - Determination of control and significant influence over investees (note 2.h)
Material accounting policies
The material accounting policies adopted in the preparation of these consolidated financial statements are set out below.
1. Changes in accounting policies due to adoption of new standards, interpretations and amendments adopted by the Group
  The accounting policies used in the preparation of these consolidated financial statements are consistent with those used in the preparation of the annual (consolidated) financial statements for the year ended December 31, 202 5. Based on the adoption of new standard and in consideration of current economic environment, the following accounting policies are applicable effective January 1, 2025 replacing, amending, or adding to the corresponding accounting policies set out in 2024 annual consolidated financial statements.
  New standards, interpretations and amendments adopted by the Group
  Following standard, interpretation or amendment are effective from the annual reporting period beginning on 1 January 2025 and are adopted by the Group, however, they do not have any significant impact on the consolidated financial statements of the year unless otherwise stated below:
  Standard, interpretation and amendments
  Description Effective
  date
  Amendment to IAS 21 - Lack of exchangeability
  IASB amended IAS 21 to add requirements to help in determining whether a currency is exchangeable into another currency, and the spot exchange rate to use when it is not exchangeable. Amendment set out a framework under which the spot exchange rate at the measurement date could be determined using an observable exchange rate without adjustment or another estimation technique.
  1 January
  2025
  
  Material accounting policies (Continued)
2. Forthcoming new standards not yet effective
Standard, interpretation and
Description Effective date
amendments
Amendments to IFRS 10 and IAS 28- Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Partial gain or loss recognition for transactions between an Effective date investor and its associate or joint venture only apply to the gain or deferred
loss resulting from the sale or contribution of assets that do not indefinitely constitute a business as defined in IFRS 3 Business Combinations

and the gain or loss resulting from the sale or contribution to an associate or a joint venture of assets that constitute a business as defined in IFRS 3 is recognized in full.
Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures
Amendments to IFRS 9 and IFRS 7 Contracts referencing
Nature-dependent Electricity
Annual improvements to IFRS -
Volume 11
Under the amendments, certain financial assets including those with ESG-linked features could now meet the SPPI criterion, provided that their cash flows are not significantly different from an identical financial asset without such a feature.
The IASB has amended IFRS 9 to clarify when a financial asset or a financial liability is recognized and derecognized and to provide an exception for certain financial liabilities settled using an electronic payment system.
Contracts Referencing Nature-dependent Electricity amends IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures to more faithfully reflect the effects of contracts referencing nature-dependent electricity on an entity's financial statements.
Annual improvements are limited to changes that either clarify the wording in an Accounting Standard or correct relatively minor unintended consequences, oversights or conflicts between the requirements in the Accounting Standards. The 2024 amendments are to the following standards: IFRS 1 First-time Adoption of International Financial Reporting Standards; IFRS 7 Financial Instruments: Disclosures and its accompanying Guidance on implementing IFRS 7; IFRS 9 Financial Instruments; IFRS 10 Consolidated Financial Statements; and IAS 7 Statement of Cash Flows.
1 January 2026
1 January 2026
1 January 2026
IFRS 18, Presentation and Disclosure in Financial Statements
IFRS 18 provides guidance on items in statement of profit or loss 1 January 2027 classified into five categories: operating; investing; financing;
income taxes and discontinued operations It defines a subset of measures related to an entity's financial performance as 'management-defined performance measures' ('MPMs'). The totals, subtotals and line items presented in the primary financial statements and items disclosed in the notes need to be described in a way that represents the characteristics of the item. It requires foreign exchange differences to be classified in the same category as the income and expenses from the items that resulted in the foreign exchange differences.

Material accounting policies (Continued)
(b) Forthcoming new standards not yet effective (Continued)
Standard, interpretation and
Description Effective date
amendments
IFRS 19, Subsidiaries without Public Accountability: Disclosures
IFRS 19 allows eligible subsidiaries to apply IFRS with the 1 January 2027 reduced disclosure requirements of IFRS 19. A subsidiary may

choose to apply the new standard in its consolidated, separate or individual financial statements provided that, at the reporting date it does not have public accountability, and its parent produces consolidated financial statements under IFRS.
Government grants
The Group recognizes a government grant related to income, if there is a reasonable assurance that it will be received, and the Group will comply with the conditions associated with the grant. The benefit of a government deposit at a below-market rate of profit is treated as a government grant related to income. The below-market rate deposit is recognized and measured in accordance with IFRS 9 - Financial Instruments. The benefit of the below-market rate of profit is measured as the difference between the initial fair value of the deposit determined in accordance with IFRS 9 and the proceeds received. The benefit is accounted for in accordance with IAS 20 - Accounting for Government grant. The government grant is recognised in the statement of income on a systematic basis over the period in which the Group recognises as expenses for which the grant is intended to compensate. The grant income is only recognised when the ultimate beneficiary is the Group. Where the customer is the ultimate beneficiary, the Group only records the respective receivable and payable amounts.
Financial assets and financial liabilities
(1) Classification of financial assets
On initial recognition, a financial asset is classified and measured at: Amortized Cost, Fair Value through Other Comprehensive Income ("FVOCI") or Fair Value through Statement of Income ("FVIS"). This classification is generally based on the business model in which a financial asset is managed and its contractual cash flows.
Financial Asset at amortised cost:
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVIS :
- the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and profit on the principal amount outstanding.
  Financial Asset at FVOCI:
  A Debt and equity instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVIS:
- the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and profit on the principal amount outstanding.

FVOCI debt instruments are subsequently measured at fair value with gains and losses arising due to changes in fair value recognised in OCI. Profit income and foreign exchange gains and losses are recognised in consolidated statement of income.

An Equity Instrument; the Group on initial recognition, may irrevocably elect to present subsequent changes in fair value in OCI for an equity investment that is not held for trading. This election is made on an instrument -by-instrument (i.e. share-by-share) basis.

Material accounting policies (Continued)

d) Financial assets and financial liabilities (Continued)

(1) Classification of financial assets (Continued) Financial Asset at FVIS:

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVIS.

In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVIS if doing so eliminates or signif icantly reduces an accounting mismatch that would otherwise arise.

Reclassification of financial assets

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes i ts business model for managing financial assets.

Business model assessment

The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management's strategy focuses on earning contractual profit revenue, maintaining a particular profit rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realizing cash flows through the sale of the assets;
the performance of the portfolio is evaluated and reported to the Group's management;
the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
the compensation made to the managers of the business- e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and
the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group's stated objective for managing the financial assets is achieved and how cash flows are realized.

The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case' scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Group's orig inal expectations, the Group does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.

Financial assets that are held for trading and whose performance is evaluated on a fair value basis are measured at FVIS because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.

Material accounting policies (Continued)

Financial assets and financial liabilities (Continued)
1. Classification of financial assets (Continued)
  Assessments whether contractual cash flows are solely payments of principal and profit (SPPP)
  For the purposes of this assessment, 'principal' is the fair value of the financial asset on initial recognition. "Profit" is the consideration for the time value of money, the credit and other basic financing risk associated with the principal amount outstanding during a particular period and other basic financing costs (e.g. liquidity risk and administrative costs), along with profit margin.
  
  In assessing whether the contractual cash flows are solely payments of principal and profit, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group considers:
  - contingent events that would change the amount and timing of cash flows;
  - leverage features;
  - prepayment and extension terms;
  - terms that limit the Group's claim to cash flows from specified assets (e.g. non-recourse asset arrangements); and
  - features that modify consideration of the time value of money- e.g. periodical reset of profit rates.
    Designation at fair value through statement of income
    At initial recognition, the Bank has designated certain financial assets at FVIS.
    The Group deploys profit based products including Mutajara, installment sales and Murabaha to its customers in compliance
    with Shari'a rules. The Group classifies its Principal financing and Investment as follows:
    Financing: These financings represent facilities granted to customers. These financings mainly constitute four broad categories i.e. Mutajara, Installment sales, Murabaha and credit cards. The Group classifies these financings at amortised cost as they are held to collect contractual cash flow and pass SPPP test.
    Due from banks and other financial institutions: These consists of placements with financial Institutions (FIs). The Group classifies these balances due from banks and other financial institutions at amortised cost as they are held to collect contractual cash flows and pass SPPP criterion.
    Investments (Murabaha with SAMA): These investments consists of placements with the Saudi Central Bank (SAMA). The Group classifies these investments at amortised cost as they are held to collect contractual cash flows and pass SPPP criterion.
    Investments (Sukuk): These investments consists of Investment in various Sukuk. The Group classifies these investments at amortised cost and FVOCI except for those Sukuk which fails SPPP criterion, which are classified at FVIS.
    Equity Investments: These are the strategic equity investments which the Group does not expect to sell, for which Group has made an irrevocable election on the date of initial recognition to present the fair value changes in other comprehensive income.
    Investments (Mutual Funds): The investments consist of Investments in various Mutual Funds. The Group classifies these investment at FVIS as these investments fail SPPP criterion.
    Investments (Structured Products): These investments consists of Investment in various structured products. Structured products are sukuks with an additional embedded feature which could be Range accrual, Credit linked and Floaters. The Group classifies these investments at amortised cost and FVOCI except for those structured products which fails SPPP criterion, which are classified at FVIS.
    
    Material accounting policies (Continued)
    d) Financial assets and financial liabilities (Continued)
2. Classification of financial liabilities
  The Group classifies its financial liabilities, other than financial guarantees and financing commitments, as measured at amortized cost. Amortized cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the Effective Profit Rate "EPR".
  All amounts Due to banks, Saudi Central Bank and other financial institutions and customer deposits are initially recognized at fair value less transaction costs. Subsequently, financial liabilities are measured at amortized cost, unless they are required to be measured at fair value through profit or loss.
3. Derecognition
  Derecognition of financial assets
  The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewar ds of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
  On derecognition of a financial asset (debt instrument), the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognized) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognized in OCI, is recognized in consolidated statement of income.
  When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to sale and repurchase transactions, a s the Group retains all or substantially all of the risks and rewards of ownership of such assets.
  In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset and it retains control over the asset, the Group continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.
  Any cumulative gain/loss recognized in OCI, among other reserve, in respect of equity investment securities designated as at FVOCI is not recognized in consolidated statement of income on derecognition of such securities. Cumulative gains and losses recognized in OCI in respect of such equity investment securities are transferred to retained earnings on disposal. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognized as a separate asset or liability.
  In certain transactions, the Bank retains the obligation to service the transferred financial asset for a fee. The transferred asset is derecognized if it meets the derecognition criteria. An asset or liability is recognized for the servicing contract if the servicing fee is more than adequate (asset) or is less than adequate (liability) for performing the servicing.
  Derecognition of financial liabilities
  The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired.
  
  Material accounting policies (Continued)
  d)Financial assets and financial liabilities (Continue)
4. Modifications of financial assets and financial liabilities Modified financial assets
  If the terms of a financial asset are modified, the Group evaluates whether the contractual cash flows of the modified asset are substantially different. If the contractual cash flows are substantially different than it was originated, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognized and a new financial asset is recognized at fair value plus any eligible transaction costs. An y fees received as part of the modification are accounted for as follows:
  - Fees that are considered in determining the fair value of the new financial asset and fees that represents reimbursement of eligible transaction costs are included in the initial measurement of the asset; and
  - Other fees are included in profit or loss as part of the gain or loss on derecognition.
    If the contractual cash flows of the modified asset carried at amortized cost are not substantially different than it was originated, then the modification does not result in derecognition of the financial asset. In this case, the Group recalculates the gross carrying amount of the financial asset and recognizes the amount arising from adjusting the gross carrying amount as a modification gain or loss in the consolidated statement of income. For floating-rate financial assets, the original effective profit rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs of fees incurred and modification fees received adjust the gross carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset
    Modified financial liabilities
    The Group derecognizes a financial liability when its terms are modified and the contractual cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognized at f air value. The difference between the carrying amount of the financial liability extinguished and the new fin ancial liability with modified terms is recognized in consolidated statement of income.
    If the modification of a financial liability is not accounted for as derecognition, then the amortized cost of the liability is recalculated by discounting the modified cash flows at the original effective profit rate and the resulting gain or loss is recognized in consolidated statement of income.
5. Impairment of financial assets
  The loss allowance is based on the Expected Credit Losses ("ECLs") associated with the Probability of Default ("PD") in the next twelve months unless there has been a Significant Increase in Credit Risk ("SICR") since origination. If the financial asset meets the definition of Purchased or Originated Credit Impaired ("POCI"), the allowance is b ased on the change in the ECLs over the life of the asset. POCI assets are financial assets that are credit impaired on initial recognition. POCI asset s are recorded at fair value at original recognition and financing income is subsequently recognised base d on a credit-adjusted ("EPR"). ECLs are only recognised or released to the extent that there is a subsequent change in the expected credit losses.
  The Group recognizes loss allowances for ECL on the following financial instruments that are not measured a t FVIS:
  - Due from banks and other financial institutions;
  - financial assets that are debt instruments;
  - lease receivables;
  - Financial guarantee contracts issued; and
  - Financing commitments issued.

No impairment loss is recognized on equity at FVOCI investments.

Material accounting policies (Continued)

d) Financial assets and financial liabilities (Continued)

(5) Impairment of financial assets (Continued)

The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as 12-month ECL:

debt investment securities that are determined to have low credit risk at the reporting date; and
other financial instruments on which credit risk has not increased significantly since their initial recognition.

The Group considers Sukuk to have low credit risk when their credit risk rating is equivalent to the globally understood

definition of "investment grade".

12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. Financial assets, for which 12 -month ECLs are recognized, are referred to as "Stage1" financial instruments. Financial instruments allocated to Stage 1 have not undergone a significant increase in credit risk since initial recognition and are not credit-impaired.

Lifetime ECL are the ECL that result from all possible default events over the expected life of the financial instrument or the maximum contractual period of exposure. Financial instruments for which lifetime ECL are recognized but that are not credit-impaired are referred to as "Stage 2 financial assets". Financial instruments allocated to stage 2 are those that have experienced a significant increase in credit risk since initial recognition but are not yet credit-impaired.

Financial assets for which the lifetime ECLs are recognized and that are credit-impaired are referred to as "Stage 3 financial assets".

Measurement of ECL

ECL are a probability-weighted estimate of credit losses. It is measured as follows:

financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive);
financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows;
undrawn financing commitments: as the present value of the difference between the contractual cash flows that are due to the Group if the commitment is drawn down and the cash flows that the Group expects to receive; and
financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover.
When discounting future cash flows, the following discount rates are used:
financial assets other than POCI financial assets and lease receivables: the original effective profit rat e or an approximation thereof;
POCI assets: a credit-adjusted effective profit rate;
Lease receivables: the discount rate used in measuring lease receivables;
Undrawn financing commitments: the effective profit rate, or an approximation thereof, that will be applied to the financial asset resulting from the financing commitment; and
financial Guarantee contracts issued: the rate that reflects the current market assessment of the time value of money and the risks that are specific to the cash flows.
The key inputs into the measurement of ECL are the term structure of the following variables;
Probability of default ("PD"),
Loss given default ("LGD"), and
Exposure at default ("EAD").

Material accounting policies (Continued)

d) Financial assets and financial liabilities (Continued)

(5) Impairment of financial assets (Continued)

Measurement of ECL (Continued)

The above parameters are generally derived from internally developed statistical models and historical data which are adjusted for forward looking information. The Group categorizes its financial assets into the following three stages in accordance with IFRS 9 methodology:

Stage 1: Performing assets;
Stage 2: Underperforming assets; and
Stage 3: Credit-impaired assets.
The three stage categories of financial assets are more elaborated in (note 32-1-a.v)
To evaluate a range of possible outcomes, the Group formulates various scenarios. For each scenario, the Group derives an ECL and applies a probability weighted approach to determine the impairment allowance in accordance with the accounting standards requirements.
For how financial assets and ECLs are allocated among the three credit stages, refer to (note 5) for due from banks and financial institutions, (note 6) for investments, (note 7) for financing facilities, and (note 18) Commitments and contingencies.
Restructured financial assets
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the customer, then an assessment is made of whether the financial asset should be derecognized and then ECLs are measured as follows:
If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset.
If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective profit rate of the existing financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:
significant financial difficulty of the customer or issuer;
a breach of contract such as a default or past due event;
the restructuring of a financing facility by the Group on terms that the Group would not consider otherwise;
it is becoming probable that the customer will enter bankruptcy or other financial reorganization; or
the disappearance of an active market for a security because of financial difficulties.
Financing facility that has been renegotiated due to deterioration in the customer's condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a retail financing that is overdue for 90 days or more is considered impaired. In making an assessment of whether an investment in sovereign debt is credit-impaired, the Group considers the following factors.
The market's assessment of creditworthiness as reflected in the yields.
The rating agencies' assessments of creditworthiness.
The country's ability to access the capital markets for new debt issuance.
The probability of financing being restructured, resulting in holders suffering losses through voluntary or mandatory financing forgiveness.

Material accounting policies (Continued)

d) Financial assets and financial liabilities (Continued)

(5) Impairment of financial assets (Continued) Credit-impaired financial assets (Continued)

The international support mechanisms in place to provide the necessary support as "lender of last resort" to that country, as well as the intention, reflected in public statements, of governments and agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political intents, whether there is the capacity to fulfil the required criteria.

POCI financial assets
POCI financial assets are assets that are credit-impaired on initial recognition. For POCI assets, lifetime ECL are incorporated into the calculation of the effective profit rate on initial recognition. Consequently, POCI assets do not carry impairment allowance on initial recognition. The amount recognized as a loss allowance subsequent to initial recognition is equal to the changes in lifetime ECL since initial recognition of the asset.
Credit cards and other revolving facilities
The Bank's products offering include a variety of corporate and retail overdraft and credit cards facilities, in which the Ba nk has the right to cancel and/or reduce the facilities with one day's notice. The Bank does not limit its exposure expectations of customer behaviour, the likelihood of default and its future risk mitigation procedures, which could include reducing or cancelling the facilities. Based on past experience and the Bank's expectations, the period over which the Bank calculates ECL for these products, is five years for corporate and seven years for retail products. The ongoing assessment of whether a significant increase in credit risk has occurred for revolving facilities is similar to other lending products. This is based on shifts in the customer's internal credit grade,but greater emphasis is also given to qualitative factors such as changes in usage.
The profit rate used to discount the ECL for credit cards is based on the average effective profit rate that is expected to b e charged over the expected period of exposure to the facilities. This estimation takes into account that many facilities are repaid in full each month and are consequently not charged profit. The calculation of ECL, including the estimation of the expected period of exposure and discount rate is made, on an individual basis for corporate and on a collective basis for retail products.
The collective assessments are made separately for portfolios of facilities with similar credit risk characteristics.
Presentation of allowance for ECL in the consolidated statement of financial position
Loss allowances for ECLs are presented in the consolidated statement of financial position as follows:
financial assets measured at amortized cost: as a deduction from the gross carrying amount of the assets;
where a financial instrument includes both a drawn and an undrawn component, and the Group cannot identify the ECL on the financing commitment component separately from those on the drawn component: the Group presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and
financing commitments and financial guarantee contracts: generally, as a provision;
debt instruments measured at FVOCI: no loss allowance is recognized in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognized in the fair value reserve.