Saudi Arabia HOLD. Result Update. SAMBA Financial Group Capital markets affect growth... CMP: SR73.3 (as on Jul 26, 2008)

Transcription

1 Result Update Saudi Arabia Tickers: SAMBA AB (Bloomberg) 1090.SE (Reuters) Listing: Saudi Stock Exchange CMP: SR73.3 (as on Jul 26, 2008) Capital markets affect growth... July, 2008 HOLD Key Data CMP#(SR) 73.3 EPS*(SR) 5.8 BVPS*(SR) 23.0 P/E* 12.7 P / BV* M Avg.vol. 240, week Lo / Hi (SR) 72.5/128.0 Source: Global Research # As on July 26, 2008 * 2008 Projected Highlights (Samba) although recorded an improved core banking performance (1H08), due to the subdued non-commission income the net income declined by 5.6% (from SR2.5bn in 1H07 to SR2.4bn in 1H08). Overall the performance was relatively better than (FY07) net income decrease of 7.7%. The bank s special commission income increase of 20.0% (from SR6.9bn in 2006 to SR8.3bn in 2007) was translated into the rise of net special commission income after PLLs by 14.8% (from SR4.0bn in 2006 to SR4.6n in 2007) The top-line performance was dampened by the drop in non-commission income by 24.2%. The main dampeners contributing to this decline were the drop in fees from banking services (from SR2.4bn in 2006 to SR1.6bn in 2007) and the losses on nontrading investments (from a gain of SR2.9mn in 2006 to a loss of SR31.7mn in 2007). Omar M. El-Quqa, CFA Executive Vice President omar@global.com.kw Phone No:(965) Faisal Hasan, CFA Head of Research fhasan@global.com.kw Phone No:(965) Mohammed Ali Shah Financial Analyst mashah@global.com.kw Phone No:(965) Naveed Ahmed Financial Analyst nahmed@global.com.kw Phone No:(965) The bank with the asset base (FY07) of SR154.4bn stood 2nd in the Saudi banking sector, posting an annual growth of 24.5%. The bank s total assets (YoY) showed an increase of 42.2% and YTD rise of 18.9% (from SR154.4bn in FY07 to SR183.6bn in 1H08). Net Loans & Advances showed an increase of 20.2% recording SR80.5bn in The higher rise in NPLs as compared to provisioning led to decline in NPL coverage ratio from 182.4% in 2006 to 159.6% in The customers deposits recorded an increase (FY07) of 22.1% closing at SR115.8bn. SAMBA remains well capitalized bank with TIER-1 capital (FY07) at SR17.9bn. Our fair value for Samba is estimated to be SR77.6 per share. According to our fair value the banking scrip is 5.9% higher than the current market price of SR73.3 (as on Jul 26, 2008). Therefore, we downgrade on our earlier recommendation of Buy to Hold on the stock with a medium term perspective. 1

2 Recent Developments: - In Jun-08, the bank disclosed its plan to establish a bank in Doha after it had (in May-08) received the Qatari authorities license to proceed. During the same month, the bank also announced that it has received the license from the Dubai authorities to proceed with the launching of its first branch in Dubai (UAE). - In May-08, the bank was shortlisted to bid for a 67% stake in Banque du Caire (Egypt), but in Jun-08 it was announced that the bank will not proceed in this bid. - In Mar-08, during the EGM and AGM the BOD approved the capital increase through 50% bonus shares (raising the bank s outstanding shares from 600mn to 900mn). Rating Update - In Nov-07, Moody s Investors Service Agency announced the ratings for the bank. The bank was assigned Aa3 /P-1 with a stable outlook for its global local currency deposits, whereas the financial strength /baseline credit assessment was placed at C+ /A2 ratings with a stable outlook. Analysis of financial performance -FY07 Income Statement - Samba s FY07 results recorded a decline in net income by 7.7% (from SR5.2bn in 2006 to SR4.8bn in 2007). The bank s subdued performance was relatively better than the rest of the Saudi banking sector (FY07) that broadly experienced a profitability drop of 14.6%. This dampened banking sector profitability can mainly be attributed to the dampened share trading activity at Tadawul that led to the decrease in brokerage income of the banks. Table 01: Income Statement Highlights (SR mn) YoY growth ( ) Special Commission Income 5, , , % Net Special commission Income after PLLs 3, , , % Fees from banking services, net 1, , , % Total Non-interest Income 2, , , % Total Operating Income 5, , , % Net Income 4, , , % Source: Samba Financial Reports & Global Research - The bank s special commission income posted an increase of 20.0% (from SR6.9bn in 2006 to SR8.3bn in 2007), which was mainly generated by income from loans & advances contributing 68% to the top line. The special commission expense during the period showed an increase of 28.0%. Overall, SAMBA s net special commission income after PLLs showed a rise of 14.8% (from SR4.0bn in 2006 to SR4.6n in 2007). - During FY07, the bank s commission earning rate of 6.9% in relation to the commission expense rate of 2.9%, resulted in the banking spread of 4.0%. Although the bank has 2

3 been able to successfully maintain its spread at 4.0% (similar to the last year level), going forward we expect pressure on the banking spreads across the industry (as the government in consonance with US monetary policy follows a similar stance in the Kingdom). Chart 01: Banking Spreads Source: Samba Financial Reports & Global Research - The bank s encouraging top-line performance was subdued by the drop in non-commission income by 24.2%. The decline in non-commission income was a result of the decrease in fees from banking services, income from investment held at FVIS, and losses on nontrading investments. - The fees from banking services recorded a considerable drop of 33.1% (from SR2.4bn in 2006 to SR1.6bn in 2007), which was mainly attributed to the reduction in income from share trading and fund management. The non-trading investments recorded a change from the gain of SR2.9mn in 2006 to a loss of SR31.7mn in The bank s total operating income showed a decrease of 1.8% (from SR7.0bn in 2006 to SR6.8bn in 2007). The reduced operating income accompanied by the rise in operating expenses by 15.5% led to a lower bottom line figure. - Samba s subdued financial performance in FY07 also had a dampening impact on the bank s return ratios. The growth in assets and equity base (24.5% and 16.6%, respectively) at times of decreasing profits led to ROAA decline from 4.5% in 2006 to 3.5% in 2007, and ROAE drop from 41.2% in 2006 to 30.5% in The bank posted an EPS (based on 900mn shares) of SR5.3 in 2007 as compared to SR5.8 in Balance sheet - Samba with asset base (FY07) of SR154.4bn ranked 2nd in the Saudi banking sector, and captured 14.9% market share of the total Saudi banking assets. The bank s balance sheet footing (total assets) strengthened over the years, posting a 3-year CAGR ( ) of 17.7% and an annual (FY07) growth of 24.5% (from SR124.0bn in 2006 to SR154.4bn in 2007). 3

4 Table 02: Balance Sheet Highlights (SR mn) Cash & balances with SAMA 3, , , ,097.6 % total 3.2% 3.8% 8.3% 7.2% % increase 37.6% 147.8% 8.2% Non-trading Investments 37, , , ,371.9 % total 39.1% 31.5% 28.7% 32.0% % increase -8.0% 4.4% 38.7% Net Loans and Advances 48, , , ,553.3 % total 50.9% 57.6% 54.0% 52.2% % increase 29.5% 7.4% 20.2% Total Assets 94, , , ,414.0 Customers Deposits 67, , , ,811.3 % total 70.8% 78.7% 76.5% 75.0% % increase 27.1% 11.3% 22.1% Total Shareholders Equity 10, , , ,844.9 % total 10.7% 11.9% 12.3% 11.6% % increase 27.4% 18.5% 16.6% Total Liabilities & Equity 94, , , ,414.0 Source: Samba Financial Reports & Global Research - Net Loans & Advances continued to constitute more than 50% of the bank s total assets and showed an annual growth of 20.2% (from SR67.0bn in 2006 to SR80.5bn in 2007). The loan portfolio s sector analysis shows that the bank has 19.6% of its lending to commerce segment, followed by 18.4% to consumer loans and credit cards. Table 03: Net Loan Portfolio by Economic Sector Government and Quasi Government 2.3% 2.5% 2.6% 0.9% Banks and other financial institutions 1.5% 2.2% 2.6% 1.9% Agriculture and fishing 2.2% 3.9% 3.7% 3.7% Manufacturing 14.5% 14.5% 14.0% 13.2% Mining and quarrying 1.3% 1.3% 0.8% 0.8% Electricity, water, gas and health services 1.6% 1.3% 1.3% 1.4% Building and construction 4.1% 8.2% 9.0% 12.1% Commerce 23.3% 23.8% 21.9% 19.6% Transportation and communication 2.3% 1.5% 2.0% 5.3% Services 6.5% 5.8% 4.8% 5.9% Consumer loans and credit cards 20.4% 23.4% 22.9% 18.4% Others 19.8% 11.8% 14.4% 16.8% Total Loan portfolio 100.0% 100.0% 100.0% 100.0% Source: Samba Financial Reports & Global Research - Samba s lending portfolio stays dominated by commercial and consumer loans facilities, having a contribution of 81% and 16%, respectively. The increase in NPLs by 23.1% (from SR1.5bn in 2006 to SR1.8bn in 2007) was mainly generated from commercial loans & advances. Although the provisioning was increased by 7.7% (during the same period), a higher increase in NPLs as compared to provisions led to decline in NPL coverage ratio from 182.4% in 2006 to 159.6% in

5 Chart 2: Credit Quality Source: Samba Financial Reports & Global Research - The customers deposits (FY07) representing 75.0% of the bank s funding sources, showed a 3-year CAGR ( ) of 20.0%. Samba s deposit growth (FY07) of 22.1% (from SR94.8bn in 2006 to SR115.8bn in 2007) exceeded the overall industry growth of 21%. Time deposits with 55.5% share of the total deposits led the deposit base, followed by demand deposits having a share of 36.1%. Chart 3: Customer Deposit Composition Source: Samba Financial Reports & Global Research - The shareholders equity (excluding proposed dividends) continues to strengthen over the years, posting a 3 year CAGR ( ) of 21.4% and also YoY rise of 21.0% (from SR14.1bn in 2006 to SR17.1bn in 2007). A relatively higher increase in the shareholders equity as compared to the rise in gross loans led to a marginal increase in Equity to Gross loans ratio from 20.3% in 2006 to 20.6% in 2007, implying the bank s adequate position to cover any unexpected loan losses. 5

6 Chart 4: Capital Adequacy Source: Samba Financial Reports & Global Research - Although Samba remains a well capitalized bank with TIER-1 capital (FY07) at SR17.9bn, the drop in TIER-1 ratio from 16.4% in 2006 to 15.2% in 2007 signals the increase in risk-weighted assets in the bank s portfolio. 6

7 Analysis of Financial Performance 1H08 - Although the bank s half yearly results showed an improved core banking performance, the subdued non-commission income dampened the bottom line results. The bank recorded YoY net income decline of 5.6% (from SR2.5bn in 1H07 to SR2.4bn in 1H08). - The increase in the bank s special commission income by 3.5% (from SR4.0bn in 1H07 to SR4.1bn in 1H08) was supported by the drop in special commission expense by 0.8%. Thus, leading to improved core banking performance as the net special commission income showed an increase of 6.6% (from SR2.3bn in 1H07 to SR2.5bn in 1H08). - Although the bank started recovering from the pressure on fees from banking services showing a rise of 7.4% (from SR830mn in 1H07 to SR891mn in 1H08), a significant (YoY) decline in trading income lead to an overall dampened non-commission income. The increase in provision for credit losses by 35.5% (from SR209mn in 1H07 to SR283mn in 1H08) added further pressure on the bank s bottom line results. Table 04: Key Income Statement Data (SR mn) 1H07 1H08 YoY growth Special Commission Income 4, , % Special Commission Expense 1, , % Fees from Banking services, net % Exchange Income, net % Trading Income, net % Provision for Credit Losses, net % Net Income 2, , % Source: Samba Financial Reports, Tadawul, & Global Research - The bank s balance sheet footing continued to strengthen posting YoY total assets increase of 42.2% and YTD rise of 18.9% (from SR154.4bn in FY07 to SR183.6bn in 1H08). The loan & advances portfolio constituted 52.5% of the bank s total assets, and showed YTD growth of 19.6% (from SR80.5bn in FY07 to SR96.3bn in 1H08) and YoY rise of 32.8%. - The customer deposits constituting 66.3% of Samba s funding sources, showed YTD rise of 5.1% (from SR115.8bn in FY07 to SR121.7bn in 1H08) and YoY increase of 23.8%. The equity base of the bank posted YoY growth of 14.5% while on YTD basis recorded an increase of 0.6% closing at SR17.9bn in 1H08. Table 05: Key Balance Sheet Data (SR mn) 1H07 FY07 1H08 YoY growth YTD growth Cash & Balances with SAMA 6, , , % -8.6% Investments 35, , , % 27.8% Loans & Advances, net 72, , , % 19.6% Total Assets 129, , , % 18.9% Customers Deposits 98, , , % 5.1% Total Shareholders Equity 15, , , % 0.6% Total Liabilities & Shareholders Equity 129, , , % 18.9% Source: Samba Financial Reports, Tadawul, & Global Research 7

8 Outlook & Valuation - Samba s improving core banking performance coupled with its developed brand name places the bank in a positive position to derive maximum benefit by expanding its banking services both in domestic as well as regional markets. Besides the bank s future growth plans in Saudi Arabia, its recent announcements for expansion into Qatar and UAE (Dubai) markets will not only diversify its revenue sources but will also provide the bank with opportunities to effectively tap the booming Gulf economies. The increasing wealth generated by high oil prices will facilitate the bank in augmenting both its deposit base and financing business. - For Saudi Arabia in particular, its strong macro-economic outlook, favorable demographics, along with the government s increased focus on developmental and infrastructural projects will provide the Kingdom s financial institutions with enormous future business opportunities. After the relatively dampened market activity at Tadawul in 2007, going forward the higher expected corporate earnings growth along with increasing focus of foreign players in the Kingdom will help raise the Saudi stock market activity. The increased capital market activity will provide the Kingdom s banks with opportunities to enhance their fee based income. - Based on the current market price of SR73.3 (as on Jul 26, 2008), Samba is trading at (2008E) P/E and P/BV multiples of 12.7x and 3.2x, respectively. Table 06: Valuation Summary Valuation Methods Price (SR) Weight Weighted Value (SR) DDM % 60.6 GGM % 17.0 Estimated Fair Price of SAMBA per share 77.6 Source: Global Research - Our fair value for Samba is estimated to be SR77.6 per share, based on DDM (80%) and adaptation of the Gordon Growth Model (20%). According to our fair value the banking scrip is 5.9% higher than the current market price of SR73.3 (as on Jul 26, 2008). Therefore, we downgrade on our earlier recommendation of Buy to Hold on the stock with a medium term perspective. 8

9 BALANCE SHEET STATEMENT (SR mn) F 2009F 2010F 2011F Cash & balances with Central Bank 4, , , , , , ,590.5 Due from banks and other FIs 2, , , , , , ,924.6 Trading investments, net 2, , , , , , ,643.6 Non-trading investments, net 34, , , , , , ,398.4 Investment in associate Loans and advances, net 62, , , , , , ,864.8 Fixed assets, net Other assets 1, , , , , , ,333.4 Total Assets 108, , , , , , ,731.8 Due to banks and other FIs 4, , , , , , ,600.0 Customer deposits 85, , , , , , ,345.8 Term loan 2, , Debt securities issued 0.0 2, , , , , Other liabilities 3, , , , , , ,972.8 Total Liabilities 95, , , , , , ,918.6 Share capital 6, , , , , , ,000.0 Statutory reserve 4, , , , , , ,000.3 Other reserves (14.5) 16.6 (152.2) , , ,644.6 Retained earnings 1, , , , , , ,213.0 Proposed dividend 1, , Employee stock option shares (338.1) (369.9) (287.6) (287.6) (287.6) (287.6) (287.6) Total Equity Attributable to Equity Holders of the Bank 12, , , , , , ,570.3 Minority interest Total Liabilities and Equity 108, , , , , , ,

10 INCOME STATEMENT (SR mn) F 2009F 2010F 2011F Special commission income 5, , , , , , ,568.3 Special commission expense (1,813.9) (2,690.0) (3,441.9) (3,282.2) (4,032.3) (4,441.0) (4,884.6) Special commission income, net 3, , , , , , ,683.7 Provision for credit losses, net (298.1) (263.7) (311.5) (412.8) (505.6) (587.2) (680.8) Special commission income after PLLs, net 3, , , , , , ,002.9 Fees from banking services, net 1, , , , , , ,540.6 Exchange income, net Income from instruments held at FVIS, net Trading income, net Loss /gains on non-trading investments, net (31.8) Other operating income Total non-commission income 2, , , , , , ,470.3 Total operating income 5, , , , , , ,473.2 Salaries & employee related expenses (909.7) (1,185.6) (1,288.6) (1,417.5) (1,559.2) (1,715.2) (1,886.7) Rent & premises related expenses (124.8) (139.5) (181.4) (235.8) (283.0) (339.6) (407.5) Depreciation (94.6) (110.8) (122.7) (131.7) (142.2) (152.1) (162.8) Other G & A expenses (372.0) (362.9) (373.1) (391.8) (411.3) (431.9) (453.5) Impairment charge on investments - - (111.1) (183.3) (73.3) - - Other operating expenses (10.2) Total operating expenses (1,511.2) (1,798.7) (2,076.9) (2,360.1) (2,469.1) (2,638.8) (2,910.5) Net Income attributable to equity holders of the bank - - 4, , , , ,562.7 Minority Interest - - (20.6) (20.9) (26.3) (30.9) (34.3) Net Income 4, , , , , , ,528.5 P&L Appropriation Account: F 2009F 2010F 2011F Opening Balance of Retained Earnings 1, , , , , , ,080.9 Net income 4, , , , , , ,528.5 Adjustmernts Bonus share issue (1,150.0) - - (3,000.0) Transfer to statutory reserve - (1,302.6) (442.8) (1,299.6) (1,636.1) (64.6) - Transfer to other reserves (1,004.6) - - (519.8) (654.4) (768.7) (852.8) Gross dividends (1,782.7) (2,171.2) (1,743.0) (1,819.4) (3,599.4) (4,612.0) (5,543.5) Net change in fair value (9.8) Closing Balance of Retained Earnings 1, , , , , , ,

11 CASH FLOW STATEMENT (SR mn) F 2009F 2010F 2011F Net income 4, , , , , , ,528.5 Accertion of discounts 66.5 (7.9) (177.8) Gains on investments (44.09) (2.93) 31.8 (158.8) (174.6) (192.1) (210.3) Depreciation and amotization Loss/gain on disposal of fixed assets (0.4) Provision for loan losses Impairment of other financial assets Due from banks and other FI s (348.3) (2,353.59) 2,832.4 (1,387.5) (370.0) (407.0) (447.7) Trading portfolio (2,124.9) (276.6) (671.1) (704.0) Loans and advances (14,506.0) (4,905.74) (13,837.2) (25,117.6) (21,925.2) (15,671.5) (14,783.7) Other assets (433.3) (1,230.2) (2,843.3) (301.7) (316.7) (332.6) (349.2) Due to banks and FI s (8,720.3) 1, , , ,469.5 (2,447.6) (2,156.9) Customers deposits 18, , , , , , ,240.7 Other liabilities 1, , , , , CF from Operations , , , , , ,578.8 Net sale /purchase of investments 2,145.6 (1,509.5) (13,919.9) (14,749.3) (1,182.1) (3,078.4) (2,543.7) Capex (83.0) (151.4) (243.6) (177.8) (181.6) (171.6) (183.6) CF from Investing 2,062.6 (1,660.8) (14,163.5) (14,927.1) (1,363.7) (3,250.0) (2,727.3) Minority Interest Proceeds from Debt Securities - 2, (2,061.3) Repayment of Term Loan - - (2,250.0) Employee Stock Option Shares (119.6) (5.4) Dividend and zakat paid (875.5) (2,803.5) (2,150.4) (2,478.7) (3,599.4) (4,612.0) (5,543.5) CF from Financing (995.1) (783.81) (4,190.1) (2,435.4) (3,573.2) (4,581.2) (7,570.6) Change in cash 1, , (5,123.7) ,280.9 Beginning cash 3, , , , , , ,309.7 Ending Cash 4, , , , , , ,

12 Fact Sheet F 2009F 2010F 2011F Profitability - Return on average assets 4.0% 4.5% 3.5% 3.0% 3.2% 3.4% 3.5% - Return on average equity 39.4% 41.2% 30.5% 27.3% 29.5% 30.5% 30.1% - Net special commission income after PLLs/ Total op. income 58.1% 57.6% 67.3% 68.3% 70.4% 70.6% 69.8% - Non-commission income/ Total op. income 42.0% 42.4% 32.7% 31.7% 29.6% 29.4% 30.2% - Non-commission expense/ Total op. income 27.3% 25.7% 30.2% 31.1% 27.3% 25.5% 25.4% - Fees from banking services/ Total op. income 34.5% 34.5% 23.5% 22.6% 21.3% 21.3% 22.1% - Dividend payout ratio 44.4% 41.7% 36.3% 35.0% 55.0% 60.0% 65.0% Margins - Net (or profit) margin 72.7% 74.3% 69.8% 68.6% 72.4% 74.2% 74.3% - Special commission expense/ Special commission income 34.1% 38.5% 41.0% 37.0% 37.0% 36.0% 36.0% - Yield on average earning assets 5.7% 6.7% 6.9% 5.8% 5.9% 6.0% 6.0% - Cost rate on average commission bearing liabilities 2.1% 2.7% 2.9% 2.3% 2.4% 2.4% 2.4% - Spread 3.6% 4.0% 4.0% 3.5% 3.5% 3.6% 3.6% Efficiency - Cost/ Total op. income 27.3% 25.7% 30.2% 31.1% 27.3% 25.5% 25.4% - Staff expenses/ Total Op. Expenses 60.2% 65.9% 62.0% 60.1% 63.1% 65.0% 64.8% - Rent, G&A expenses/ Total Op. Expenses 32.9% 27.9% 26.7% 26.6% 28.1% 29.2% 29.6% - Non-commission expense/ Average total assets 1.5% 1.5% 1.5% 1.4% 1.2% 1.2% 1.2% Liquidity - Loans / Commission earning assets 64.9% 64.1% 62.7% 62.5% 66.4% 67.8% 69.0% - Loans/ Customer Deposits 76.4% 73.6% 72.1% 83.8% 88.0% 87.5% 86.0% - Customer Deposits/ Equity 660.5% 620.0% 649.0% 630.7% 631.5% 628.6% 633.6% - Customer Deposits/ Total assets 78.7% 76.5% 75.0% 68.2% 69.2% 71.1% 73.5% - Due from Banks/ Due to Banks 63.5% 88.9% 20.2% 13.3% 13.9% 16.7% 20.0% Credit Quality - Provisions /Total op. income 5.4% 3.8% 4.5% 5.4% 5.6% 5.7% 5.9% - Provisions /Average loans 0.5% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% - Non Performing Loans (SR mn) 2,214 1,527 1,880 2,495 3,185 3,568 4,081 - Provision for loan losses (SR mn) 2,755 2,785 2,999 3,412 3,918 4,505 5,186 - NPLs /Gross Loans 3.4% 2.2% 2.2% 2.3% 2.4% 2.4% 2.5% - NPLs /(Equity+provision for loan losses) 14.1% 8.4% 9.0% 10.4% 11.6% 11.5% 11.7% - PLLs / Gross Loans 4.2% 4.0% 3.6% 3.1% 3.0% 3.1% 3.2% - NPL Coverage 124.4% 182.4% 159.6% 136.8% 123.0% 126.3% 127.1% Capital Adequacy - Equity/ Total Assets (Equity capital ratio) 11.9% 12.3% 11.6% 10.8% 11.0% 11.3% 11.6% - Equity/ Gross Loans 17.1% 20.3% 20.6% 18.9% 18.0% 18.2% 18.4% Constitution of Total Operating Income - Net special commission income after PLLs/ Total op. income 58.1% 57.6% 67.3% 68.3% 70.4% 70.6% 69.8% - Fees from banking services/ Total op. income 34.5% 34.5% 23.5% 22.6% 21.3% 21.3% 22.1% - Investment Income/ Total op. income 2.4% 1.2% 1.6% 2.4% 2.2% 2.1% 2.1% - FX Income/ Total op. income 3.9% 3.9% 6.3% 6.0% 5.4% 5.2% 5.2% - Other Income/ Total op. income 0.2% 0.2% 0.5% 0.5% 0.5% 0.4% 0.4% - PLLs/ Total op. income 5.4% 3.8% 4.5% 5.4% 5.6% 5.7% 5.9% Operating Performance - Change in special commission income 41.6% 31.4% 20.0% 5.8% 22.9% 13.2% 10.0% - Change in Fees from banking services 144.2% 27.0% -33.1% 6.0% 12.0% 15.0% 15.0% - Change in Investment Income 44.5% -36.0% 29.3% 61.0% 9.4% 9.4% 9.4% - Change in Exchange Income 51.9% 27.4% 56.5% 5.0% 8.0% 10.0% 10.0% - Change in Other Income -40.5% 12.4% 198.5% 10.0% 10.0% 10.0% 10.0% RATIO S USED FOR VALUATION - Par value per share (SR) Shares in issue (mn) EPS (SR) -Adjusted DPS (SR) -Adjusted Book value per share (SR) - Adjusted Market price year end (SR) -Adjusted Market Cap. (SR bn) P/E P/BV Dividends yield 1.5% 2.6% 1.6% 2.8% 5.5% 7.0% 8.4% *Historical P/E & P/BV multiples pertain to respective year-end prices, while those for future years are based on market price in the Saudi Stock Exchange as on Jul 26,

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16 The following is a comprehensive list of disclosures which may or may not apply to all our researches. Only the relevant disclosures which apply to this particular research has been mentioned in the table below under the heading of disclosure. Disclosure Checklist Company SAMBA Financial Group Recommendation HOLD Ticker Price Disclosure SAMBA AB (Bloomberg) 1090.SE (Reuters) SR73.3 1, did not receive and will not receive any compensation from the company or anyone else for the preparation of this report. 2. The company being researched holds more than 5% stake in. 3. makes a market in securities issued by this company. 4. acts as a corporate broker or sponsor to this company. 5. The author of or an individual who assisted in the preparation of this report (or a member of his/her household) has a direct ownership position in securities issued by this company. 6. An employee of serves on the board of directors of this company. 7. Within the past year, has managed or co-managed a public offering for this company, for which it received fees. 8. has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 9. expects to receive or intends to seek compensation for investment banking services from this company in the next three month. 10. Please see special footnote below for other relevant disclosures. Global Research: Equity Ratings Definitions Global Rating Definition Buy Hold Reduce Sell Fair value of the stock is >10% from the current market price Fair value of the stock is between +10% and -10% from the current market price Fair value of the stock is between -10% and -20% from the current market price Fair value of the stock is < -20% from the current market price This material was produced by KSCC ( Global ),a firm regulated by the Central Bank of Kuwait. This document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any securities. Global may, from time to time,to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities ( securities ), perform services for or solicit business from such issuer, and/or have a position or effect transactions in the securities or options thereof. Global may, to the extent permitted by applicable Kuwaiti law or other applicable laws or regulations, effect transactions in the securities before this material is published to recipients. Information and opinions contained herein have been compiled or arrived by Global from sources believed to be reliable, but Global has not independently verified the contents of this document. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document. Global accepts no liability for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. This document is not to be relied upon or used in substitution for the exercise of independent judgement. Global shall have no responsibility or liability whatsoever in respect of any inaccuracy in or ommission from this or any other document prepared by Global for, or sent by Global to any person and any such person shall be responsible for conducting his own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this or other such document. Opinions and estimates constitute our judgment and are subject to change without prior notice.past performance is not indicative of future results. This document does not constitute an offer or invitation to subscribe for or purchase any securities, and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. It is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. Neither this report nor any copy hereof may be distributed in any jurisdiction outside Kuwait where its distribution may be restricted by law. Persons who receive this report should make themselves aware of and adhere to any such restrictions. By accepting this report you agree to be bound by the foregoing limitations. 16