SAMBA Financial Group

Transcription

1 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Investment Update Market Data Bloomberg Code: SAMBA AB Reuters Code: 1090.SE CMP (15 th May 2010): SR59.0 O/S (mn): Mkt Cap (SRmn): 53,100.0 Mkt Cap (US$mn): 14,160.0 P/E 2010e (x): 11.2 P/Bv 2010e (x): 2.1 Price Performance 1-Yr High /Low (SR): 63.5 / 40.2 Average Volume (000): m 3m 12m Absolute (%) Relative (%) Relative Performance 7,000 6,500 6,000 5, SAMBA Financial Group Good potential for revenue generation from diverse business segments. Robust system platform offering range of financial services. Net income estimated CAGR ( ) of 12.6%. HOLD Target Price SR 60.9 Attractive growth potential in both core & non-core banking operations SAMBA Financial Group (Samba) successfully managing the challenges of 2009 recorded profitability & assets growth, while maintaining NPL coverage above 100%. The list of driving factors expected to facilitate the bank s growth include (i) Strong corporate relationships, (ii) Good potential for revenue generation from diverse set of business segments, (iii) Robust system platform to offer range of financial services and (iv) Well capitalized balance sheet with TIER-1 ratio of 16.0%. Profitability growth supported by non-commission income Samba s net income (FY09) increase of 2.4% was led by non-com. income rise of 4.6%, while marginal growth of 0.2% in core banking results. Overall the bank was able to absorb the rise in provisions for credit losses of 2.3xs. The drop in 1Q10 net income (YoY) by 4.8% was led by lower interest income, while provisions for credit shrank by 21% in 1Q10. We estimate provisions to drop by 28.5%, net income to rise by 4.2%, and the banking spreads to hover around 3.5% in 2010 (reaching 3.7% by 2013). The bank s net special com. income & net income is estimated to post CAGR ( ) of 11.6% & 12.6%, respectively, and ROE could reach 25% by ,000 4,500 4, Balance sheet continues to grow The bank s total assets (FY09) posted an increase of 3.7%, while advances contracted by 13.5%. Although NPL ratio rose to 3.3% in 2009, we expect it to drop to 2.8% and NPL coverage to reach 133% by We expect assets, loans & deposits to post (FY10) growth of 5.2%, 10.9% & 3.6%, respectively. Tadawul -lhs Source: Tadawul & Zawya SAMBA (SR) -rhs Valuations - Hold with an upside potential of 3.2% Based on the closing price of SR59.0 per share, Samba is trading at a discount of 19% (PE basis) and 4% (PBV basis) to our sector 2010 estimates. According to our estimated fair value of Samba at SR60.9 per share, the scrip offers an upside potential of 3.2% on the current market price (as on 15 th May, 2010) of SR59.0 per share. Mohammad Ali Shah Financial Analyst mashah@globalinv.com.sa Phone: ext.951 Investment Indicators Year 2007A 2008A 2009A 2010E 2011E 2012E 2013E Net income (SR mn) 4, , , , , , ,332.4 EPS (SR) BVPS (SR) ROAE (%) P/E (x) P/BV (x) 6.2 Source: Company Annual Reports & Global research *Historical P/E & P/BV multiples pertain to respective year-end prices, while those for future years are based on closing prices on Tadawul as of 15th May,

2 Cost of Equity Valuation & Recommendation For arriving at the fair value of SAMBA share, we have used the two valuations methods (DDM & GGM). Dividend Discounting Model - DDM Our use of DDM valuation is based on a 4-year forecast of dividends as cash flows ( ). We have used following assumptions in order to arrive at the equity value of the bank: - Cost of Equity (COE) derived using Capital Asset Pricing Model (CAPM) is estimated to be 11.6% based on the following assumptions: - Risk-free rate of 5.6%. - Market risk premium of 6.0%. - Beta of 1.0 (based on 5 years monthly data from Bloomberg). If the actual beta of the bank is less than 1 or if the data available is of less than 5 years, we have taken it as 1. - Terminal growth rate of 3.0%. DDM Valuation (SR mn) 2010E 2011E 2012E 2013E Dividends Expected 1,991 3,177 4,387 5,325 Terminal Value 63,995 NPV of Dividends Expected 11,689 NPV of Terminal Value 42,937 Estimated Fair Value of Equity 54,626 No. of Outstanding Shares (mn) 900 DDM Value of SAMBA per share (SR) Source: Global Research 60.7 Sensitivity Analysis We have also prepared a sensitivity analysis for the estimated fair price of the share based on various terminal growth rates and COE. Sensitivity analysis -DDM Terminal Growth Rate 2.0% 2.5% 3.0% 3.5% 4.0% 10.6% % % % % Source: Global Research Gordon Growth Model - GGM The adaptation of the Gordon Growth model uses the sustainable return on average equity (ROAE), cost of equity (COE) and expected growth in earnings (g) to calculate the target P/BV of the bank. Under this methodology, we have used the following assumptions to arrive at the fair value of the bank: 2 Samba Financial Group May 2010

3 Cost of Equity Sustainable ROE calculated as the average ROAE of the forecasted 4 years. Cost of Equity derived using CAPM, using the same assumptions as in the DDM. Terminal growth rate of 3.0%, similar to the DDM. Gordon Growth Model Sustainable ROE (%) 21.8 COE (%) 11.6 Terminal Growth Rate (%) E: P/BV target multiple (x) E: BV/Share (SR) 28.1 GGM Value of SAMBA per share (SR) 61.8 Source: Global Research Sensitivity Analysis This sensitivity analysis shows the movement in fair value as a consequence of different ROE and COE assumptions. Sensitivity analysis -GGM Return on Equity 20.8% 21.3% 21.8% 22.3% 22.8% 10.6% % % % % Source: Global Research Valuation Based on the current market price of SR59.0 per share (as on May 15, 2010), the bank is traded at 2010E P/E and P/BV multiples of 11.2x and 2.1x, which shows Samba is trading at a discount of 19% (PE basis) and 4% (PBV basis) to our sector 2010 estimates. Valuation Summary Price (SR) Weight Weighted Value (SR) DDM % 48.5 GGM % 12.4 Estimated Fair Price SAMBA per share 60.9 Source: Global Research According to our estimated fair value of Samba at SR60.9 per share, the banking scrip offers an upside potential of 3.2% on the closing price (as on May 15, 2010) of SR59.0 per share. Therefore, we maintain our recommendation of Hold on the Samba stock with medium term perspective. 3 Samba Financial Group May 2010

4 Samba Financial Group -Financial Update Samba s net income (FY09) increase of 2.4% was led by non-commission income rise of 4.6% while core banking results showed a marginal growth of 0.2%. The non-commission income was driven by income from investments held at FVIS (from a loss of SR645.9mn in FY08 to profit of SR58.8mn in FY09), while fee & com. income and exchange income declined by 25.5% & 16.3%, respectively. Overall improved performance was able to absorb the rise in net provisions for credit losses of 2.3xs in The provisioning escalation is believed to be a one-off high and Samba undertook a conservative policy stance. Although the net income (YoY) declined by 4.8% in 1Q10, we expect Samba to post net income increase of 4.2% in Besides expectation for the bank s provisioning (FY10) drop by 28.5%, the economic expansion will lead to revival of corporate market activity that will directly benefit the banking sector. Over the medium term we expect net special com. income, non-com. income, and net income to post CAGR ( ) of 11.6%, 6.6% & 12.6%, respectively. Income performance 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% -60% E 2011E 2012E 2013E Net interest income (lhs) Fee & commission income (lhs) Exchange, investment & other income (lhs) Net income growth (rhs) 25% 20% 15% 10% 5% 0% -5% -10% Although the overall provisions rose by 32.1% in 2009, the bank successfully eliminated the impairment charge on investments. The inflated levels of prov./nii at 11.9% and prov./net income at 13.3% in 2009, are expected to drop to 8.6% and 9.1%, respectively in Income statement provisions 14% 12% 10% 8% 6% 4% E2011E2012E2013E Prov./Net int. inc. (lhs) Prov./Net income (lhs) IS -prov. growth (rhs) 65% 45% 25% 5% -15% -35% Provisions' details (SR mn) Consumer Corporate Treasury The rise in provisions (esp. comm. loans) could be linked to troubled Saudi groups and overall softening of business activity. We do not expect to witness any significant hike from these levels as overall market confidence improves and uncertainties could start clearing up in near future. 4 Samba Financial Group May 2010

5 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Spreads to improve gradually Samba s interest rate spreads that hovered around 4.0% during 2007, although witnessed a drop of 50bps in 2008, were successfully maintained around 3.5% in FY09. The bank s ability to sustain the spreads in 2009 was made possible as the bank shed the high cost deposits. We estimate the bank s interest rate spreads to hover around 3.5% in 2010, reaching 3.7% by Since Jun2009, repo rate maintained at 2.0% and reverse repo rate at 0.25% indicates stability in the government policy rates with very low chances of further cuts. However, the interest rates could start inching upward from 2011 as the economic expansion continues. Banking spreads 7.5% 4.1% 6.5% 4.0% 5.5% 3.9% 4.5% 3.8% 3.5% 3.7% 2.5% 3.6% 1.5% 3.5% 0.5% 3.4% E 2011E 2012E 2013E Yield on Earning Assets (lhs) Cost of Funds (lhs) Spreads (rhs) Interest rates market 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Repo Rate Reverse Repo rate SAIBOR3M Balance sheet growth follows cautious approach Despite the lackluster market conditions, the bank s total assets (FY09) recorded growth of 3.7%. Samba continued to maintain comfortable capital adequacy (2009: 17.1% CAR) position, with deposit increase of 9.6% while loan portfolio contracted by 13.5% in FY09. We expect assets, loans and deposits to record annual (FY10) growth of 5.2%, 10.9% & 3.6%, respectively, and gross loans to deposit ratio between 60% to 70% (during ). Loan and deposit base (SR bn) E 2011E 2012E 2013E Loans (lhs) Deposits (lhs) Loan Growth (rhs) Deposit Growth (rhs) LTD (rhs) 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% The total deposits (constituting 79% of total assets) witnessed rise in proportion of demand deposits (FY09:39% vs. FY08:33%) that is believed to directly benefit the bank in managing cost of funds. 5 Samba Financial Group May 2010

6 NPL coverage maintained above 100%... Although Samba s NPL coverage witnessed a decline from 167.0% in 2008 to 116.1% in 2009, the bank still maintains comfortable cushion against any asset quality deterioration (since we expect the worst to have already past). The bank s loan portfolio dominated by commercial loans & advances (83% of total) showed a drop of 18% in FY09. An annual increase in net NPLs for commercial loans & advances by 58.5% was also accompanied by rise (YoY) in bad debts write off to SR148mn FY09. The high write offs in this category are expected to be a result of the bank s recognition for the majority of the expected credit worries linked to troubled Saudi groups. Despite the drop in gross loans during 2009, the rising NPLs in 2009 led to the inflating of NPL ratio from 1.8% in 2008 to 3.3% in We expect NPLs to grow at an avg. ( ) of 7.3%, while NPL ratio is estimated to reach 2.8% and NPL coverage to reach 133% by Credit quality 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% E 2011E 2012E 2013E NPLs /Gross loans (lhs) NPLs growth (rhs) NPL coverage (rhs) The net NPLs for commercial loans & advances also overshadowed the total NPLs constituting 98.3% of total. This was followed by consumer loans NPL merely composing 0.8% of the total. 170% 150% 130% 110% 90% 70% 50% 30% 10% -10% NPLs segment wise (SR mn) 3,000 2,500 2,000 1,500 1, Consumer Commercial loans & advances Others Provisions by segment (SR mn) 3,500 3,000 2,500 2,000 1,500 1, Credit cards Consumer loans Comm. loans & advances Others The bank maintaining its prudent stance also increased the provisions for commercial loans & advances (YoY) by 10.5% that constituted 93% of total provisions in Besides, the rise in provisions for credit cards, the provisions for both consumer loans & others reduced during Samba Financial Group May 2010

7 Marginal growth in investments portfolio The bank s investments portfolio posted a marginal growth of 1.4% in FY09, and remains dominated by government & quasi-government securities. The dominance of government securities on investment book is comforting factor considering the debt issues faced by both regional & international corporations. The investments classified under available for sale (AFS) currently constituting 54% (FY08: 36%) of the total investments also recorded an annual increase of 54% in FY09. Although AFS/equity ratio stood at 132%, any gain or loss arising from un-hedged fair value for AFS is recognized under equity while any gain or loss from hedged relationship is recognized directly in the income statement. Investments classification (SR bn) AFS portfolio (lhs) Total investments (lhs) AFS /Total investments (rhs) AFS /Equity (rhs) 150% 130% 110% 90% 70% 50% 30% Although government and quasi-government securities continued to overshadow the portfolio, its portion in total decreased from 66% in 2008 to 64% in The investments in government and quasi-government securities showed a decrease of 2.5%, while investments in corporate and banks & other recorded an increase of 15% & 22%, respectively. Investments detail 2009 Hedge funds & others, 3% Banks & other FIs, 17% Corporat e, 16% Gov. & quasi Gov., 64% Quoted & unquoted investments 70% 60% 50% 40% 30% 20% 10% 0% Quoted Unquoted The bank also increased its proportion of investments in quoted securities from 33% in FY08 to 59%in FY09. In addition, the bank was successful in eliminating impairment charge on investments in FY09 from SR190.9mn in FY08. 7 Samba Financial Group May 2010

8 Financial Performance -1Q Samba recorded net income (YoY) decline of 4.8% (from SR1,272mn in 1Q09 to SR1,211mn in 1Q10), while as compared to 4Q09 posted an increase of 45.0%. The bank s subdued core banking result (1Q10) with net special commission income (YoY) decrease of 10.5% resulted in operating income decline of 7.4% in 1Q10. - Although the bank showed improved control over operating expenses and provision for credit losses recorded (YoY) decline of 21.1% in 1Q10, the pressure from top-line led to decrease in bottom-line profitability. We expect the bank s profitability performance to improve in the year ahead. Financial highlights 1Q2010 (all figs. in SR mn, unless stated) 1Q09 1Q10 YoY 4Q09 1Q10 QoQ Net special com. income 1,309 1, % 1,162 1, % Operating income 1,988 1, % 1,547 1, % Net income 1,272 1, % 835 1, % EPS (SR) % % Loans (SR bn) % % Deposits (SR bn) % % Assets (SR bn) % % Source: Company reports & Tadawul - Although the bank s net special commission income on annual basis posted a decline of 10.5% (from SR1,309mn in 1Q09 to SR1,172mn in 1Q10), on quarterly basis recorded a marginal growth of 0.9%. The bank showed annual operating income decline (YoY) of 7.4%, whereas on quarterly basis (relative to 4Q09) posted a rise of 19.0%. - Samba s deposit base expanded (YoY) showing an increase of 10.5% (from SR124bn in 1Q09 to SR137bn in 1Q10), while reduced by 6.8% as compared to 4Q09. The bank s loan book recording (YoY) decline of 5.6% (from SR90bn in 1Q09 to SR85bn in 1Q10), however increased on quarterly basis by 1.2%. - Samba s balance sheet footing grew both on annual and quarterly basis. The asset base posted an annual increase of 10.7% (from SR168bn in 1Q09 to SR186bn in 1Q10), while posted marginal rise of 0.3% as compared to 4Q09. 8 Samba Financial Group May 2010

9 Outlook Samba maintains a robust balance sheet structure and holds the largest share of 17.4% and 18.9% in both total assets and deposits, respectively, amongst the listed Saudi banks. We expect the bank s assets, loans and deposits to record a 4-year ( ) CAGR of 8.2%, 12.7% & 8.7%, respectively. Samba being able to record profitability growth (FY09: 2.4%) even during the year of global slowdown, leads us to believe that the bank is well positioned for growth as the overall market conditions (both capital and corporate) improve. We expect Samba to record net income increase of 4.2% and asset growth of 5.2% in Besides, our forecasts for decrease in provisions by 29% in 2010, the overall improved performance in various business segments are expected to drive 2010 results. We expect Samba s net income to CAGR ( ) increase 12.6%. Strong corporate relationships. Good potential for revenue generation from diverse business services. Ability to generate higher non-interest income from market dealings. Attractive potential to benefit from credit expansion (loan to deposit FY09: 60%). Robust system platform to offer range of financial services. Well capitalized balance sheet with TIER-1 ratio of 16.0%. The bank s ROE from the highs of 30% in 2007 has consolidated around 21% in The drop in net profit margin (NPM) between 52% to 58% (in 2007 & 2008) significantly improved to 72% in The increase in NPM can be attributed to overall improved financial performance of the bank even during the times of low interest rate environment. DuPont analysis 78% 72% 66% 60% 54% 48% 42% 36% 30% 24% 18% 12% 6% 0% E 2011E 2012E 2013E Net profit margin (lhs) Asset turnover (lhs) Return on Equity (lhs) Leverage (rhs) The net profit margins are forecasted to remain close to 70% and above, while the leverage ratio is expected to range between 7.6x to 8.2x during With asset turnover ratio estimated between 3.3% to 4.3% during , we expect the return on equity (ROE) to reach 25% by Samba Financial Group May 2010

10 INCOME STATEMENT SAMBA FINANCIAL GROUP (SR mn) E 2011E 2012E 2013E Special commission income 8, , , , , , ,468.8 Special commission expense (3,441.9) (3,364.6) (1,281.9) (1,321.8) (1,804.6) (2,209.2) (2,617.2) Special commission income, net 4, , , , , , ,851.6 Provision for credit losses, net (311.5) (267.1) (604.9) (432.5) (370.8) (430.0) (496.5) Special commission income after PLLs, net 4, , , , , , ,355.1 Fees and commission income, net 1, , , , , , ,851.9 Exchange income, net Income (loss) from investments held at FVIS, net 55.2 (646.0) Trading income, net Gains (losses) on non-trading investments, net (31.8) Other operating income Total non-commission income 2, , , , , , ,634.2 Total operating income 6, , , , , , ,989.3 Salaries & employee related expenses (1,288.6) (1,366.1) (1,265.9) (1,303.9) (1,447.3) (1,577.6) (1,640.7) Rent & premises related expenses (181.4) (198.7) (222.1) (244.4) (276.1) (298.2) (316.1) Depreciation (122.7) (136.9) (143.2) (165.9) (195.2) (219.3) (241.3) Other general & administrative expenses (373.1) (409.3) (320.3) (333.1) (386.4) (428.9) (458.9) Impairment charge on investments (111.1) (190.9) Total operating expenses (2,076.9) (2,301.9) (1,951.5) (2,047.2) (2,305.0) (2,524.0) (2,656.9) Net Income 4, , , , , , ,332.4 Loss attributed to non-controlling interest Net Income attributable to the bank s equity holders 4, , , , , , ,332.4 P&L appropriation Opening balance of retained earnings 2, , , , , , ,904.2 Net income to equity holders 4, , , , , , ,332.4 Net changes in treasury shares (16.4) (30.3) Bonus share issue - (3,000.0) Transfer to statutory reserve (442.8) (1,110.7) (1,138.3) (750.9) Gross dividends (1,743.0) (1,606.5) (1,606.5) (2,138.4) (3,412.7) (4,711.7) (5,719.2) Net change in fair value Others Closing balance of retained earnings 5, , , , , , , Samba Financial Group May 2010

11 BALANCE SHEET SAMBA FINANCIAL GROUP (SR mn) E 2011E 2012E 2013E Cash & balances with central bank 11, , , , , , ,633.9 Due from banks and other FIs 2, , , , , ,228.6 Trading investments, net 4, , , , , , ,549.1 Non-trading investments, net 49, , , , , , ,712.1 Investment in associate Loans and advances, net 80, , , , , , ,049.0 Property & equipment, net , , , ,589.3 Other assets 6, , , , , , ,186.0 Total assets 154, , , , , , ,968.7 Due to banks and other FIs 11, , , , , , ,132.0 Customer deposits 115, , , , , , ,656.1 Debt securities issued 2, , , , Other liabilities 7, , , , , , ,208.3 Total liabilities 136, , , , , , ,996.3 Share capital 6, , , , , , ,000.0 Statutory reserve 6, , , , , , ,000.0 General & other reserves (152.2) (895.1) (1,174.3) (234.9) Retained earnings 5, , , , , , ,590.7 Proposed dividend Treasury shares (287.6) (433.4) (710.4) (757.9) (811.2) (875.8) (949.1) Total equity attributable to the bank's equity holders 17, , , , , , ,783.6 Non-controlling interest Total liabilities and equity 154, , , , , , , Samba Financial Group May 2010

12 CASH FLOW STATEMENT SAMBA FINANCIAL GROUP (SR mn) E 2011E 2012E 2013E Net income 4, , , , , , ,332.4 Accretion of discounts (11.1) (427.0) (132.2) Gains on investments 31.8 (501.0) (193.1) (127.1) (71.5) (85.1) (97.8) Depreciation and amortization Loss/gain disposal of assets Provision for loan losses Impairment of other fin. assets Due from banks and other FI's 2, ,177.9 (2,725.3) (346.4) (419.5) (313.2) Trading portfolio (2,124.9) 1, ,085.6 (1,051.0) (883.5) (539.4) (413.6) Loans and advances (13,837.2) (17,861.0) 13,395.8 (9,528.6) (13,447.9) (15,777.1) (14,878.5) Other assets (2,843.3) (4,944.0) 4,823.1 (923.1) (566.2) (382.2) (160.5) Due to banks and FI's 5, (4,770.7) 1, (465.4) Customers deposits 20, , , , , , ,557.8 Other liabilities 3, ,253.7 (4,172.0) 1, CF from operations 19, , , , , , ,494.2 Net sale /purchase of investments (13,919.9) (1,779.1) (1,642.0) (7,162.0) (9,170.4) (7,634.5) (6,068.0) Capex (243.6) (196.3) (173.7) (288.9) (431.5) (438.0) (356.6) CF from investing (14,163.5) (1,975.3) (1,815.7) (7,451.0) (9,601.9) (8,072.5) (6,424.6) Minority Interest (2.8) Proceeds from Debt Securities 13.8 (165.9) (1,873.9) - - Repayment of Term Loan (2,250.0) Treasury shares, net 65.9 (176.2) (210.2) (47.5) (53.3) (64.5) (73.3) Dividend and zakat paid (2,150.4) (1,520.4) (1,447.3) (2,870.4) (3,412.7) (4,711.7) (5,719.2) CF from financing (4,320.7) (1,607.8) (1,656.6) (2,920.8) (5,339.9) (4,776.2) (5,792.6) Change in cash , ,047.3 (8,397.1) (9,125.2) (968.1) (1,723.0) Beginning cash 10, , , , , , ,356.8 Ending cash 11, , , , , , , Samba Financial Group May 2010

13 FACT SHEET SAMBA FINANCIAL GROUP E 2011E 2012E 2013E Profitability - Return on average assets 3.5% 2.7% 2.5% 2.5% 2.6% 2.9% 3.0% - Return on average equity 30.5% 24.2% 22.2% 20.2% 20.2% 22.7% 24.3% - Net sp. comm. inc. after PLLs/ Total op. inc. 67.3% 71.1% 68.6% 67.7% 72.1% 73.1% 73.6% - Non-comm. income/ Total op. income 32.7% 28.9% 31.4% 32.3% 27.9% 26.9% 26.4% - Fees & comm. income/ Total op. income 23.5% 24.1% 18.6% 19.6% 19.2% 18.8% 18.5% - Dividend payout ratio 36.1% 36.1% 35.2% 45.0% 64.0% 73.0% 78.0% Margins - Net (or profit) margin 70.1% 66.0% 70.1% 69.9% 69.8% 71.9% 73.4% - Special comm. expense/ Sp. comm. income 41.0% 39.9% 20.2% 20.8% 23.5% 24.0% 25.0% - Yield on average earning assets 6.9% 5.9% 4.4% 4.3% 4.6% 4.9% 5.0% - Cost rate on average comm. bearing liabilities 2.9% 2.4% 0.8% 0.8% 1.1% 1.2% 1.3% - Spread 4.0% 3.5% 3.5% 3.5% 3.5% 3.7% 3.7% Efficiency - Cost/ Total op. income 30.2% 34.1% 30.0% 30.1% 30.2% 28.1% 26.6% - Staff expenses/ Total Op. Expenses 62.0% 59.3% 64.9% 63.7% 62.8% 62.5% 61.8% - Rent, G&A expenses/ Total Op. Expenses 26.7% 26.4% 27.8% 28.2% 28.7% 28.8% 29.2% Liquidity - Loans/ Customer deposits 72.1% 75.4% 59.5% 63.6% 66.4% 67.1% 68.6% - Customer deposits/ Equity 649.0% 676.4% 659.5% 606.8% 606.9% 645.1% 668.1% - Customer Deposits/ Total assets 75.0% 75.0% 79.3% 78.1% 79.0% 80.3% 81.0% - Due from banks/ Due to banks 20.2% 7.3% 47.8% 36.1% 37.1% 43.7% 46.3% Credit Quality - Provisions /Total op. income 4.5% 4.0% 9.3% 6.4% 4.9% 4.8% 5.0% - Non performing loans (SR mn) 1,880 1,840 2,907 3,128 3,426 3,678 3,845 - Provision for loan losses (SR mn) 2,999 3,073 3,376 3,808 4,179 4,609 5,106 - NPLs /Gross loans 2.3% 1.9% 3.4% 3.3% 3.2% 3.0% 2.8% - PLLs / Gross loans 3.6% 3.0% 3.9% 3.9% 3.8% 3.7% 3.6% - NPL coverage 159.6% 167.0% 116.1% 121.8% 122.0% 125.3% 132.8% Capital Adequacy - Equity/ Total assets 11.6% 11.2% 12.1% 13.0% 13.1% 12.5% 12.2% - Equity/ Gross loans 21.5% 19.8% 25.7% 26.1% 25.0% 23.2% 21.9% Operating Performance - Change in special commission income 20.0% 0.5% -24.6% 0.1% 20.8% 19.9% 13.7% - Change in fees & commission income -33.1% 0.4% -25.5% 10.0% 10.0% 15.0% 10.0% Ratios 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 1.6% 3.5% 3.5% 4.0% 6.4% 8.9% 10.8% Source: Company Annual Reports & Global research *Historical P/E & P/BV multiples pertain to respective year-end prices, while those for future years are based on closing prices on Tadawul as of 15th May, Samba Financial Group May 2010

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15 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 Recommendation Ticker Price Disclosure Samba Financial Group Hold SAMBA AB 1090.SE SR59.0 1,10 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 Fair value of the stock is >10% from the current market price Hold Fair value of the stock is b/w +10%/-10% from the current market price Reduce Fair value of the stock is b/w -10%/-20% from the current market price Sell Fair value of the stock is < -20% from the current market price This material was produced by - Saudia, a firm regulated by the Capital Market Authority of KSA. This document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any securities Information and opinions contained herein have been compiled or arrived by Global -Saudia from sources believed to be reliable, but Global- Saudia 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 - Saudia accepts no liability for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Global shall have no responsibility or liability whatsoever in respect of any inaccuracy in or omission from this or any other document prepared by Global- Saudia for, or sent by Global- Saudia 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. Global investment house- Saudia is authorized and regulated by the Capital Market Authority (CMA) in the Kingdom of Saudi Arabia. License Number Samba Financial Group May 2010

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