Changes in core portfolios

Transcription

1 S e c t o r C o v e r a g e S e p t e m b e r Jaap Meijer, MBA, CFA jaap.meijer@arqaamcapital.com Loubna ElHassan Nisreen Assi Christine Kalindjian Arqaam Capital Research offshore s.a.l. Michael Malkoun Jonathan Milan Zeina Nasreddine Changes in core portfolios Strong performance core portfolios: The Core Buy portfolio has generated a positive return of 9.6% vs. a negative performance of the S&P Arabia of (0.13%), resulting in a relative outperformance of over 9.7%. The largest positive contribution came from CAE and COMI, while Muscat worked against us. The Avoid portfolio has generated a negative return of (2.7%) vs. a negative performance of the S&P Arabia of (0.13%), resulting in a positive contribution from our sells of 2.55%. The largest positive contribution came from MASQ and Medgulf, while EGB worked against us. All in all, the long/short portfolio generated an alpha of 12.3%. We have substantially increased our TPs for Egyptian banks We have increased the TPs for Egyptian banks and we continue to strongly recommend CIB and CAE. The support from the GCC has been even stronger with Qatar unveiling an investment plan of USD18bn, which should address the balance of payment deficit and significantly boost the GDP and reduces the macro risk, while as we expected QNB is looking actively at Egypt for inorganic expansion. Elsewhere we have also increased our TPs and EPS for Albilad, while we have cut the EPS FY12e for most Kuwaiti banks due to a higher cost of risk in FY12e. We remove RJHI and Salama include Samba. We close our long positions in Al Rajhi and replace it with Samba as the net interest margin compression has come to a standstill and the bank is re-leveraging, while competition in retail banking should continue to affect Al Rajhi s net interest margins. We expect a poor Q3 12 for Salama, but underwriting margins should improve as of Q4 12. We close our shorts in Mashreq and Shuaa. We close our short positions in Shuaa and Mashreq after their sharp falls. We cannot rule out renewed speculation about a break-up of Shuaa given the very low valuation, while our TP for Mashreq now points to upside. We continue to strongly recommend QNB, with any M&A acquisition unlocking value, while we continue to see UNB, FGB and CBD as the preferred plays in UAE. We see strong value in bank Muscat after the poor share price performance, even though we reduced our TP to reflect further net interest margin pressure. The consolidated profits of the MENA financials increased 3.8% y/y and 1.2% sequentially. The largest y/y increase was achieved by the Egyptian banks (44.4%), helped by stronger margins, followed by Omani (+18.9%), KSA (10.9%), Qatari (9.1%) and Bahraini banks (5.9%). UAE (- 8.2%), Kuwaiti (-0.9%) and Lebanese banks (-2.4%) reported lower earnings. Core Buy Portfolio Company Ticker UNB UH Price Target AED 4.7 Upside (%) 49.7 Company Ticker BKMB OM Price Target OMR 0.81 Upside (%) 46.7 Company Ticker CBD UH Price Target AED 4.2 Upside (%) 45.3 Company Ticker QNBK QD Price Target QAR Upside (%) 44.7 Company Ticker FGB UH Price Target AED 13.9 Upside (%) 41.2 Company Ticker AAAL AB Price Target SAR 37.3 Upside (%) 38.5 Company Ticker SAMBA AB Price Target SAR 64.7 Upside (%) 38.2 Company Ticker COMI EY Price Target EGP 44.2 Upside (%) 34.4 Company Ticker CIEB EY Price Target EGP 15.5 Upside (%) 28.2 Company Ticker BURG KK Price Target KWD 0.6 Upside (%) 14.7 Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice.

2 Table of Contents Core Portfolio performance... 3 KSA : positive stance UAE : Be selective Qatar : Play QNB Egyptian : Plenty of upside left in COMI & CIEB Lebanese : Not investable now Kuwaiti : Avoid, with one exception: Burgan Omani : Play Bank Muscat Bahrain : Better value elsewhere Insurance: Very disappointing Q2, improvements still uncertain Commercial International Bank National Societe Generale Bank Credit Agricole Egypt Qatar National Bank Albilad Bank Al Rajhi Bank National Bank of Kuwait Bank Muscat MedGulf Insurance Qatar Insurance Company Salama Insurance Tawuniya Insurance Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 2

3 Exhibit 1: Core Buy Portfolio Performance Core Portfolio performance The Core Buy portfolio has generated a positive return of 9.6% vs. a performance of the S&P Arabia of (0.13%), resulting in a relative outperformance of 9.74%. The largest positive contribution came from CIB and CAE. CAE and COMI increased substantially on the back of a perceived improvement in the Egyptian political situation, the election of a new president and the renewed (M&A) interest of GCC countries in Egypt. We believe foreign investors still have to step in and could provide a further boost for the shares. We are also less concerned about the macro picture. We argue that a strong devaluation is unlikely given the potential social unrest (8 of food is imported), the potential impact on interest rates (every 1% hike in interest increases the deficit by 0.6% within 12 months), while a fiscal deficit of c. 1 is consistent with a stable net debt/gdp ratio. We expect funds from the Middle East and IMF, in addition to a credible fiscal consolidation to stabilize the current account. Burgan Bank is our second best performer, and still offers substantial value and stronger growth (supported by the Tekfen acquisition). FGB and UNB performed well, helped by lower impact of new retail banking regulation in UAE and investors hunting deep value. We expect UNB to increase its pay-out and further increase its net interest margins, which should allow it to absorb a higher cost of risk. Bank Muscat worked against us, due to the rights issue, and now shows the second highest upside in the sector. We very positive on the macro outlook of Oman, which a very balanced growth, strong loan growth related to projects, growth in Islamic finance, partly offset by continued margin pressure in retail, and relatively below average returns. Bank Curr TP Upside YTD Initiation Investment case CBD AED % % Share buy-back of potentially 35% of market cap FGB AED % 28.03% 10.44% Good entry point after pull back due to impatience on buy back UNB AED % 8.65% 8.62% Offers deepest value, higher NIMs absorbing higher loan losses QNB QAR % (2.3) --% Best LT growth, strong RORWA & capital, acquisitions unlocking value CAE EGP % 54.53% 34.15% Take-over target, positive outlook FY12 after transitional FY11 CIB EGP % 79.68% 28.54% Growing when others do not, helped by higher NIMs, and very low valuation Al Rajhi SAR % 5.76% 0.68% Best geared to benefit from retail growth, strong RORWA to be maintained SHB SAR % 8.72% (1.1) Very cheap, potential to cut C/I, new potential core shareholder a positive catalyst Muscat OMR (14.53%) (4.19%) Two capital increases should bolster its growth outlook, cheap entry point Burgan KWD % 14.95% 25.3 Best Kuwait growth story. Tekfen could add 12% to EPS and 3% to loan growth CAGR Salama AED % 22.14% (0.29%) Deep value. RoE to improve due to growing GWP, improve underwriting margins & yields Average 36% 19.15% 9.61% S&P Arabia 4.98% (0.13%) Outperformance 14.17% 9.74% Source: Bloomberg, Company Data, Arqaam Capital Research The Avoid portfolio has generated a negative return of -2.77% vs. a performance of the S&P Arabia of -0.13%, resulting in a positive contribution from our Sells of 2.52%. The largest positive contribution came from Medgulf (on very disappointing claims in Q2 12), Shuaa (due to ongoing operational losses) and Mashreq (due to its unjustified valuation premium), while BJAZ and EGB (renewed M&A speculation after QNB doing a due diligence of NSGB) worked Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 3

4 NSGB CIEB COMI HDBK BURG TAMWEEL EGBE SALAMA ENBD FGB ALBI HRHO BJAZ UNB ADCB ADIB CBQK QIIK ALINMA KCBK CBD DIB MARK QNBK QIBK DFM NBAD RAKBANK AAAL BOUBYAN RJHI KFIN BOB BKMB SAMBA DHBK RIBL ARNB SIBC BLOM OIBB GBK QATI BYB BKSB SABB AUDI NBK MEDGULF AUB TAWUNIYA BSFR SHUAA MASQ September Exhibit 2: Avoid Portfolio Performance against us. We continue to keep both in our Avoid portfolio, as we expect an earnings dilutive capital increase for BJAZ, while for EGB we cannot justify its M&A premium. However, EGB significantly underperformed CIB and CAE. Boubyan did not perform despite the bid from NBK, and after acquiring 57% of the shares, we see downside risk, as the M&A support has effectively disappeared. Bank Curr TP Upside YTD Initiation Investment case DIB AED 1.75 (1) 0.52% 2.63% Substantial hidden losses on associates, real estate, provisions and fair value reserves MASQ AED % --% (21.42%) Unjustified premium, below average fundamentals Khaliji QAR 14.1 (19%) 2.56% 0.99% Low quality of earnings EGB USD 1.16 (32%) 11.18% 13.33% Unjustified M&A premium BOB USD 10.5 (45%) (2.06%) --% Weakest capital base of sector due to high reliance on preference shares BJAZ SAR 22.0 (2) Sector-worst returns and asset quality HBMO OMR 0.22 (1%) (21.17%) (6.44%) Merger synergies fully factored in its valuation Boubyan KWD 0.29 (52%) 3.39% (1.64%) Valuation artificially high KFH KWD 0.60 (13%) (18.4) (5.48%) Capital gains should come down Gulf Bank KWD 0.34 (14%) (18.68%) (3.66%) Valuation fully reflects earnings recovery MedGulf SAR 19.3 (26%) (5.0) (11.49%) Exposed to higher claims in medical, expensive and high capitalized goodwill Shuaa AED 0.63 (1%) 11.82% (9.43%) Break-up unlikely and upside too low to play this scenario. DFM AED 0.74 (23%) 15.0 (2.26%) Only option value Average (18%) 3.37% (2.68%) S&P Arabia 4.98% (0.13%) Outperformance 1.61% 2.55% Total alpha (Core Buy & Core Sells) 15.78% 12.29% Our Buys of our entire coverage across MENA financials have performed well (+10.7%). Our Holds gave a negative return of -5.9%, while our average Sell recommendation gave a negative return of -1.9% since our initiation (23 May 2012). Exhibit 3: performance since initiation Core buy in green Core sell in red NSGB was the strongest performer in our universe, followed by CAE and CIB. We missed NSGB as we saw CAE as a more likely take-over candidate, as the bank is smaller in size and the capital position of Credit Agriciole SA, the parent company of Credit Agricole Egypt, is a lot tighter as compared to SocGen, the parent company of NSGB. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 4

5 RAKBANK NBAD UNB BKMB CBD QNBK BLOM FGB RIBL AAAL SAMBA ARNB COMI AUDI TAMWEEL RJHI CIEB ALBI SIBC MASQ AUB SABB BSFR NBK BURG ALINMA BKSB ENBD QIBK DHBK CBQK ADCB QIIK MARK NSGB HDBK HBMO BYB DIB ADIB KFIN GBK BJAZ KCBK EGBE BOB BOUBYAN September Exhibit 4: 6 Target Price vs. Current Market Price Source: Bloomberg, Arqaam Capital Research RAK now shows the highest upside in our universe, followed by BMBK, NBAD and UNB. We do not play RAKbank as we remain wary of future retail regulation, while we shy away from Lebanon due to the spillover effects of Syria, while NBAD s growth strategy could be severely impacted by new regulation capping single party exposures. We see the largest downside in Boubyan (the valuation support of NBK has fallen away, and the stock is trading over 4x P/tNAV12e), BOB (very tight capital position), EGBE (unjustified M&A premium), KCBK (investment income unsustainable) and BJAZ (upcoming dilutive capital increase). Exhibit 5: Core buy portfolio performance since initiation Exhibit 6: Core sell portfolio performance since initiation % 5.8% 1.4% 0. May Jun Jul Aug Sep -2.2% 0.5% % % % % % 0. May Jun Jul Aug Sep -1.3% -2.9% -2.8% -4.2% Core Buy S&P Arab Index Core Sell S&P Arab Index Source: Company Data, Bloomberg, Arqaam Capital Research Source: Company Data, Bloomberg, Arqaam Capital Research Egypt doing best: The consolidated profits of the MENA financials increased 3.8% y/y and 1.2% sequentially. The largest y/y increase was achieved by the Egyptian banks (44.4%), helped by stronger margins, followed by Omani (+18.9%), KSA (10.9%), Qatari (9.1%) and Bahraini banks Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 5

6 KFIN BJAZ ALBI EGB ALINMA CAE CIB BKSB SHB BKMB NSGB QNBK Rakbank FGB RJHI MASQ UNB BOUBYAN RIBL KCBK HBMO SABB CBQK AUB SIBC BOB SAMBA DHBK ANB BURG ADIB MARK NBAD AUDI QIIK BLOM BSFR DIB QIBK ENBD CBD BYB QIC Tamweel Salama GBK NBK ADCB Tawuniya MedGulf September (5.9%). UAE (-8.2%), Kuwaiti (-0.9%) and Lebanese banks (-2.4%) reported lower earnings, for the latter two due to higher loan loss charges, while for UAE this was caused by exceptional items in Q2 11 for ADCB & ENBD (excluding these two banks, net earnings would have increased 5.4% y/y). Without those, the consolidated group profits of our financials coverage would have increased 8.3% and 1.6% respectively. The sequential earnings growth was 1.2%. The largest q/q increase was Egypt again (12.2%), Oman (+9.3%), Bahrain (8.5%), KSA (3.7%), Qatar (3.3%), UAE (2.3% (without ENBD & ADCB 4.7%)). Lebanon s earnings were virtually flat (0.9% vs Q1 12), while the Kuwaiti banks were very disappointing due to general provisions (-24.6% vs. Q1 12). Exhibit 7: Consolidated Net Income by Company y/y q/q Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 6

7 Exhibit 8: Consolidated Net Income by Country Egypt Oman KSA Qatar Bahrain Lebanon Kuwait UAE Insurance Sector y/y q/q Changes to our Core Buy portfolio: We have penciled in a higher net interest margin compression due to the increased rivalry in the retail segment, particularly affecting Al Rajhi, which has 6 of its loans in this segment, and we remove Al Rajhi from our Core Buy portfolio, given the lower upside. We include Samba as a Core Buy after slightly exceeding our forecasts, and maintaining its net interest margins. Samba s net interest margin has come to an end (at least on a sequential basis) and the bank is actively re-leveraging its balance sheet. We remove 2 stocks from our Avoid portfolio: Mashreq and Shuaa Mashreq fell substantially, while we have increase our forecasts for the stock post a strong Q2 12. We also remove Shuaa from our Avoid portfolio after a fall of 15%. At the current valuation, potentially renewed talk could re-emerge, though we view a break-up still unlikely. We calculate a break-up value of AED 1.11 per share. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 7

8 Exhibit 9: Breakup value for Shuaa shows significant upside Item Value Comments Total equity 1,140,939 Goodwill 34,111 NAV 1,106,828 Adjustments third party investments 0 Adjustments investments 0 Adjustment Gulf Finance House 64, x bv (12% equity allocation) Adjustment for asset management 35, % of AuM Adjustment for stock listing 10,000 Redemption staff -34,546 3 months salaries 222 staff Adjustment for net debt 0 Total break-up value 1,182,222 Shares outstanding 1,065,000 Value per share 1.11 Islamic Portfolio We also introduce our portfolios comprising solely of Sharia compliant banks. We include Tamweel, QIB, Albilad, Alinma and Al Rajhi as Core Buys, while we highlight DIB, ADIB, BJAZ, Boubyan and QIIB as the least attractive Islamic banks. Exhibit 10: Islamic portfolio Bank Curr TP Upside FY 13e P/E FY 12e P/tNAV YTD Investment case TAMWEEL AED % 12.5x 0.5x 90.7% Very low valuation, best geared towards improving sukuk market and real estate market QIB QAR % 10.8x 1.6x (8.3%) Impressive loan growth, strong capital base Albilad SAR % 11.3x 2.0x 36. Strong fee generation, coupled with strong commercial momentum and margins Alinma SAR % 21.5x 1.2x 41.7% Burgeoning bank with ample capital to grow Al Rajhi SAR % 12.3x 3.1x 6.5% Best geared to benefit from retail growth, strong RORWA to be maintained Average 21% % Short Islamic Portfolio Bank Curr TP Upside FY 13e P/E FY 12e P/tNAV YTD Investment case DIB AED 1.75 (1) 8.0x 0.8x (2.6%) Substantial hidden losses on associates, real estate, provisions and fair value reserves ADIB AED 2.87 (13%) 7.1x 1.1x (1.9%) Unjustified premium, below average fundamentals BJAZ SAR 22.8 (17%) 14.7x 1.5x 50.4% Sector-worst returns and asset quality Boubyan KWD 0.29 (52%) 40.8x 4.1x 3.4% Valuation artificially high QIIB KWD % 11.9x 1.6x (7.5%) Worst quality of earnings among islamic banks in Qatar, to be impacted by normalization of capital gains Average (18%) % Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 8

9 Buys: Al Rajhi Blue chip bank with strong returns (RORWA), high commercial momentum, coupled with a strong capital and liquidity base. Margin compression is concern, and we have increased NIM compression due to the retail exposure, but performance continues to be impressive. TP of SAR 94.9 with upside of 29%. Bank is trading at a P/E13e of 12.3x and P/tNAV12e of 3.1x and has an ROTE12e of 23.8% and RORWA of c. 4%. We removed it from our Core Portfolio, but we include it in the Sharia compliant portfolio given the smaller universe. Albilad Improving Islamic banks, with highest returns among KSA banks and impressive lending growth of 3 in FY 12e. Strong growth prospects, ample capital and liquidity. TP of SAR 36.0 offers 21% upside. Bank is trading at a P/E13e of 11.3x and a P/tNAV12e of 2.1x and has an ROTE12e of 16.5%. Alinma Youngest bank in KSA with high growth potential given ample capital reserves. We estimate 39% FY 12e net lending growth with pristine asset quality. TP of SAR 15.4 offers 12.3% upside. Bank is trading at a P/E13e 33.5x and P/tNAV of 1.3x and has an ROTE12e of 5.6%, but the bank has substantial surplus capital and deploying it at solid returns should unlock value. Tamweel Tamweel is most geared towards an improving real estate market. It reported an increase of 10-15% in sales price over the last 18 months. Higher selling prices have a direct effect on LGD and an indirect effect on NPLs. We use an average NPL of 19.2% (vs. 1 YE 2011) and a loss given default of 45%. A fall of 1% in NPLs increases our TP by 2.6% and a fall in LGD of 10pp increases our TP by 11.3%. Tamweel could benefit from lower funding costs depending on successful placements of Sukuks. Demand for Sukuks could triple between , outstripping supply (E&Y study). RoE could be boosted by an increasing leverage. Tamweel has the lowest leverage in UAE, with a CET1 of >2 even when risk-weighting the real estate investment book at 125 (i.e. 10 equity allocation for the real estate investment). Our TP of AED 1.7 (just 0.7 P/tNAV) offers 39% upside. The stock is the cheapest within UAE banking sector in terms of P/tNAV after the re-rating of UNB. QIB Impressive loan growth in Q2 12A, much stronger than expected and capturing most of the growth in Qatar. We expect higher NIMs and fees, along with lower provisioning after removing the Arcapita exposure. We expect QIB to regain market share and has ample capital to do so. TP of QAR 85.7, offering an 11% upside. Bank is trading at a P/E13e of 10.8x and P/tNAV of 1.6x and has an ROTE12e of 14.2%. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 9

10 Avoids: DIB Large hidden losses from (1) valuation from associates (though they have increased y-t-d), 2) aggressive valuation of Tamweel, 3) real estate portfolio not fully impaired 4) fair value losses not deducted from capital ratios Severe asset quality concerns due to high exposure to commercial real estate and low preprovisioning earnings capacity Low P/tNAV of 0.7 fully warranted due to tight capital and hidden losses ADIB Weakest capital base in UAE under Basel III:(1) low capital base (2) high reliance on Tier-1 debt and 3) dividends not deducted from capital ADIB plans to rebuild capital ratios, but that should go at the expense of its growth. Average return bank, valuation not fully reflecting the low capital base. BJAZ Low returns and weak asset quality Capital increase of 1 anticipated, diluting EPS High growth already reflected in its valuation Boubyan Strong fundamentals (growth, capital, returns) RORWA to improve, strong EPS growth However, Boubyan is the most expensive stock in our universe, while valuation support from NBK has disappeared after NBK acquired 58% of the shares. QIIB NIM compression continues unabated, strong liquidity negatively affects NIMs, and we have cut our EPS forecasts significantly. Highest real estate exposure and high concentration risk Fully valued at P/E13e of 11.9x and P/tNAV12e of 1.6x. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 10

11 Exhibit 11: Composition of Tier 1 (Basel III FY 13e) Tier-1 (Basel 3) (Preference (Subordinated (Associates) Associates already Current year (Dividends) Intangibles Allowed CET1 shares) debt) deducted earnings minorities Audi 11.9% 1.2% % 0.2% % Blom 12.9% 1.2% % Byblos 13.9% 3.1% % 0.4% % BOB 12.9% 6.3% % 0.2% % Lebanon 12.9% % 0.1% 0.3% 0.1% QNB 23.8% % 1.9% % Doha 11.2% % QIB % 2.5% CBQ 13.2% % 2.8% % MARK 15.1% % 1.1% % Khaliji 15.6% % QIIB 18.8% % 0.4% % % Qatar % 1.3% 0.4% 0.4% % NBK 20.3% % 4.9% % Burgan 13.9% % GBK 14.8% % KFH 11.7% % 0.6% % Boubyan 21.5% % 1.2% % % Kuwait 16.5% % 1.3% % % Muscat 12.2% % 0.8% 0.5% Sohar 9.3% % OIB 13.3% % Oman 11.3% % 0.3% 0.2% % CIB 12.9% % % 0.9% 0.5% 0.1% 14.8% CAE 10.6% % % NSGB 12.7% % % HDB 15.5% % 4.1% 1.6% 0.7% % EGB 18.7% % % % Egypt 14.1% % 0.8% % 0.1% % ADCB 14.5% % 0.1% % % ADIB 12.8% % 1.1% % % NBAD 14.7% % % % FGB 17.7% % 0.3% % % UNB 15.8% % % % ENBD 12.8% % % % DIB 10.5% % % % CBD 17.1% Mashreq 15.9% % % Rakbank 23.2% % % Tamweel 22.9% % % UAE 16.2% % 0.2% % % SAMBA % % RIYAD 13.7% % 0.1% 1.6% 0.5% % ALRAJHI 14.8% % % BSFR 14.2% % 0.1% % % SABB 12.4% % 0.2% 1.9% 0.4% % ANB % 0.2% % SHB 12.3% % SIB 17.8% % % ALBILAD 15.6% % 0.3% BJAZ 13.1% % % ALINMA 24.8% % KSA 15.3% % 0.1% 0.9% 0.4% % AUB 11.3% 0.5% % 1.3% 1.7% 0.6% % Bahrain 11.3% 0.5% % 1.3% 1.7% 0.6% % Source: Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 11

12 QNB to acquire NSGB: attractive financial impact QNB has recently expressed an interest in NSGB. The discussions between SocGen and QNB are preliminary and there can be no certainty as to whether an agreement will be reached, and the potential deal is currently subject to due diligence. NSGB had previously denied that SocGen would be willing to sell, but SocGen never ruled out a sale. We assign a probability of a deal at well above 5. We expect an attractive ROI of 12% & QNB's EPS would increase 6.3%, with a manageable negative impact on CET1 of -5.9% & Tier-1 of -6.2% if executed at 31.8 (price as of takeover news) which valued NSGB at a P/E 13e of 8.2x and P/tNAV 1.7x leaving QNB s CET1 at a still solid 16.5%. This would imply that QNB is to buy listed shares (23%), given Egyptian take-over regulation (enforced by EFSA), and hence minority shareholders could reap additional benefits. QNB might even pay at yesterday s closing price of EGP 39.9x, which has surged 26% since takeover news. We believe this should be considered an extremely full price (P/E 13e of 11.2 and P/tNAV12e of 2.13x vs. RoTE of 2). QNB has shown to have a very disciplined approach on M&A opportunities, it has previously shied away from acquiring Denizbank and we believe this could be the ceiling QNB could be willing to pay. We do, however, add a 1 takeover/control premium to our old TP. We expect the deal should unlock value for QNB, as the market does not value QNB's surplus capital base. The news also supports our very positive view on Egypt. With QNB s potential acquisition, QNB acquires a strong foothold in Egypt, the most promising market for the next few decades in financial services in the MENA region. QNB can increase NSGB s growth by allocating more capital or reducing dividends, as SocGen was constrained by its capital position. The sale of NSGB should bolster the capital ratios of SocGen and reduce its capital deficit. SocGen is also in the process of selling its Greek subsidiary, as is Credit Agricole. Exhibit 12: M&A scenario at 31.8 at 39.9 QNB Acquisition of NSGB FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e EPS: old (QAR) EPS: new (QAR) Change 6.4% 6.3% 7.2% 5.1% 5.2% 6.1% Return on investment (earnin 11.2% 12.1% % 9.6% 11.2% Tier-1 ratio: old 21.9% 22.2% 21.7% 21.9% 22.2% 21.7% Tier-1 ratio: new 16.1% 16.8% 16.8% % 16.1% Net impact on T1 from the ac (5.9%) (5.4%) (4.8%) (6.9%) (6.2%) (5.6%) CET1 ratio: old 21.4% 21.5% 21.4% 21.4% 21.5% 21.4% CET1 ratio: new 15.8% 16.5% 16.8% 14.8% 15.6% 16. Net impact on CET1 from the (5.6%) (5.) (4.6%) (6.6%) (5.9%) (5.3%) tnav: old tnav: new Net impact on tnav (7.4%) (5.3%) (3.4%) (12.) (9.3%) (7.) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 12

13 KSA : positive stance We are generally positive on KSA with an average upside of 27%. The sector is trading at a P/E13e of 10.8x and a P/tNAV12e of 1.6x. The sector has decent returns, with a ROTE12e of 13.3%, in addition to ample capital and liquidity. We generally revised our lending assumptions upwards slightly, following very strong sector growth in H1 12A coming in at 10. y-t-d and 15.6% y/y, mainly driven by an increase in private sector lending. We see a significant amount of margin contraction in the sector as competition increases in the retail space primarily. Al Rajhi is the most affected, while other banks, like Albilad and Samba, are able to offset the margin compression by significantly increased net lending (increasing the loan/deposit ratio). We prefer to play the sector through SHB, which continues to trade at very attractive multiples while performing very well this year. We continue to believe that a new potential core shareholder would be a positive catalyst. Moreover, we remove RJHI from our core portfolio, and include Samba as the latter s NIM compression seems to have abated and the bank is re-leveraging, putting it in a good position to grow further. We choose to continue to avoid BJAZ as earnings have continued to disappoint and we expect a dilutive capital hike. Exhibit 13: KSA valuation summary Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e ANB BUY 6,403 SAR 24, Al Rajhi BUY 29,399 SAR 110, BSFR HOLD 7,666 SAR 28, Riyad BUY 9,280 SAR 34, Samba BUY 11,304 SAR 42, SABB HOLD 8,506 SAR 31, SHB BUY 2,858 SAR 10, Albilad BUY 2,376 SAR 8, Aljazeera SELL 2,232 SAR 8, (17.3) SIB BUY 2,398 SAR 8, Alinma HOLD 5,520 SAR 20, KSA banks 87, , We revise our EPS estimates for KSA banks following the Q2 results. We increase our FY 12e EPS estimates for ARNB, RJHI, ALBI, BJAZ, and Alinma; while we cut our estimates for BSFR and RIBL. We maintain our recommendations for all banks except Albilad, which we upgrade from Hold to Buy, and we have increased our EPS estimates reflecting the stronger fee generation and higher loan growth. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 13

14 Exhibit 14: KSA EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons ARNB (1.4%) % (2.3%) No significant changes RJHI (5.6%) % (1.4%) (4.) Lower margins on new retail book BSFR (9.4%) (3.1%) (0.) (0.3%) Lower NII and fee generation, coupled with higher cost of equity RIBL (2.) (0.2%) (1.5%) (0.9%) No significant changes SAMBA (1.5%) (2.) (1.6%) (2.5%) Conservative loan loss charges, higher than expected SABB (0.2%) (0.3%) Higher operating profits offset by higher provisioning AAAL (2.7%) (1.9%) (3.) (1.1%) No significant changes ALBI % % % % Earnings beat on the back of higher fee generation and margins BJAZ % % % % Negative earnings surprise as a result of higher costs and provisioning charges SIBC (0.9%) (8.6%) (2.2%) (1.2%) Higher loan loss charges ALINMA (0.) % % (0.1%) No significant changes The KSA banking sector growth exceeded our forecasts. All 11 KSA banks exhibited continued growth with aggregate net profit growing 3.7% q/q and 10.9% y/y, slightly ahead of our estimates (1.7% above). SHB, ANB, Samba and SIBC exceeded our forecasts, while BJAZ, RJHI, SABB and BSFR came in below our forecasts. RJHI came in slightly below our estimates (3.6%) due to lower than expected NII, though ahead of consensus, while SHB surprised positively (13.6% ahead). ANB and SAMBA, both buys, came in above our estimates, while RIBL was in line. Our core sell, BJAZ, came in at 11.7% below estimates. Loans and deposits increased 4.3% q/q, more or less in line with our estimates. However, lending growth outpaced deposits over the past year; 15.6% vs. 10.7% respectively, taking the sector L/D ratio from 79% to 82%, reducing some of the excess liquidity and improving the NIM outlook. On the other hand, Alinma s growth in deposits was very impressive and it has addressed part of its weak liquidity profile. Exhibit 15: Earnings Summary Results (SAR) q/q (%) y/y (%) vs AC est (%) NII (mn) Rev (mn) NP (mn) Loans (bn) Deposits (bn) NII Rev NP Loans Deposits NII Rev NP Loans Deposits NII Rev NP Loans Deposits SHB ANB , SAMBA 1, , , (2.8) (3.0) (0.4) RJHI 2, , , (0.0) (3.2) (1.0) (3.6) 1.5 (2.5) SABB , ALINMA SIBC (8.6) (5.1) (1.4) 5.7 (2.2) RIBL 1, , (1.7) 7.6 (1.0) (1.0) (4.3) BSFR , (4.0) (2.1) (0.6) 1.8 (5.2) 1.3 (4.4) ALBI (1.8) (2.2) BJAZ (4.2) (9.8) (11.7) Sector 8, , , (1.1) Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 14

15 ANB SIBC BJAZ SHB SABB ALINMA SAMBA ALBI BSFR RIBL RJHI ALINMA BJAZ ANB SHB SIBC SABB SAMBA ALBI RJHI RIBL BSFR ALINMA ALBI RJHI BJAZ SHB BSFR SABB SAMBA ALINMA ALBI BJAZ SHB SABB ANB RJHI BSFR SAMBA SIBC RIBL ANB RIBL SIBC ALBI ALINMA RIBL ANB SABB SHB BJAZ BSFR SAMBA RJHI SIBC ALINMA BJAZ ALBI RIBL RJHI SHB BSFR ANB SAMBA SABB SIBC September Exhibit 16: Net Interest Income: Margin pressure offset by lending increase for most banks Exhibit 17: Operating Income still strong on the back of strong brokerage activity y/y q/q 15% 1 5% -5% -1 vs. AC est. Exhibit 18: Lending growth highest for Islamic banks Exhibit 19: Deposits growing in-line with loans 35% 3 25% 2 15% 1 5% -5% % 6% 4% 2% -2% -4% y/y ytd q/q 12% 1 8% 6% 4% 2% -2% -4% -6% y/y q/q vs. AC est. vs. AC est. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 15

16 SHB ANB SIBC ALBI SAMBA ALINMA RIBL RJHI BSFR SABB BJAZ BJAZ ALBI ALINMA SHB RJHI RIBL SABB SIBC SAMBA ANB BSFR September Exhibit 20: Net profit growth highest for the Islamic and our top picks y/y q/q 15% 1 5% -5% -1-15% vs. AC est. Exhibit 21: SAMBA deviation table Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII 1, , , ,133.4 (3.0) Total Revenues 1, , ,796.2 (2.8) 1, Operating Costs (5.4) Pre-provision operating income 1, , ,282.2 (4.9) 1, Loan Loss Provisions (55.8) Net Profit 1, , , , Exhibit 22: RJHI deviation table Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII 2, ,421.3 (3.2) 2, , Total Revenues 3, ,462.8 (1.0) 3,427.4 (0.0) 3, Operating Costs Pre-provision operating income 2, , ,478.1 (0.3) 2, Loan Loss Provisions (19.7) (18.9) Net Profit 2, ,171.7 (3.6) 2, , Cost to Income 3 29% 29% 32% Net Interest Margin 4.66% 4.62% % Annualised charge % loans 0.25% 0.41% 0.59% 0.05% Loan to Deposit 68% 66% 66% 59% Net Loans Deposits (0.4) Annualized ROE 15.9% Annualized ROA 2.3% EPS Cost to Income 28% 29% 28% 28% Net Interest Margin 6.05% 6.22% 6.37% 7.13% Annualised charge % loans 0.96% 0.78% 1.23% 1.09% Loan to Deposit 85% 82% 82% 77% Net Loans Deposits (2.5) (0.1) Annualized ROE 6.2% Annualized ROA 6.2% EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 16

17 Exhibit 23: SABB deviation table Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII Total Revenues 1, , , , Operating Costs (3.8) Pre-provision operating income (6.6) Loan Loss Provisions (35.3) (8.7) Net Profit (5.3) Exhibit 24: ALINMA deviation table Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII Total Revenues Operating Costs Pre-provision operating income (23.9) Loan Loss Provisions (72.3) ,238.9 Net Profit Cost to Income 28% 31% 31% 3 Net Interest Margin 3.56% 3.43% 3.52% 3.84% Annualised charge % loans 0.49% 0.31% 0.16% 0.61% Loan to Deposit 81% 81% 82% 82% Net Loans Deposits Annualized ROE 20.3% Annualized ROA 2.5% EPS Cost to Income 47% 55% 64% 65% Net Interest Margin % % Annualised charge % loans % 0.24% 0.08% Loan to Deposit 116% 128% 129% 152% Net Loans Deposits Annualized ROE 4.4% Annualized ROA 2.4% EPS Exhibit 25: RIBL deviation table Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII 1, ,113.9 (1.7) 1, , Total Revenues 1, , , , Operating Costs (0.2) (4.8) Pre-provision operating income 1, ,045.3 (13.6) 1, Loan Loss Provisions (68.8) Net Profit (1.0) Exhibit 26: ALBI deviation table Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII Total Revenues Operating Costs (8.7) Pre-provision operating income (14.8) Loan Loss Provisions (27.5) 65.7 (12.0) Net Profit Cost to Income 34% 38% 37% 41% Net Interest Margin 3.83% 3.83% 3.77% 3.83% Annualised charge % loans 1.34% 0.41% 0.54% 0.31% Loan to Deposit 84% 81% 81% 85% Net Loans (1.0) Deposits (4.3) (1.8) Annualized ROE 11.9% Annualized ROA 2. EPS Cost to Income 52% 54% 51% 61% Net Interest Margin 5.26% 4.98% 5.38% 5.48% Annualised charge % loans 1.43% 1.02% 1.75% 1.54% Loan to Deposit 69% 68% 66% 72% Net Loans (1.8) Deposits (2.2) Annualized ROE 15.3% Annualized ROA 2.1% EPS Exhibit 27: SHB deviation table Reported AC est SAR Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (mn) Rev (mn) NP (mn) Net Interest Margin 3.35% 3.22% 3.31% 3.46% Loans to deposits 84% 84% 84% 81% Net Loans (bn) Deposits (bn) EPS Exhibit 28: ANB deviation table Reported AC est SAR Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (mn) Rev (mn) 1, , , , NP (mn) Net Interest Margin 4.31% 4.03% 4.17% 4.66% Loans to deposits 85% 83% 83% 82% Net Loans (bn) Deposits (bn) EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 17

18 Exhibit 29: SIB deviation table Reported AC est SAR Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (mn) (5.1) Rev (mn) (8.6) (8.6) (1.4) NP (mn) Exhibit 30: ALBI deviation table Reported AC est SAR Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (mn) (0.6) Rev (mn) 1, , , , NP (mn) (5.1) (4.0) (2.1) Net Interest Margin 4.24% 4.05% 4.22% 4.22% Loans to deposits 78% 75% 76% 83% Net Loans (bn) (2.2) Deposits (bn) EPS Net Interest Margin % 3.38% 3.73% Loans to deposits 93% 87% 87% 85% Net Loans (bn) Deposits (bn) (4.4) (3.2) EPS Exhibit 31: BJAZ deviation table Reported AC est SAR Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (mn) Rev (mn) (4.2) NP (mn) (11.7) (9.8) Net Interest Margin 3.69% 3.56% 3.62% 3.5 Loans to deposits 73% 73% 72% 71% Net Loans (bn) Deposits (bn) EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 18

19 UAE : Be selective We are positive on UAE despite a 4.4% YTD rally, as we still observe very compelling valuations (P/E13e of 7.5x, P/tNAV13e of 0.9x, and P/PPP13e of 4.1x and an average dividend yield of 5.6%). We see an average upside potential of 27.8% in the UAE banks under coverage. In the UAE, we play FGB, UNB and CBD and we keep them in our core portfolio on the back of attractive valuation, more than adequate capital positions and attractive earnings outlook; Tamweel is our preferred play in Islamic banks. Exhibit 32: UAE valuation summary Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e ADCB HOLD 5,134 AED 18, ADIB SELL 2,105 AED 7, (12.6) CBD BUY 1,609 AED 5, DIB SELL 2,016 AED 7, (10.3) ENBD HOLD 4,660 AED 17, FGB BUY 8,078 AED 29, NBAD BUY 9,325 AED 34, UNB BUY 2,133 AED 7, Tamweel BUY 362 AED 1, Mashreq HOLD 2,424 AED 8, Rakbank BUY 1,730 AED 6, UAE banks 39, , We revise our EPS estimates for the UAE banks after Q2 12 results. ADCB, MASQ and Rakbank delivered impressive earnings on the back of improved margins driven by better asset yields, improved cost of funding, and lending growth; while CBD and UNB came in line with our expectations. We increased our TP estimate for ADCB from AED 3.0 to AED 3.7 and its EPS on the back of impressive margins driven by improved asset yield accompanied with enhanced cost efficiency. MASQ beats estimates on the back of improved margins driven by better cost of funding management and lower provisioning; we upgrade to stock from core sell to hold and increase its TP from AED 57.0 to AED 62.4 and EPS by an average of 10.1% for the period FY12-14e, helped by wider NIMs. We are positive on Rakbank which has reported positive net profit as its net interest income has been less affected by retail regulation; very attractive stock but remains vulnerable for future regulatory changes. We decrease our EPS estimates for ADIB in FY 14e driven by the banks plans to rebuild Tier 1 to over than 15% from its 13.4% level which in turn will lead to lower loan growth potential. We maintain our recommendations for all the banks except for MASQ, which we upgrade from core sell to hold. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 19

20 Exhibit 33: UAE EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons ADCB % % % % Impressive margins on the back of improved asset yields ADIB % % % (2.4%) Plans to build up capital implying lower loan growth CBD % (1.4%) (1.) (0.1%) No major surprises DIB (0.5%) (1.8%) (2.5%) (3.2%) No significant changes ENBD % % (0.3%) % Higher capital gain and lower than expected provisioning FGB % % (0.7%) (0.9%) No significant changes NBAD % % % % Lower than expected provisioning UNB % % (0.8%) % No significant changes TAMWEEL % (3.9%) % % Dissapointing net interest income and F&Cs MASQ % % % % Beat expectations on the back of improved cost of funding and lower provisioning RAKBANK % % % % New retail regulation biting less hard than expected The UAE banking sector have reported a decent net profit of AED 5,462mn, up by 2.3% q/q but down by -8.2% y/y. The main contributor for the q/q growth was DIB and FGB by 27.7% and 8.8% respectively. Total revenues have increased by 1.6% q/q and 4. y/y mainly driven by ADCB and FGB s growth of 11.7% and 6.3% q/q and 24.4% and 11.6% y/y respectively. The catalyst behind the aggregate revenue growth is the growth in NII of 2.5% q/q and 6.2% y/y. Lending growth have surpassed that of deposits and the aggregate L/D stood at 99.9% in Q2 12A up from 94.8% in Q1 12A and 94.5% in Q2 11A. ADIB and FGB have gained lending market share from ADCB, NBAD and UNB. However, NBAD was the main contributor for the drop in deposits growth as the bank have lost more than expected government deposits which have temporarily parked with the bank in Q1 12A. Margins results have come in mixed as NBAD has witnessed a margin compression on the back of government deposits while ADCB, DIB and MASQ have experienced margin improvements. The provisioning cycle have narrowed down in the UAE banking sector as a whole as the LLP has dropped by -0.3% q/q and -18.4% y/y driven by some normalization in the cost of risk. Efficiency have came in flat as C/I ratio stood at 33.8% with some improvement in DIB, MASQ and FGB but higher C/I for NBAD driven by the bank s strategic domestic and international expansion. Exhibit 34: UAE Results Summary Results (AED mn) q/q (%) y/y (%) vs AC est (%) NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits ADCB UH 1,383 1,769 1, , , (8.6) (0.3) (2.8) (47.4) (45.1) (5.9) 39.8 (2.2) (3.3) ADIB UH ,508 60, (2.4) (7.6) (26.8) (19.3) CBD UH ,918 29, (0.3) 18.1 (7.0) (0.3) (13.3) (0.4) DIB UH ,237 68, (19.3) (5.8) (4.2) (12.1) 1.1 (7.1) (7.3) (34.4) (1.8) Emirates UH 1,639 2,499 1, , ,417 (7.7) (7.0) (8.0) (13.3) (0.1) (5.3) (2.9) (8.1) (2.7) (13.0) (6.4) (13.9) FGB UH 1,350 1,778 1, , , , (2.9) MASQ UH ,611 43, (1.7) (2.0) (10.4) (16.8) (43.4) (15.9) (34.0) (3.6) NBAD UH 1,526 2,071 1, , , , (1.3) (6.7) 0.6 (0.3) (14.5) (1.4) (11.9) (0.2) (1.5) (3.1) (19.3) 2.8 (5.0) (12.8) UNB UH ,302 60, (0.2) (1.8) 3.1 (3.2) (1.4) (5.3) (20.5) (43.0) 33.1 (4.3) (9.0) Tamweel UH ,399 0 (15.7) (24.9) (34.0) (55.8) na (19.8) (16.6) (22.2) 0.0 (33.0) 28.5 na (23.4) (24.6) (33.2) (40.8) (26.3) (0.9) na Rakbank UH ,551 20, (10.5) (22.3) (41.9) Sector 9,314 12,906 8,549 3,049 5, , , (0.7) (3.1) (18.4) (8.2) (16.9) (3.6) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 20

21 ADCB Rakbank ENBD MASQ FGB UNB ADIB CBD NBAD DIB Tamweel Rakbank ADIB ENBD CBD DIB FGB ADCB MASQ UNB NBAD ADIB MASQ FGB Rakbank ENBD DIB CBD Tamweel NBAD ADCB UNB Rakbank ADIB CBD FGB DIB ENBD MASQ ADCB UNB NBAD ADCB Rakbank ENBD MASQ FGB UNB ADIB CBD NBAD DIB Tamweel ADCB MASQ NBAD FGB CBD Rakbank UNB DIB ADIB ENBD Tamweel ADCB FGB Rakbank DIB MASQ NBAD ADIB CBD UNB ENBD Tamweel September Exhibit 35: Net interest income the main catalyst for profitability growth Exhibit 36: Operating Income still strong on interest income growth q/q y/y 2 15% 1 5% -5% -1-15% -2-25% -3 q/q y/y 2 15% 1 5% -5% -1-15% -2-25% -3 vs AC est vs AC est Exhibit 37: FGB increasing lending market share Exhibit 38: Deposits growing less than loans 1 25% 8% 2 6% 4% 2% -2% -4% 15% 1 5% -5% -1-15% -6% -2 q/q y/y q/q y/y % 1 5% 5% -5% -1-15% -2-25% -3-5% -1-15% vs AC est vs AC est Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 21

22 MASQ ENBD ADCB UNB Rakbank DIB ADIB FGB NBAD CBD Tamweel DIB FGB MASQ Rakbank ADIB Tamweel ENBD NBAD UNB CBD ADCB September Exhibit 39: Net profit growth highest for DIB & FGB q/q y/y vs AC est Exhibit 40: ADCB deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % % % Total Revenues % % % Operating cost () 506 6% 560 (4%) Pre-provision operating income % % % Loan loss provision (8%) % 935 (47%) Net Profit (9%) 1335 (45%) Exhibit 41: ADIB deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % Total Revenues % 871 2% 908 (2%) Operating cost % % Pre-provision operating income % 493 3% 551 (8%) Loan loss provision (49%) (27%) Net Profit % 307 5% 315 2% Cost to Income 3 35% 32% 39% Net Interest Margin 3.28% 2.86% 2.79% 2.6 Annualised charge % loans 1.59% 1.66% 0.93% 3.18% Loan to Deposit 111% % 11 Net Loans 123, , , ,430 Deposits 111, , , ,351 Annualized ROE 12.8% Annualized ROA 1.6% EPS 0.13 Cost to Income 43% 43% 43% 4 Net Interest Margin 3.99% 3.93% % Annualised charge % loans % % Loan to Deposit 88% 84% 86% 9 Net Loans 53,508 49,542 49,615 48,128 Deposits 60,546 58,701 57,550 53,192 Annualized ROE 14.7% Annualized ROA 1.7% EPS 0.14 Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 22

23 Exhibit 42: CBD deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 331 3% 339 1% Total Revenues % 466 1% 471 () Operating cost () 135 3% 143 (3%) Pre-provision operating income % 331 () 328 1% Loan loss provision (25%) 89 18% 68 54% Net Profit % 242 (7%) 260 (13%) Exhibit 43: DIB deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 653 1% 629 5% Total Revenues (7%) 903 2% 904 2% Operating cost (7%) 364 (2%) 365 (2%) Pre-provision operating income (7%) 539 5% 539 5% Loan loss provision (37%) 299 (19%) % Net Profit % % 343 (6%) Cost to Income 29% 3 29% 3 Net Interest Margin 3.69% 3.51% 3.64% 3.68% Annualised charge % loans 1.51% 1.48% 1.29% 1.04% Loan to Deposit 96% 95% 97% 93% Net Loans 27,918 27,831 27,565 26,128 Deposits 29,074 29,193 28,343 28,153 Annualized ROE 14.3% Annualized ROA 2.3% EPS 0.11 Cost to Income 39% 39% 4 4 Net Interest Margin 3.12% 3.08% 3.14% 2.73% Annualised charge % loans 1.81% % 1.52% Loan to Deposit 78% 75% 77% 72% Net Loans 53,237 52,435 52,532 55,571 Deposits 68,289 69,516 68,153 77,645 Annualized ROE 12.8% Annualized ROA 1.4% EPS 0.09 Exhibit 44: ENBD deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (6%) 1777 (8%) 1731 (5%) Total Revenues % 2686 (7%) 2574 (3%) Operating cost % 963 (5%) 849 8% Pre-provision operating income % 1723 (8%) 1725 (8%) Loan loss provision % 1101 (13%) 981 (3%) Net Profit % 641 1% 744 (13%) Exhibit 45: FGB deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % % % Total Revenues % % % Operating cost (4%) 326 5% % Pre-provision operating income % % Loan loss provision % % Net Profit % 935 9% % Cost to Income 37% 35% 36% 33% Net Interest Margin % 2.66% 2.57% Annualised charge % loans 1.83% 2.23% 2.16% 2.22% Loan to Deposit 10 97% 98% 88% Net Loans 208, , , ,882 Deposits 208, , , ,513 Annualized ROE 7.4% Annualized ROA 0.9% EPS 0.12 Cost to Income 19% 21% 19% 18% Net Interest Margin 3.63% 3.56% 3.55% 3.64% Annualised charge % loans 1.49% 1.39% 1.58% 1.67% Loan to Deposit 106% 102% 101% 98% Net Loans 110, , ,580 98,598 Deposits 104, , , ,394 Annualized ROE 15.2% Annualized ROA 2.5% EPS 0.34 Exhibit 46: MASQ deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 440 6% 477 (2%) Total Revenues % 937 2% 1069 (1) Operating cost () 456 (1%) 458 (2%) Pre-provision operating income % 481 6% 611 (17%) Loan loss provision (61%) 176 1% 312 (43%) Net Profit % 300 8% Exhibit 47: NBAD deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII () % % Total Revenues (1%) % % Operating cost % 645 9% % Pre-provision operating income (3%) 1384 (1%) 1385 (1%) Loan loss provision (58%) 313 (7%) 331 (12%) Net Profit % % % Cost to Income 47% 49% 49% 43% Net Interest Margin 2.69% 2.56% 2.48% 2.45% Annualised charge % loans 1.78% 2.82% 1.89% 3.28% Loan to Deposit 91% 84% 84% 73% Net Loans 39,611 37,930 37,159 38,095 Deposits 43,677 45,309 44,421 51,942 Annualized ROE 10.1% Annualized ROA 1.7% EPS 1.92 Cost to Income 34% 33% 32% 31% Net Interest Margin 2.28% 2.29% 2.24% 2.56% Annualised charge % loans 0.72% 0.84% 0.77% 0.87% Loan to Deposit 101% 93% 87% 104% Net Loans 162, , , ,957 Deposits 160, , , ,196 Annualized ROE 15.1% Annualized ROA 1.5% EPS 0.27 Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 23

24 Exhibit 48: UNB deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 618 1% 595 5% Total Revenues % 782 () 753 4% Operating cost % 185 5% 180 8% Pre-provision operating income % 597 (2%) 573 2% Loan loss provision (38%) 117 3% 151 (2) Net Profit % 475 (3%) Exhibit 49: TAMWEEL deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (23%) 57 (16%) 60 (2) Total Revenues (25%) 74 (25%) 67 (17%) Operating cost (9%) 26 (7%) 26 (8%) Pre-provision operating income (33%) 49 (34%) 41 (22%) Loan loss provision (48%) 31 (56%) Net Profit (26%) 18 3% 28 (33%) Cost to Income 25% 26% 24% 24% Net Interest Margin 3.11% 3.06% 3.07% 3.0 Annualised charge % loans 0.84% 1.41% % Loan to Deposit 95% 91% 92% 96% Net Loans 57,302 59,851 58,091 56,244 Deposits 60,004 65,929 63,393 58,463 Annualized ROE 13.8% Annualized ROA 2.2% EPS 0.18 Cost to Income 43% 35% 35% 38% Net Interest Margin % 2.31% 2.47% Annualised charge % loans 0.57% 0.96% 1.31% 0.59% Loan to Deposit #DIV/0! #DIV/0! #DIV/0! #DIV/0! Net Loans 9,399 9,488 9,299 7,317 Deposits Annualized ROE 3.3% Annualized ROA 0.7% EPS 0.02 Exhibit 50: RAKBANK deviation table Reported AC est AED mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 538 2% % Total Revenues % 693 3% % Operating cost % 307 4% % Pre-provision operating income % 366 9% Loan loss provision (82%) 60 (1) 70 (22%) Net Profit % 325 6% % Cost to Income 44% 45% 44% 43% Net Interest Margin % 9.58% 8.96% Annualised charge % loans 1.11% 1.96% 1.28% 1.59% Loan to Deposit 96% % 103% Net Loans 19,551 19,067 18,877 17,516 Deposits 20,277 19,147 18,589 17,045 Annualized ROE 27.5% Annualized ROA 5.4% EPS 0.23 Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 24

25 Exhibit 51: Qatar valuation summary Qatar : Play QNB We are positive on Qatar with an average upside of 26%. Qatar banks are trading at a P/E13e of 10.4x and P/tNAV12e of 1.7x which do not fully cater in the country solid returns (high ROTE of 15.1% in FY 12e), ample liquidity, strong double digit loan growth, and relatively exceptional Basel 3 capital position. We think the potential inclusion in MSCI Emerging market indices should be a positive catalyst. We expect continued loan growth of c15% pa, of which 1 stemming from projects, while the public sector should keep outpacing the corporate loan demand. We see continued pressure on margins across the Qatari sector due upward pressure on deposit rates. We see no asset quality issues raised and expect pressure on cost efficiency due to investments in expansionary plans. We still prefer to play growth through QNB only, which is the cheapest Qatari bank that still does not have its excellent capital, strong growth and high return fully priced in. QNB should outpace the sector at the expense of the other banks (especially CBQ and Doha) Company Rating Mkt. Cap. Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e CBQ HOLD 4,893 18, Doha HOLD 3,190 11, QIB HOLD 5,062 18, QNB BUY 25,714 93, MARK HOLD 5,582 20, Khaliji SELL 1,732 6, (20.6) QIIB HOLD 2,129 7, Qatar banks 48, , We revise our EPS estimates for Qatari banks post mixed Q2 results. While QNB and QIB generated much stronger loan growth than expected, capturing most of the growth in Qatar, we were disappointed in the quality of earnings of CBQ, Doha, QIIB and Al Khaliji. We decrease our EPS forecasts for the latter banks as substantial capital gains offsetting NIM contraction and lack of core revenues, would not be sustainable for the long term. We expect CBQ and Doha to lose market share as are both tightly capitalized under Basel III and face capital shortfall by FY 13e. We also decreased our EPS forecasts for MARK mainly due continued pressure on NIM, lower provisioning and non-recurring items in other income. We increase QNB EPS by 1% for FY 12e as higher loan growth was partly offset by pressure on asset yield and slower growth in F&C, and increase QIB EPS by a substantial 31% for FY 12e mainly after removing the provisioning previously triggered on Arcapita exposure which was swapped with Land collateral before the insolvency. We reiterate our recommendations for all the banks except for QIIB, which we downgrade from Buy to Hold, as the bank is severely impacted by lower net interest margins and an anticipated improvement in net interest margins in Q2 12 failed to materialize. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 25

26 Exhibit 52: Qatar EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons CBQK (2.5%) % % (1.) Lower NII and fee generation offset by lower provisioning and unsustainable capital gains DHBK (9.3%) (0.4%) (6.9%) (8.4%) Disappointing loan growth, pressure on NIM and F&C offset by unsustainable capital gains QIBK % % % Lower provisioning (after removing Arcapita exposure), higher loan growth, NII and F&C QNBK % % % Much stronger than expected loan growth MARK (10.1%) (4.8%) (14.1%) (12.9%) Lower than expected NIM, lower costs, non-recurring items in Other income KCBK (1.5%) % (9.5%) (5.2%) Margin contraction, slower loan growth QIIK (12.2%) (9.5%) (13.9%) (13.8%) NIM compression Source: Company Data, Arqaam Capital Qatar banks Q2 earnings results came in 12% ahead of our estimates (+3% q/q, +9% y/y). The highest beat was from QIB due to much lower LLP (we accounted for Arcapita). Doha, CBQ and Al Khaliji reported poor quality of earnings (unsustainable capital gains) while QIIB and MARK were a bit disappointing on NIM (which can be lumpy for Islamic banks). QNB reported the highest quality of earnings although earnings were 1% short. Qatar Loan growth slow downed in June (+2.1% M/M vs. 5% in May and 13.8% Ytd). QNB and QIB captured most of the growth leaving a much smaller share for the other banks. We saw NIM contraction by an average 28bps from a year ago due to pressure on asset yield and funding costs. Cost efficiency weakened across the sector with C/I up to 24% vs. 22% last year, except for some improvement in QIIB and Al Khaliji. Exhibit 53: Earnings Summary NII Rev Results (QAR mn) Op. Profit LLP NP Loans Deposits NII Rev q/q Op. Profit LLP NP Loans Deposits NII Rev y/y Op. Profit LLP NP Loans Deposits NII Rev vs AC est Op. Profit LLP NP Loans Deposits QNBK 2,240 2,794 2, , , ,902 () 1% () 3% 5% 17% 13% 28% 22% 2 59% 17% 56% 25% (1%) (4%) (4%) (11%) (1%) 14% 1 QIIK ,425 18,481 (1%) (15%) (14%) (61%) (6%) 8% 1% (16%) (5%) 2% 17% 1% 13% 8% (19%) (11%) 1% (13%) 2% 4% (1%) DHBK ,667 30,339 (7%) (1%) (7%) 26% (1) (3%) (6%) 5% 3% (1%) 3% 7% 4% (9%) 3% (2%) (16%) (3%) (7%) CBQK ,927 40,556 (3%) 7% 3% (84%) 16% 5% 7% (3%) () (5%) (84%) 7% 1 17% (5%) () (2%) (86%) 17% 1% 2% QIBK ,771 33,445 (2%) (4%) (6%) 2 (1) 12% 12% 23% 16% 19% (1,465%) (9%) 45% 28% 4% 3% 5% (71%) 388% 1 6% MARK (15) ,982 51,191 (2%) (5%) (8%) (164%) 5% 6% 5% 4 (19%) (23%) (121%) 2% 34% 26% (9%) (15%) (17%) (12) 8% 1% (1%) KCBK ,321 12,752 () 12% 16% 1 15% (2%) 6% (13%) (9%) 1% (72%) 8% 34% 28% (4%) 2 6 (8) 97% (7%) 1% Sector 3,988 5,663 4, , , ,666 (2%) (2%) (13%) 3% 12% 9% 16% 9% 9% 19% 9% 4 22% (3%) (2%) (2%) (51%) 12% 8% 6% Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 26

27 Exhibit 54: Net Interest Income: Pressure on asset yields and funding costs across the sector (especially for QIIB, DHB, CBQ and KCBK) % -5% -1-15% -2-25% MARK QNBK QIBK CBQK DHBK KCBK QIIK q/q QIBK QNBK KCBK CBQK DHBK MARK QIIK y/y vs AC est Exhibit 55: Revenues: We are concerned about the low quality of earnings of CBQ, DHB, QIIK and KCBK 25% 2 15% 1 5% -5% -1-15% -2-25% 25% 2 15% 1 5% -5% -1-15% -2 QNBK QIBK DHBK CBQK QIIK KCBK MARK q/q KCBK QIBK DHBK CBQK QNBK QIIK MARK y/y vs AC est Exhibit 56: QNB eating market share particularly at the expense of CBQ and DHB Exhibit 57: Deposit growth generally outpaced by loan growth pushing L/D up for most of Qatari 35% 3 25% 2 15% 1 5% -1 QNBK QIBK MARK KCBK QIIK CBQK DHBK -5% QIBK KCBK MARK QNBK CBQK QIIK DHBK 15% 1 5% -5% -1 q/q QNBK QIBK QIIK CBQK MARK DHBK KCBK y/y 12% 1 8% 6% 4% 2% -2% -4% -6% -8% -1 q/q QNBK QIBK CBQK KCBK MARK QIIK DHBK y/y vs AC est vs AC est Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 27

28 Exhibit 58: Net Interest Income: QIB beat was due to premature provisioning for Arcapita 2 15% 1 5% Exhibit 59: NIM contraction across the sector % % QNBK KCBK CBQK DHBK MARK QIIK QIBK -100 KCBK QIIK QNBK QIBK MARK DHBK CBQK q/q y/y q/q (bps) y/y (bps) QIBK KCBK CBQK MARK QIIK DHBK QNBK -80 QIBK QNBK KCBK CBQK MARK DHBK QIIK vs AC est vs. AC (bps) Exhibit 60: QNB deviation table Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (1%) 2247 () % Total Revenues (4%) % % Operating Costs (4%) 450 7% % Operating Income (4%) 2319 () Loan Loss Provisions (11%) 266 3% % Net Profit (1%) % % Exhibit 61: QIIB deviation table Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (19%) 129 (1%) 153 (16%) Total Revenues (11%) 249 (15%) 224 (5%) Operating Costs (44%) 43 (17%) 51 (29%) Operating Income % 206 (14%) 173 2% Loan Loss Provisions (13%) 30 (61%) 10 17% Net Profit % 176 (6%) 163 1% Cost to Income 17% 17% 16% 16% Net Interest Margin 3.11% 3.21% 3.35% 3.24% Annualised charge % loans 0.46% 0.59% 0.52% 0.45% Loan to Deposit 95% 92% 92% 77% Net Loans 234, , , ,526 Deposits 245, , , ,279 Annualized ROE 20.2% 20.4% Annualized ROA 2.8% 2.8% EPS Cost to Income 17% 27% 17% 23% Net Interest Margin 2.91% % 3.56% Annualised charge % loans % 0.38% 0.4 Loan to Deposit 62% 59% 58% 59% Net Loans 11,425 10,990 10,531 10,122 Deposits 18,481 18,659 18,286 17,067 Annualized ROE 14.6% 14.7% Annualized ROA % EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 28

29 Exhibit 62: DHB deviation table Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (9%) 439 (7%) 435 (6%) Total Revenues % 613 (1%) 580 5% Operating Costs % % Operating Income (2%) 429 (7%) 387 3% Loan Loss Provisions (16%) 37 26% 47 (1%) Net Profit (1) 339 3% Exhibit 63: CBQ deviation table Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (5%) 478 (3%) 477 (3%) Total Revenues () 680 7% 726 () Operating Costs % % % Operating Income (2%) 469 3% 509 (5%) Loan Loss Provisions 8 58 (86%) 51 (84%) 49 (84%) Net Profit % % 509 7% Cost to Income 35% 32% 3 33% Net Interest Margin 3.33% 3.59% 3.67% 3.8 Annualised charge % loans 0.42% 0.64% 0.48% 0.55% Loan to Deposit 98% 94% 94% 95% Net Loans 29,667 30,601 29,543 27,714 Deposits 30,339 32,684 31,365 29,197 Annualized ROE % Annualized ROA 2.9% 2.9% EPS Cost to Income 34% 32% 31% 3 Net Interest Margin % 3.28% 3.38% Annualised charge % loans (0.12%) % 0.35% Loan to Deposit 108% % 115% Net Loans 43,927 43,427 42,011 39,788 Deposits 40,556 39,637 37,856 34,737 Annualized ROE 14.5% 13.6% Annualized ROA 2.8% 2.6% EPS Exhibit 64: QIB deviation table Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 383 (2%) % Total Revenues % 672 (4%) % Operating Costs (2%) 195 1% 180 9% Operating Income % 477 (6%) % Loan Loss Provisions (71%) 85 2 (7) (1,465%) Net Profit % 388 (1) 382 (9%) Exhibit 65: MARK deviation table Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (9%) 239 (2%) Total Revenues (15%) 460 (5%) 536 (19%) Operating Costs (4%) 82 6% 84 3% Operating Income (17%) 378 (8%) 452 (23%) Loan Loss Provisions (15) 77 (12) 24 (164%) 75 (121%) Net Profit % 353 5% 363 2% Cost to Income 31% 32% 29% 32% Net Interest Margin 4.02% % 3.55% Annualised charge % loans 1.14% % (0.12%) Loan to Deposit 107% 104% 106% 95% Net Loans 35,771 32,574 31,898 24,727 Deposits 33,445 31,457 29,982 26,031 Annualized ROE 13.7% 8.7% Annualized ROA 2.6% 1.7% EPS Cost to Income 2 18% 18% 16% Net Interest Margin 2.31% 2.55% 2.63% 2.2 Annualised charge % loans (0.16%) 0.81% 0.27% 1.06% Loan to Deposit 74% 73% 74% 7 Net Loans 37,982 37,763 35,965 28,331 Deposits 51,191 51,466 48,744 40,626 Annualized ROE 17.4% 16.8% Annualized ROA 2.6% 2.6% EPS Exhibit 66: Al Khaliji deviation table Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (4%) 137 () 156 (13%) Total Revenues % 266 (9%) Operating Costs (15%) 87 7% 118 (21%) Operating Income % 148 1% Loan Loss Provisions 4 20 (8) (72%) Net Profit % % 130 8% Cost to Income 38% 54% 4 44% Net Interest Margin 2.19% % 2.96% Annualised charge % loans 0.14% 0.54% (0.04%) 0.69% Loan to Deposit 89% 96% 96% 85% Net Loans 11,321 12,112 11,557 8,456 Deposits 12,752 12,673 12,067 9,969 Annualized ROE 9.8% 7.3% Annualized ROA % EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 29

30 Egyptian : Plenty of upside left in COMI & CIEB We reiterate on positive stance on Egypt with an average upside of 16%, with even more upside in COMI & CIEB, our Core Buys. The sector trades at a P/E13e of 8.7x with a P/tNAV12e of 1.8x and a decent FY 12e ROTE of 18%. The Egyptian banking sector also commands (along with Lebanon) the strongest liquidity positions. We have increased our TPs on the back of lower macro risk and increased earnings estimates. We are just beginning to see foreign interest in Egypt. We generally revised our margin estimates upwards, following the sequential hike in asset yields in H1 12A coming in at 4.25% vs. 3.55% in H1 11A driven by surging T-bill rates. We reduced our loan growth estimates for CIB following stagnant activity in H1 and lower forecasts on management guidance while we increased CAE s loan and deposit estimates following the bank s strong commercial momentum in H1 12A. We strongly prefer to play Egypt through COMI and CIEB, which are still at c2 earnings discount to the sector post rally. COMI is our top pick in Egypt given its strong and improving fundamentals (stronger margins, cost of risk under control, solid liquidity and capital position and highest RORWA among coverage). We continue to see Credit Agricole Egypt as an eligible take-over target, due to its parent s high capital deficit and the bank s improved fundamentals. We think the M&A premium for EGB is too high, while we see potential for EFG to close the gap to its sum of the parts of EGP16.6. Exhibit 67: Egypt valuation summary Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e CAE BUY 578 EGP 3, CIB BUY 3,293 EGP 20, HDB HOLD 285 EGP 1, (0.3) NSGB HOLD 2,897 EGP 17, EGB SELL 338 USD 2, (31.8) Egypt banks 7,391 45, Source: Company data, Arqaam Capital Research We revise our EPS estimates for Egyptian banks post Q2 results. We increase our FY 12e EPS estimates for CAE, CIB and EGB while we lowered our EPS estimates for NSGB and HDB as we continue to believe the bank is most vulnerable to a deterioration in asset quality (exposure to lower & middle income consumer loans). We reiterate our recommendations for all Egyptian banks, but revise our TP up by an average of 15% on lower cost of capital (reflecting the reduced macro risk) and increase EPS forecasts for some. We add a 1 take-over/control premium to our TP for NSGB as the acquisition could unlock value for QNB and could position the bank for the strong anticipated growth in the Egyptian financial services for the next few decades and ease NSGB s growth potentials given the tight capital position of parent company. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 30

31 Exhibit 68: Egypt EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons CIEB % % Earnings beat fuelled by investment income, decent commercial momentum and rising margins COMI % % % Revised loan estimates down for FY12e but compensated by spiking margins HDBK % (3.3%) (2.8%) (2.9%) Vulnerable to a deterioration in asset quality NSGB % (0.1%) % % Improved cost efficiency but provisions yet to increase EGBE % % % % Higher margins and improved cost efficiency but remains significantly underprovisioned HRHO Qinvest still uncertain, IB continues to be a drag All banks beat our profit estimates with the exception of CIB, who fell 1 short on substantially higher loan loss charges, however the H1 trends remain very satisfactory. Both CAE and NSGB kicked off the quarter beating our estimates: NSGB Q2 profits rose 18% y/y, 25% q/q beating our estimates by 22% on improved cost efficiency and higher trading income while CAE marked a staggering 67% rebound y/y and 13% ahead of our estimates on higher trading and investment income but low quality of earnings. CAE has already beaten our old full year estimates for loans and deposits, while NSGB posts sluggish YTD figures falling short of our expectations. Provisioning came in lower than estimates but remain conservative and on the rise with an annualized 82 bps and 105 bps for CAE and NSGB respectively vs. 53 bps and 86 bps in Q1 12A and our estimates of 88 bps and 124 bps. EGB also posted better than expected results. Exhibit 69: Earnings summary Results (EGP mn) q/q (%) y/y (%) NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits CAE ,848 22, (8.2) (6.4) CIB 932 1, ,771 76, (0.9) (9.8) (3.1) 1.9 NSGB ,889 51, (1.6) (0.1) 7.8 (15.5) 22.5 (0.3) (4.4) EGB ,242 5, (283.0) (40.0) 84.4 (1.4) (42.7) Sector 1,827 2,538 1, ,096 89, , (1.4) 0.7 vs AC est (%) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 31

32 Exhibit 70: Net Interest Income: Margins on a sequential hike 4 35% 3 25% 2 15% 1 5% EGB CIB CAE NSGB y/y q/q 2 15% 1 5% -5% Exhibit 71: Strong revenue growth reverses earnings contraction 4 35% 3 25% 2 15% 1 5% 2 15% 1 5% CAE CIB EGB NSGB y/y q/q -1 EGB CIB NSGB CAE vs AC est -5% EGB CAE NSGB CIB vs AC est Exhibit 72: CAE beats loan growth estimates while CIB falls short of expectations 16% 14% 12% 1 8% 6% 4% 2% -2% -4% CAE CIB NSGB EGB y/y q/q Exhibit 73: Deposits growth outpaces loan growth 3 25% 2 15% 1 5% -5% EGB CIB CAE NSGB y/y q/q 2% 1% 1% -1% -1% -2% -2% -3% -3% -4% EGB CAE NSGB CIB 1 8% 6% 4% 2% -2% -4% -6% CAE EGB CIB NSGB vs AC est vs AC est Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 32

33 Exhibit 74: CAE deviation table Reported AC est EGP mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (8.2%) % % Total Revenues % % % Operating Costs (1.3%) % % Pre-provision operating income % % % Loan Loss Provisions (6.4%) % % Net Profit % % % Exhibit 75: NSGB deviation table Reported AC est EGP mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % % % Total Revenues (0.1%) % % Operating Costs (14.3%) 290 (4.1%) Pre-provision operating income % % % Loan Loss Provisions (15.5%) % % Net Profit % % Cost to Income 45% 5 47% 52% Net Interest Margin 3.98% 4.33% 3.86% 3.44% Annualised charge % loans 0.82% 0.88% 0.53% 1.77% Loan to Deposit 56% 6 61% 54% Net Loans 12,848 12,738 12,636 11,274 Deposits 22,938 21,216 20,699 20,812 Annualized ROE 27.4% 24.3% Annualized ROA 2.1% 1.9% EPS Cost to Income 31% 36% 34% 37% Net Interest Margin 4.18% 4.13% 4.04% 3.4 Annualised charge % loans 1.05% 1.24% 0.86% 0.5 Loan to Deposit 7 67% 66% 67% Net Loans 35,889 36,006 34,683 33,752 Deposits 51,566 53,955 52,384 50,516 Annualized ROE 24.4% 19.9% Annualized ROA 2.9% 2.4% EPS Exhibit 76: CIB deviation table Reported AC est EGP mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % % Total Revenues (0.9%) % % Operating Costs (9.4%) 426 (5.9%) % Pre-provision operating income % % % Loan Loss Provisions % % % Net Profit (9.8%) % % Exhibit 77: EGB deviation table Reported AC est EGP mn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % % % Total Revenues % % % Operating Costs (8.5%) 43 (16.4%) Pre-provision operating income % % Loan Loss Provisions 7 13 (42.7%) -4 (283.) 12 (40.) Net Profit % % Cost to Income 32% 35% 36% 39% Net Interest Margin 4.63% 4.49% 4.37% 3.9 Annualised charge % loans 1.33% 0.75% 0.16% 2.06% Loan to Deposit 53% 56% 54% 55% Net Loans 40,771 42,068 40,053 37,248 Deposits 76,767 75,333 74,220 67,288 Annualized ROE 24.5% Annualized ROA 2.5% Cost to Income 39% 51% 56% 49% Net Interest Margin 4.51% % 3.7 Annualised charge % loans (0.45%) 1.32% Loan to Deposit 54% 57% 56% 71% Net Loans 3,242 3,208 3,113 3,289 Deposits 5,968 5,582 5,554 4,606 Annualized ROE 15.9% Annualized ROA 2.6% Egypt Macro Overview We think the risk of a devaluation has been mitigated by commitments of Qatar to invest USD18bn in Egypt over the next 5 years, boosting GDP by 1.4% pa and reducing the balance of payment deficit by c6. We expect more banks to be interested in inorganic expansion, and we see CAE and the BNP s operations as attractive take-over targets amongst others. Egypt could further balance the balance of payments through: o o o Normalization in tourism. A return in FDIs, helped by a favorable investment climate and influx of capital inflows from the gulf. Return of portfolio investments (particularly when Egypt launches a credible fiscal policy). Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 33

34 Exhibit 78: Economic indicators Macro Forecasts Primary deficit/gdp (3.8%) (4.7%) (5.3%) (4.5%) (4.3%) (5.8%) (5.1%) (2.3%) (1.) (0.2%) 0.3% Total deficit/gdp (9.2%) (7.5%) (7.8%) (6.8%) (7.8%) (9.9%) (10.) (7.8%) (6.6%) (5.3%) (3.8%) Deficit with stable net debt/gdp (10.5%) (13.3%) (11.2%) (9.6%) (9.5%) (8.8%) (8.1%) (10.8%) (10.4%) (10.) (9.1%) Above/below sustainable deficit 1.3% 5.7% 3.5% 2.8% 1.6% (1.1%) (1.9%) % 4.7% 5.3% Nominal GDP growth (%) 14.7% 20.6% 20.2% 16.4% 15.8% 13.7% 11.8% 15.9% 15.7% 15.8% 15.2% Real GDP growth (%) 6.8% 7.1% 7.2% 4.7% 5.1% 1.8% 1.5% 3.3% % 6.5% Net debt/gdp 71% 64% 56% 59% 6 64% 68% 68% 67% 63% 6 Source: IMF We are not too concerned about the fiscal deficit, even though it hits 11% the fiscal year 2011/12. A deficit of 8-1 is already leading to a fall in net debt/gdp ratio if the nominal GDP bounces back as expected. The fiscal deficit is absorbed by the very liquid domestic banking system. Exhibit 79: Egypt Balance of Payment Q1 08A Q2 08A Q3 08A Q4 08A Q1 09A Q2 09A Q3 09A Q4 09A Q1 10A Q2 10A Q3 10A Q4 10A Q1 11A Q2 11A Q3 11A Q4 11A Q1 12A Potential delta Potential Trade Balance (5,521) (6,626) (7,000) (7,628) (4,866) (5,680) (6,254) (5,675) (6,608) (6,583) (7,134) (6,692) (5,543) (5,369) (7,823) (7,775) (7,929) -- (7,929) Services (net) 4,049 4,170 4,060 3,406 2,158 2,878 3,302 2,983 2,478 1,577 2,623 2,961 1,265 1,030 1,622 1, ,376 o/w Suez 1,235 1,409 1,456 1, ,045 1,107 1,155 1,104 1,151 1,254 1,254 1,230 1,316 1,360 1,323 1, ,246 o/w Tourism (net) 1,981 1,868 2,490 1,732 1,525 2,002 2,516 2,175 2,254 2,319 3,021 2,694 1,400 1,361 2,075 1,669 1, ,129 Transfers 2,165 2,945 1,974 2,675 1,790 1,808 2,459 1,903 2,807 3,295 3,205 3,132 2,829 3,971 4,026 4,395 4, ,915 Balance of Current Account (966) (1,547) (918) (994) (493) (790) (1,323) (1,711) (1,306) (599) (999) (369) (2,175) (1,879) (2,339) 700 (1,639) Capital Account (0.2) (0.1) 0.7 (0.9) 0.1 (2.5) (14.0) (2.4) (0.4) (19.4) (7.9) (11.5) (4.8) (8.1) (20.5) (11.8) (46.5) -- (46.5) Financial Account 507 3,933 2,186 (159) (1,347) 704 2, ,877 3,182 1,040 1,797 (4,589) (3,039) 523 (2,902) (1,210) 2,465 1,255 o/w FDIs 3,482 1,985 1,655 2,373 1,211 2,875 1, ,706 2,426 1, (164) (858) o/w Portfolio investments in Egypt 383 (23) (3,485) (3,902) (1,503) (321) 1, , ,900 (1,329) (5,540) (1,582) (1,730) (1,579) (1,260) 2, o/w other investmensts (2,825) 2,702 4,847 1,818 (969) (1,463) 69 (590) (4,401) 145 (6,115) 2,615 1,469 (1,322) 1,955 (349) (505) 465 (40) Overall Balance 1, (1,006) (1,796) (1,035) 2, (6,071) (4,255) (2,356) (5,649) (3,165) 3,165 (0) Source: Egypt Central Bank The recent increases in net international reserves have been fueled by one-offs including; o The first US$ 500 MM tranche of the US$ 2 bn Qatari aid o The Central Bank s sale of US$ 642 MM worth of EUR-denominated T-bills At current levels, net reserves are enough to cover around 3 months of imports. International reserves are expected to stabilize at current rates before increasing again by the end of FY 12e. Exhibit 80: Reserves have drastically fallen vs. FY 10A levels 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Dec 08A Jun 09A Dec 09A Jun 10A Dec 10A Jun 11A Dec 11A Jun 12A 6% 4% 2% -2% -4% -6% -8% -1-12% Net International Reserves Growth (m/m) Source: Egypt Central Bank Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 34

35 Lebanese : Not investable now We avoid Lebanese banks, despite very attractive valuations for Bank Audi and BLOM, as the unrest in Syria could further spill over in Lebanon. Valuations generally remain low but we believe are unlikely to move. We expect a lackluster FY 12e because of higher provisioning. BLOM remains our favorite pick in Lebanon due to its conservative strategy, strong management, cost efficiency, very cheap multiples and resilience under weak economic conditions. We remain negative on BOB, mainly due to the very tight capital base, as its Tier-1 is highly dependent on preference shares. We maintain our recommendations for all banks but slightly decrease our TPs to reflect the increased uncertainty. Exhibit 81: Lebanon valuation summary Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e Audi BUY 1,917 USD 1, BLOM BUY 1,591 USD 1, Byblos HOLD 843 USD (4.1) BOB SELL 959 USD (44.8) Lebanon banks 5,309 5, We revise our estimates down for all Lebanese banks as macro levels remain contingent to troubled Syria and due to unrest in the country. The sector trades at a P/E13e of 5.9x and a P/tNAV12e of 0.61x with a ROTE of 15.8%. We decreased EPS estimates for both BLOM and BYB, following lackluster results and flat earnings. BOB has beaten our estimates on the back of lower loan loss charges, but we now factor in the high amount of dividends on preference shares in our EPS forecasts. Exhibit 82: Lebanon EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons AUDI (21.1%) % % Overestimated gains from sale of insurance BLOM (4.8%) (5.) (4.6%) (4.1%) Lacklustre Fy12e with continued conservative provisioning BYB (6.) % (4.8%) (4.1%) Flat earnings with lower loan growth estimates BOB (0.4%) (23.1%) (20.1%) (16.9%) Massively underprovisioned with lower loan and deposit estimates Subdued profits across sector as the country remains contingent to troubled Syria: Stagnant core profits came in line with our estimates for the sector, flat q/q but down 2.4% y/y pulled by the 17% earnings fall posted by Byblos Bank while BOB topped our coverage exhibiting a 5% increase y/y, 7% ahead of our estimates. Top line figures look better with 6.5% growth y/y: All banks posted revenue growth y/y except Byblos Bank while BOB outcast q/q numbers being the only bank recording positive growth. Margins came in 6 bps higher q/q but 8 bps down y/y falling short of our forecasts by 9 bps. All banks substantially missed our net margin estimates except BLOM (+4 bps vs AC estimates). No major surprises for Bank Audi as the sale of insurance inflated the second quarter earnings. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 35

36 Stagnant loan and deposit growth in line with estimates: Loans increased 3.8% YTD, 2.8% q/q, while deposits rose 1.8% YTD, 1.3% q/q vs 3.6% YTD and 1.3% q/q for the sector. L/D flat and low at 34% giving room to take on more leverage. Both AUDI and BLOM exceeded our loan loss charges forecasts with annualized charges of 158 bps and 71 bps respectively vs our estimates of 108 bps and 64 bps, while BOB still stands far below industry peers with an annualized 12 bps, but we expect charges to increase for BOB, particularly if Lebanon is affected even more by Syria. Exhibit 83: Earnings summary NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits AUDI ,682 37,245 (5.6) (1.8) (1.1) 18.0 (4.8) (2.2) (5.9) (0.5) BLOM ,747 31, (21.4) (27.4) (75.3) (4.1) (5.6) (1.9) 10.2 (4.4) (0.7) (1.6) BYB ,172 20, (7.7) (0.8) (45.4) (5.7) (4.6) (2.4) (17.1) (9.3) (6.3) (0.7) (24.1) 4.2 (1.3) (2.6) BOB ,115 11, (12.5) (78,050) (5.5) (71.4) 7.1 (0.3) (2.3) Sector , , (7.5) (8.4) (36.2) (2.4) (4.0) (1.1) (0.2) 0.2 (1.2) Results (LBP bn) q/q (%) y/y (%) vs AC est (%) Exhibit 84: Net Interest Income: Loan growth partly offsets weak margins Exhibit 85: Operating Income: BOB beats our estimates and tops revenue growth 25% % 15% 1 5% -5% 1 5% -5% -1-15% % BLOM AUDI BYB BOB -25% BOB AUDI BLOM BYB y/y q/q y/y q/q 2% 6% 4% -2% -4% -6% 2% -2% -4% -8% -6% -1 BLOM BOB AUDI BYB -8% BOB AUDI BLOM BYB vs AC est vs AC est Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 36

37 Exhibit 86: Loan growth positive but modest across sector 8% 7% 6% 5% 4% 3% 2% Exhibit 87: Deposit growth outpaced by loan growth 1 8% 6% 4% 2% 1% -2% BOB AUDI BLOM BYB y/y q/q -4% BOB BYB BLOM AUDI y/y q/q % 1.5% % 0.5% % -0.5% % -1.5% AUDI BOB BLOM BYB -3. AUDI BLOM BOB BYB vs AC est vs AC est Exhibit 88: Profits beat expectations (except BLOM) but remain subdued AUDI BOB BLOM BYB y/y q/q AUDI BOB BYB BLOM vs AC est Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 37

38 Exhibit 89: AUDI deviation table Reported AC est LBPbn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (5.9%) 221 (5.6%) % Total Revenues % 410 (1.8%) % Operating Costs (5.3%) 176 (2.6%) % Pre-provision operating income % 233 (1.1%) % Loan Loss Provisions % % Net Profit (0.5%) 142 (4.8%) % Exhibit 90: BLOM deviation table Reported AC est LBPbn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % % % Total Revenues (5.6%) 333 (21.4%) % Operating Costs (10.9%) 111 (9.2%) 106 (4.8%) Pre-provision operating income (1.9%) 222 (27.4%) % Loan Loss Provisions % 65 (75.3%) % Net Profit (4.4%) 127 (4.1%) Cost to Income 43% 46% 43% 46% Net Interest Margin 2.38% 2.53% 2.56% 2.31% Annualised charge % loans 1.58% 1.08% 1.36% 0.98% Loan to Deposit 37% 36% 36% 34% Net Loans 13,682 13,465 13,365 12,914 Deposits 37,245 37,133 36,766 38,091 Annualized ROE 25.5% 16.3% Annualized ROA 1.9% 1.2% EPS Cost to Income 38% 41% 33% 42% Net Interest Margin 2.36% 2.32% 2.25% 2.34% Annualised charge % loans 0.71% 0.64% 2.94% 0.17% Loan to Deposit 28% 28% 28% 27% Net Loans 8,747 8,810 8,558 8,329 Deposits 31,384 31,882 31,104 30,624 Annualized ROE 19.4% 17.6% Annualized ROA 1.4% 1.3% EPS Exhibit 91: BYB deviation table Reported AC est LBPbn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (9.3%) % 105 (5.7%) Total Revenues (6.3%) 179 (7.7%) 173 (4.6%) Operating Costs (11.6%) 93 (14.1%) 85 (6.9%) Pre-provision operating income (0.7%) 86 (0.8%) 88 (2.4%) Loan Loss Provisions 8 11 (24.1%) 15 (45.4%) % Net Profit % % 74 (17.1%) Exhibit 92: BOB deviation table Reported AC est LBPbn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (5.5%) % 72 (12.5%) Total Revenues % % % Operating Costs % % % Pre-provision operating income % % Loan Loss Provisions 2 5 (71.4%) % 0 (78,05) Net Profit % % % Cost to Income 48% 51% 52% 49% Net Interest Margin 1.65% 1.81% Annualised charge % loans 0.51% 0.68% 1.68% 0.67% Loan to Deposit 31% 3 31% 31% Net Loans 6,172 6,252 6,073 5,916 Deposits 20,005 20,539 19,749 18,987 Annualized ROE 15.2% 13.7% Annualized ROA % EPS Cost to Income 5 48% 58% 48% Net Interest Margin 2.24% 2.37% 1.84% 3.05% Annualised charge % loans 0.12% 0.42% 0.03% (0.0) Loan to Deposit 45% 44% 43% 46% Net Loans 5,115 5,129 4,795 4,807 Deposits 11,484 11,753 11,193 10,531 Annualized ROE 23.4% 21.8% Annualized ROA 1.6% 1.5% EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 38

39 Kuwaiti : Avoid, with one exception: Burgan We remain negative on Kuwait with an average downside of 2.6%, despite the country s support for high oil prices and government surplus, structural political gridlock continues to slow down the Kuwaiti economy affecting the banking system in Q2. All the Kuwaiti banks concerned about the slowdown in Kuwait were forced to take additional provisions in Q2. The sector is trading at a P/E13e of 13.9x and a P/tNAV12e of 2.2x. The sector has decent returns, with ROTE12e and ROTE13e of 13. and 13.9 respectively. We prefer to play the sector through Burgan, which continues to trade at attractive multiples, and it offers a growth story as a result of its Tekfen acquisition. We continue to believe that a new potential acquisition would add 3% to annual loan growth. We maintain our lending assumptions as we don t see much variation to our forecast, coming in at 4.3% y-t-d and 7. y/y for all Kuwaiti banks under coverage. Exhibit 93: Kuwait valuation summary Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e NBK HOLD 14,710 KWD 4, KFH SELL 7,024 KWD 1, (13.8) Gulf Bank SELL 3,699 KWD 1, (14.1) Burgan BUY 2,857 KWD Boubyan SELL 3,793 KWD 1, (52.3) Kuwait banks 32,084 9,021 (2.6) We revise our EPS estimates for Kuwaiti banks following the Q2 results. We cut our FY 12e EPS estimates for KFIN, GBK, and BOUBYAN; while leaving our estimates for NBK and BURG more or less unchanged. We maintain our recommendations for all banks. Exhibit 94: Kuwait EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons NBK (2.8%) (0.9%) % (0.5%) Consolidating financials after 58.34% ownership in Boubyan. KFIN (0.3%) (10.1%) % % Higher provisions and lower interest income on the back of slightly lower loan growth. GBK (0.9%) (21.9%) % % Higher loan loss charges BURG (1.) % (1.1%) (1.1%) Despite higher LLPs in Q2, in line with our forecast. BOUBYAN (15.7%) (3.5%) (7.8%) Loan loss provisioning higher than expected. Disappointing earnings for Kuwaiti banks driven by loan loss charges surprise in Q2 12, with earnings falling by 25% q/q and 7.9% y/y. NBK was impacted as well by higher loan loss charges, despite its low NPLs. Boubyan on the other hand looked better, despite sharply higher provisioning, earnings grew by 1 y/y and 4% q/q. KFIN earnings beat our expectation on the back of exceptionally high non recurring income despite higher loan loss charges, leaving a growth of 68% q/q and 179%y/y. Loans increased by 2% q/q with stagnant deposit growth q/q, more or less in line with our estimates. Net loans growing in line with our forecast with deposits arriving only 2% below our estimate. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 39

40 Exhibit 95: Earnings Summary Review Results (LCmn) q/q (%) y/y (%) vs AC est (%) NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit NP Loans Deposit NBK KK N/A 40 8,389 7,251-1% -2% -8% N/A -51% 1% 1% 1% -2% -5% N/A -4 7% 12% -4% -6% -11% -51% 1% 1% KFIN KK N/A 32 6,880 8,894 7% 32% 8 N/A 68% 2% -3% 11% 27% 54% N/A 179% 5% 6% -1% 17% 44% -11% -1% -4% BOUBYAN KK N/A 2 1,155 1,301 6% 9% 14% N/A 4% 6% 4% 27% 121% -3083% N/A 1 26% 19% 4% 3% 11% -37% 5% 3% GBK KK N/A 5 3,428 3,252 3% -7% -3% N/A -26% 2% -1% 13% -6% -13% N/A -36% 4% 1% 5% 2% 2% -49% -3% BURG KK N/A 16 2,592 3,164 7% 13% 1 N/A -7% 8% 4% 4% 13% 8% N/A 2% 2 27% 1% 5% 5% 6% Kuwait Sector ,444 23,863 3% 12% 2 N/A -25% 2% 7% 13% 6% N/A -8% 8% 1-1% 5% 11% -35% 1% -2% Exhibit 96: KFIN beating BURG s NII on the back of higher Margins 3 25% 2 15% 1 5% Exhibit 97: KFIN highest Q/Q growth in revenue on the back of 19 q/q investment income growth % KFIN KK BURG KK BOUBYAN KK GBK KK NBK KK -2 KFIN KK BURG KK BOUBYAN KK NBK KK GBK KK q/q (%) y/y (%) q/q (%) y/y (%) 6% 4% 2% -2% -4% -6% GBK KK BOUBYAN KK BURG KK KFIN KK NBK KK vs AC est (%) 2 15% 1 5% -5% -1 KFIN KK BURG KK BOUBYAN KK GBK KK NBK KK vs AC est (%) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 40

41 Exhibit 98: Higher LLPs this quarter affecting Net Profits, which fell substantially Exhibit 99: BURG highest q/q loan book growth beating our forecast 3 25% 2 15% 1 5% -10 KFIN KK BOUBYAN KK BURG KK GBK KK NBK KK BURG KK BOUBYAN KK GBK KK KFIN KK NBK KK q/q (%) y/y (%) q/q (%) y/y (%) 1 7% % 5% 4% 3% -3 2% % -1% -6 BURG KK KFIN KK BOUBYAN KK GBK KK NBK KK -2% BURG KK BOUBYAN KK NBK KK KFIN KK GBK KK vs AC est (%) vs AC est (%) Exhibit 100: BURG and NBK q/q deposit growth in line with our forecast 3 25% 2 15% 1 5% Exhibit 101: Higher NIMs for all Kuwaiti this quarter, KFIN witnessing highest NIM expansion % BOUBYAN KK BURG KK NBK KK GBK KK KFIN KK q/q (%) y/y (%) KFIN KK BURG KK GBK KK BOUBYAN KK NBK KK 4% q/q (bps) y/y (bps) 3% 2% 1% % -2% -3% % -10-5% BOUBYAN KK NBK KK BURG KK GBK KK KFIN KK -15 NBK KK KFIN KK BURG KK BOUBYAN KK GBK KK vs AC est (%) AC (bps) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 41

42 Exhibit 102: NBK deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (4%) 95 (1%) 93 1% Total Revenues (6%) 130 (2%) 129 (2%) Operating Cost % 39 11% 41 6% Pre-provision operating income (11%) 91 (8%) 88 (5%) Net Profit (51%) 81 (51%) 66 (4) Exhibit 103: KFIN deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (1%) 78 7% 75 11% Total Revenues % % % Operating Cost (8%) 75 (5%) 70 1% Pre-provision operating income % % Net Profit (11%) 19 68% % Cost to Income 34% 31% 32% 3 Net Interest Margin % % Annualised charge % loans 1.66% 0.48% 0.39% 0.86% Loan to Deposit 116% 116% 115% 121% Cost to Income 41% 52% 51% 56% Net Interest Margin 3.29% 3.33% 3.07% 3.11% Annualised charge % loans 3.17% 1.95% 2.26% 3.38% Loan to Deposit 77% 75% 74% 78% Net Loans 8,389 8,346 8,271 7,866 Deposits 7,251 7,207 7,197 6,495 Net Loans 6,880 6,972 6,769 6,536 Deposits 8,894 9,274 9,182 8,360 Annualized ROE 10.5% 14.2% Annualized ROA 1.7% 2.3% EPS Annualized ROE 8.4% 9. Annualized ROA 0.8% 0.8% EPS Exhibit 104: BOUBYAN deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 12 6% 10 27% Total Revenues % 13 9% 7 121% Operating Cost 7 7 (4%) 7 4% 7 3% Pre-provision operating income % 7 14% 0 (3,083%) Net Profit 2 4 (37%) 2 4% 2 1 Exhibit 105: GBK deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 29 3% 26 13% Total Revenues % 44 (7%) 44 (6%) Operating Cost % 15 (14%) 11 13% Pre-provision operating income % 30 (3%) 33 (13%) Net Profit 5 11 (49%) 7 (26%) 9 (36%) Cost to Income 48% 52% 104% 51% Net Interest Margin % 3.26% 2.91% Annualised charge % loans % 1.86% (0.78%) Loan to Deposit 89% 87% 87% 84% Cost to Income % 42% Net Interest Margin 2.47% 2.34% 2.38% 2.28% Annualised charge % loans 1.35% 2.44% 2.18% 2.94% Loan to Deposit 105% 102% 103% 102% Net Loans 1,155 1,102 1, Deposits 1,301 1,261 1,249 1,091 Net Loans 3,428 3,429 3,365 3,288 Deposits 3,252 3,347 3,281 3,223 Annualized ROE 3.8% 5. Annualized ROA 0.6% 0.7% EPS Annualized ROE 5.9% 8.2% Annualized ROA 0.5% 0.7% EPS Exhibit 106: BURG deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 28 7% 29 4% Total Revenues % 43 13% 43 13% Operating Cost % 16 17% 16 21% Pre-provision operating income % % Net Profit (7%) 16 2% Cost to Income 39% 39% 36% 48% Net Interest Margin 2.83% 2.79% 2.73% 3.01% Annualised charge % loans % 0.83% 1.37% Loan to Deposit 82% 77% 79% 86% Net Loans 2,592 2,447 2,406 2,152 Deposits 3,164 3,161 3,040 2,500 Annualized ROE 14.6% 14.6% Annualized ROA 1.4% 1.4% EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 42

43 Omani : Play Bank Muscat We remain positive on Oman with an average upside of 41.1%. The sector is trading at a P/E13e of 7.9x and a P/tNAV12e of 1.0x. The sector has decent returns, with ROTE12e and ROTE13e of 12.1% and 13.1 respectively. We maintain our view on Oman, as we still view Bank Muscat as an attractive opportunity in the Omani market. Despite slightly disappointing Q2 numbers we continue to believe that our TP of Bank Muscat offers an attractive upside, especially given that the bank has largely addressed its weak capital base. HSBC Oman remains too expensive and already factors in all merger synergies. Exhibit 107: Oman valuation summary Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e Muscat BUY 2,929 OMR 1, Sohar HOLD 389 OMR HBMO SELL 1,133 OMR (1.1) Oman banks 4,450 1, We revise our EPS estimates for Omani banks following the Q2 results. We have reduced our estimates for BKMB as we pencil in further NIM pressure. Nevertheless, we reiterate our recommendations for all banks. Exhibit 108: Oman EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons BKMB (9.5%) % (6.3%) (8.8%) Lower NIMs, higher number of shares BKSB % % % % Higher interest income on the back of higher loan book growth and strong Q2 numbers. OIBB No major surprises for HSBS Oman reporting below our estimate despite synergies with HSBC. All banks posted revenue growth y/y, however with relatively stable q/q growth. Operating profit dropped by 2% q/q on the back of 6% q/q drop in Bank Muscat s operating profit. Bank Sohar surprisingly reported the highest growth in NII, growing by 9% q/q vs. 2% for banks under coverage. No surprises for HSBC Oman, operating profit came in 5% below our forecast with 22% q/q growth and 26% y/y. Despite disappointing NIMs earnings beat our estimate. Omani banks witnessed NIM contraction over the past quarter except for Bank Sohar. Bank Muscat s earnings increased by 5% q/q and 19% y/y despite lower NIMs, beating our estimate by 1 on the back of lower LLCs. Bank Sohar on the other hand reported a drop in earnings by 6% q/q. Balance sheet expansion was inflated by HSBC merger. Loans and deposits increased 11% and 14% q/q respectively, slightly above our estimates, 5% and 9% respectively. Net lending only grew by 4% q/q for Bank Muscat and Bank Sohar, with HSBC achieving 72% Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 43

44 growth q/q. HSBC Oman net loans growth only 0.4% short our FY 12e and deposits were 2.8% short our FY 12e forecast. Exhibit 109: Earnings Summary Review Results (LCmn) q/q (%) y/y (%) vs AC est (%) NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit LLP NP Loans Deposits NII Rev Op. Profit NP Loans Deposits BKMB OM ,181 5,040-4% -6% 3% 5% 4% 2% 4% 7% 5% -3% 19% 21% 2-6% -7% % BKSB OM ,101 1,309 9% 2% 5% 7% -6% 4% 1 19% 19% 37% 26% 3 12% 32% 4% 5% 17% 28% 2% 9% HBMO OM ,215 1,806 6% 33% 22% 18% 145% 72% 77% 8% 37% 4 29% 8% 95% 128% -7% 1-5% -7% 32% 48% Oman Sector ,497 8,156 2% -2% 8% 9% 11% 14% 7% 12% 13% 8% 19% 28% 36% -5% -3% -7% 1 5% 9% Exhibit 110: BKSB net interest income growth beating BKMB Exhibit 111: BKMB disappointing revenue growth 25% 2 15% 1 5% BKSB OM HBMO OM BKMB OM 4 35% 3 25% 2 15% 1 5% -5% -1 HBMO OM BKSB OM BKMB OM q/q (%) y/y (%) q/q (%) y/y (%) 6% 4% 2% -2% -4% -6% -8% BKSB OM BKMB OM HBMO OM vs AC est (%) 12% 1 8% 6% 4% 2% -2% -4% -6% -8% HBMO OM BKSB OM BKMB OM vs AC est (%) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 44

45 Exhibit 112: BKMB looking better on the net level Exhibit 113: HBMO high loan growth on the back of merger, Net loans growth only 0.4% short our FY 12e HBMO OM BKMB OM BKSB OM HBMO OM BKSB OM BKMB OM q/q (%) y/y (%) q/q (%) y/y (%) 35% 35% 3 25% 2 15% 1 5% 3 25% 2 15% 1 5% -5% -1 BKSB OM BKMB OM HBMO OM HBMO OM BKSB OM BKMB OM vs AC est (%) vs AC est (%) Exhibit 114: Deposit growth for HBMO 2.8% short our FY 12e Exhibit 115: Lower NIMS across the Omani banks except for Sohar HBMO OM BKSB OM BKMB OM -100 BKSB OM BKMB OM HBMO OM q/q (%) y/y (%) HBMO OM BKSB OM BKMB OM q/q (bps) y/y (bps) BKMB OM HBMO BKSB vs AC est (%) AC (bps) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 45

46 Exhibit 116: BKMB deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII (6%) % Total Revenues (7%) 79 (4%) 71 7% Operating Cost (2%) 34 (2%) 30 1 Pre-provision operating income (1) 45 (6%) 41 5% Loan loss provisions % 198 (3%) Net Profit % 29 19% Exhibit 117: BKSB deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 10 9% 9 19% Total Revenues % 13 2% 11 19% Operating Cost 6 6 (5%) 6 () 6 4% Pre-provision operating income % 7 5% 5 37% Loan loss provisions % 19 26% Net Profit % 5 (6%) 4 3 Cost to Income 43% 41% 42% 57% Net Interest Margin 3.35% 3.57% 3.49% 3.53% Annualised charge % loans 0.27% 0.73% 0.55% 0.39% Loan to Deposit 103% 102% 101% 102% Cost to Income 47% 52% 54% 33% Net Interest Margin % 2.85% 2.96% Annualised charge % loans 0.41% 0.49% 0.21% 0.25% Loan to Deposit 84% 9 89% 99% Net Loans 5,181 5,138 4,988 4,267 Deposits 5,040 5,058 4,959 4,200 Net Loans 1,101 1,077 1, Deposits 1,309 1,203 1, Annualized ROE 15.2% 14.5% Annualized ROA % EPS Annualized ROE 15.8% 14.1% Annualized ROA 1.2% 1.1% EPS Exhibit 118: HBMO deviation table Reported AC est LCmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII 8 9 (7%) 8 6% 8 8% Total Revenues % 10 37% Operating Cost % 6 42% 6 36% Pre-provision operating income 6 6 (5%) 5 22% 4 4 Loan loss provisions % 81 29% Net Profit 4 5 (7%) 2 145% 4 8% Cost to Income 61% 54% 61% 38% Net Interest Margin 2.14% % Annualised charge % loans 0.22% 0.28% 1.47% (0.33%) Loan to Deposit 67% 75% 69% 78% Net Loans 1, Deposits 1,806 1,223 1, Annualized ROE 4.1% 4.3% Annualized ROA 0.5% 0.5% EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 46

47 Bahrain : Better value elsewhere Exhibit 119: Bahrain valuation summary We continue to have a neutral view on Ahli United Bank, the country largest bank. AUB is currently trading at P/E 13e of 8.0x and P/tNAV of 1.7x, which is fully factors the bank poor liquidity, tight capital and below sector average (RoRWA of 1.6%, 1.2% if adjusted for associates' interest). We prefer other value play banks in MENA such as UNB, FGB and CBD as they have much better capital positions and offer more attractive valuations. Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e Ahli United HOLD 3,066 BHD 3, Bahrain banks 3,066 3, We continue to expect loan growth to stand at a 7% for FY 12e and forecast a CAGR of 9% over our forecasted period. We expect less than 1 structural loan growth for the country. We expect NIM to remain stable and stand at 2.31% and earnings growth to remain decent at 13% CAGR helped by lower C/I and lower provisioning. Exhibit 120: Bahrain Bank EPS and TP changes TP EPS FY12e EPS FY13e EPS FY14e Key reasons Previous New Old New Old New Old New AUB In line with our estimates, no major surprises We believe the bank should address its poor liquidity and negative cash and interbank position (-1 of assets) by issuing substantial issuance of wholesale debt. We think AUB will be hit by Basel 3 capital regulation, due high investments in associates, and some reliance on preference shares. Its CET1 of 1 is below our minimum requirement we have set for the region of 12%. The bank might have to cut payout, limit loan growth or raise fresh equity. AUB earnings results were almost in line with our estimates, with no major surprises. We reiterate our Hold recommendation and TP of USD Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 47

48 Exhibit 121: Ahli United Bank deviation table AUB BI Reported AC In QARm Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y NII % 151 4% 143 9% Total Revenues () 195 6% 198 4% Operating Costs (1%) 63 5% 64 3% Pre-provision operating income % 134 4% Total provisions (24%) 46 (44%) 44 (41%) Net income (2%) 82 6% 84 4% Cost to income 32.2% 32.5% 32.6% 32.4% Net interest margin 2.36% 2.3% 2.24% 2.36% Annualized Loan loss charges as % loans 0.64% 0.84% 1.16% 1.19% Loans/Deposits 88.2% 88.1% % Net loans 16,182 16,233 15,946 14,877 Total deposits 18,341 18,424 18,127 17,405 Annualized ROE % Annualized ROA 1.3% 1.3% EPS Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 48

49 Insurance: Very disappointing Q2, improvements still uncertain The insurance sector performed far worse than anticipated, with claims rising beyond expectations. The overall hike in net loss ratios has pushed combined ratios close to 10 for FY 12e. We expect an improvement in underwriting profitability in FY 13e and FY 14e, due to increased rates and lower catastrophe related claims. Rising net loss ratios in Saudi medical segment: The Saudi medical insurance sector witnessed a substantial surge in net claims, pushing combined ratios beyond 10 for the companies under coverage. Although we expect an improvement in underwriting profitability in H2, we expect combined ratios to remain north of 97%, diminishing underwriting profitability compared to post FY 11A. Non-motor reinsurance segment still affected by disasters in the Far East: Two of the companies under coverage (QIC and Salama) have non-motor reinsurance operations in the Far East and have been severely affected by the Thai floods, Japanese tsunami and New Zeeland earthquakes in FY 11A and even further in FY 12e. Although net claims caused a deterioration in earnings, both companies seem to have dealt with the majority of claims as of H1 12A (though Salama expects further claims in Q3) and are expected to report much better performance in FY 13e. QIC still capable of achieving strong investment returns: We increased QIC s return on investment by 80bps from FY 13e moving forward. The company is proving capable of maintaining strong investment yields despite poor market performance in Q2 12A. Mixed top level results: Tawuniya reported a 10.7% y/y (28.1% q/q) increase in GWP in Q2 12A. However NEPs did not see similar growth recording a 23.8% y/y growth and 1.1% drop q/q. QIC reported 16.6% growth q/q with little change y/y, however due to rising cession ratios q/q and higher changes in unearned premiums, NEPs fell 12% q/q (-1.8% y/y). Surge in claims flows into Q2: MedGulf suffered the most from surging claims, recording an increase of 18.1% y/y (27.3% q/q), along with an 18.5% rise in net loss ratios y/y (14.2% q/q), and surprised the most. QIC s net claims dropped 9.4% q/q (27.5% increase y/y) while net loss ratios rose 2.2% q/q (17.4% y/y). Tawuniya s claims dropped 4.5% q/q while net loss ratios declined 3. q/q, though less than expected. Sector-wide dive in net earnings: Amid soaring claims, MedGulf reported an SAR 11mn loss during Q2 12A. Tawuniya reported a 46.8% drop q/q (78.3% y/y). QIC net earnings also dropped by 54% q/q (31% y/y) as the company took further provisioning for unearned premiums, incurred higher claims, while recovered less from reinsurers. The worst is almost over? The insurance sector has seen overall disappointing H1 12A results, and 2012 may be the worst year yet. However we expect a better performance in FY 13e and FY 14e amid better claims management in the medical segment, higher reinsurance rates and lower claims from catastrophes in the Far East. Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 49

50 Exhibit 122: Despite recent performance, we still the majority of the stocks as undervalued based on anticipated earnings growth Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e Salama BUY 229 AED Qatar Insurance BUY 1,722 QAR 6, Tawuniya BUY 870 SAR 3, MedGulf SELL 567 SAR 2, (26.4) Salama severely affected by family Takaful and non-motor: Very poor performance in the family Takaful segment due to tough competition resulted in a surprising drop in GWP and rising claims. Adjusting for the latter has resulted in a substantial drop in underwriting profits for that segment. Higher than anticipated claims from the Thai floods have also contributed to the drop in EPS. QIC still paying down claims from New Zeeland quakes: management is targeting combined ratios ranging between 85% and 9 from FY 13e onwards. We increased our net loss ratio forecast from FY 13e onwards accordingly, aiming for 87%-88% combined ratio. Tawuniya reported disappointing investment income and higher claims: Claims from the medical segment were higher than anticipated in FY 12e and reported investment income for Q2 12A fell. Adjusting for both resulted in a severe reduction in our forecasts for FY 12e. MedGulf severely affected by soaring net loss ratios in several segments: Although an increase in net loss ratios in the medical segment was anticipated, the actually increase YTD was much higher and was accompanied by a 1 increase in net loss ratio for the motor segment. Both have resulted to sharply lowered EPS estimates. Exhibit 123: We have seen disappointing results in the insurance sector as a whole mostly due to higher claims TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons SALAMA (12.2%) (22.9%) (16.1%) (25.1%) Higher claims in family takaful and non-motor segment QATI (10.1%) (2.8%) (10.1%) (5.5%) Rising claims from New Zeeland quake TAWUNIYA (13.6%) (17.5%) (12.9%) (4.1%) higher than anticiapted net loss ratio in medical segment MEDGULF (21.7%) (58.9%) (28.9%) (19.2%) Soaring net loss ratios in medical and motor segments Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 50

51 Exhibit 124: Tawuniya reported disappointing bottom line results Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y Gross written premiums 1,383 1, % 1, % 1, % Net earned premiums % 927 (1.1%) % Net claims (4.5%) % Claims ratio 81.7% 75.7% % (3.) 75.5% 6.2% Investment income (40.8%) 79 (52.7%) % Net income (73.) 53 (46.8%) 129 (78.3%) Exhibit 125: MedGulf reported an SAR 11mn loss during Q2 12A due to high loss ratios Reported AC est SARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y Gross written premiums (3.5%) 871 (15.7%) % Net earned premiums (2.7%) % 544 (5.4%) Net claims % % Claims ratio 93.2% 78.2% % 14.2% 74.7% 18.5% Investment income 2 5 (66.6%) % 2 (4.8%) Net income (11) 43 (125.5%) 50 (122.1%) 55 (119.9%) Exhibit 126: Despite a surge in GWP, QIC reported a drop in net earnings Reported AC est QARmn Q2 12A Q2 12e Q1 12A q/q Q2 11A y/y Gross written premiums % % 793 (0.3%) Net earned premiums (1.9%) 392 (12.) 351 (1.8%) Net claims % 289 (9.4%) % Claims ratio 75.8% 62.9% 12.9% 73.6% 2.2% 58.4% 17.4% Investment income % 178 (39.3%) % Net income (68.1%) 208 (54.2%) 138 (31.) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 51

52 Exhibit 127: Strong GWP growth for Tawuniya Exhibit 128: Lower NEP for QIC despite GWP growth 35% 3 25% 2 15% 1 5% -5% -1-15% -2 QIC Tawuniya MedGulf 3 25% 2 15% 1 5% -5% -1-15% QIC Tawuniya MedGulf y/y (%) q/q (%) y/y (%) q/q (%) 3 25% 2 15% 1 5% -5% QIC Tawuniya MedGulf 5% 4% 3% 2% 1% -1% -2% -3% -4% QIC Tawuniya MedGulf AC (bps) AC (bps) Exhibit 129: Surge in claims in sector as a whole so far Exhibit 130: MedGulf hit the most by rising claims ratios 4 35% 3 25% 2 15% 1 5% -5% -1-15% QIC Tawuniya MedGulf 2 15% 1 5% -5% QIC Tawuniya MedGulf y/y (%) q/q (%) y/y (%) q/q (%) 2 18% 16% 14% 12% 1 8% 6% 4% 2% QIC Tawuniya MedGulf 16% 14% 12% 1 8% 6% 4% 2% QIC Tawuniya MedGulf AC (bps) AC (bps) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 52

53 Exhibit 131: Mixed results in investment income Meaningless for MedGulf Exhibit 132: Overall deterioration in net income throughout the sector due to rising claims ratios QIC Tawuniya MedGulf QIC Tawuniya MedGulf y/y (%) q/q (%) y/y (%) q/q (%) QIC Tawuniya MedGulf -14 QIC Tawuniya MedGulf AC (bps) AC (bps) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 53

54 July Exhibit 133: MENA banks valuation screen Ticker Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e ADCB UH ADCB HOLD 5,134 AED 18, ADIB UH ADIB SELL 2,105 AED 7, (12.6) CBD UH CBD BUY 1,609 AED 5, DIB UH DIB SELL 2,016 AED 7, (10.3) EMIRATES UENBD HOLD 4,660 AED 17, FGB UH FGB BUY 8,078 AED 29, NBAD UH NBAD BUY 9,325 AED 34, UNB UH UNB BUY 2,133 AED 7, TAMWEEL UTamweel BUY 362 AED 1, MASQ UH Mashreq HOLD 2,424 AED 8, RAKBANK URakbank BUY 1,730 AED 6, UAE banks 39, , CBQK QD CBQ HOLD 5,002 QAR 18, DHBK QD Doha HOLD 3,190 QAR 11, QIBK QD QIB HOLD 5,062 QAR 18, QNBK QD QNB BUY 25,944 QAR 94, MARK QD MARK HOLD 5,613 QAR 20, KCBK QD Khaliji SELL 1,741 QAR 6, (20.1) QIIK QD QIIB Hold 2,174 QAR 7, Qatar banks 48, , CIEB EY CAE BUY 578 EGP 3, COMI EY CIB BUY 3,293 EGP 20, HDBK EY HDB HOLD 285 EGP 1, (0.3) NSGB EY NSGB HOLD 2,897 EGP 17, EGBE EY EGB SELL 338 USD 2, (31.8) Egypt banks 7,391 45, AUDI LB Audi BUY 1,917 USD 1, BLOM LB BLOM BUY 1,591 USD 1, BYB LB Byblos HOLD 843 USD (4.1) BOB LB BOB SELL 959 USD (44.8) Lebanon banks 5,309 5, ARNB AB ANB BUY 6,403 SAR 24, RJHI AB Al Rajhi BUY 29,399 SAR 110, BSFR AB BSFR HOLD 7,666 SAR 28, RIBL AB Riyad BUY 9,280 SAR 34, SAMBA AB Samba BUY 11,304 SAR 42, SABB AB SABB HOLD 8,506 SAR 31, AAAL AB SHB BUY 2,858 SAR 10, ALBI AB Albilad BUY 2,376 SAR 8, BJAZ AB Aljazeera SELL 2,232 SAR 8, (17.3) SIBC AB SIB BUY 2,398 SAR 8, ALINMA AB Alinma HOLD 5,520 SAR 20, KSA banks 87, , Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 54

55 July Exhibit 134: MENA banks valuation screen (continued) Ticker Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e NBK KK NBK HOLD 14,710 KWD 4, KFIN KK KFH SELL 7,024 KWD 1, (13.8) GBK KK Gulf Bank SELL 3,699 KWD 1, (14.1) BURG KK Burgan BUY 2,857 KWD BOUBYAN KBoubyan SELL 3,793 KWD 1, (52.3) Kuwait banks 32,084 9,021 (2.6) BKMB OM Muscat BUY 2,929 OMR 1, BKSB OM Sohar HOLD 389 OMR HBMO OM HBMO SELL 1,133 OMR (1.1) Oman banks 4,450 1, AUB BI Ahli United HOLD 3,066 BHD 3, Bahrain banks 3,066 3, MENA banks' avg. 228, Source: Bloomberg, Arqaam Capital Research Exhibit 135: MENA diversified financials valuation screen Ticker Company Rating Mkt. Cap. Currency Mkt Cap. Share Target Upside P/E (x) Target P/E(x) CAGR PEG P/tNAV (x) ROTE(%) Dividend yield (%) P/PPP (x) USDm (m) Price* Price % FY 12e FY 13e FY 14e FY 13e FY 12-15E FY 12e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e SHUAA UH Shuaa SELL 178 AED (1.0) (21.7) (49.7) (49.2) na na (2.7) (1.2) (27.5) (61.2) 889 HRHO EY EFG BUY 1,036 EGP 6, DFM UH DFM SELL 2,104 AED 7, (22.8) SALAMA UHSalama BUY 229 AED na na na QATI QD Qatar Insurance BUY 1,722 QAR 6, na na na TAWUNIYA Tawuniya BUY 870 SAR 3, na na na MEDGULF AMedGulf SELL 567 SAR 2, (26.4) NA NA na na na MENA financials' avg. 235, Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 55

56 July Exhibit 136: MENA financials: Earnings estimates (LCY) Company Rating Currency EPS tnav DPS BBG EPS consensus Deviation vs consensus BBG consensus PE FY 11A FY 12e FY 13e FY 14e FY 11A FY 12e FY 13e FY 14e FY 11A FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e ADCB HOLD AED % 5% (1%) ADIB SELL AED % (15%) (25%) CBD BUY AED na (19%) (32%) na na DIB SELL AED (5%) (32%) (4) ENBD HOLD AED % (41%) (6) FGB BUY AED (8%) (17%) NBAD BUY AED (8%) (9%) (6%) UNB BUY AED % (15%) (27%) Tamweel BUY AED % (49%) (46%) Mashreq HOLD AED na na na na na na na na na Rakbank BUY AED na na na na na na na na na CBQ HOLD QAR (9%) (15%) (17%) Doha HOLD QAR (5%) (22%) (28%) QIB HOLD QAR (14%) (3%) (9%) QNB BUY QAR (15%) (1%) (2%) MARK HOLD QAR (2%) (6%) 9% Khaliji SELL QAR na na na na na na na na na QIIB Hold QAR na na na na na na na na na CAE BUY EGP (4%) 22% 15% CIB BUY EGP (14%) 23% 19% HDB HOLD EGP (18%) (24%) (16%) NSGB HOLD EGP (6%) (7%) (4%) EGB SELL EGP na na na na na na na na na Audi BUY USD na 1% (11%) na na BLOM BUY USD na 8% (5%) na na Byblos HOLD USD % (2%) BOB na na na na na na na na na ANB BUY SAR (1) (2%) (1%) Al Rajhi BUY SAR (11%) 1% (3%) BSFR HOLD SAR (9%) (11%) (18%) Riyad BUY SAR (6%) (5%) (7%) Samba BUY SAR (9%) (1) (12%) SABB HOLD SAR (13%) 7% 3% SHB BUY SAR (9%) (7%) (8%) Albilad BUY SAR (37%) 6% 2% Aljazeera SELL SAR (36%) (8%) (1) SIB BUY SAR (15%) (3%) 1% Alinma HOLD SAR (37%) (3%) (19%) Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 56

57 July Exhibit 137: MENA financials: Earnings estimates (LCY) Company Rating Currency EPS tnav DPS BBG EPS consensus Deviation vs consensus BBG consensus PE FY 11A FY 12e FY 13e FY 14e FY 11A FY 12e FY 13e FY 14e FY 11A FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e NBK HOLD KWD (4%) (14%) (22%) KFH SELL KWD (33%) (22%) () Gulf Bank SELL KWD na na na na na na na na na Burgan BUY KWD (16%) 3% 1% Boubyan SELL KWD na na na na na na na na na Muscat BUY OMR (11%) (12%) (12%) Sohar HOLD OMR na (19%) (3%) na na HBMO SELL OMR (7%) (6%) 9% AUB HOLD BHD na na na na na na na na na Source: Bloomberg, Arqaam Capital Research Exhibit 138: MENA diversified financials: Earnings estimates (LCY) Company Rating Currency EPS tnav DPS BBG EPS consensus Deviation vs consensus BBG consensus PE FY 11A FY 12e FY 13e FY 14e FY 11A FY 12e FY 13e FY 14e FY 11A FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e FY 12e FY 13e FY 14e Shuaa SELL AED (0.28) (0.03) (0.01) (0.17) (0.01) na 63% 16% na (3.7) (57.6) na EFG BUY EGP (28%) 36% 16% DFM SELL AED (0.00) (105%) (29%) (23%) Salama BUY AED na na na na na na na na na Qatar InsuraBUY QAR na na na na na na na na na Tawuniya BUY SAR na na na na na na na na na MedGulf SELL SAR na na na na na na na na na Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 57

58 July Exhibit 139: MENA banks: Assets and returns Company Arqaam Currency RWA (bn) RWA Growth RORWA Tier I Ratio CET1 RotE Rating FY 11A FY 12e FY 13e FY 11A FY 12e FY 13e FY 11A FY 12e FY 13e FY 11A FY 12e FY 13e FY 11A FY 11A FY 12e FY 13e ADCB HOLD AED % 12.1% 6.3% % 1.4% 15.9% 14.5% 14.6% 11.5% 16.7% ADIB SELL AED (2.) 14.6% 4.8% 1.7% 1.4% 1.3% 14.2% 12.7% 12.9% % % CBD BUY AED % % 2.3% % 16.6% % 16.6% 18.8% 16.2% 16.5% DIB SELL AED (4.9%) 29.1% 2.3% 1.3% 0.9% 0.9% 13.6% % 12.1% % 9.5% ENBD HOLD AED % 7.6% 3.1% % 0.6% % 12.3% 10.5% 9.3% 6.4% 5.8% FGB BUY AED % % 2.6% 2.4% 2.4% 18.5% 17.9% 17.5% 13.3% 16.6% 15.5% 15.7% NBAD BUY AED % 18.3% 10.5% % 2.2% 15.6% 14.7% % 16.3% 16.6% 18.2% UNB BUY AED % 6.9% 4.9% 1.8% 1.6% 1.5% 16.7% % 13.1% 13.7% 11.4% 11. Tamweel BUY AED (7.5%) 1.4% 2.8% % % % 22.4% 4.8% 3.6% 4.4% MASQ HOLD AED % 8.4% 6.3% 1.1% % 16.2% 16.1% 15.8% 15.5% 6.8% 6.9% 7.4% RAKBANK BUY AED % 20.7% 8.1% 7.6% 6.3% 5.7% % 23.3% 19.1% 28.6% 23.7% 20.4% CBQ HOLD QAR % 13.2% % 2.4% 16.4% 14.6% 13.3% 12.5% 13.7% 13.1% 13.1% Doha HOLD QAR % 5.5% 12.8% 2.4% 2.4% % 12.6% 11.3% 10.1% 18.5% QIB HOLD QAR (9.4%) 27.1% 9.5% 3.9% 3.3% 3.5% % 19.4% 21.8% 13.3% 12.8% 14.2% QNB BUY QAR % % 4.7% 4.7% 4.7% % 22.2% 21.2% 22.3% 18.8% 18.9% MAR HOLD QAR % 31.8% 16.4% 3.9% % 21.8% 17.6% 16.2% 20.1% 17.6% 15.2% 15.2% Khaliji SELL QAR % 34.7% 11.5% 2.3% 1.7% 1.2% % 15.9% 16.3% 9.5% % QIIB Hold QAR % 17.2% 14.9% 3.9% 3.3% 2.9% 24.3% % 22.6% 14.6% 12.9% 12.7% CAE BUY EGP % 22.9% 13.8% 1.9% 2.3% 2.1% 11.6% 10.2% 10.3% % % CIB BUY EGP % 15.9% % 3.2% 3.4% 12.5% 13.5% 13.9% 13.4% 19.8% 23.7% 23.3% HDB HOLD EGP % 157.2% 9.9% 1.9% 0.7% 0.9% % 8.5% 20.8% 6.3% 5.8% 8.1% NSGB HOLD EGP % % 3.2% 2.8% 2.7% 12.8% 12.5% 12.7% 13.4% 21.6% 20.3% 19.3% EGB SELL EGP (6.2%) % 1.2% 2.2% % 19.1% 18.4% 17.4% % 10.8% Audi BUY USD trn % 5.7% 4.9% 1.9% % 10.4% 11.2% 11.9% 8.5% 18.7% 19.9% 16.1% BLOM BUY USD trn % 17.6% 8.6% 2.3% % 12.8% 12.8% % 18.9% 17.8% 16.3% Byblos HOLD USD trn % 4.6% 10.6% 1.3% 1.2% 1.1% 13.3% 14.5% 13.9% 10.3% 12.3% 11.1% 10.7% BOB SELL USD trn % 14.1% 6.8% 1.2% % 14.5% 13.7% 13.4% 6.1% 14.5% 14.3% 15.1% ANB BUY SAR % % 1.7% 1.8% 1.8% % 13.4% % 12.8% 13.6% Al Rajhi BUY SAR % 19.1% 14.1% 3.8% 3.9% 3.8% 14.7% 14.1% 14.2% 14.6% % 23.8% BSFR HOLD SAR % 14.2% 9.8% 2.1% 1.9% 1.8% 13.9% 13.7% 13.9% % 13.3% 12.3% Riyad BUY SAR % 7.2% 7.6% 1.7% 1.7% 1.7% 14.8% 14.6% 14.3% 15.3% 10.1% 10.9% 11.1% Samba BUY SAR % 25.8% 10.8% 2.7% 2.2% 2.2% 18.1% 15.9% 15.8% 14.8% 15.5% 14.7% 14.5% SABB HOLD SAR % % % 11.8% 13.5% 12.8% 13.4% 16.2% 14.5% 13.5% SHB BUY SAR % 18.1% 10.7% 1.6% 1.8% 1.7% 12.7% 12.4% 12.3% 12.9% 12.5% 13.7% 12.7% Albilad BUY SAR % 12.9% 1.6% 3.6% 2.6% 15.4% 13.2% 14.6% 15.6% 10.1% 24.5% 16. Aljazeera SELL SAR % 24.5% 16.8% 0.8% 1.2% 1.2% 13.6% 13.8% 12.7% 11.7% 6.3% 9.6% 10. SIB BUY SAR (5.3%) % 1.6% 1.6% 1.6% 17.2% 17.8% 16.7% 16.1% 8.2% 8.6% 9.6% Alinma HOLD SAR % 49.3% 30.1% 0.7% 1.1% 1.4% 43.8% 30.5% 24.8% % 3.8% 5.6% Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 58

59 July Exhibit 140: MENA banks: Assets and returns (continued) Company Arqaam Currency RWA (bn) RWA Growth RORWA Tier I Ratio CET1 RotE Rating FY 11A FY 12e FY 13e FY 11A FY 12e FY 13e FY 11A FY 12e FY 13e FY 11A FY 12e FY 13e FY 11A FY 11A FY 12e FY 13e NBK HOLD KWD % 23.6% 6.7% 3.5% % 18.3% 16.5% 17.5% 15.9% 14.8% 16.1% 17.6% KFH SELL KWD % 9.3% 0.8% 0.9% % 11.9% 11.7% % 9.1% 11. Gulf Bank SELL KWD % % % 1.6% 13.6% 14.1% 14.8% 13.6% 7.3% 9.1% 10.7% Burgan BUY KWD % 23.4% 0.7% 1.7% 1.6% % 14.6% 15.6% 14.3% 19.7% 19.5% 20.5% Boubyan SELL KWD % 13.7% 24.3% 0.9% 1.3% % 24.3% 21.5% 22.2% 3.3% 5.2% 9.5% Muscat BUY OMR % 20.6% 14.9% 1.8% 1.7% 1.7% 11.9% 11.4% 12.7% 9.1% 15.9% 15.6% 14.8% Sohar HOLD OMR % 12.2% 1.1% 1.2% 1.2% 9.3% 9.6% 9.3% 9.3% 11.5% % HBMO SELL OMR % 101.4% 7.5% 1.9% 1.7% 1.8% 13.6% 13.4% 13.3% 12.1% 10.5% 9.8% 11.1% AUB HOLD BHD % 9.9% 7.8% 1.5% 1.6% 1.7% 11.5% 11.2% 11.3% 10.3% 18.2% 19.6% 19.4% Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 59

60 July Exhibit 141: MENA banks: Key performance indicators Company Arqaam Currency Rev Growth Cost Growth Jaws Cost / Income Ratio LCR NSFR Rating FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 10A FY 11A ADCB HOLD AED 9.6% 21.4% 10.8% 4.4% 7.1% 25.1% 6.3% 5.4% 2.5% (3.7%) 4.5% (1.) % 32.9% 80.3% 150.9% 110.6% 92. ADIB SELL AED 21.2% 11.4% 1.9% 2.2% % 3.3% 4.9% (9.8%) 0. (1.5%) (2.7%) 42.5% 42.5% 43.1% 44.3% 358.4% 216.7% 127.4% 102.3% CBD BUY AED 6.9% (1.7%) 0.7% 4.9% 1.4% % 3.9% 5.5% (5.7%) (2.1%) % 30.4% 31.1% 30.8% 46.3% % 101.7% DIB SELL AED (3.1%) 10.5% (0.1%) 7.4% % % (5.) 2.4% (0.2%) % 41.4% 41.4% 39.1% 201.8% 269.8% 108.7% 116.5% ENBD HOLD AED (9.9%) 2.1% 0.5% (2.) (13.7%) 14.4% 0.3% (2.6%) 3.7% (12.3%) 0.2% 0.6% 32.4% 36.3% 36.2% % 80.8% 91.6% 94.2% FGB BUY AED 3.4% 2.3% % 3.8% 9.1% 13.2% 13.8% (0.4%) (6.8%) (6.1%) (5.3%) 17.7% 18.9% 19.9% 20.9% 144.2% 134.5% 83.7% 87.2% NBAD BUY AED 12.2% 9.8% 9.5% 18.3% 15.2% 17.3% 12.5% 13.3% (3.) (7.5%) (3.) % 32.5% 33.4% % 68.9% 74.5% 81.1% UNB BUY AED 20.6% 11.1% 7.4% 2.5% 10.2% 1.9% 3.5% 7.6% 10.4% 9.2% 4. (5.) % 24.7% 25.9% 139.2% 143.9% 91.8% 100.4% Tamweel BUY AED (10.6%) (4.1%) (3.3%) 14.8% (23.4%) 2.6% 1.6% 3.8% 12.8% (6.7%) (4.9%) % 37.3% 39.2% 35.4% na 29.4% 309.8% 100.5% Mashreq HOLD AED (11.6%) (11.7%) (1.9%) 5.8% (0.4%) 1.7% 2.9% 5.3% (11.2%) (13.4%) (4.7%) 0.4% 40.2% 46.3% 48.6% 48.4% 218.1% 162.8% 127.4% 113.3% Rakbank BUY AED 28.4% 19.2% % 26.1% 20.4% 6.6% 4.2% 2.3% (1.2%) (1.6%) (2.6%) 42.5% % 44.7% 79.9% 81.9% 210.8% 95.9% CBQ HOLD QAR (7.8%) 11.8% 0.6% 9.8% 3.7% 11.2% 10.9% 10.2% (11.4%) 0.6% (10.3%) (0.4%) 30.7% 30.6% 33.7% 33.8% 191.1% 167.2% 93.9% 71.2% Doha HOLD QAR 4.6% 9.1% 3.1% 2.4% 9.8% % 11.4% (5.2%) (0.9%) (7.4%) (9.) 33.8% 34.1% 36.5% 39.7% 119.9% 123.2% 128.4% 91.6% QIB HOLD QAR (4.3%) 19.7% 23.4% 11.4% 0.5% 57.1% 12.5% 9. (4.9%) (37.4%) 10.9% 2.4% 26.5% 34.8% 31.7% % 187.1% % QNB BUY QAR 37.5% 35.5% 17.9% 13.6% 16.7% 24.1% 25.3% 17.7% 20.7% 11.4% (7.4%) (4.1%) 17.5% % 198.8% 162.5% 53.7% 88.7% MAR HOLD QAR % 3.8% 19.9% 15.3% % 17.3% 5.7% (1.7%) (7.1%) 2.6% 17.3% 17.5% 18.7% 18.3% 129.7% % 107.3% Khaliji SELL QAR 45.6% 23.7% 0.6% (2.) 290.5% (1.) % (244.9%) 24.6% (6.4%) (8.8%) 51.7% 41.4% 44.1% % 159.1% 291.5% 66.7% QIIB Hold QAR 8.1% 18.8% 6.3% 2.8% (12.1%) 39.3% 3.7% % (20.4%) 2.5% (7.2%) 19.1% 22.4% 21.9% 23.4% 460.9% 965.9% 340.6% 137.7% CAE BUY EGP 15.1% 8.5% 17.2% 4.5% 9.2% 17.6% 8.3% % (9.1%) 8.9% (2.5%) % 49.2% 72.1% 117.2% 201.8% 127. CIB BUY EGP 21.6% 1.2% 25.3% 11.6% 54.7% (0.1%) (3.9%) 10.5% (33.1%) 1.3% 29.2% 1.1% 42.6% 42.1% 32.3% % 249.9% 104.6% 110.2% HDB HOLD EGP 13.1% (5.4%) 3.5% % 3.6% 5.8% 5.9% (11.) (9.) (2.3%) 11.1% 58.3% 63.8% 65.3% 59.1% % 233.7% 126.7% NSGB HOLD EGP 17.8% 7.8% 14.1% 7.8% 6.8% (18.2%) 8.9% 9.1% % (1.3%) 44.7% 33.9% 32.4% 32.8% 87.2% 135.4% 102.8% 113.3% EGB SELL EGP 21.5% (20.8%) 51.2% 7.7% (0.8%) 6.4% % (27.1%) 44.2% (0.3%) 46.9% % 44.7% 75.2% 97.2% 453.4% 94.4% Audi BUY USD 20.1% 14.1% 5.4% (0.2%) 17.2% 9.8% 4.7% 7.3% 2.9% 4.2% 0.7% (7.5%) 47.4% 45.7% 45.3% 48.7% 440.6% 854.5% 245.3% 199.4% BLOM BUY USD 19.6% 7.3% 5.1% 4.9% 12.8% 8.1% 7.1% % (0.9%) (2.) (3.1%) 38.4% 38.7% 39.4% 40.6% 594.4% % 168.6% Byblos HOLD USD 19.6% % 7.9% 20.4% (3.4%) 9.1% 8.6% (0.8%) 7.4% (7.8%) (0.7%) 46.6% 43.3% 46.6% 46.9% 321.5% na 104.8% na BOB SELL USD 24.8% 11.5% 7.8% 11.1% 15.3% % 7.6% 9.4% (9.5%) 1.1% 3.6% 46.3% 50.3% 49.7% 48.1% 346.7% na 64.5% na ANB BUY SAR (0.4%) 0.8% 6.7% 11.6% 2.7% 7.9% 3.8% 7.2% (3.1%) (7.1%) 2.9% 4.3% 36.5% 39.1% % 172.2% 169.2% % Al Rajhi BUY SAR 0.2% 7.2% 10.6% 11.9% 0.1% 16.7% 7.9% 8.7% 0.1% (9.5%) 2.6% 3.2% 25.9% 28.2% 27.5% 26.7% 202.6% % 118. BSFR HOLD SAR 2.3% 4.3% % 8.7% 19.2% 5.7% 7.3% (6.3%) (14.8%) 3.3% 2.2% 28.6% 32.7% 31.7% 31.1% 177.2% 180.6% 100.3% 131.2% Riyad BUY SAR 0.3% 5.7% % 5.1% 8.9% 2.6% 6.5% (4.8%) (3.2%) 3.3% 0.6% 38.6% 39.7% 38.5% 38.2% 160.6% 139.2% 69.4% 119.2% Samba BUY SAR (2.9%) (4.9%) 4.6% 8.8% (2.1%) 2.4% 1.4% 5.3% (0.8%) (7.3%) 3.2% 3.5% 27.7% 29.8% 28.9% % 193.1% 142.6% 157.9% SABB HOLD SAR (6.2%) 1.2% 6.2% 11.7% 4.6% (8.5%) 1.8% 8.1% (10.8%) 9.7% 4.3% 3.6% 36.2% 32.8% 31.4% 30.4% 221.8% 194.8% 108.7% 137.9% SHB BUY SAR (9.) 2.6% % (4.9%) 3.9% 5.3% 6.7% (4.) (1.2%) 3.8% 2.1% 39.5% % 37.9% 224.9% % 150.6% Albilad BUY SAR 20.9% % 10. (9.7%) 10.4% 11.4% 9.2% 30.6% 14.6% 15.1% 0.7% 65.3% 57.6% 50.8% 50.4% 280.8% 349.3% 253.8% 119.7% Aljazeera SELL SAR (1.4%) 4.6% 33.1% 14.1% 5.3% 9.2% % (6.6%) (4.6%) 22.1% 3.5% 66.2% 69.1% 57.6% 55.8% 309.2% 242.8% 153.7% 238.5% SIB BUY SAR 15.3% (7.6%) 5.7% 5.8% 3.7% 11.6% 2.8% 8.7% 11.6% (19.2%) 2.9% (3.) % 37.6% 38.6% 164.7% 89.7% 127.2% 132.1% Alinma HOLD SAR (30.6%) 109.6% 27.3% % 29.2% 13.2% 20.3% (31.5%) 80.4% 14.1% 13.7% 97.3% 59.9% 53.3% 47.9% 238.3% 136.1% 159.1% 109.7% Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 60

61 July Exhibit 142: MENA banks: Key performance indicators (Continued) Company Ticker Arqaam Currency Rating FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 12e FY 13e FY 10A FY 11A FY 10A FY 11A NBK NBK KK HOLD KWD (7.) 7.5% 14.4% 8.7% (11.6%) 1.8% 20.6% 5.7% 4.6% 5.6% (6.2%) % % 31.8% 83.7% 78.5% 347.1% 100.5% KFH KFIN KK SELL KWD 6.9% 14. (8.4%) % 20.4% 0.3% % (6.5%) (8.7%) (0.1%) 43.3% 45.7% 50.1% 50.1% 104.6% 103.2% 365.3% 93.4% Gulf Bank GBK KK SELL KWD 38.3% (16.1%) 8.7% 6. (1.6%) 10. (4.7%) 4.8% 39.8% (26.1%) 13.4% 1.3% 25.9% % 29.5% % 946.9% 89.9% Burgan BURG KK BUY KWD 7.1% (0.9%) 13.6% 9.5% 49.9% (5.9%) 13.1% 5.5% (42.8%) % 4.1% 39.6% 37.6% 37.4% % % 114.2% Boubyan BOUBYAN KK SELL KWD 498.1% 7.1% 33.5% 22.7% % 11.7% 10.8% 485.1% (7.3%) 21.7% 11.9% 56.2% % 45.3% 223.5% 242.6% Source: Bloomberg, Arqaam Capital Research Rev Growth Cost Growth Jaws Cost / Income Ratio Muscat BKMB OM BUY OMR (8.8%) 10.8% 12.9% 13.2% 25.3% 17.5% 10.5% 11.5% (34.1%) (6.7%) 2.3% 1.2% 38.8% 41.1% 40.2% 39.7% 315.3% 220.8% % Sohar BKSB OM HOLD OMR 20.9% 22.6% % 13.8% 18.3% 6.5% 9.8% 7.2% 4.2% 11.4% 1.1% 55.6% 53.7% 48.5% % % HBMO HBMO OM SELL OMR (6.9%) 5.1% 62.9% 36.8% 7.3% 18.5% 50.9% 23.2% (14.2%) (13.4%) % 51.9% 58.5% 54.2% 48.8% 533.1% 172.2% % 108.2% AUB AUB BI HOLD BHD 7.2% 11.7% % 7.6% 7.8% (1.7%) 6.3% (0.4%) 3.9% 6.8% 1.8% % 32.5% % 99.5% 66.9% 67.6% LCR NSFR Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 61

62 July Exhibit 143: MENA banks: Key performance indicators (Continued) Company Arqaam Currency Net Interest Margin Loan Loss Charge / Avg Loans Rating FY 09 FY 10 FY 11 FY 12e FY 13e FY 09 FY 10 FY 11 FY 12e FY 13e FY 10 FY 11 FY 12e FY 13e FY 10 FY 11 FY 12e FY 13e ADCB HOLD AED 2.4% 2.47% 2.91% % 2.6% 2.3% 1.6% 1.5% 1.4% 11.1% 4.6% 5.9% 6.6% 44.1% 94.8% % ADIB SELL AED % 4.08% 4.14% 4.08% 2.5% 0.9% 1.1% 1.2% 1.3% 7.1% 8.7% 8.8% % 66.8% 78.3% 88.4% CBD BUY AED 3.9% 3.91% 3.75% 3.69% 3.64% 1.3% 1.8% 1.6% 1.8% 1.8% 5.8% 13.1% 13.2% 13.3% 76.7% 47.4% 52.2% 53.4% DIB SELL AED 3.2% 2.87% 3.33% 3.23% 3.21% 1.2% 1.1% 1.6% % 8.3% 14.5% % 48.4% 62.7% ENBD HOLD AED 2.9% 2.62% 2.79% 2.65% 2.66% 1.4% 1.4% 2.2% % 15.5% 16.5% 40.7% 43.4% 50.7% 58.5% FGB BUY AED 3.6% 3.51% 3.71% 3.58% 3.57% 1.9% 1.7% 1.5% 1.4% 1.2% 4.6% % 4.8% 72.1% 84.2% 65.1% 49.8% NBAD BUY AED 2.6% 2.69% % 2.54% 1.1% 0.8% 0.9% 0.8% 0.8% 2.6% 3.3% 3.6% 3.9% 101.6% 89.9% % UNB BUY AED 2.5% % 3.16% 3.13% 0.5% 0.8% % 1.3% 4.3% 3.7% % 47.5% 74.7% 71.8% 66.9% Tamweel BUY AED 2.4% 1.86% 2.41% 2.27% 2.53% 1.3% 1.1% 0.2% 0.4% 0.6% 6.7% % 51.7% 35.4% 33.6% 33.7% Mashreq HOLD AED 2.5% 2.81% 2.63% 2.48% 2.53% 2.8% 3.2% 2.3% 2.3% 2.2% 11.9% 12.6% 12.8% 12.9% % 59.9% 68.5% Rakbank BUY AED 8.3% 8.75% 9.07% % % 1.7% 1.8% 1.8% 2.5% 2.5% 2.8% 3.2% 74.8% 71.3% 66.6% 61.7% NPL Ratio Coverage CBQ HOLD QAR 3.1% 3.32% 3.22% % 1.4% 0.5% 0.6% 0.4% 0.7% 3.2% 1.2% 0.9% 1.4% 89.7% 107.8% 141.5% 119.7% Doha HOLD QAR % 3.63% 3.19% % 1.1% 0.9% 0.6% 0.6% 4.9% 3.4% 3.5% 3.6% 73.8% 73.1% 104.4% 101.1% QIB HOLD QAR 4.3% 3.21% 2.88% 3.48% 3.25% 0.1% 0.2% % 0.7% 1.5% 1.2% 1.6% 1.9% 83.2% 97.7% 65.3% 83.9% QNB BUY QAR 2.4% 2.95% 3.08% 2.95% 2.86% 0.3% 0.4% 0.6% 0.6% 0.5% % 1.2% 1.3% 117.7% 118.9% % MAR HOLD QAR 3.4% 3.73% 1.64% 1.75% 1.87% 0.1% % 0.3% 0.6% % 0.5% 0.9% 100.5% 82.2% 159.1% 179.4% Khaliji SELL QAR 2.5% 3.23% % 2.14% 3.1% (0.9%) 0.4% 0.2% 0.6% 1.4% 0.5% 0.9% 1.3% 161.1% 296.5% 183.6% 154. QIIB Hold QAR 4.5% 3.86% 3.72% 2.85% 2.88% 0.2% 0.1% 0.2% 0.2% 0.6% 3.9% 1.8% % 30.6% 84.3% 68.6% 70. CAE BUY EGP 3.1% 3.32% 3.54% 3.92% 3.77% 0.3% 0.3% 1.2% 1.1% 0.9% 2.6% 1.9% % 107.6% 163.9% 110.4% 116.3% CIB BUY EGP 3.5% 3.38% 3.48% 4.22% 4.02% % 0.8% 0.7% 2.8% 2.8% 3.1% 3.1% 125.4% 120.6% % HDB HOLD EGP 3.5% 3.48% 3.37% 3.48% 3.49% 0.3% 0.9% 0.7% % % 91.1% % NSGB HOLD EGP 3.5% 3.43% 3.56% 4.02% 3.79% (1.) (0.2%) 0.4% % 3.4% % 3.3% 93.8% 101.3% 94.8% 100.6% EGB SELL EGP % % 3.67% (0.6%) 0.5% 0.8% 0.8% 12.4% 11.2% 14.1% 14.1% 122.6% 126.3% 70.3% 70.7% Audi BUY USD 1.9% 1.72% 1.94% 1.99% 2.03% 0.4% 0.4% % 0.9% 3.3% 3.9% 3.8% 3.5% % 83.3% 92.2% BLOM BUY USD 2.2% 2.36% 2.33% 2.28% 2.29% (0.1%) 0.3% 0.7% % 2.2% 2.2% 2.7% 3.3% 70.4% 73.5% 121.6% 138.9% Byblos HOLD USD 2.2% 1.98% 1.85% 1.61% 1.73% 0.6% 0.5% 0.7% 0.8% 0.9% 3.2% 3.3% 3.8% % 140.5% 151.7% 163.2% BOB SELL USD 2.01% 1.47% 1.64% 1.62% (0.) 0.1% 0.5% 0.6% 0.6% 0.5% 0.8% 0.8% 160.8% 231.9% 191.6% 232.7% ANB BUY SAR 3.1% 2.88% 2.81% 2.75% 2.72% 0.7% 1.4% 0.9% 0.8% 0.8% % 2.4% 2.4% 108.1% Al Rajhi BUY SAR 5.8% % 4.12% % 1.5% 1.1% 0.9% 0.8% 2.2% 1.7% 1.8% 1.8% 135.8% 148.4% 150.3% 152.6% BSFR HOLD SAR 2.6% 2.64% % 2.43% 0.7% 0.4% 0.2% 0.4% 0.5% 1.2% 1.2% 1.3% 1.4% % 131.3% 134.3% Riyad BUY SAR 2.7% 2.45% 2.46% 2.44% 2.41% 0.6% 0.9% 0.6% 0.7% 0.6% 1.7% 1.6% 1.6% 1.5% 126.2% 106.3% 112.5% 123.9% Samba BUY SAR 2.9% 2.53% 2.39% 2.29% 2.29% 0.6% 0.7% 0.3% 0.4% 0.5% 3.7% % 118.1% 124.4% 133.3% 129. SABB HOLD SAR 2.7% 2.66% 2.37% 2.29% 2.25% 1.9% 1.6% 0.6% 0.6% 0.6% 3.4% 1.9% 2.1% 2.1% % 119.4% SHB BUY SAR 2.7% 2.35% 2.39% 2.27% % 0.5% 0.6% 2.6% 1.9% % 145.4% Albilad BUY SAR 3.4% 3.37% 2.96% 2.88% 2.83% 3.1% % 1.5% 0.8% 5.5% 4.7% 4.2% 4.2% 89.4% % 151.2% Aljazeera SELL SAR 2.4% % 2.32% 2.23% 2.6% % 0.6% 0.5% 9.1% 7.7% 7.5% 7.2% % SIB BUY SAR 2.1% 2.74% 2.52% 2.32% 2.26% 1.7% 2.3% 0.9% 1.1% 0.8% 5.4% 6.1% 5.8% 5.7% 110.4% 124.6% 129.8% 128.4% Alinma HOLD SAR 5.8% 2.56% 3.78% 3.45% 3.43% --% % 0.6% 0.6% --% % 0.7% --% % % Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 62

63 July Exhibit 144: MENA banks: Key performance indicators (Continued) Company Ticker Arqaam Currency Net Interest Margin Loan Loss Charge / Avg Loans NPL Ratio Rating FY 09 FY 10 FY 11 FY 12e FY 13e FY 10 FY 11 FY 12e FY 13e FY 09a FY 10 FY 11 FY 12e FY 13e FY 10 FY 11 FY 12e FY 13e NBK NBK KK HOLD KWD 3.2% % 3.16% % 0.6% 0.5% 0.5% 1.8% 1.6% 1.5% 1.8% 1.5% 208.7% % 257.6% KFH KFIN KK SELL KWD 3.3% 3.41% 3.24% 3.05% % % % % 77.3% 129.9% 135.7% Gulf Bank GBK KK SELL KWD 1.9% 2.25% % 3.3% 1.9% % 30.3% 18.7% 14.4% % 38.1% 51.2% 60.4% Burgan BURG KK BUY KWD 2.7% 2.79% 2.59% 2.53% 2.52% 3.1% 1.3% 1.3% 1.1% % 11.5% % 35.3% 42.5% 49.3% Boubyan BOUBYAN KK SELL KWD 2.6% 2.81% % 2.98% 1.4% 1.1% 1.3% 0.8% 11.7% 0.7% 0.5% 2.9% 3.1% % % 332.7% 317. Muscat BKMB OM BUY OMR 3.1% 3.36% 3.42% 3.23% 3.16% 0.8% 0.6% 0.7% 0.7% 5.2% 4.2% % 118.4% 75.6% 74.5% Sohar BKSB OM HOLD OMR 2.5% 2.74% 2.64% 2.86% 2.92% 0.4% 0.3% 0.4% 0.5% 0.2% 0.9% 1.5% 1.9% 2.3% 212.5% 133.6% 131.8% 131.8% HBMO HBMO OM SELL OMR 3.3% 3.02% 2.79% 2.78% 2.78% (0.1%) (0.4%) 0.3% 0.4% 10.5% 10.8% 10.9% 10.7% 10.6% 42.7% 38.8% 48.1% 47.4% AUB AUB BI HOLD BHD --% 2.24% 2.26% 2.31% 2.35% 1.1% 0.8% 0.8% 0.8% --% 2.4% 2.5% % 119.5% 135.3% 130.7% 135.7% Source: Bloomberg, Arqaam Capital Research NPL Ratio Coverage Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 63

64 July Exhibit 145: MENA financials: Share price performance Company Arqaam Currency Share Source: Bloomberg, Arqaam Capital Research 52 Week % to 52 week Absolute Performance % Relative Performance (vs. sector) % Relative Performance (vs. market) % Peformance Rating Price High Low High Low 5D 1M 3M 6M 12M y-t-d 5D 1M 3M 6M 12M y-t-d 5D 1M 3M 6M 12M y-t-d since initiation ADCB HOLD AED % 2 (0.6) (2.5) (1.1) (0.2) (0.7) ADIB SELL AED % 6% (1.6) (2.2) (8.8) (1.9) 0.6 (1.9) (0.8) (0.9) (11.1) (10.5) 0.2 (8.2) (1.2) (0.4) (8.6) (1.7) 7.9 (4.6) 3.8 CBD BUY AED % 5% (5.1) (5.4) (8.2) (3.4) (2.4) (12.4) (1.0) (12.5) 3.6 DIB SELL AED % 3% (3.6) (4.5) (12.1) (6.0) (12.9) (2.6) (1.4) 4.3 (1.3) (1.0) 5.6 (9.4) (13.0) (5.7) (11.6) 2.6 ENBD HOLD AED % 3% (2.9) (5.2) (4.9) (16.3) (28.2) (7.5) (0.7) (9.5) (14.0) 1.2 (0.3) 4.9 (2.2) (23.3) (21.1) (16.5) 11.8 FGB BUY AED % (1.0) (4.8) (1.6) 16.8 (5.8) 13.4 (0.2) (3.4) (3.9) 8.2 (6.3) 7.1 (0.6) (3.0) (1.3) NBAD BUY AED % 19% (0.6) (0.1) UNB BUY AED % 4% (1.0) (1.7) (2.3) (0.3) (17.8) 0.7 (0.2) (0.3) (4.7) (8.9) (18.2) (5.6) (0.6) 0.1 (2.1) (0.1) (10.6) (2.0) 8.6 Tamweel BUY AED % 119% 3.3 (4.5) (31.9) (3.1) 0.4 (8.1) (32.4) (2.7) (24.7) Mashreq HOLD AED % 41% (1.7) (7.3) (0.9) (5.9) (1.3) (5.5) (21.4) Rakbank BUY AED % 29% (5.0) (15.9) 14.0 (1.2) (23.3) 14.2 (4.3) (14.5) 11.7 (9.8) (23.7) 7.8 (4.6) (14.1) 14.3 (1.0) (16.1) 11.4 (64.7) UAE CBQ HOLD QAR % (2.8) (6.8) (12.7) (14.7) (4.4) (16.7) (2.6) (5.5) (10.0) (9.6) (6.8) (10.2) (1.7) (3.8) (11.7) (11.4) (2.5) (13.0) 2.7 Doha HOLD QAR % 16% 1.0 (3.2) (6.5) (7.9) 7.8 (9.5) 1.2 (1.9) (3.8) (2.8) 5.4 (3.1) 2.1 (0.2) (5.4) (4.6) 9.7 (5.8) (2.8) QIB HOLD QAR % (0.6) (0.3) (3.6) (6.0) (3.6) (8.3) (0.5) 1.1 (0.9) (0.9) (6.0) (1.9) (2.6) (2.7) (1.7) (4.6) (0.8) QNB BUY QAR % (0.4) -- (3.3) 1.4 (3.3) (1.0) MAR HOLD QAR % 21% (0.7) (0.6) (4.1) (0.6) (0.4) 1.1 Khaliji SELL QAR % 6% (2.0) (5.2) (1.0) (7.6) (3.3) QIIB Hold QAR % 11% (1.5) (2.1) (7.3) (10.2) 6.3 (7.5) (1.3) (0.7) (4.6) (5.1) 3.9 (1.1) (0.4) 0.9 (6.3) (6.9) 8.1 (3.8) 3.6 Qatar CAE BUY EGP % 18% (3.5) 7.8 (23.5) (0.8) 13.0 (25.8) (1.7) (2.0) (10.7) (17.7) (20.8) 34.1 CIB BUY EGP % 38% (2.0) (12.8) 36.6 (1.8) (15.2) (11.0) (7.1) HDB HOLD EGP % 13% (5.2) (8.6) (5.6) (8.2) (36.3) 7.7 (5.0) (7.2) (3.0) (3.1) (38.7) 14.1 (2.7) (13.2) (4.1) (26.8) (30.5) (27.3) 26.8 NSGB HOLD EGP % 63% (6.9) (9.3) (1.2) EGB SELL EGP % 15% (8.6) (8.6) (23.7) (2.6) (6.0) (3.5) (26.1) (7.1) (27.2) (18.0) (37.6) 13.3 Egypt Audi BUY USD % 7% (0.8) -- (0.2) 0.3 (14.3) (2.4) 6.4 (0.5) (7.1) BLOM BUY USD % 11% (0.1) (12.0) 5.0 (0.7) (16.7) (5.0) Byblos HOLD USD % 2% (1.3) (1.3) (3.7) (1.3) (12.2) (3.1) (14.4) 11.4 (0.9) (0.3) (2.8) (1.2) 2.9 (2.9) (5.7) BOB SELL USD % 2% -- (0.1) (0.1) (0.8) 1.5 (0.6) (1.1) 0.1 (1.0) 3.9 (14.6) (0.8) 16.7 (0.4) -- Lebanon ANB BUY SAR % 12% (1.7) (5.8) (9.8) (3.9) (5.7) (9.4) (3.6) 0.0 (0.3) (4.2) (8.8) (16.6) (3.7) (2.8) Al Rajhi BUY SAR % 14% (2.0) (5.1) (1.7) (2.9) (3.5) (1.2) (4.0) (0.3) 0.4 (3.2) (6.5) (8.4) (4.2) 0.7 BSFR HOLD SAR % 24% (0.5) (5.4) (5.7) (0.5) (5.3) (1.2) (3.6) (12.5) (1.4) (10.9) Riyad BUY SAR % 8% (1.6) (4.4) (1.4) 1.9 (6.3) (5.3) (9.2) (5.8) (7.5) (5.7) (12.2) (13.0) (7.6) (1.7) Samba BUY SAR % 14% (1.4) (10.3) (0.2) 1.7 (12.0) (2.7) (4.1) (9.4) (11.5) (7.0) 0.3 (4.8) (4.4) (12.5) (18.7) (7.2) (1.9) SABB HOLD SAR % 24% (1.4) (6.0) (0.5) (4.3) 2.4 (9.4) SHB BUY SAR % 29% (2.9) (6.9) (0.9) (1.7) (1.2) (1.4) (1.9) (1.1) Albilad BUY SAR % 64% (1.5) (14.6) (6.9) (9.1) Aljazeera SELL SAR % 69% (2.3) (13.6) (0.3) (5.9) (0.6) (8.1) SIB BUY SAR % 1 (3.1) (10.5) (2.3) 4.9 (10.5) 5.3 (1.1) (2.9) (6.2) (6.2) (10.1) (5.2) (1.5) (5.0) (6.5) (9.2) (17.3) (5.4) (6.3) Alinma HOLD SAR % 51% (5.4) (12.8) (3.4) (5.2) (3.7) (7.3) KSA Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 64

65 July Exhibit 146: MENA financials: Share price performance (Continued) Company Arqaam Currency Share Source: Bloomberg, Arqaam Capital Research 52 Week % to 52 week Absolute Performance % Relative Performance (vs. sector) % Relative Performance (vs. market) % Peformance Rating Price High Low High Low 5D 1M 3M 6M 12M y-t-d 5D 1M 3M 6M 12M y-t-d 5D 1M 3M 6M 12M y-t-d since initiation NBK HOLD KWD % 16% (3.7) (1.9) (1.4) (1.4) (6.2) 2.1 (3.7) (1.6) (2.9) (0.0) (1.4) (0.0) (2.2) (0.3) (10.4) KFH SELL KWD % 1% (2.8) (9.2) (11.3) (17.2) (26.9) (17.2) (2.8) (8.9) (12.8) (15.9) (18.7) (18.0) (0.5) (7.4) (12.1) (16.1) (17.4) (18.1) (5.5) Gulf Bank SELL KWD % 2% (1.2) (2.3) (9.1) (15.2) (22.6) (13.5) (1.2) (2.0) (10.6) (13.9) (14.4) (14.3) 1.2 (0.5) (9.9) (14.1) (13.1) (14.5) (3.7) Burgan BUY KWD % 2% (3.5) (2.4) (5.3) (7.3) (17.8) (8.3) (3.5) (2.0) (6.8) (6.0) (9.6) (9.0) (1.2) (0.5) (6.1) (6.2) (8.2) (9.2) 25.3 Boubyan SELL KWD % (1.6) Kuwait Muscat BUY OMR % 4% (1.2) (7.9) (5.8) (5.3) (6.2) (12.3) (1.2) (7.6) (7.4) (3.9) 2.0 (13.1) 0.4 (2.0) (5.9) (7.7) 0.0 (11.7) (4.2) Sohar HOLD OMR % 13% (2.0) (6.2) (2.6) (3.2) (1.3) (5.1) (2.0) (5.9) (4.2) (1.9) 6.9 (5.8) (0.4) (0.4) (2.7) (5.7) 4.9 (4.4) (10.5) HBMO SELL OMR % 8% -- (2.8) (9.7) (15.2) (6.1) (12.5) (150.0) 13.9 (109.7) (915.2) (906.1) (55.3) (9.8) (17.7) 0.1 (11.8) (6.4) Oman AUB HOLD BHD % 3% (4.4) (12.3) (12.9) (3.7) -- (0.3) 1.6 (1.3) (8.2) (0.1) (10.0) Bahrain Exhibit 147: MENA diversified financials: Share price performance Company Arqaam Currency Share Source: Bloomberg, Arqaam Capital Research 52 Week % to 52 week Absolute Performance % Relative Performance (vs. sector) % Relative Performance (vs. market) % Peformance Rating Price High Low High Low 5D 1M 3M 6M 12M y-t-d 5D 1M 3M 6M 12M y-t-d 5D 1M 3M 6M 12M y-t-d since initiation Shuaa SELL AED % 74% 3.3 (4.5) (31.9) (5.0) 0.2 (10.5) (6.5) (24.7) 27.2 (9.4) EFG BUY EGP % 27% (12.0) 2.9 (5.6) (3.9) (24.6) 17.2 (4.8) (7.7) (3.5) (0.4) (9.5) (1.8) (4.0) (22.5) (18.8) (17.8) 19.1 DFM SELL AED % 41% (5.0) (15.9) 14.0 (1.2) (23.3) 14.2 (2.8) (1.6) (1.9) 0.4 (2.4) (5.7) 16.7 (8.2) (16.1) 5.1 (2.3) Salama BUY AED % 29% (8.5) (17.9) (5.3) 0.7 (18.1) 7.2 (6.0) (12.8) (5.8) (1.3) (13.4) 3.4 (5.9) (7.7) (2.6) (6.3) (10.9) (1.8) (0.3) Qatar InsurBUY QAR % 18% 0.4 (2.1) (0.0) 0.0 (0.1) (0.1) (0.1) (0.1) (5.3) Tawuniya BUY SAR % 6% 0.8 (9.4) (16.6) 1.2 (24.3) (4.5) na na na na na na 2.5 (3.9) (20.9) (12.9) (31.0) (15.2) (11.2) MedGulf SELL SAR % 22% (3.6) (13.4) (13.4) 12.7 (0.7) 4.3 na na na na na na (1.9) (7.9) (17.6) (1.4) (7.4) (6.3) (11.5) Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 65

66 July Exhibit 148: Interest rates NIM Asset yield Of Which Funding costs Of which FY 11A FY 14e Change FY 11A FY 14e Change Loan Impact increased T-bill rate T-bill Retail Credit Retail vs Public vs Local vs Deposit Deposit Net wholesale FY 11A FY 14e Change margins liquidity impact investment caps card caps Corporate Loans Private Loans USD margins mix debt issuance ADCB 2.91% 2.95% 0.03% 4.79% 4.5 (0.29%) (0.18%) (0.11%) (0.0) 2.07% 1.71% (0.36%) (0.32%) 0.02% (0.05%) ADIB 4.08% 4.07% (0.01%) 5.36% 5.33% (0.03%) 0.01% (0.03%) (0.01%) 1.37% 1.35% (0.02%) (0.08%) 0.06% (0.01%) CBD 3.75% 3.6 (0.15%) 4.94% 4.64% (0.3) (0.25%) (0.05%) (0.01%) 1.39% 1.2 (0.19%) (0.25%) 0.09% (0.03%) DIB 3.33% 3.16% (0.17%) 5.06% 4.79% (0.27%) (0.22%) (0.05%) (0.0) 1.82% 1.72% (0.1) (0.14%) 0.05% (0.0) ENBD 2.79% 2.66% (0.13%) 4.45% 4.08% (0.37%) (0.26%) (0.08%) (0.03%) % (0.25%) (0.47%) 0.02% 0.2 FGB 3.71% 3.55% (0.16%) 5.17% 4.9 (0.27%) (0.16%) (0.03%) (0.07%) (0.01%) 1.62% 1.5 (0.12%) 0.13% (0.17%) (0.07%) NBAD % (0.19%) 3.73% 3.5 (0.23%) 0.38% (0.57%) (0.04%) 1.11% 1.1 (0.01%) 0.06% (0.01%) (0.06%) UNB 3.05% % 4.91% 4.84% (0.07%) (0.16%) 0.11% (0.03%) % (0.17%) (0.06%) (0.09%) (0.02%) TAMWEEL 2.41% % 5.82% 5.6 (0.22%) (0.22%) 0.01% --% 4.35% 4.0 (0.35%) (0.73%) 0.09% 0.28% MASQ 2.63% 2.54% (0.09%) 4.58% 4.1 (0.48%) (0.37%) (0.09%) (0.02%) (0.5) (0.5) 0.0 RAKBANK 9.07% 7.77% (1.3) 10.81% 9.15% (1.66%) (1.64%) (0.03%) --% 2.09% 1.7 (0.39%) (0.17%) (0.2) (0.02%) UAE banks CBQK 3.22% 2.73% (0.49%) 4.78% 4.17% (0.61%) (0.46%) 0.07% (0.02%) (0.03%) (0.05%) 1.83% 1.58% (0.25%) (0.23%) (0.05%) 0.03% DHBK 3.63% 3.07% (0.55%) 4.76% 4.2 (0.56%) (0.14%) (0.21%) (0.03%) (0.01%) (0.05%) 1.29% % 0.03% (0.0) (0.01%) QIBK 2.88% 3.22% 0.34% 4.13% 4.45% 0.32% 0.42% 0.13% (0.04%) (0.01%) (0.05%) 1.21% 1.02% (0.19%) (0.3) (0.1) 0.21% QNBK 3.08% 2.8 (0.28%) 4.23% 3.95% (0.28%) (0.15%) 0.15% (0.02%) (0.09%) (0.05%) 1.31% 1.3 (0.01%) (0.04%) 0.04% (0.01%) MARK 1.64% 2.02% 0.37% 2.98% 3.18% % 0.01% --% (0.06%) (0.05%) 1.58% 1.28% (0.3) (0.1) (0.3) 0.1 KCBK % (0.52%) % (0.45%) (0.04%) (0.11%) (0.11%) (0.02%) (0.05%) 1.28% 1.26% (0.02%) 0.13% (0.26%) 0.11% QIIK 3.72% 2.82% (0.9) 5.35% 4.19% (1.16%) (1.22%) 0.27% (0.02%) (0.01%) (0.05%) 1.64% 1.28% (0.36%) (0.48%) 0.07% 0.05% Qatar banks CIEB 3.54% 3.64% % 7.66% 0.15% (0.09%) (0.1) 0.24% 0.01% 0.06% --% 0.04% 4.36% 4.35% (0.01%) (0.2) 0.19% (0.0) COMI 3.48% % 7.07% 7.62% 0.55% 0.39% (0.32%) 0.42% (0.02%) 0.04% --% 0.04% 3.98% % 0.06% 0.26% 0.0 HDBK 3.37% 3.47% % 8.66% (0.32%) (2.13%) (0.02%) 1.86% (0.07%) --% --% 0.04% % 1.41% 1.23% 0.32% (0.15%) NSGB 3.56% 3.72% 0.16% 7.39% 7.53% 0.14% (0.04%) (0.12%) 0.19% 0.01% 0.06% --% 0.04% 4.38% 4.39% 0.01% (0.01%) 0.04% (0.01%) EGBE % (0.01%) 7.39% 7.55% 0.16% (0.23%) (0.13%) 0.41% 0.01% 0.06% --% 0.04% (0.0) (0.1) 0.1 (0.0) Egypt banks AUDI 1.94% 2.03% % % 0.46% (0.4) 0.06% (0.0) 3.27% 3.22% (0.05%) 0.14% (0.19%) (0.01%) BLOM 2.33% 2.32% (0.01%) 5.53% 5.32% (0.21%) 0.02% (0.29%) 0.06% --% % (0.26%) (0.38%) 0.13% (0.01%) BYB 1.85% 1.72% (0.13%) 5.51% 5.32% (0.19%) 0.06% (0.31%) 0.06% --% 3.95% 3.98% 0.03% 0.24% (0.17%) (0.04%) BOB 1.47% 1.61% 0.14% 5.06% 5.35% 0.29% 0.6 (0.37%) 0.06% --% 3.82% 3.85% 0.03% 0.29% (0.19%) (0.07%) Lebanon banks ARNB 2.81% 2.71% (0.1) 3.06% 2.98% (0.08%) (0.13%) 0.04% 0.01% (0.0) 0.29% % (0.14%) 0.17% (0.01%) RJHI 4.61% 3.88% (0.73%) 4.74% 3.99% (0.75%) (0.8) 0.01% 0.04% --% 0.15% 0.13% (0.02%) (0.19%) 0.17% --% BSFR % (0.12%) 2.89% 2.77% (0.12%) (0.24%) 0.11% 0.01% (0.0) 0.46% 0.43% (0.03%) 0.05% 0.11% (0.18%) RIBL 2.46% 2.41% (0.05%) 2.88% 2.79% (0.09%) 0.14% (0.24%) 0.01% (0.0) % (0.04%) (0.13%) 0.06% 0.03% SAMBA 2.39% 2.24% (0.15%) 2.65% 2.42% (0.23%) (0.24%) % (0.01%) 0.31% 0.21% (0.1) (0.37%) 0.24% 0.03% SABB 2.37% 2.22% (0.15%) 2.76% 2.62% (0.14%) (0.32%) 0.18% 0.01% (0.0) 0.45% 0.45% 0.0 (0.16%) 0.14% 0.02% AAAL 2.39% 2.2 (0.19%) % (0.19%) (0.18%) (0.02%) 0.01% (0.0) 0.59% 0.58% (0.01%) (0.65%) 0.59% 0.06% ALBI 2.96% 2.79% (0.17%) 3.07% 2.86% (0.21%) (0.78%) 0.56% 0.01% --% 0.12% 0.08% (0.04%) (0.63%) 0.55% 0.04% BJAZ 2.27% 2.18% (0.09%) 2.81% 2.65% (0.16%) (0.38%) 0.21% 0.01% --% 0.61% 0.5 (0.11%) (0.01%) (0.06%) (0.03%) SIBC 2.52% 2.18% (0.34%) 3.18% 2.87% (0.31%) (0.28%) (0.04%) 0.01% (0.0) 0.76% 0.87% 0.11% (0.45%) 0.57% (0.02%) ALINMA 3.78% 3.4 (0.38%) 4.03% 3.63% (0.4) (0.57%) 0.17% 0.01% (0.01%) 0.47% 0.29% (0.18%) (0.36%) 0.18% --% KSA banks 0.43% 0.39% NBK 3.11% 2.95% (0.16%) % (0.14%) 0.04% --% 1.01% % (0.31%) 0.49% KFIN 3.24% 3.06% (0.18%) 5.34% 4.58% (0.76%) (0.51%) (0.3) 0.04% --% 2.01% 1.47% (0.54%) (0.54%) --% GBK % 0.12% 3.74% 3.65% (0.09%) 0.02% (0.15%) 0.04% --% 1.59% 1.38% (0.21%) (0.09%) (0.11%) (0.01%) BURG 2.59% 2.52% (0.07%) 4.13% 4.0 (0.13%) (0.02%) (0.14%) 0.04% --% 1.69% 1.62% (0.07%) (0.05%) (0.02%) BOUBYAN % 0.08% 3.88% 3.77% (0.11%) 0.14% (0.28%) 0.04% --% 1.14% 0.9 (0.24%) (0.24%) --% Kuwait banks BKMB 3.42% 3.09% (0.33%) 4.63% 4.32% (0.31%) (0.39%) 0.04% 0.04% (0.0) 1.41% 1.42% 0.01% (0.5) 0.6 (0.09%) BKSB 2.64% % 4.62% 4.67% 0.05% (0.09%) % (0.0) % (0.39%) (0.33%) (0.06%) 0.01% OIBB 2.79% 2.78% (0.01%) 3.38% 3.35% (0.03%) (0.0) (0.07%) 0.04% (0.0) 0.68% 0.65% (0.03%) (0.39%) 0.36% --% Oman banks AUB 2.26% 2.38% 0.12% 3.89% 4.04% 0.15% 0.15% 0.08% (0.0) % 0.06% (0.01%) (0.09%) 0.16% Bahrain banks Source: Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 66

67 July Exhibit 149: TP and EPS revision TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons ADCB % % % % Impressive margins on the back of improved asset yields ADIB % % % (2.4%) Plans to build up capital implying lower loan growth CBD % (1.4%) (1.) (0.1%) No major surprises DIB (0.5%) (1.8%) (2.5%) (3.2%) No significant changes ENBD % % (0.3%) % Higher capital gain and lower than expected provisioning FGB % % (0.7%) (0.9%) No significant changes NBAD % % % % Lower than expected provisioning UNB % % (0.8%) % No significant changes TAMWEEL % (3.9%) % % Dissapointing net interest income and F&Cs MASQ % % % % Beat expectations on the back of improved cost of funding and lower provisioning RAKBANK % % % % New retail regulation biting less hard than expected CBQK (2.5%) % % (1.) Lower NII and fee generation offset by lower provisioning and unsustainable capital gains DHBK (9.3%) (0.4%) (6.9%) (8.4%) Disappointing loan growth, pressure on NIM and F&C offset by unsustainable capital gains QIBK % % % Lower provisioning (after removing Arcapita exposure), higher loan growth, NII and F&C QNBK % % % Much stronger than expected loan growth MARK (10.1%) (4.8%) (14.1%) (12.9%) Lower than expected NIM, lower costs, non-recurring items in Other income KCBK (1.5%) % (9.5%) (5.2%) Margin contraction, slower loan growth QIIK (12.2%) (9.5%) (13.9%) (13.8%) NIM compression CIEB % % Earnings beat fuelled by investment income, decent commercial momentum and rising margins COMI % % % Revised loan estimates down for FY12e but compensated by spiking margins HDBK % (3.3%) (2.8%) (2.9%) Vulnerable to a deterioration in asset quality NSGB % (0.1%) % % Improved cost efficiency but provisions yet to increase EGBE % % % % Higher margins and improved cost efficiency but remains significantly underprovisioned HRHO Qinvest still uncertain, IB continues to be a drag AUDI (21.1%) % % Overestimated gains from sale of insurance BLOM (4.8%) (5.) (4.6%) (4.1%) Lacklustre Fy12e with continued conservative provisioning BYB (6.) % (4.8%) (4.1%) Flat earnings with lower loan growth estimates BOB (0.4%) (23.1%) (20.1%) (16.9%) Massively underprovisioned with lower loan and deposit estimates ARNB (1.4%) % (2.3%) No significant changes RJHI (5.6%) % (1.4%) (4.) Lower margins on new retail book BSFR (9.4%) (3.1%) (0.) (0.3%) Lower NII and fee generation, coupled with higher cost of equity RIBL (2.) (0.2%) (1.5%) (0.9%) No significant changes SAMBA (1.5%) (2.) (1.6%) (2.5%) Conservative loan loss charges, higher than expected SABB (0.2%) (0.3%) Higher operating profits offset by higher provisioning AAAL (2.7%) (1.9%) (3.) (1.1%) No significant changes ALBI % % % % Earnings beat on the back of higher fee generation and margins BJAZ % % % % Negative earnings surprise as a result of higher costs and provisioning charges SIBC (0.9%) (8.6%) (2.2%) (1.2%) Higher loan loss charges ALINMA (0.) % % (0.1%) No significant changes Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 67

68 July Exhibit 150: TP and EPS revision (Continued) TP EPS FY12e EPS FY13e EPS FY14e Previous New Old New Old New Old New Key reasons NBK (2.8%) (0.9%) % (0.5%) Consolidating financials after 58.34% ownership in Boubyan. KFIN (0.3%) (10.1%) % % Higher provisions and lower interest income on the back of slightly lower loan growth. GBK (0.9%) (21.9%) % % Higher loan loss charges BURG (1.) % (1.1%) (1.1%) Despite higher LLPs in Q2, in line with our forecast. BOUBYAN (15.7%) (3.5%) (7.8%) Loan loss provisioning higher than expected. BKMB (9.) (6.6%) (8.6%) Lower NIMs, higher number of shares BKSB % % % % Higher interest income on the back of higher loan book growth and strong Q2 numbers. OIBB No major surprises for HSBS Oman reporting below our estimate despite synergies with HSBC. AUB In line with our estimates, no major surprises SHUAA (0.03) (0.01) No major surprises DFM No major surprises SALAMA (12.3%) (22.9%) (16.1%) (25.1%) Drop in GWP and higher claims in family takaful and non-motor segment QATI (10.1%) (2.8%) (10.1%) (5.5%) Rising claims from New Zeeland quake TAWUNIYA (14.6%) % (9.) (1.7%) higher than anticiapted net loss ratio in medical segment MEDGULF (21.7%) (58.9%) (28.9%) (19.2%) Soaring net loss ratios in medical and motor segments Source: Bloomberg, Arqaam Capital Research Copyright 2012, Arqaam Capital Limited. All Rights Reserved. See Important Notice. 68