INVESTOR PRESENTATION Financial Year 2012 1
Disclaimer The information contained in this document has been provided on the basis of current knowledge, assumptions and expectations. In the event that any information is incorrect or any party misrepresented, Burgan Bank and its consultants cannot be held responsible for this. Various factors could cause future results, performance or events to differ materially from those given in this document. No obligation is undertaken to update this document or the statements / information contained in it. The information contained in this document should by no means be interpreted as an invitation to making any investment decision based on the same. Our continuous advice is that every investor must rely on his/her own advisor and resources to ensure the correctness of the information presented to him/her and then makes his/her investment decision accordingly. 2
Agenda 2012: Key Highlights Financial Performance Inorganic Highlights Capital Adequacy Performance vs. Peers Conclusion Appendix 3
2012: Key Highlights 4
FY 12: Key Highlights of 16% backed by growth in core income outpacing Peers. Solid Business Performance of 10% outperforming Peers reaching KD55.6M. of 27.5% and 21.3% respectively. at 12.4% and at 20.2% in FY 12. Improved Credit Quality drop from 11.5% in FY 11 to 7.1% in FY 12. improved from 131.1% to 171% (198% Ex. BBT). Fortified Balance Sheet of 31.5%. ; Tier 1 Ratio 12.0% & Capital Adequacy Ratio of 18.5%. Inorganic Growth completed transaction of ET in 21 st December 2012 & rebranded as Burgan Bank - Turkey (BBT). Approval received from Kuwait Regulator to acquire 25% stake in FIMBank, Malta. 5
Financial Performance 6
Strong Financial and Operating Performance Revenue (KD million) (1) 16.4% 190.1 163.4 33.4% 51.2 38.4 Q4 11 Q4 12 FY 11 FY 12 Cost of Credit (KD million) (1) 3,384 2,252 2,135 36.1 29.1 17.3 16.1 12.9 13.7 7.9 10.8 18.8 13.1 5.0 2.9 Q4 11 Q4 12 FY 10 FY 11 FY 12 Additional Provisions Net Loans in KD million. Net Profit (KD million) (1) 55.6 50.6 9.2 9.2 Q4 11 Q4 12 FY 11 FY 12 Key Indicators (1) Burgan Bank Group FY 11 FY 12 Revenue Growth (YoY) (0.9)% 16.4% Operating Profit Growth (YoY) 2.4% 16.6% Operating Profit Margin 62.4% 62.6% Cost to Income Ratio 37.6% 37.4% Jaws Ratio (YoY) 5.0% 0.5% Loans to Cust. Deposits 80.6% 86.9% Liquidity Ratio(2) 40.2% 31.5% NPL to Gross Loans 11.5% 7.1% NPL net of Collateral to Gross Loans 3.1% 1.9% ROE 12.0% 12.4% ROTE 21.1% 20.2% (1) Figures are reported after consolidation adjustments. (2) Liquid assets comprises of Cash & Cash eq., Treasury bills & bonds and Due from Banks & OFIS. 7
with quality earnings Revenue (KD million) 39 43 43 48 44 48 38 51 13 15 18 17 21 14 17 15 26 28 29 30 27 31 30 24 Q1 11 Q1 12 Q2 11 Q2 12 Q3 11 Q3 12 Q4 11 Q4 12 Net Interest Income (2011) Non Interest Income (2011) Net Interest Income (2012) Non Interest Income (2012) BB Consolidated (KD mn) Operating Margin Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 59.3% 63.5% 65.7% 60.5% 62.3% 60.9% 64.2% 62.8% NIM^ (%) 2.5% 0.3% 2.5% 0.3% 2.2% 2.6% 2.6% 2.6% 2.2% Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Due to BBT Acquisition One Off* * One off of KD 2.5mn Revenue composition has remained stable across FY 12. Net interest income as a percent of total income was ~63% in FY12 Contribution of net interest income and Fee income to total income was ~83% in FY 12 Fee income contributed nearly ~54% of total non interest income in FY 12 Post BBT acquisition, earnings quality is expected to remain strong with net interest income and fee income contributing to ~87% of BBT s revenues in FY 12 ^ Net interest income divided by end of period interest earning assets i.e. cash, t-bills and bonds, due from banks and OFIs, loans and advances to customers, investment securities. 8
supported by solid balance sheet growth KD (million) Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 (1) Q4 12 Loans & Advances 2,252 2,405 2,592 2,783 2,871 3,384 Total Assets 4,552 4,773 4,967 5,171 5,272 5,977 Deposits 2,796 3,040 3,164 3,330 3,392 3,895 Total Liabilities 3,986 4,205 4,386 4,573 4,652 5,357 Shareholder's Equity 447 450 464 478 491 491 Liabilities & Sh. Equity 4,552 4,773 4,967 5,171 5,272 5,977 Assets Progression (KD billion) Liabilities Progression (KD billion) 6.0 2.3 4.6 15.8% 27.5% 2.9 5.3 3.4 2.8 4.0 16.7% 21.3% 3.4 4.7 3.9 5.4 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 (Ex. BBT) Loans & Advances Total Assets Q4 12 (Inc. BBT) Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 (Ex. BBT) Deposits Total Liabilities Q4 12 (Inc. BBT) (1)Excludes Burgan Bank Turkey. 9
and enhanced risk position Non Performing Loans (KD million) and Coverage Ratio 400 300 131% 145% 139% 154% 198% 171% 200% 150% 200 100% 100 0 270 266 254 253 219 247 73 95 102 70 76 105 111 114 72 92 67 46 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 (Ex. BBT) Q4 12 (Inc. BBT) NPL NPL net of collateral Total provisions Coverage net of collateral 50% 0% NPLs to Gross Loans (%) NPLs net of collateral to Gross Loans Gross Loan Industry Split 2,348 3,498 11.5% 10.6% 9.4% 8.8% 7.4% 7.1% 3.1% 2.8% 2.8% 2.5% 1.6% 1.9% 13.6% 30.4% 9.9% 15.7% 22.4% 27.0% 9.7% 15.1% 26.6% 19.8% 2011 Q1 12 Q2 12 Q3 12 Q4 12 *Q4 12 (Ex. BBT) (Inc. BBT) 2011 Q1 12 Q2 12 Q3 12 Q4 12 *Q4 12 (Ex. BBT) (Inc. BBT) FY 11 FY 12 Real estate Trade Construction Manufacturing Personal Others 10
Solid & improved shareholder returns Quarterly Net Profit (KD million) Annual Net Profit (KD million) 72.9 16.5 17.0 4.6 3.5 11.8 13.5 16.1 16.1 17.1 17.5 17.6 17.7 4.0 2.5 7.9 4. 17.5 5 13.6 15.2 9.2 20.0 10.8 9.2 66.6 16.1 50.6 17.3 55.6 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 FY 11 FY 12 Quarterly ROE (1) Annual ROE (2) 33.7 37.8 16.6% 16.9% 4.9% 3.7% 15.7% 16.4% 16.6% 16.6% 16.2% 7.8% 3.9% 2.4% 17.8% 9.9% 27.8% 26.5% 15.8% 16.3% 3.8% 3.9% 11.7% 13.2% 15.7% 8.6% 16.6% 12.7% 13.8% 7.9% 12.0% 12.4% Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Additional Provisions EPS for the year (Fils) Annual ROTE FY 11 FY 12 (1) ROE are calculated on a Quarterly basis (2) ROTE excl. additional provisions 11
Financial Performance - By Country 12
Strong Revenue Diversity Revenue FY 12 (1)(2) Operating Profit Margins FY 12 (1)(2) Burgan Group at KD190.1m. (2) Burgan Group at 62.6%. (2) Kuwait, KD94.2m, 49% Jordan, KD46.2m, 24% 69.6% (3) 70.6% (4) 69.4% (4) 54.1% (4) 57.6% (4) Algeria, KD34.7m, 18% 66.6% 69.2% 66.0% 50.4% Tunisia, KD3.3m, 2% Iraq, KD12.4m, 7% 37.0% Kuwait Jordan Algeria Iraq Tunisia FY 12 Revenues grew 16.4% from FY 11 levels led by Kuwait and Algeria (1) Reported contribution excluding consolidated adjustments. (2) Based on Kuwait CBK Reporting Standards. (3) Kuwait Operating Margins excludes Subdebt cost of KD9.1m. (4) Based on subsidiary local reporting Standards. 13
from all the subsidiaries Total Assets (KD mn) Net Loans (KD mn) Customer Deposits (KD mn) 3,273 3,854 1,576 2,054 1,819 2,218 950 890 390 284 158 258 185 149 559 488 230 150 38 34 7 5 600 591 271 173 229 144 68 73 Kuwait Jordan Algeria Iraq Tunisia FY 11 FY 12 Kuwait Jordan Algeria Iraq Tunisia FY 11 FY 12 Kuwait Jordan Algeria Iraq Tunisia FY 11 FY 12 Revenue (KD mn) 94 84 43 46 35 23 11 12 4 3 Kuwait Jordan Algeria Iraq Tunisia FY 11 FY 12 Operating Profit (KD mn) 63 54 30 32 23 16 7 6 2 1 Kuwait Jordan Algeria Iraq Tunisia FY 11 FY 12 Stable growth in MENA, but risks ahead from jittery global markets & lack of domestic credit growth. Low investment levels in a low interest environment. Burgan Banking Group continue to witness growth in core business. 14
and further strengthened by acquisition of BBT Contribution for FY 12 (Actual) (1) Contribution for FY 12 (Pro forma (2) ) (1) 11.1% 15.1% 12.9% 2.5% 4.5% 1.9% 5.9% 6.1% 6.8% 7.0% 15.0% 16.5% 15.4% 1.7% 6.5% 18.2% 24.2% 1.0% 5.0% 4.4% 18.3% 19.9% 10.3% 25.5% 11.1% 15.1% 12.9% 17.7% 8.0% 3.8% 4.2% 0.9% 2.5% 1.9% 4.6% 4.5% 5.9% 19.1% 6.1% 6.8% 1.4% 5.4% 16.9% 7.0% 15.0% 16.5% 15.0% 9.9% 15.4% 23.5% 19.9% 60.8% 60.5% 57.0% 49.4% 50.2% 65.5% 60.8% 60.5% 57.0% 40.7% 46.2% 63.0% Total Assets Customer Loans Customer Deposits Revenue Operating Profit Net Profit^ Total Assets Customer Loans Customer Deposits Revenue Operating Profit Net Profit^ Kuwait Jordan Algeria Iraq Tunisia Turkey Kuwait Jordan Algeria Iraq Tunisia Turkey ^ Net Profit contribution of BB Share; Tunisia Net Profit Contribution NM. (1) Reported contribution excluding consolidated adjustments. (2) Assuming 12 months of Consolidation of BBT in 2012. 15
Inorganic Highlights 16
BBT: Compelling Business Proposition Tekirdag Izmir 2 1 Mugla Istanbul Kocaeli Bursa Nationwide Network of 61 branches 2 Sakarya 7 2 1 1 Zonguldak 1 3 1 Denizli 1 Eskisehir Antalya 6 Ankara 6 Konya Mersin 1 Kayseri 1 Adana Note: Numbers in circles indicate number of branches 1 1 1 1 Samsun 2 Hatay Gaziantep 1 Diyarbakir Coverage Presence in 21 leading industrial and business cities, accounting for ~90% of the Turkish economy 44% of branches located in Istanbul, the country s wealthiest city Modern and rebranded branches with highly scalable IT systems Branch network not operating at full capacity - providing further growth potential KD Million, as on Dec 12 BB, excl Turkey BBT BB + BBT Assets 5,272 704 5,977 Strong financial performance Loans Deposits 2,871 3,392 513 503 3,384 3,895 Revenue 190 41 231 Net Income 56 3 58 17
resulting in strengthening Business Position Access to Market with High Entry Barriers Opportunity to be part of the growing Turkish banking sector Acquisition of full fledged commercial bank with 61 branches at valuations similar to acquiring a greenfield banking license in a market with high entry barriers Significant trade synergies between Turkey and existing Burgan Bank operations (Kuwait, Jordan, Lebanon, Algeria, Tunisia and Iraq) Opportunity for Burgan Bank to expand its trade funding business Trade Synergy Opportunities Fit with Burgan s Expansion Strategy Strategic fit with operations in a market decoupled from existing operations in oil dependent economies BBT offers the right scale and asset base at the right valuation Burgan Bank s main focus would be to grow the Corporate and SME business in Turkey Related adjacencies to capture the retail business by leveraging on corporate and SME client contacts Cross Selling Opportunities Well Established Banking Platform Established platform offering value added products & services to Corporate, SME, Small Business and Retail clients Scalable - can handle additional flow of business with existing infrastructure & resources at minimal additional expenses Focus on growth in corporate and SME business Achieve operational excellence through integration Implement Burgan Bank s risk framework with appropriate policies, procedures & controls Re-Branded as Burgan Bank, Turkey Future Direction BBT fits with Burgan s regional strategy providing a full fledged and scalable platform that offer upside growth potential, in the right country at the right time 18
Capital Adequacy 19
Q4'07 Q4'08 Q4'09 Q4'10 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Capital Adequacy Trend CAR (FY08 FY 12) 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 16.6% 13.8% 16.9% 742 558 585 262 309 379 441 31 55 34 128 132 133 125 124 125 114 74 146 145 144 143 144 146 150 152 152 277 276 276 225 247 248 233 274 316 313 400 401 414 411 413 406 439 437 424 436 480 Acquired JKB Acquired AGB Acquired BoB Acquired TIB 21.0% Acquisition ET and Issuance of KD 100mn Sub debt 19.6% 18.5% 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Eligible Capital (KD Mn) Historical CAR, Quarterly Tier 1 Cap. Tier 2 Cap. Regulatory Security Optimum Readiness for Growth Actual CAR CAR Walk (FY 11 FY 12) 19.6% (3.5% ) (1.5% ) 2.5% 1.4% 18.5% Pillar II Requirement: 14.1% Regulatory Requirement: 12% FY 11 Impact of BBT Increase in BAU RWAs Additional Sub debt Retained Earnings FY 12 20
Performance vs. Peers 21
.. Local Peers (FY 12 Vs. FY 11) Net Loans Growth FY 12 vs. FY 11 Deposits Growth FY 12 vs. FY 11 Liquidity Ratio* 104% 87% 20.7% 14.4% 6.2% 50.3% 22.8% 27.5% 39.8% 39.3% 14.1% 18.0% 25.7% 21.3% 23.0% 24.3% 27.3% 28.0% 31.5% (3.8%) (0.3%) (2.0%) (12.5%) (2.5%) (3.0%) NBK ABK GBK CBK Burgan NBK ABK GBK CBK Burgan NBK ABK GBK CBK Burgan Revenue Growth FY 12 vs. FY 11 20.3% 16.4% 19.7% 12.8% 0.6% 0.7% (6.3%) NBK ABK GBK CBK Burgan Net Profit Growth FY 12 vs. FY 11 10.0% 0.9% 0.9% NM (27.2%) (40.3%) NBK ABK GBK CBK Burgan ROTE 26.5% 20.2% 14.5% 6.1% 7.2% (3.2%) NBK ABK GBK CBK Burgan CBK numbers are annualized based on 9M FY 12 reported financials. Loan to Deposits Ratio. ROTE excl. additional provisions. * Liquid assets comprises of Cash & Cash eq., Treasury bills & bonds and Due from Banks & OFIS, 9m 2012 no.s for CBK. Impact of Boubyan acquisition on NBK and BBT Acquisition on Burgan; NBK s P&L numbers have been adjusted for consolidation gains of KD 81.5mn and 58.4% NBK s stake in Boubyan) of KD 6mn (Islamic net profit). 22
.. Regional Peers (FY 12 Vs. FY 11) Net Loans Growth FY 12 vs. FY 11 Deposits Growth FY 12 vs. FY 11 Liquidity Ratio* 50.3% 22.8% 28.9% 20.7% 11.3% 16.5% 14.4% 8.2% 9.3% 3.1% 6.2% 27.5% 39.8% 39.3% 34.9% 14.1% 25.7% 7.4% 5.1% 8.9% 5.1% NBK Blom Bank 8.1% 18.0% 21.3% AUB BSF CBQ QNB Audi Burgan 23.0% NBK 33.1% Blom Bank 21.6% 16.5% 15.5% 13.1% 30.2% 31.5% AUB BSF CBQ QNB AUDI Burgan Revenue Growth FY 12 vs. FY 11 Net Profit Growth FY 12 vs. FY 11 ROTE 20.3% 19.7% 9.1% 6.0% 9.9% 4.2% 12.2% 8.2% 16.4% 0.9% 2.6% 8.1% 3.6% 6.8% 11.1% 5.0% 10.0% 26.5% 19.9% 20.2% 17.8% 18.2% 18.1% 14.5% 15.3% 14.1% 0.6% NBK Blom Bank AUB BSF CBQ QNB AUDI Burgan (27.2%) NBK Blom Bank AUB BSF CBQ QNB Audi Burgan NBK Blom Bank AUB BSF CBQ QNB AUDI Burgan Audi Bank Figures are annualized based on 9M FY 12 reported financials expect Deposits and Net Profit are based on FY 2012. ROTE excl. additional provisions. * Liquid assets comprises of Cash & Cash eq. Treasury bills & bonds and Due from Banks & OFIS, 9m 2012 no.s for CBK. Impact of Boubyan Acquisition for NBK and ET Acquisition for BB. 23
Conclusion 24
FY 12: Key Highlights Resilient Business Model in core market despite stagnant economy. with Subsidiaries being profitable & on growth mode. provides further diversified revenue stream through operations in a non-oil economy. Enhance Risk Position improvement. showing considerable Solid Capital Base of 18.5%; Tier 1 Ratio 12.0% & Tier 2 Ratio 6.5%. All leading indicators in place to sustain a solid operating performance 25
Thank You 26
Appendix 27
Share Price Progress Last Twelve Months Share Price Performance vs. Peers 1400 1300 1200 1100 1000 900 800 700 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 NBK CBoK ABK GBK BB Source: Bloomberg. 28