Investor Analyst Day 2017 5 December 2017
Vision and five year plan Joseph Abraham Group Chief Executive Officer Mr. Abraham has been the Chief Executive Officer of Commercial Bank since July 4th 2016 and has extensive banking experience across both developed and emerging markets. Before joining Commercial Bank, Mr Abraham was Chief Executive Officer of ANZ Indonesia (Australia and New Zealand Banking Group) based in Jakarta, a position he served in from 2008 to 2016. Mr. Abraham graduated with an MBA from Stanford Business School and has worked in Indonesia, Singapore, Hong Kong, Ghana, the UK and India in various country and regional banking roles with a successful track record covering general management, corporate banking, strategy, product management as well as acquisitions and integrations. Prior to joining ANZ Indonesia, Mr. Abraham was with Standard Chartered Bank, where he served in a number of roles including Chief of Staff to the Global Head of Client Relationship, Wholesale bank; Head of Strategy and Product Management, North East Asia; Managing Director and Chief Executive Officer Ghana; and Executive Director Corporate Banking. 2
Commercial Bank: A solid franchise built on more than 40 years of innovation and customer service Incorporated in 1974 as the first private bank in Qatar The first Bank in Qatar to introduce: ATM s Credit cards POS machines Personal & Vehicle Loans Internet Banking services Mall Pavilions/mini-branches We were the first Qatari bank to: Become a licensed broker on the Doha Securities Market List its shares (in the form of GDRs) on the London Stock Exchange List a bond issue on the SIX Swiss Exchange Be awarded the PCI Card Security Certificate 3
Vision: To be the Best Bank in Qatar recognised for our Five C s Corporate Earnings Quality Sustainable quality earnings, risk book re-shape, diversify revenue streams, cost control, subsidiary and associates contribution Client Experience People, Process, Technology - Qatari Bank of Choice for our clients Creativity and Innovation Culture Compliance Digital Transformation, e2e, STP One Bank, Collaboration, No Bureaucracy, Empowerment, Teamwork, Realising People Potential Good Governance - Essential Foundation for a Bank, Growth with Governance Confidence and Trust From our Clients, Regulators, Shareholders, Board and Staff 4
Our 5-year plan, to be the Best Bank in Qatar recognised for our Five C s Strategic Intent: Maintain a minimum CET1 range of 11.0% to 11.5% at all times De-risk legacy assets, diversify the portfolio and proactively exit high risk names Reshape and diversify our loan book Costs broadly held flat until CB moves back into alignment with the market average Focus on client experience as a key differentiator Deepen our digital leadership through end-to-end process automation One Team One Bank culture Market leader for compliance and good governance A region-wide Alliance of banks with closer integration of risk protocols and business strategy for sustainable earnings Status: Successful Rights Issue, CET1 of 11.2% Wholesale have exited QAR 2.8bn of high risk names in 2016/17. Further exits planned in 2018. Loan book growth 11.2% ahead of market 10.6% 1. Loan reshaping: decrease in real estate from 28% to 25% & increase in public sector from 10% to 12% CB Consolidated costs are down 17% year on year and the Cost/Income ratio has decreased from 44.9% to 38.0% 2. Cash Centres established to free up branches. Branch network reconfigured to match changing client traffic Contactless cards, 60 second online remittance, revamped mobile banking, e-gifts and CB Smart implemented. Simplified Performance Management, Rapid execution Cross functional teams (e.g. Remote cheque deposit, 60 second remittance) Mandatory deferred executive remuneration linked to clear outcomes with Malus and Clawback. Zero overdue audit and compliance issues Solid NBO franchise. Potential sale of UAB holding in progress. ABank new experienced management and board directors appointed. 1 Consolidated annualized. CB Domestic growth 12.2% ahead of market 6.0% 2 CB Domestic costs down 16% YoY and CTI has decreased from 38.8% to 33.3% 5
A key element of our vision to be the Best Bank in Qatar is our goal to dominate transaction banking in Qatar CB in the Transactional Banking Market Over 20% share of credit card spend and 17% of cards in force Market leader in acquiring with 56% of all POS terminals (ex- Govt.) in Qatar Over 1 million cards issued, including over 60% share of the Paycard market. 600k salaries processed Bank ATM s Branches in Qatar bank with QNB 419 66 Commercial Bank CB 179 29 2 nd largest ATM network 1 and 3 rd largest Branch network QIB 174 29 Doha Bk 120 31 Branches and ATMs will process an estimated QAR 68 billion in cash and cheque transactions this year CB Branches and Digital channels will jointly handle an estimated 15 million transactions this year Transactional Banking Opportunity Opportunity to create diversified, sustainable earnings, supporting fee income, low cost deposits and the benefits of economies of scale To realize this, we need to change the way we work, with an operations entity that is scalable, handling ever greater volumes at lower costs With outsourcing, costs increase proportional to volumes We needed to create our own entity, allowing us to implement new technologies (e.g. Robotics, machine learning) and revamp our end to end operating model. We have created our own Centre of Excellence for innovation called Commercial Bank innovation Services (CBIS) to provide that scalability 6
Liquidity Management Limited exposure to impacted GCC countries while liquidity levels remain adequate Funding exposure to GCC Impacted countries reduced to 0.7% as at Sept 30 2017. Qatar residential deposit mix increases from 71% to 83% as public sector increases deposit levels. New interbank relationships established in countries such as Kuwait, Oman and Lebanon to support liquidity. LCR and NSFR remain comfortably above the QCB regulatory limits of 90%. Funding pipeline remains strong with Capital Market issuances planned for 2018. Qatar Asia N.America Kuwait UAE Europe Other Saudi Commercial Bank deposits by Geography 4% 4% 3% 2% 1% 0% 15% Pre Embargo 71% Exposures to impacted GCC QAR(m) Mar 17 Sept 17 Customer Deposits 2,497 136 Interbank takings 3,791 370 As % of Total Funding 6.9% 0.7% Financial Indicators Mar 17 Sept 17 Customer deposits QAR (m) 64,089 64,202 Loan to deposit 110.0% 110.7% % of resident deposits 71% 83% Qatar Asia Kuwait Europe Other N.America Saudi UAE 3% 1% 1% 0% 0% 0% 12% Post Embargo 83% % of non resident deposits 29% 17% 7
Capital and Financials Rehan Khan EGM, Chief Financial Officer Mr. Khan joined Commercial Bank as Chief Financial Officer in 2013 and has over 23 years banking experience, previously with HSBC working in London, India, Malaysia and Saudi Arabia. Mr. Khan graduated from the London School of Economics with a bachelor s degree in economics, trained with KPMG in London and is a member of the Institute of Chartered Accountants in England and Wales. Mr. Khan is also a Director of Orient 1 Limited and CBQ Finance Limited. 8
Progress against our 5-year plan : Continued progress on operating profit and improvement in the cost to income ratio QAR Million Q4 2016 CB Consolidated Q1 2017 Q2 2017 Q3 2017 Q4 2016 Domestic Q1 2017 Q2 2017 Q3 2017 CET 1 9.7% 11.4% 11.2% 11.2% 9.6% 11.6% 11.5% 11.7% CAR 15.2% 16.2% 16.0% 16.0% 14.7% 15.9% 15.8% 15.8% Lending Volume 77,797 82,029 83,610 84,534 65,910 70,475 71,264 71,101 NIM 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% Operating Income 857 885 882 887 725 772 757 780 Costs 413 355 332 325 324 281 253 245 Operating Profit 444 530 550 562 401 491 504 535 Provisions 218 485 501 501 136 443 478 458 Net Profit 10 91 89 79 251 58 36 58 C/I Ratio 48.2% 40.1% 37.6% 36.6% 44.7% 36.4% 33.4% 31.4% C/I Ratio YTD 46.0% 40.1% 38.9% 38.0% 40.8% 36.4% 34.9% 33.3% 9
Loan growth outperforms market and a strong Q4 pipeline has been established while the loan portfolio reshape is starting to take effect QAR Million Sept 2016 Sept 2017 Variance Total assets 123,922 133,997 8.1% Loan & advances 75,995 84,534 11.2% 11.2% September YTD Loan Growth 10.6% 12.2% * Qatar Central Bank **Source: Financial Statements 6.0% Deposits 66,730 73,282 9.8% CB Consol Qatar Banks Average** CB Domestic Qatar Market* Continuing strong pipeline We continue to diversify liquidity channel and explore new funding opportunities. Loan Sector Breakdown Dec 16 Sept 17 5yr Target Govt and Public Sector 10% 12% 16% Real Estate *** 28% 25% 20% * CB Consol Financials ***Some clients were re-classified into Real-estate sector in June 2017 post a detailed portfolio review. 10
Necessary provisions have been taken on the legacy portfolio in line with our strategy. Enhanced Risk Culture to significantly reduce cost of risk moving forward Cost of Risk (%) Loan Coverage Ratio 91.6% 74.3% 71.0% 78.9% 78.8% 2.38% 1.64% 2014 2015 2016 Sept'16 Sept'17 0.89% 1.13% 1.00% 0.80% Target 0.70% 0.63% 1.64% Cost of Risk (%) 2016 Market Comparison 2014 2015 2016 Sept 2017 2018 2019 2020 2021 0.84% 0.55% 1.04% * Market Average 0.63% 0.45% 0.28% 0.00% CB Con Doha QNB Ahli Khaliji QIB QIIB Rayan * Market average excluding CB, Ahli & Rayan 11
Operational efficiencies lead to lower headcount and staff costs while structural changes to the cost base to drive further cost saving throughout 2018 QAR Million Commercial Bank Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Staff Costs 166 161 186 150 139 135 Depreciation 32 32 29 42 30 35 General & Admin Exp 110 118 109 89 84 75 Head Count (Nos) 1240 1228 1210 1,187 1,160 1,137 2018 Cost Initiatives Operational efficiencies and automation expected to result in further reduction in cost and headcount. Commercial Bank Innovation Services (CBIS) to drive lower operating costs. Branch Network Optimization & Streamline front to back end processes will further deliver sustainable savings. 12
We continue to drive costs lower through reduced waste while simultaneously investing in new technology and branches Operating Expenses 1 (QAR m) 1 CB Consol 421 410 403 413 355 332 325 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Cost to Income Ratio Investing in new Technologies and branches 60 second online remittance Contactless cards CB Tap n Go CB Smart internet connectivity Remote cheque deposit Trade system upgrade New branch openings in Al Ruwais and Doha Festival City Cost to Income: Market Comparison 38.0% 37.3% 44.9% Market Average 29.0% 38.0% 38.8% 33.3% 29.0% 28.6% 26.0% 25.7% 25.1% 21.9% 9m 16 9m 17 CB Consol 9m 16 9m 17 CB Domestic CB Con Doha QNB Ahli Khaliji QIB QIIB Rayan 13
2018 Outlook: Key Financial Ratios 1. Loan Growth 2. Net Interest Margin 3. Cost of Risk 4.Cost to Income Ratio Expectation CB expects loan growth to be in line with the market. Tighter liquidity and higher funding costs will see margins come under pressure. Manage through active loan re-pricing Reduced provisioning requirements currently foreseen within the lending portfolio Further cost reductions through operational efficiencies 2018 Outlook 7% to 9% Decrease by 10bps to 15bps Decrease to approximately 1% Further reduction of 2% 14
UAB update Signed a 90 day exclusivity agreement with Tabarak Investment to negotiate terms of the transaction of the potential sale of CB s stake in UAB. Underlying work is progressing and we are awaiting completion of the due diligence to negotiate final terms. This sale has not been actively sought by CB but we were approached by a number of parties who showed interest in UAB. This is not a forced sale. Book value of UAB equates to approx 1.7% to 2% of CET1 and CAR. 15
IFRS 9 update Draft instructions received from QCB and these are in line with IFRS 9 guidelines. In the final stages of model refinement to be ready for QCB reporting from January 2018. Draft submission of impact done by all banks on June 2017 numbers. Awaiting final instructions from QCB, expected in early December which will crystallise treatment of the one time charge including retained earnings, risk reserve and deferral of the charge for CAR purposes in line with Basel III. 16
Balance Sheet Management Parvez Khan EGM, Treasury, Investments & Strategy Mr. Khan has over 20 years of experience in Treasury Capital Markets and Investment Banking and joined Commercial Bank in 1994, being initially responsible for setting up the investment services business. Mr. Khan graduated from Aligarh Muslim University with a Bsc in Chemical Engineering and completed a Diploma in International Capital Markets from The New York Institute of Finance. In addition to his current role, Mr. Khan is also a Director of Commercial Bank Investment Services. 17
Well Diversified Funding Mix Diversified Funding Mix Total Funding Mix 30 September 2017 Our strong customer franchise provides the bank with a healthy mix of current call and saving accounts. The Capital Market funding increases the duration of our funding profile and provides net stable funding. Debt maturities of approximately QAR 4bn are scheduled for 2018 which we are confident of replacing with new issuance in 2018. Due to Banks & FI, 9% Total Equity, 16% Debt Securities, 16% Other Liabilities, 4% Customers' deposits, 55% Qatari Banks Deposit by Sector 30 September 2017 Deposit by Customer Type 30 September 2017 Government 15% Gov. & Semi- Gov. Agencies 37% Non Resident 19% Corporate 28% Individuals 20% Gov. & Semi- Gov. Agencies 16% Individuals 28% Corporate 41% 18
High Quality Investment Portfolio Investment Portfolio dominated by high quality government bonds 91% of portfolio with 88% of securities within the portfolio in AA rated securities, (increasing from 82% Dec 2016) High quality securities improve liquidity as the majority are acceptable as collateral under Repurchase arrangements During 2017 we have reduced exposure to equities from 4% to 2%, mainly from within the Saudi market. Investment Portfolio 30 September 2017 Asset Quality Investment Funds 1% Other Debt Securities 7% Government Bonds 91% Equities 2% Rating Sept 17 Dec 16 AA- and above 88% 82% A- to A+ 2% 9% BB- to BBB+ 7% 7% Unrated and below 3% 2% 19
Direct trade flows consequences for Qatar Total Qatari exports to Bahrain, Egypt, Saudi Arabia and the United Arab Emirates accounted for 3% of Qatar s GDP in 2016, as Qatar s main export destinations are in Asia Imports from the four countries are also small, accounting for 3% of Qatar s GDP in 2016. Some of these imports are only transited through these countries and trade routes can be diverted, if needed Country Exports from Qatar (% GDP) Imports to Qatar (% GDP) Saudi Arabia 0.3 0.9 United Arab Emirates 1.9 1.7 Bahrain 0.1 0.2 Egypt 0.7 0.3 Total 3.0 3.1 Qatar shifted all imports via shipping channels from the Dubai port to Sohar & Sallalah Ports in Oman Some consumer goods were rapidly substituted by products from Turkey and other countries Most of Qatar Airways flights continue to operate normally, with diversions made where necessary Source: QNB Economic Research 20
Sufficient liquidity buffers maintained while capital market issuance planned in 2018 Current Liquidity The Liquidity Market has tightened over the past 5 months however the majority of the funding outflow from GCC impaired countries has already exited the system. Liquidity has been maintained by diversifying product and customer channels; New interbank relationships have been established with counterparties in Kuwait, Oman and Lebanon to maintain liquidity levels. A USD 500m Commercial Paper program has been established through Wells Fargo and issuance is active. Sufficient Liquidity buffers are maintained including > QAR 9bn Qatar Sovereign bonds available for repo with the Qatar Central Bank. Funding Outlook A range of capital market issuance products are being considered for 2018 including; Syndicated Loan Formosa Issuance EMTN Kangaroo Bond Issuance Tier II capital issuance 21 21
Wholesale Banking Raju Buddhiraju EGM, Chief Wholesale Banking Mr. Buddhiraju was EGM, Retail & Enterprise Banking at Commercial Bank from 2008 to 2012 before moving to UAE as EGM, Retail & SME Banking at Dubai Islamic Bank. He rejoined Commercial Bank in 2014 as EGM, Chief Wholesale Banking. Prior to Commercial Bank, Raju worked with Citibank in India, Singapore, Hungary and Poland for 13 years in various capacities. After that, he worked with Arab National Bank in Saudi Arabia for 6 years. Mr. Buddhiraju graduated from the Indian School of Mines with a Bachelor s Degree in Petroleum Engineering and has an MBA from the Indian Institute of Management, Calcutta, India. 22
Strategic Re-shape Balance Sheet Reshape the composition of the balance sheet to reflect the market (focus on Government & Public Sector and rationalise Real Estate) 2016 2021 Sep 2017 Actual Government & Public Sector* 13% 21% 17% Domestic Wholesale Banking portfolio Market: Real Estate 16%, Public Sector 36% Real Estate* 37% 25% 31% De-risking Over 15 Client Exposures have been identified to de-risk In some cases, we will partially reduce these exposures, while in others, we will fully reduce them 23
Strong Pipeline Asset book (QAR Bn) Wholesale Banking Domestic Banking 50 40 30 14.5% 49.4 43.2 11.1 49.1% 35.7 7.2% 38.3 7.5 Dec-16 Mar-17 Jun-17 Sep-17 12 Gov't & Public Sector 9 6 Wholesale Banking Domestic Banking Gov't & Public Sector Market growth: 6.6% CB Wholesale growth: 14.5% - Gov t & PS Growth = 49.1% - Gov t & PS Growth = 21.3% (with normalized MoF O/D) Lending Pipeline Sector Amount (QAR million) Private Customers 3,735 Public Sector 4,461 Total Lending Pipeline 8,196 24
Key Focus Areas for Wholesale Banking Cash Management Corporate Internet Banking (CIB) Phase II launched Aggregation, Pooling, Avalisation, Host to Host connectivity Able to Compete with Multi National Banks now Remote Cheque Deposit launched in October 2017 12 customers signed up Converting 80% of Cheque volume Trade Innovation (TI) Plus launched in November 2017 New Products : Factoring/Pre-shipment Finance Best Cash Management Bank in Qatar 2016 Best Cash Management Bank in Qatar 2017 Digitisation Bank-wide Priority Top 3 products to be digitised by Q2 2018 25
International Banking Fahad Badar EGM, International Banking Fahad Badar s career at The Commercial Bank (P.S.Q.C) spans over 18 years. He held a number of senior roles in Wholesale Banking, Government Sector and International Banking. In addition, he occupied other key positions in Retail Banking and Operations. Mr. Badar holds a Bachelor s degree in Banking & Finance from Bangor University and an MBA from Durham University, UK. He is the Director of Alternatifbank (ABank), United Arab Bank and National Bank of Oman. 26
International Banking: On Track for Diversification and Healthy Growth - Progress and Deliveries in 2017 International Banking Key Source of Diversification for the Bank Strategic Priority Actions Overview Progress in 2017 1. Greater geographic diversification for a healthier risk profile 2. Enhanced value proposition to accelerate growth 3. Portfolio quality focus to ensure future sustainability Decrease concentration in areas where the Bank holds also equity exposures (Turkey) Target geographies with high growth potential (Asia and Africa) Leverage the Qatar trade and investment flows with a number of selective geographies ( Europe and America) Building up a distribution capability through Structured Finance dedicated resources Acquire origination capabilities across targeted geographies vs. plain syndication participation Increase cross-sell efforts especially for off B/S income Dedicated portfolio strategy detailing exhaustively risk governance parameters Prudent lending criteria Prudent country and ticket limits Note : figures for international corporates and financial institutions portfolio booked out from Qatar only as of Sep 2017 Turkey portfolio weight reduced to 50% down from 52% Select Executions across Africa and Asia Landmark executions in UK and US with Qatar angle Work in progress on the development of distribution and origination capabilities Cross sell income at c. 16% of Op Income through major treasury cross sell trades Improved overall quality of the portfolio (one notch equivalent) No major credit incidents so far 27
International Banking Geographic Diversification Progress and Deliveries in 2017 Diversify geographic distribution of the portfolio for healthier risk profile Evolution Portfolio Contribution By Geography Evolution vs. 5-Yr Strategic Vision Americas and Europe have witnessed major breakthrough in 2017 thanks to new transactions with Qatari angle Sep 2016 0.4% Americas Sep 2017 12% Target 3% Sep 2016 0.002% Europe Sep 2017 2% Target 5% As per the strategic reshape plan, Asia sub-continent and MENA (excl. GCC) weight has been kept broadly stable in 2017 Sep 2016 6% Asia Sub Cont. Sep 2017 6% Target 6% Sep 2016 3% MENA (excl. GCC) Sep 2017 Note : figures for international corporates and financial institutions portfolio booked out from Qatar only as of Sep 2017 28 2% Target 2%
International Banking Geographic Diversification Progress and Deliveries in 2017 (cont d) Diversify geographic distribution of the portfolio for healthier risk profile Evolution Portfolio Contribution By Geography Evolution vs. 5-Yr Strategic Vision Turkey exposure weight has decreased slightly in 2017 with the intention to continue on the same track over the next period Due to the regional situation, the GCC exposure weight has come slightly down The Africa and Asia exposures would require extra effort and familiarisation over the next period in order to meet the 5-year plan expectations Sep 2016 52% 15% (*) Turkey Sep 2017 50% (*) Transactions with strategic Qatari angle Africa Sep 2016 Sep 2017 6% 2% Target 25% Target 12% Sep 2016 25% Sep 2016 8% GCC Sep 2017 23% Asia Sep 2017 4% Target 28% Target 18% Note : figures for international corporates and financial institutions portfolio booked out from Qatar only as of Sep 2017 29
International Banking Equity Story Wrap Up 2018 Key Themes 5-Yr Strategic Priority 2018 Key Themes 2018 Expected Challenges 1. Diversify geographically Continue deleveraging in areas of high concentration and build up on the momentum in under-represented areas (Asia, Africa, Europe) Possible liquidity and funding challenges Higher focus on domestic markets might impact international lending possibilities 2. Grow and leverage the Alliance synergies Concentrate efforts on synergies with A-Bank in Turkey and NBO in Oman for cross sell and joint deals executions Challenging regional situation may impact some of the Alliance geographies 3. Focus on portfolio quality and reinforce track record Maintain high double digit RAROC while ensuring high quality overall rating of the book Regional situation and global economy headwinds impact to be monitored closely 30
Retail and Consumer Banking Amit Sah EGM, Consumer Banking Mr. Sah brings a wealth of banking experience to Commercial Bank, with over 25 years serving in various senior management roles. Before joining Commercial Bank in December 2016, Amit was with Citibank based in London as Regional Head of their retail and cards business covering Europe, the Middle East and Africa. Prior to that he was the Head of Citibank consumer banking in Thailand and in Russia. Best SME Bank in Middle East 2017 Best Retail Bank in Qatar 2017 Best New Product Qatar 2017 Signature Credit Card for SME 31
A strong and diverse business 19% of domestic assets, 32% of domestic deposits and 40% of domestic operating income Revenue Mix 1. Customer Deeply embedded franchise in the community A trusted brand with loyal customers. Well represented in key customer segments 2. Products A diversified and sustainable income profile with high ROE 70% of income generated from non-asset, non-capital intensive, sources. Liquid balance sheet with loan to deposit ratio of 64% Salary credits from over 600k customers providing stable and secure flows High quality deposit base, with 52% low cost transactional Robust loan book 62% tangibly secured, 37% against salary Leading Cards franchise in issuing (over 20%) and acquiring (over 50% non gvmt) 3. Channels Well positioned and fit for purpose physical distribution in Qatar Branches - Top 3 and ATMs Top 2 Leading Digital and Mobile Banking offering Fee Income, 36.8% ATM, 75% Loan Margin, 27.2% Deposit Margin, 36.1% A dominant presence in Qatar s Retail Banking Sector Channel Mix Online, 21% Branch, 4% Over 70% of income generated from non-asset, non-capital intensive sources 96% of all financial transactions completed by Retail customers are through Digital and ATM channels. 32
Key Customer Segments 4. Wealth Key focus area for next few years A previously untapped opportunity in the Qatar market Progress in product and process platforms being delivered Large scale advances made in people up-skilling and development 20 CISI Level 3 qualified advisors 5. Salaried Customers A best in market offer through our Banking at Work proposition The pre requisite for offering credit products (Loans and Credit Cards) Over 600k salaried customers generating QR31bn of annual flows A strong digital user base, high consumers of remittances A reliable source of low cost funds 6. Enterprise SME Controlled growth (3% of Bank) through selected customer base Continued emphasis on diversified income profile Strong and diversified off-balance sheet fee income Deposits driven by low cost transactional flows Enhancements to online banking, lowering transactional costs Size of Household Opportunity in Qatar* Salaried Base Income 37% 27% 36% SEGMENT TOTAL AVERAGE 500 UHNW $72 bn $144 mn 19,000 HNW $70 bn $37 mn 40,000 AFFLUENT $25 bn $625k 8.5 9.2 18.5 19.4 2.1 2.2 2016 2017 Net Interest Income Net Deposit Income Fee Income (incl. FX) * Source: EY GCC Wealth and asset management report 2015 QATARI EXPATRIATE PAYCARD Revenue Per Customer 2015 2017 3 3 33
Accelerating the Digital Future 7 Digital Transformation 8 Digital Remittance +95% customer satisfaction with high scores across all parameters No.1 Financial App in Qatar, as rated by the Apple Store Increasing trend using Mobile as preferred device 70%, versus Desktop 30% Physical vs Self Service Txns Branch Digital Self Service 9.7m 12.5m 5.1m 5.7m 1.6m 1.6m 1.7m 2.1m 2014 2015 2016 2017 Instant remittance to major markets of India, Sri Lanka & Philippines Competitive exchange rates with reduced transfer fee and charges. Expanding Nationalities and increasing coverage 24x7 availability Biometric Registrations 2017 59k 43k 28k 6k SME Mobile Transactions 2017 12k 10k 7k 3k 2017 MAR JUNE SEPT DEC Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Market Visibility 9. Dominance in Cards 17% share of cards, with over 20% share of spend The market leader with over 50% of Retail acquiring 7,500 merchants and over 11,000 POS machines Over 1 million cards and 3.5 million transactions monthly World class premium card value proposition Market leading rewards loyalty program Recently launched Qatar s first contactless debit card Digital Mobile Wallet is soon to follow 10. Branch Distribution A fit for purpose network, that maintains alignment to market trends whilst operating cost neutral or better Survey results consistently indicate that Branches remain important for customers though the nature of services changes Still investing in the right locations, e.g. Metro branches, whilst optimising cost structure Each branch is monitored on key elements and profitability 35
Operations Dr. Leonie Lethbridge EGM, Chief Operating Officer Dr. Lethbridge joined Commercial Bank in July 2017 from the ANZ Banking Group, where she was CEO of ANZ Royal Cambodia. In her fifteen years at ANZ, Leonie held a number of senior roles including Regional Chief Operating Officer Asia; Chief Operating Officer Indonesia; Head of Integration and Enablement Indonesia; Acting Head of Risk Asia Pacific; and Head of Risk International Partnerships. Dr. Lethbridge has a PhD from the Swinburne University of Technology, a Master of Applied Science (Innovation and service management) from RMIT University, and a Bachelor of Applied Science (Hons) from the University of New South Wales. 36
Strategic reshape Insource core operational capability to deliver scale agnostic approach Rationale: goal is to dominate transaction banking Leverages existing market position to deliver NII and NIM benefits Implication: need to service exponential increases in transaction volumes, and new product offerings Requires a highly flexible, scale-agnostic cost model Current model: volume linked with cost Outsourced to a global Top 3 Business Process Outsourcing firm in 2011 Cost increase 2.5 times since 2011 Projected to increase 4 times under current model Creating a scale-agnostic model Created a new company in Qatar Financial Centre: CBIS Completely different remuneration set and approach: CBIS to be cost competitor with India Cut over from current arrangement on 15 Dec Initial productivity gain on handover (221 people vs 284) Delivers control of operating model Operational cost proportional to transaction volume 20 34 1.7x 48 2.5x Captive to deliver cost reduction in 2018 80 4x 2011 2013 2017F 2020F Lower costs FY17 FY18 F 37
Next steps: drive CBIS as the engine for strategic leadership in Transaction Banking 1. Automate for STP Process re-engineering and automation for productivity Initial productivity uplift of 15% via automation on new Trade platform, more to come. High-volume remittance business delivered with volume-agnostic expense 2. Revamp End to End Operating model Employing Hi-tech capability: Robotics, Machine Learning and Analytics experts to rapidly automate and improve process flexibility Use acquired process flexibility and control of operating model to drive End-to-End digitization. (e.g. 50% increase in digitized Payroll processing in 6 months) 3. Expand the model Transfer more functions from within the Bank to CBIS, to deliver further cost and productivity enhancements Leveraging all three mechanisms will position CBIS as the cornerstone of CBQ s strategic leadership of transaction banking in Qatar. 38
Summary & Close
Summary Five Year Plan and Strategy Capital and financials Liquidity Wholesale Banking International Banking Retail and Consumer Banking Operations We are on track to deliver on our Five Year Plan. An important element of which, is to dominate transaction banking in Qatar, Commercial Bank Innovation Services will help us achieve this goal. We have strengthened our Capital, are improving our asset quality through a balance sheet reshape and providing for legacy loans, while reducing costs. We have a well diversified funding mix and high quality investment portfolio. We are reshaping and proactively de-risking our balance sheet for sustainable growth, while building a strong pipeline for 2018. We are developing greater geographic diversification, while enhancing our cross sell value proposition and portfolio quality for sustainability. We are reshaping our award winning Retail franchise to provide better market coverage and driving substantial growth in digital transactions from innovative products such as 60 second remittance We are reconfiguring our Operational Core to provide a scale agnostic capability to support the banks growth at no additional cost. 40
Vision: To be the Best Bank in Qatar recognised for our Five C s Corporate Earnings Quality Sustainable quality earnings, risk book re-shape, diversify revenue streams, cost control, subsidiary and associates contribution Client Experience People, Process, Technology - Qatari Bank of Choice for our clients Creativity and Innovation Culture Compliance Digital Transformation, e2e, STP One Bank, Collaboration, No Bureaucracy, Empowerment, Teamwork, Realising People Potential Good Governance - Essential Foundation for a Bank, Growth with Governance Confidence and Trust From our Clients, Regulators, Shareholders, Board and Staff 41
Panel Discussion Q & A
Mr. Ahmed Al-Musalmi Chief Executive Officer, National Bank of Oman Mr. Al-Musalmi has held the position of CEO at National Bank of Oman since 2014. Under Mr. Al-Musalmi s leadership, National Bank of Oman focuses on delivering long-term sustainable growth and promoting a culture of high performance and excellence across the organisation. Mr. Al-Musalmi s professional career spans more than two decades and has included senior leadership roles at National Bank of Abu Dhabi and Majan International Bank. Mr. Al-Musalmi is a graduate of Harvard Business School, holds an MBA with distinction from the University of Luton, UK and an International Diploma in Financial Services. He is also a Chartered Market Analyst with Financial Analyst Designate, Chartered Portfolio Manager and Chartered Wealth Manager. 44
45
46 46
47 47
48 48
49 49
50 50
51 51
52 52
Mr. Cenk Kaan Gür Chief Executive Officer, ABank Cenk Kaan Gür was appointed as CEO and Member of the Board of ABank in October 2017. Mr. Gür has 28 years of experience in the banking industry, beginning his career at Garanti Bank. At Garanti Bank, Mr. Gür assumed the roles of branch and regional manager in Corporate, Commercial and SME Banking, before serving as the Director in charge of SME Marketing Coordination. From 2011, Mr. Gür served as Executive Vice President Commercial and SME Banking at Akbank, and held the positions of Chairman of AKLease and Vice Chairman of AKInvestment between 2011 and 2017, which are both Akbank subsidiaries. 53
54
Snapshot of Turkish Economy Key Highlights GDP Strong economic growth performance with 4.8% CAGR over the last decade. Government led growth to elevate budget deficit, but still in line with Maastricht criteria and one of the lowest in EM comparison. 10% 5% 8.5% 5.2% 6.1% 4.8%* 2.9% 6.1% 4.4% REER at 84, lowest level since 2002, promoting export potential for 2018. CAD at higher levels with rising energy prices, but core deficit still at historic lows. Inflation to moderate and generate additional real interest rate potential by early 2018. 0% 2013 2014 2015 2016 2017 2018 * Cummulative Annual Growth Rate Fiscal Performance Current Account/GDP Inflation 3% 2% 2% 1% 1% 0% -1% Budget Deficit/GDP 0% 15% Primary Balance/GDP 2.0% 1.9% 1.7% 10.8% -2% 10% 7.4% 8.2% 8.8% 8.5% 8.6% 1.3% 1.3% 1.0% 1.1% 1.1% -4% 1.0% 0.8% -4.7% -3.7% -3.8% -6% 5% -5.1% -5.4% 0.2% -8% -6.7% -0.1% 0% 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Potential for Turkish Lira Assets with moderation in inflation 55
Phase 1 of the Strategy Revamp the Bank IMPROVE CAPITAL COMPOSITION EXPAND CUSTOMER BASE OPTIMIZE NETWORK & ADC NON-INTEREST INCOME GENERATION SUBSIDIARY SYNERGY Revamping the bank in order to become BEST IN CLASS in short term 56
Business Units Strategy Business Banking Companies with over TL 150 million annual turnover. Objective to become the prime counterpart of the subject customer. Maximum use of CB and Alliance Banks synergies. Trade finance is one of the major areas of focus under Corporate Banking. Commercial Banking Companies with up to TL 150 million turnover, with particular focus between TL 40 million TL 150 million turnover. Cross-sell opportunities and diversified income generation capabilities to be pursued. Affluent Banking Major focus on mass affluent and affluent individual / professional customers and micro enterprises. Deposit collection, salary payments and extending loans through alternative distribution channels. Exclusive Banking to target customers of Alliance Banks. Business units focus on a diversified and sustainable income base 57
Phase 2 Targets of the strategy LONG TERM GOALS ROAE NIM COR CIR NPL % ~16% - 18% ~3.5% - 4.0% ~0.7% ~35% ~2% Join the league of Tier-2 banks and become a strong competitor 58
Panel Discussion Q & A