National Commercial Bank Investor Presentation FY 7 Results FY 7 Investor Presentation
Disclaimer The National Commercial Bank (NCB) prepared this presentation on a proprietary basis as general background information about the activities of NCB. The information contained herein is given in summary form and for discussion purposes only. Some of the information that is relied upon by NCB is obtained from sources believed to be reliable, but NCB (nor any of its directors, officers, employees, agents, affiliates or subsidiaries) does not guarantee the accuracy or completeness of such information, and disclaims all liability or responsibility for any loss or damage caused by any act taken as a result of the information. This presentation including the information covered therein is not intended either to be relied upon or construed as an advertisement for, or an offer, solicitation or invitation to sell or issue, or to subscribe, underwrite or otherwise acquire any securities in any jurisdiction. It should and must not be treated as giving tax, legal, investment or other specialist advice or a recommendation to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Neither shall any part of this information nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision or commitment relating thereto, nor does it constitute a recommendation regarding the subject of this presentation. All statements included in this presentation other than statements of historical facts, including, without limitation, those regarding financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives) are forward-looking statements and may thus include words like "anticipate", "believe", "intend", "estimate", "expect", "will", "may", "project", "plan" and such other words of similar meaning. Such forward-looking statements are based on numerous assumptions regarding present and future business strategies and the relevant future business environment. Any forward-looking statements speak only as of the date of this presentation and NCB expressly disclaims to the fullest extent permitted by law any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. Due to rounding, numbers and percentages presented throughout this presentation may not add up precisely to the totals provided. NCB is not under any obligation to update, complete, amend, revise or keep current the information contained herein, and any opinions expressed herein are subject to change materially without notice. Accordingly, no representation or warranty, express or implied, is or will be made by NCB, their respective advisors or any such persons directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, and any reliance you place on them will be at your sole risk. Investors must rely solely on their own examinations of the Offering and relevant documentation in making a determination as to whether to invest in the securities described. An investor should seek independent professional advice when deciding if an investment is appropriate. Securities that may be discussed herein may not be suitable for all investors. Investors are required to make their own independent investigation and appraisal of the business and financial condition of NCB and its subsidiaries, the nature of the securities and the merits or suitability of the securities or any transaction to any investor s particular situation and objectives, including the possible risks and benefits of purchasing any securities. Any such determination should involve an assessment of the legal, tax, accounting, regulatory, financial, credit or other related aspects of the offering or the securities. Without prejudice to the foregoing, NCB, their advisors and any such persons directors, officers or employees expressly disclaim any liability whatsoever, in negligence or otherwise, for any loss howsoever arising, directly or indirectly, from use of, or reliance on, this presentation or its contents or otherwise arising in connection therewith. FY 7 Investor Presentation
Investor Presentation Contents 4 NCB The leading KSA bank Grow with KSA. Grow with NCB. 7 Strategy Overview 8 Financial Results Highlights 35 Financial Results Details 5 Segmental Overview 56 Additional Information FY 7 Investor Presentation 3
National Commercial Bank The Leading KSA Bank FY 7 Results FY 7 Investor Presentation 4
NCB is the leading banking group in Saudi Arabia Established in 953; IPO in 4 NCB Snapshot >8m Clients 3,436 Employees* SAR 444bn Assets SAR 39bn Deposits SAR >bn Market Cap Wholesale branch in Bahrain Offices: Singapore, Seoul, Shanghai Subsidiary in Turkey: Türkiye Finans Katılım Bankası Subsidiary in KSA: NCB Capital Jeddah HQ *Includes Alahli Esnad (,38 employees) - fully owned subsidiary engaged in recruitment services within KSA FY 7 Investor Presentation 5
NCB is the leading banking group in Saudi Arabia NCB has a strong market and financial position (3Q 7) Market Position by KSA Overall banking Assets # Corporate banking Financing # Retail banking Financing # Treasury Investments # Asset Management AUMs # Brokerage Value Traded #4 Financial Position KSA GCC Assets # #4 Financing # #4 Deposits # #3 Investments # # Total Operating Income # #3 Net Income # #3 Assets (SARbn) Financing (SARbn) Deposits (SARbn) 5 45 4 35 3 5 5 5 445 338 9 8 NCB Rajhi Samba Riyad BSF 3 5 5 5 57 33 4 9 NCB Rajhi Riyad BSF Samba 35 3 5 5 5 33 7 67 56 55 NCB Rajhi Samba Riyad BSF FY 7 Investor Presentation 6
NCB has a well-diversified business model Total operating income contribution (FY 7) 3.3bn 8% TREASURY SAR 6.bn 88%.6bn 9% 636mn 3% 4.5bn 5% Capital Markets CORPORATE NCB 4 branches, 3,488 ATMs 5 Remittance centers 7,99 Employees 8.3bn 45% International Türkiye Finans Katılım Bankası (TFKB) 87 branches, 587 ATMs 3,767 employees Largest Asset Manager in KSA Largest Shariah-compliant Asset Manager worldwide Top 3 Broker 5 locations 97 Employees RETAIL Note: KSA based recruitment services firm Alahli Esnad (fully owned subsidiary) employs,38 persons FY 7 Investor Presentation 7
NCB has a strong financial position Key KPIs Total Assets (SARbn) Total Equity (SARbn) 7 6 5 4 377 +4% 435 449 443 444 8 6 43 47 +% 56 6 64 3 4 3 4 5 6 7 3 4 5 6 7 CAGR CAGR.%.% 8.% 6.% 4.%.%.% Capital Ratios (%) 9.%.% 7.% 7.% 7.% 6.9% 7.7% 5.% 6.% 4.7% 5.3% 5.7% 3.5% TC ratio T ratio CET ratio 3 4 5 6 7 Capital ratios are based on Pillar I RWA Liquidity Ratios (%) 6.4% 66.3% Liquidity coverage ratio (LCR) LCR is based on 4Q average numbers LCR was not reported before 5 5.3% 7.5% 77.3% 78.% 8.3% 8.7% Financing to customer deposit ratio 3 4 5 6 7 FY 7 Investor Presentation 8
NCB has a strong performance track record Key KPIs Total Operating Income (SARbn) Net Income Attributed to Equity Holders (SARbn) 3 +5% 8 6 +6% 5 5 4.9 4.8 6. 7.5 8.6 8.3 4.8 4.9 5. 4.7 4 8 7.9 8.7 9. 9.3 9.8 5..4.6 3.5 3.7 6 4 3 4 5 6 7 3 4 5 6 7 Net special commission income Fee and other income CAGR CAGR Net Special Commission Margin (%) Cost to Income Ratio (%) Returns (%).99%.9% 3.4% 3.35% 3.48% 39.% 39.% 37.4% 37.7% 35.%.%.% 9.% 7.8% 7.4% 8.% 7.% 6.% 5.%.%.%.%.%.% 4.% 3.%.% 3 4 5 6 7 3 4 5 6 7 ROE common shares (%) ROA (%) 3 4 5 6 7.%.% FY 7 Investor Presentation 9
NCB Group listed on Tadawul in November 4 Ranked third in Tadawul, S&P Pan Arab and MSCI Indices with significant weightings Share parameters 3 Dec 7 Closing Price (SAR) 55.5 5 week range (SAR) 37-56 Free Float 36% Shares issued (mn), Tangible Book Value (SARmn) 55,738 Tangible BVPS 7.87 P/TBV Ratio Source: NCB, Bloomberg Source: Bloomberg. x P/E Ratio.6x Div Yield (%) 3.8 3m Avg Daily Volume (Shares) 78,97 Share price performance since IPO (SAR) 8 7 6 5 4 3 Nov-4 Mar-5 Jul-5 Nov-5 Mar-6 Jul-6 Nov-6 Mar-7 Jul-7 Nov-7 FY 7 Investor Presentation MSCI GCC Index Float Adj. Mcap (USDb) Weighting (%) Al Rajhi Bank.94 8.63 SABIC.38 8.4 National Commercial Bank.44 4.7 Etisalat 8.9 3.4 Qatar National Bank 8.5 3.3 Saudi Telecom 7.3 3. National Bank of Kuwait 6.99.88 Samba Financial Group 6.84.8 Emaar Properties 6.63.73 Almarai 6.47.67 [Source: MSCI, 9 December 7] Ratings LT ST Outlook National Commercial Bank S&P BBB+ A- Stable Fitch A- F Stable Moody s* A P- Stable Capital Intelligence A+ A Negative Government of Saudi Arabia S&P A- Stable Fitch A+ Stable Moody s A Stable Capital Intelligence A+ Negative *Moody s rating is unsolicited
National Commercial Bank Grow with KSA. Grow with NCB. FY 7 Results FY 7 Investor Presentation
Economic headwinds Challenges persist, but three-year high oil prices and rising non-oil revenues reduced the overall fiscal deficit in 7 from double to single digits Oil Market 8 6 4 9 3 4 5 6 7 MMBD Saudi Oil Production, LHS Arabian Light Spot Price, RHS 4 8 6 4 USD/bbl Twin Balances (%) 5. % 5.% 5.% -5. % -5. % - 5. % 8.% 6.4% 9.7% -.3% -8.7% -4.8% -3.7% -.9%.5% 3 4 5 6 7P Budget Balance / GDP Current Account Balance / GDP -9.% Foreign Reserves (USDbn) 9 8 7 6 5 4 3 SAMA Banks 754 768 36 43 78 75 67 6 6 59 489 Source: Thomson Reuters, Ministry of Finance, SAMA, Tadawul, and NCB Economics Forecasts FY 7 Investor Presentation 568 39 58 3 4 5 6 7 39 Stock Market,,, 9, 8, 7, 6, 5, 4, Jan-4 Jul-4 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Tadawul Index
Saudi banking sector Banking profit growth is expected to rebound on the back of recent government stimuli in support of private sector and individuals Bank Lending (SARbn) Interbank Rates (%) Bank Deposits (SARbn) 3,5 3,,5,,5, 5.%.6% 8.9%,,5,36,4,387.9% -.% 5.%.% 5.%.% -5.%.%.3% ().9%.7% 4, 3,5 3,,5,,5, 5.%.4%,4,576,65,67,69.9%.8%.% 5.%.% 5.%.% -5.% 3 4 5 6 7 -.% () 3 4 5 6 7 Dec-7 3 4 5 6 7 -.% Bank credit, private and public sectors Credit Growth Rate (YoY%) 3M SAR SAIBOR 3M USD LIBOR Deposits Deposit Growth Rate (YoY%) 8 6 4 8 6 4 Net Operating Income (SARbn) 9.% 6.8% 69 5.7% 76 8 83 3.8% 3.% 63 65.% 8.% 6.% 4.%.%.% -.9% -3.9% -5.9% -7.9% 7 6 5 4 3 Profits (SARbn) 7.% 38.% 4 44 5.4% -5.4% 4 3.3% 33 34.%.% 8.% 6.% 4.%.%.% -.% -4.% -6.% 3 4 5 6 9M 7-9.9% 3 4 5 6 9M 7-8.% Profits (9M) Profits (FY) Annual Growth (%) Source: Thomson Reuters, SAMA, Banks Annual Reports, and NCB Economics Estimates FY 7 Investor Presentation 3 Profits (9M) Profits (FY) Annual Growth (%)
Vision 3 The Kingdom of Saudi Arabia established a clear direction to accelerate economic growth through vision 3 and its programs Pillars Objectives Selected Goals & KPIs Vision Realization Programs A Thriving Economy Grow & diversify the economy Increase employment Lower the rate of unemployment from.6% to 7% Increase the Public Investment Fund s assets to over SAR 7 trillion Increase the private sector s contribution from 4% to 65% of GDP Enriching the Hajj and Umrah Experience National Transformation Program PIF Program National Industrial Development and Logistics Program A Vibrant Society An Ambitious Nation Strengthen Islamic values & national identity Offer a fulfilling & healthy life Enhance government effectiveness Enable social responsibility Raise the share of non-oil exports in non-oil GDP from 6% to 5% Increase SME contribution to GDP from % to 35% Increase FDI from 3.8% to the international level of 5.7% of GDP Raise the share of non-oil exports in non-oil GDP from 6% to 5% Raise non-oil government revenue from SAR 63 billion to SAR trillion Increase women s participation in the workforce from % to 3% Financial Sector Development Program Lifestyle Improvement Program National Companies Promotion Program Strategic Partnerships Program The Housing Program Privatization Program Saudi Character Enrichment Program Fiscal Balance Program FY 7 Investor Presentation 4
Economic upturn Budgetary pro-growth measures, growing CAPEX, and additional stimulus point to 8 economic and banking sector growth,,5, 5 Government Revenue (SARbn) 8 99 5 53 55 55 55,56 4,44 3 66 696 798 85 93 59,35 93 69 56 89 36 368 86 446 334 44 59 56 554 3 4 5 6 7P 8F 9F F 9 7 5 3 () (3) (5) (7),, 8 6 4 Government Expenditure (SARbn) 976 664, 74 978 74 3 37 64 83 696 96 978,6,5 746 773 789 8 34 8 5 8 8 3 4 5 6 7 8F 9F F,, 8 6 4 Government Debt (SARbn) 3% 6% 438 % % 37 7% % 4% 5% 673 749 555 6 44 4 3 4 5 6 7P 8F 9F F 3% 5% % 5% % 5% % -5% -% Oil Revenues Non-oil Revenues Average Oil Price (USD) Capex Current Expenditure (Opex) Domestic Public Debt Debt to GDP Ratio (%) () () Real GDP Growth (%).7% 3.6% 4.%.5%.3%.7% 3.% -.8% 3 4 5 6 7P 8F 9F F 3,,5,,5, Money Supply (SARbn) 5.9%.9%,545,79,773,787,79.5%,5,5,9.8%.% 6.6% 7.5% 8.4% 3 4 5 6 7 8F 9F F Money Supply Money Supply Growth Rate (YoY%) 4.%.%.% 8.% 6.% 4.%.%.% -.% 4, 3,5 3,,5,,5, Bank Lending (SARbn) 5.%.6% 8.9%,,5,36,4,387,473,575,698.9% -.% 6.% 7.% 7.8% 3 4 5 6 7 8F 9F F Bank credit, private and public sectors Credit Growth Rate (YoY%) 5.%.% 5.%.% -5.% -.% Source: Ministry of Finance, Fiscal Balance Program, and NCB Economics Forecasts FY 7 Investor Presentation 5
NCB is aligned with Government priorities NCB has already made significant contributions to the economic welfare of Saudi Arabia Government aims to mobilize capital and channel to target sectors NCB plans to target sectors where we have competitiveness and scale NCB has provided home financing for more than 8, Saudi families with a portfolio of SAR bn Increase home ownership Achieving fiscal sustainability NCB is a large investor in Saudi Government Bonds with a portfolio SAR 44bn. NCB supports +7, SME across Saudi Arabia with leading market share Increase SME contribution to GDP Opening up the Saudi economy Preferred local partner for Government and GRE sukuk issuances (KSA Government, Aramco, Ma aden Aluminum refinancing and SEC Sukuk extension) NCB is the leading lender for KSA companies with a portfolio of SAR 36bn; 5% market share Diversify economy Reduce Saudi unemployment NCB is the leading financial institution in Saudization (95%) and has a % Saudi top management team FY 7 Investor Presentation 6
National Commercial Bank Strategic overview FY 7 Results FY 7 Investor Presentation
NCB s strategic plan is about execution Our strategic objectives are supported by productivity enablers Strategic enablers Lean Distribution Digitization Expand reach with lean branches Anywhere, anytime, instant banking Retail Banking Expand share of retail profits Strategic objectives Corporate Banking Treasury Grow in Vision 3 targeted sectors and resilient SME s Diversify funding, sustain investment returns and crosssell NCBC Generate AUMs and cater to GRE s growing needs TFKB Increase profit contribution FY 7 Investor Presentation 8
NCB continued to deliver on its strategic plan 7 Achievements 7 Achievements Lean Distribution Digitization Retail Banking Corporate Banking Treasury NCBC TFKB Expanded our branch network by 6 with no increment in head count driven by digital migration Deployed digital functionality which enabled a % decline in branch financial transactions Continued growing market share across majority of consumer lending products Sustained our leadership position in corporate lending and continued growing revenues Completed issuance of Tier I Sukuk program (totaling SAR 7bn) and expanded suite of liability products including Shariah compliant CD s and call accounts Delivered net income growth by increasing AUMs and maintaining cost discipline Delivered improvement in net income through effective cost and recoveries management FY 7 Investor Presentation 9
Lean distribution We accelerated expansion of our distribution platform in Saudi Arabia and are streamlining branch formats to enhance productivity gains Strategic Imperatives Cost / Income Ratio (%) Number of branches Continue expanding our distribution reach to acquire customers and grow market share Expand with smaller branches that are headcount efficient Optimize costs of existing branch network Equip branches with self-service/assisted-service technologies Enhance the in-branch sales and service model to improve customer experience 39.% -% 35.% 7 6 5 4 3 34 +7% 4 4 7 4 7 Bank Headcount (NCB employees) FTE / Branch Front / Back Office Ratio (%) Operating Income / FTE (SARmn) 4,,, +5% 7,576 7,99 8 6 4. -9%. 6% +8% 7% 4 3 3.75 +5%. 8, 6, 8 4, 6, 4 4 7 4 7 4 7 4 7 FY 7 Investor Presentation
Digitization Migrate customers to digital through superior user experiences Strategic Focus Areas Mobile first - anytime, anywhere Consistently lead KSA banks in functionality and user-experience Expand end-to-end digital sales capability Expand subscription base and incentivize usage Leverage data and analytics to drive sales effectiveness Digital Transactors (% of total base) +54% 37% 9 8 7 6 Digital Transactions (mn) +47% 5. Branch Financial Transactions (% of total) 8% -% % 5 4 3 9.4 5.8.8 3. 3.7 4% 4 7 Online 4 7 4 7 Mobile CAGR CAGR CAGR FY 7 Investor Presentation
Retail Banking We are transforming retail distribution to increase share of profits Strategic Focus Areas Grow market share in consumer finance Grow deposits in key segments (Mass/ Affluent/ GRE) Expand and optimize branch network Drive digital migration Continue improving customer satisfaction Consumer Financing & Advances, net (SARbn) Total Operating Income (SARbn) Net Income (SARbn) 6 4 +6% 5.% 45.% 4.% 4 +3% 7 6 +38% 8 74 89 35.% 3.% 5. % 8 5.7 8.3 5 4 4. 6 4 7.4% 9.5%. % 5.%.% 6 4 3.6 5.% FY 7 Investor Presentation.% 4 7 4 7 4 7 Consumer Financing & Advances, net (SARbn) Market Share (%) CAGR CAGR CAGR Market share as at 3Q 7 based on performing loans
Corporate Banking Grow selectively and increase risk-adjusted returns Strategic Focus Areas Build a deal pipeline in V3 target sectors Cross sell treasury and cash management Focus on portfolio quality and proactively manage risk Drive migration to digital channels Expand collection capacity and increase recoveries Corporate Financing & Advances, net (SARbn) Total Operating Income (SARbn) Net Income (SARbn) 5 +5% 8 7 +6% 6 5 -% 5 8 4 6 5 4 3.7 4.5 4 3 3..3 3 5 4 7 4 7 4 7 CAGR CAGR CAGR FY 7 Investor Presentation 3
Treasury Broaden and deepen liquidity access while sustaining investment returns and cross-sell Strategic Focus Areas Execute international hubs strategy New York London Frankfurt Jeddah Bahrain Hong Kong Singapore Expand wholesale funding program Maintain the high quality/liquidity and profitability of the investment book Support the development of the sukuk capital markets Underpin Islamic product innovation Established Under consideration Saudi Government and Investment Grade Investments as % of Total -% 94% 9% Investments as % of Total Assets -% 35% 6% HQLA and Liquidity Coverage (SARbn/%) 8 6 4 5.3% 77.3% 95.% 8.% 6.% 4.%.%.% 8 6 8.% 6.% 4 4.%.% 4 7 FY 7 Investor Presentation 4 CAGR 4 7 CAGR 5 7 High quality liquid assets (HQLA) Liquidity coverage ratio (LCR) HQLA is group-wide 4Q average LCR shows 4Q average.%
NCB Capital KSA s leading investment bank and asset manager; well positioned to capture future growth Strategic Focus Areas Grow recurring revenues by gathering more AUMs, launching new products, growing Corporate Savings business Set the stage for future market upturn by growing brokerage market share and continuing to invest in NCBC capabilities Build on market leadership, landmark IB mandates to support GREs as well as local and foreign institutional clients Continue to focus on increasing efficiency, improving productivity to bolster resilience Tadawul Traded Value (SARbn) & TASI Index NCBC Traded Value (SARbn) & Market Share (%) NCBC Assets under Management (SARbn) NCBC Share of Sector Net Income (%) 9, 8, 7, 6, 5, 8,333 7,6 9 8 7 6 5.4%.8% 49 4.%. %.% 8.% 5 5 +33% 9 +.9ppt.% 4, 3,,,47 836 4 3 98 6.% 4.% 5 55.%,. % 4 7 Traded Value TASI Index 4 7.% 4 7 4 7 7 share as at 3Q 7 FY 7 Investor Presentation 5
Türkiye Finans Katılım Bankası We are executing a transformation program to grow TFKB s net income Strategic Focus Areas Resume branch expansion and expand digital channels to drive customer acquisition Strengthen underwriting and improve collections Increase automation and drive capacity optimization Instill NCB s principles (Customer excellence, robust governance, best-in-class technology) Total Assets (TRYbn) Total Operating Income (TRYmn) Net Income (TRYmn) TFKB Contribution to NCB Net Income (%) 7 6 5 4 3 34 +5% 39 4, 3,5 3,, 5,,5,446 +%,94 6 5 4 3 334 +4% 375.9% +3% 3.%, 5 4 7 CAGR 4 7 CAGR 4 7 CAGR 4 7 CAGR FY 7 Investor Presentation 6
Three Strategic Priorities for 8 NCB s strategy continues to be about execution. Position Corporate Banking for growth Win mandates in vision 3 targeted sectors Resume growth in SMEs by targeting resilient sectors Optimize operating model to improve platform productivity Reduce cost of credit through proactive remedial management and recoveries. Grow Residential Finance Position NCB as the preferred funding partner Leverage National housing initiatives 3. Current Account and Capital Base Focus Leverage branch expansion for customer acquisition Drive focus on current account growth to maintain funding advantage Sustain capital base to support credit growth FY 7 Investor Presentation 7
National Commercial Bank Financial Results Highlights FY 7 Results FY 7 Investor Presentation
. 4%. %. %.8%.6%.4%.%.% % 9% 8% 7% 6% 5% 4% 3% % % % Key messages FY 7 Results Balance Sheet Stable total assets and % financing decline mainly due to corporate repayments (domestic financing -%; international -8% impacted by Turkish Lira depreciation) 3% investments growth through Saudi Government debt issuance participation and portfolio re-balancing % decline in deposits as the funding mix was optimized by reducing time deposits, but CASA growth of 6% 6 5 4 3 Financing (SARbn) -% 54 49 4Q 6 4Q 7 8 7 6 5 4 3 Deposits (SARbn) -% 36 39 4Q 6 4Q 7 Income Statement % NSCI growth in 7 as NSCI margin improved by 3bps while average earning assets declined by % compared with FY 6 attributable to international 8% decline in fee and other income in 7 due to lower investment-related income and fees from financing, trade finance and credit cards Expenses for FY 7 improved 8% due to ongoing digitization and productivity initiatives 5% growth in 7 net income Net income attributable to equity holders movement (SARbn). 9.8.59. 9.3. 6 NSCI (.4) Non- SCI Expenses Impairments Other 7 Asset Quality, Capital & Liquidity Impairment charge for FY 7 improved 9% on lower retail & international charges Group NPL ratio at.9% at 4Q 7 and adequate NPL coverage at 43% Capital position comfortably above regulatory minima with CET of 5.7% and T of 7.7% at 4Q 7 Strong liquidity with LTD ratio of 8%, average 4Q 7 LCR of 77% and Leverage Ratio of 3.% at 4Q 7 The initial implementation of IFRS 9 on January 8 is not expected to have a material impact on NCB's capital position. NPL & CoR (%) CET and LTD (%).9%.5%.7%.7% 8% 8% 5.3% 5.7% 4Q 6 4Q 7 4Q 6 4Q 7 NPL CoR (YTD) CET LTD FY 7 Investor Presentation 9
Profitability 7 Net income growth from improved impairments and efficiency, partly offset by lower fee and other income Profitability Trends SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 YoY % change Net special commission income 3,378 3,449 3,34 +% 3,66 3,55 +% Fee and other income,38,4,77 -% 4,684 5,98-8% Total operating income 4,56 4,49 4,6 -% 8,345 8,647 -% Operating expenses (,64) (,6) (,86) -% (6,453) (7,38) -8% Total impairment charge (347) (695) (439) -% (,939) (,37) -9% Income from operations, net,56,95,345 +8% 9,953 9,47 +5% Net income attributed to equity holders,556,6,87 +% 9,8 9,37 +5% Total Operating Income (SARbn) 3 -% Net Income Attributed to Equity Holders (SARbn) 6 6 +5% 9 8 7 6 5 4 3 4.7 4.66 4.66 4.6 4.86 -% 5 4.48 4.49 4.5 5 5 8.6 8.3 5 4 3.63.44.96.9.7 +%.4.3 4.56 8 6 4 9.3 9.8 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 6 7 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 6 7 FY 7 Investor Presentation 3
Balance Sheet Growth constrained by economic environment Balance Sheet Trends SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change Investments, net 4,578 6,9,59 +3% Financing and advances, net 49,34 56,85 53,59 -% Total assets 443,866 444,679 44,657 +% Due to banks and other financial institutions 48,558 57,8 45,474 +7% Customers' deposits 38,94 3,593 35,68 -% Debt securities issued,5,66 9,98 +3% Total liabilities 379,59 38,944 38,73 -% Equity attributable to shareholders 56,4 54,433 53,38 +6% Total equity 64,76 6,736 59,96 +7% Financing and Advances, net (SARbn) Customers' Deposits (SARbn) 45 4 35 3 5 -% 65 65 6 54 54 57 57 49 38 37 33 8 7 7 7 6 8 83 84 85 85 87 88 89 6 5 4 3 -% 36 35 3 36 34 35 33 39 8 8 78 79 66 55 59 58 5 5 36 37 35 3 34 35 35 4 3 7 4 36 48 3 38 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 Corporate Consumer and credit card International Others FY 7 Investor Presentation 3 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 CASA Time Others
Segmental Information 7 Total operating income lower due to depreciation of Turkish Lira and lower Treasury income, partly offset by higher Retail operating income,8,6,4,, 8 6 4 7 Total Operating Income Movement by Segment (SARbn) 9 599 55 8,647 (4) (636) 8,345 Total Operating Income by Segment (SARbn) International 9% Capital Market 3% Treasury 8% 5,, 5,, 5, 8.6 8.3 6 7 Retail 45% Corporate 5% 6 Retail Corporate Treasury Capital Market International 7, 4Q 7 Total Operating Income Movement by Segment (SARbn) 439 Total Assets by Segment (SARbn) Financing and Advances, net by Segment (SARbn) 9 8 7 6 5 4 3 4,6 (95) (346) 4 (97) 4,56 7 6 5 4 3 +% 443 445 444 4 39 38 56 54 63 39 43 33 5 7 9 45 4 35 3 5 5 5 -% 54 57 49 8 7 6 3 35 4 85 88 89 4Q 6 Retail Corporate Treasury Capital Market International 4Q 7 FY 7 Investor Presentation 3 4Q 6 3Q 7 4Q 7 Retail Corporate Treasury Capital Market International 4Q 6 3Q 7 4Q 7 Retail Corporate International Other
Segmental Information 7 net income growth mainly driven by Retail segment, partly offset by Corporate and Treasury declines 7 Net Income Movement by Segment* (SARmn) Net Income by Segment* (SARbn) 4, 3,5 3,,5 9,46 997 (44) (83) 69 8 9,965 International 5% Capital Market 3% 8 9.4. Retail 4%,,5, Treasury 8% 6 4 6 7 5 6 Retail Corporate Treasury Capital Market International 7 Corporate 3%, 9 8 7 6 5 4 3 4Q 7 Net Income Movement by Segment* (SARmn) 485 (7) 9,36 (74) 7,6 Management Commentary 7 Total operating income declined % due to depreciation of the Turkish Lira impacting International income (-8% ) and lower Treasury income (-% ), partly offset by growth in Retail (+8% ) and Corporate (+% ) income. 7 Net income improved 5% due to growth in Retail (+33% ) and International (+64%), partly offset by a decline in Corporate net income (-5% ) due to higher impairments and Treasury (-9% ) from lower operating income. 4Q 6 Retail Corporate Treasury Capital Market International 4Q 7 *Net income for the period, before deduction of non-controlling interests FY 7 Investor Presentation 33
Outlook Improved macroeconomic environment expected to drive growth 8 Macroeconomic Outlook FY 7 Reported FY 8 Guidance Average Arabian light oil price of USD 55 per barrel Three US Fed rate hikes of 5bps each in March, June and December. Government s expansionary budget for 8 will drive corporate lending activity Residential financing will drive consumer lending growth Budget deficit narrows to SAR 8bn Real GDP growth of.5% VAT and increased tariffs on utilities will increase inflation to around 5% Balance Sheet Profitability Capitalisation and Asset Quality Financing growth -% +5% to 8% NSCI margin 3.48% +5 to 5bps Cost to income 35.% Below 35% Tier CAR 7.7% 6% to 8% Cost of Risk.7%.6% to.8% FY 7 Investor Presentation 34
National Commercial Bank Financial Results Details FY 7 Results FY 7 Investor Presentation
Income Highlights Lower FY 7 and 4Q 7 total operating income largely attributable to lower fee and other income and Turkish Lira depreciation 8 7 6 5 4 3 Total Operating Income (SARbn) -% 4.6 4.49 4.5.8.4.4 3.3 3.45 3.38 4Q 6 3Q 7 4Q 7 3 5 5 5 -% 8.6 8.3 5. 4.7 3.5 3.7 6 7 Management Commentary 4Q 7 total operating income declined % YoY despite a % improvement in net special commission income due to lower investment-related income. FY 7 total operating income declined % despite % growth in net special commission income due to lower fee and other income and average Turkish Lira depreciation of 7%. Excluding the International business, 4Q 7 total operating income was marginally higher YoY. Net special commission income Fee and other income 4Q 7 Total Operating Income Movement (SARbn) 7 Total Operating Income Movement (SARbn) 4.6.5 (.4) 4.6 (.) 4.5 4 4 3 3 8.65.5 (.8) 8.98 (.64) 8.35 4Q 6 NSCI Non-NSCI Income Excl. Intn'l International 4Q 7 6 NSCI Non-NSCI Income Excl. Intn'l International 7 FY 7 Investor Presentation 36
Net special commission income trends 7 commission income growth limited as domestic margin improvement partly offset by Turkish Lira depreciation Management Commentary The 4Q 7 net special commission margin increased by bps YoY to 3.49% due to improved funding costs (+3bps to 3.48% FY 7). Special commission expense for 4Q 7 was 9% lower YoY (-% FY 7) due to lower SAIBOR rates and a more optimal funding mix. Excluding the International business, domestic NSCI grew by % in 4Q 7 (+4% FY 7). Net Special Commission Income SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 Special commission income 4,373 4,8 4,46 -% 7,45 7,59 -% YoY % change Special commission expense (996) (833) (,9) -9% (3,484) (3,969) -% Net special commission income 3,378 3,449 3,34 +% 3,66 3,55 +% Net special commission margin (%) 3.49% 3.45% 3.9% +6% 3.48% 3.35% +4% Net Special Commission Margin (%) Commission Yield and Funding Cost (%) SAIBOR and LIBOR Rates (%) 3.4% 3.8% 3.44% 3.9% 3.49% 3.49% 3.45% 3.49% 4.35% 4.4% 4.37% 4.37% 4.4% 4.33% 4.3% 4.4%.%.36%.4%.8%.74%.78%.79%.9%.%.3%.99%.5%.%.9%.9%.99%.63%.65%.85%.%.69%.5%.3%.33% Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 () Commission yield (%) Funding cost (%) Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 3M SAR SAIBOR (%) 3M USD LIBOR ($) Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 FY 7 Investor Presentation 37
Fee and other income trends Lower FY 7 fees and investment related income Fee and Other Income (SARmn),8.,3.,8.,3. 8. 3. (.) -%,77,4,38 337 65 87 8 66 779 793 8 (6) (3) (3) 4Q 6 3Q 7 4Q 7 Other operating income (expenses), net Investment-related income Exchange Income, net Fee income from banking services, net 7 Key Drivers of Fee Income from Banking Services Movement (SARmn) 8,6 7,6 6,6 5,6 4,6 3,6,6,6 6 (4) -8% 5,98 4,684,4 8,43,56 3,363 3,5 (433) (479) 6 7 Fee & Other Income Management Commentary 4Q 7 fee and other income declined % YoY as 5% growth in fees from banking services was more than offset by a 5% decline in investment-related income. The higher fees from banking services in 4Q 7 were mainly driven by higher fees from investment management services and financing activity. FY 7 fee and other income declined 8% from reduced income from banking services (-5% ) and investment-related income (- % ). The lower fees from banking services in 7 were driven by lower financing, trade finance and credit card fees, partly offset by higher fees from investment management services. SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 YoY % change 9 8 7 6 5 4 3 3,363 7 6 Invmnt. Mgmnt. (86) Financing (66) Trade Finance (63) Credit Cards (49) 3,5 Others 7 Shares brokerage 5 3 59-6% 83 9-7% Investment management services 8 7 9 +43% 44 333 +3% Financing and advances, net 49 373 366 +%,537,63-5% Credit cards 8 4 5-46% 83-35% Trade finance 37 3 54 -% 537 64 -% Others 89 99 96-8% 389 4-3% Fee income from banking services 8 793 779 +5% 3,5 3,363-5% Exchange Income, net 66 8 87-7%,56,43 +% Other operating income (expenses) (3) (3) (6) -% (479) (433) +% Fee income, excl. investmentrelated income 973 94 94 +4% 3,88 4,74-5% Investment-related income 65 337-5% 8,4 -% Fee and other income,38,4,77 -% 4,684 5,98-8% FY 7 Investor Presentation 38
Expense highlights Digitization and productivity enhancement delivered expense savings in 7 3,5 3,,5,,5, Operating Expenses (SARmn) 5,86 -%,6,64 66 455 49 3 96 53 53 97 3 88 797 794,, 8, 6, 4,, 7,38,7-8% 6,453,76 76 654 774 77 3,433 3,66 Management Commentary 7 operating expenses improved by 8% YoY. The FY 7 cost to income ratio improved by.5% YoY to 35.%. The cost base improvement was relatively broad-based, reflecting the continued strides made in digitisation and productivity initiatives, and further benefited from the cessation of intangible assets amortisation as well as currency depreciation in the Turkish subsidiary. 4Q 6 3Q 7 4Q 7 Employee-related Rent & premises Depreciation & amortisation Other G&A 6 7 Operating Expenses Movement Drivers (SARmn) Cost to Income Ratio (YTD %),6,4,, 8 6 7,38 (67) (3) (7) (39) 6,453 36.% 33.% 37.5% 37.% 35.% 34.9% 37.7% 36.% 34.7% 34.4% 34.8% 35.% 3.9% 3.4% 3.9% 33.3% 4 Group (%) Excluding International (%) 6 Employeerelated Rent & premises Depreciation & amortisation Other G&A 7 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 FY 7 Investor Presentation 39
Asset highlights and composition Balance sheet growth reflective of a more subdued economic environment and Turkish Lira depreciation 8 7 6 5 4 3 Total Assets (SARbn) +% 443 445 444 63 5 6 7 5 Management Commentary Total assets were stable during 7 due to limited decline in financing (-% ) and moderate growth in investments (+3% ). Overall balance sheet and financing trends were reflective of a more subdued economic environment domestically, and further muted by Turkish Lira depreciation. 54 57 49 4Q 6 3Q 7 4Q 7 Financing and advances, net Investments, net Cash, bank and SAMA balances Other assets Total Assets Mix (SARbn) Other assets 5% Cash, bank and SAMA balances 3% Investments, net 6% 6 5 4 3 443 444 4Q 6 4Q 7 Financing and advances, net 56% Total Assets by Segment (SARbn) Capital Market % Treasury 37% 6 5 4 3 443 444 4Q 6 4Q 7 International 9% Retail 4% Corporate 3% FY 7 Investor Presentation 4
Financing and advances Financing decline driven by Corporate segment and Turkish subsidiary 6 5 4 3 Financing and Advances, net (SARbn) -% 54 57 49 8 7 6 85 88 89 3 35 4 Management Commentary Domestically, financing grew for the Consumer segment (+5% ) but declined for the Corporate segment (-6% ) during 7. The decline in 7 Corporate financing occurred during 4Q 7 (-8% QoQ) due to repayments, particularly in the building & construction and commerce sectors. International financing declined 8% in 7 due principally to weakened Turkish Lira. 4Q 6 3Q 7 4Q 7 Corporate Consumer and credit card International Others Financing and Advances, gross by Economic Sector (SARbn) Others across 6 sectors 3% Building & construction 5% Utilities & health services 7% Services 8% Manufacturing 3% 4 35 3 5 5 5 6 56 4Q 6 4Q 7 Consumer financing & credit cards 37% Commerce 7% 5 5 Movement in Financing, gross by Economic Sector (SARbn) 5 6 4Q 6 3 Consumer Utilities & health Services (6) Building & construction Commerce (6) () Mining & Others 56 4Q 7 FY 7 Investor Presentation 4
Financing and advances credit quality () Rise in Corporate NPLs and impairment but stable Retail and International credit quality NPL (SARbn) Movement in NPLs by Economic Sector (SARbn) 8 7 6 5 4 3 +% 3.96 3.83 4.7 3.93 4. 4.33 4.67 4.77.86.6.8.48.48.5.5.4.53.56.63.5.49.49.5.53.57.65.73.9.3.34.63.84 3.93.45.7..4 (.) (.) (.) 4.77 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 Corporate Consumer and credit card International Others 4Q 6 Building & construction Manufacturing Commerce Services Transport & comms Agriculture & fishing Others 4Q 7 Impairment Allowances (SARbn) Impairment Charge (SARbn) 8 6 4 +5% 5.79 6. 5.56 5.93 6.5 6.5 6.65 6.8.49.3.5.6.7.9.33.6.38.7.45.3.6.4.9.3.88.93 3.3 3.4 3.68 3.9 3.99 4.8 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 Corporate Consumer and credit card International Others.84-4%.4.35.38.36.4.47.4.5.8.8.7.5.....8.5.9.9.6.5.69.8.5.47.8.8.5.4 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 Corporate Consumer and credit card International Others FY 7 Investor Presentation 4
Financing and advances credit quality () Rise in NPL ratio but continued strong NPL coverage NPL Ratios (%) 4.7% 4.3% 5.3% 5.% 5.3% 5.4% 5.4% 5.% NPL Coverage Ratios (%) 5% 9% 96% 9% 86% 84% 69% 64%.5%.4%.6%.5%.6%.6%.8%.9%.9%.%.%.%.%.%.3%.5% 46% 45% 47% 5% 5% 5% 4% 43% 8% 8% 83% 85% 86% 86% 87% 9% () () Domestic International Total NPL ratio Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 () Domestic International Total NPL coverage ratio Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 CoR Ratios (YTD %).7%.3%.9%.5%.%.%.%.%.8%.7%.5%.5%.7%.6%.7%.8%.6%.5%.3%.3%.6%.6%.8%.7% Management Commentary Rising NPL ratio driven by the Corporate segment. Consumer and International credit quality remained stable during 7. NPL coverage was comfortable at 43% as at 4Q 7. () () Domestic International Total CoR ratio Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 FY 7 Investor Presentation 43
Financing and advances credit quality (3) Consumer NPLs stable while Corporate NPLs increased NPL Ratios (%) NPL Coverage Ratios (%).%.%.3%.4%.5%.7%.9%.% 3 3 3 6% 54% 9% 3% 34% 38% 84% 77% 8% 77% 73% 68% 46% 45%.7%.7%.7%.6%.6%.6%.6%.6% 5% 47% Corporate Consumer and credit card Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 Corporate Consumer and credit card Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 CoR Ratios (YTD %).8%.6%.6%.3%.4%.5%.%.3%.9%.9%.8%.7%.6%.6%.5%.4% Management Commentary Rising Corporate NPL ratio, in part due to repayments during 4Q 7, but coverage remains strong at 47% as at 4Q 7. Consumer NPL ratio and coverage remain stable. () () Corporate Consumer and credit card Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 FY 7 Investor Presentation 44
IFRS 9 The initial implementation of IFRS 9 on January 8 is not expected to have a material impact on NCB's capital position NCB will implement IFRS 9 with effect from January 8. Implementation It plans to categorizes its financial assets into the following three stages in accordance with the IFRS 9 methodology: o Stage Performing assets o Stage Underperforming assets o Stage 3 Impaired assets The Group will also consider forward-looking information in its assessment of significant deterioration in credit risk since origination as well as the measurement of Expected Credit Loss. NCB expects to exercise the accounting policy choice to continue IAS 39 hedge accounting. Overall impact on the classification of financial assets and liabilities is not expected to be significant. Impact NCB anticipates an increase in allowance for credit losses in respect of financial assets and as a result, the Bank s Tier ratio may be impacted primarily from potential increase in credit impairment provisions, net of tax. IFRS 9 day impact expected to reduce total equity as at January 8 by ~% to.4% i.e. the T capital ratio by ~bps to 7bps. FY 7 Investor Presentation 45
Investments trends and composition Investments rose through participation in Saudi Government debt issuance and ~9% of the investment portfolio remains Saudi Government or investment grade 5 5 5 Investments (SARbn) +3% 7 5 35 44 43 7 66 67 Management Commentary The investment portfolio is built on high quality securities with ~9% being investment grade. Since the resumption of KSA government debt issuance, NCB has actively participated in issues of longer term debt securities. The portfolio has been re-balancing towards floating rate securities during the year in light of the rising interest-rate environment. 4Q 6 3Q 7 4Q 7 Equity instruments, Mutual Funds, Hedge Funds and Others Floating rate securities Fixed rate securities Investments by Credit Grade (SARbn) Investments by Geography (SARbn) Unrated 4% Non-investment grade 6% 8 6 4 8 6 5 Saudi Government Securities 39% Other countries 4% Turkey 3% 6 4 8 6 5 Saudi Arabia 54% 4 Other investment grade 5% 4 4Q 6 4Q 7 Europe % GCC and Middle East 8% 4Q 6 4Q 7 FY 7 Investor Presentation 46
Liabilities trends and composition Stable total liability base and improving deposit mix towards CASA balances 7 6 5 4 3 Total Liabilities (SARbn) -% 383 38 38 45 58 49 36 33 39 Management Commentary Customers deposits are the main source of funding and declined by % during 7 as the funding mix was optimized by reducing time deposits. CASA balances grew by 6% during 7 and account for 77% of customers deposits. 4Q 6 3Q 7 4Q 7 Customers' deposits Due to banks and other financial institutions Debt securities issued Other liabilities Total Liabilities Mix (SARbn) Customers' Deposits (SARbn) Other liabilities 3% Debt securities issued 3% 6 5 4 3 383 38 Due to banks and other financial institutions 3% 6 5 4 3 -% 36 39 79 58 6 7 8 3 4Q 6 4Q 7 Customers' deposits 8% CASA - Domestic CASA - International Time Others 4Q 6 4Q 7 FY 7 Investor Presentation 47
Liquidity NCB maintained a strong liquidity profile 5 5 HQLA and Liquidity Coverage (SARbn/%) 45.3% 56.% 59.8% 7.5% 63.8% 66.% 7.5% 77.3% 94 97 4 96 9 95 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 High quality liquid assets (HQLA) Liquidity coverage ratio (LCR) Quarterly averages Financing to Customer Deposit Ratio (%).% 8.% 6.% 4.%.%.% 8.% 6.% 4.%.%.% Management Commentary As at 4Q 7, the financing to customer deposit ratio was 8.7% and comfortably below the regulatory guidelines. HQLA balances declined compared to 4Q 6 due to a decline in reverse repo balances placed temporarily with SAMA at the end of 6. The average quarterly LCR improved to 77.3% from 7.5% in 4Q 6. Basel III leverage ratio improved to 3.% from.% in 4Q 6. Basel III Leverage Ratio (%) 3.% 8.4% 84.% 83.5% 8.3% 8.% 8.6% 84.9% 8.7%.%.%.4%.%.7%.5%.6% Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7 FY 7 Investor Presentation 48
Capital Capital position comfortably above regulatory minima 8 6 Capitalisation (SARbn) +6% 68 7 7 8 6 8 7 8 7 7 6 5 4 3 Pillar I Risk Weighted Assets (SARbn) +% 353 38 36 33 34 34.%.% 9.% 8.% 7.% 6.% Capital Ratios (%) 7.5% 8.% 8.7% 9.%.% 8.% 8.% 8.5% 5.5% 6.% 6.5% 6.9% 7.7% 6.% 6.% 6.4% 4 54 55 57 4Q 6 3Q 7 4Q 7 Tier capital (T) Additional tier capital (AT) Common equity tier capital (CET) Total Capital Composition (SARbn) Tier capital (T) % Additional tier capital % FY 7 Investor Presentation 9 8 7 6 5 4 3 68 7 4Q 6 4Q 7 Common equity tier capital (CET) 79% 3 336 38 4Q 6 3Q 7 4Q 7 Credit risk Operational risk Market risk 49 5.% 4.% 3.%.% Management Commentary 3.9% 4.5% 4.9% 5.3% 4.6% 4.% 4.5% T ratio TC ratio CET ratio Capital ratios are based on Pillar I RWA As at 4Q 7, capitalization remained strong and comfortably above the regulatory minima. Pillar I risk weighted assets increased by % in 7 principally by an increase during Q 7 due to revised regulatory requirements for the calculation of certain credit risk-weighted assets and was partially offset by reduction during 4Q 7 from corporate loans repayments. During Q 7, additional Tier Sukuk of SAR.3bn were issued, taking the total to SAR 7bn as at 3 December 7. On 8 December 7, NCB announced an increase in the Bank s paid-up share capital through a for bonus shares issue which, subject to AGM approval, will increase paid-up share capital to SAR 3bn (3,mn shares) from SAR bn (,mn shares). 5.7% Q 6 Q 6 3Q 6 4Q 6 Q 7 Q 7 3Q 7 4Q 7
National Commercial Bank Segmental Review FY 7 Results FY 7 Investor Presentation
Retail Banking Strong FY 7 and 4Q net profit growth resulting from operating income growth and improved efficiency 5, 4,5 4, Total Operating Income (SARmn) +5% Summary Financial Performance SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 Total assets 8,53 6,939 4,97 +3% 8,53 4,97 +3% YoY % change 3,5 3,,5,,5, 5,78 98,6, 44 36,584,7,95 4Q 6 3Q 7 4Q 7 Net special commission income Fee and other income Total operating income,,6,78 +5% 8,34 7,75 +8% Net special commission income,95,7,584 +% 6,883 6,68 +% Fee income from banking services, net 65 37 +3%,63,4-6% Operating expenses (973) (95) (,8) -% (3,799) (4,49) -8% Impairment charge (5) (48) 4 -% (447) (5) -% Other income (expenses) () (6) (4) -6% (3) (6) +6% Net income,96, 7 +68% 4,45 3,48 +33% Cost to income (%) 43.8% 44.7% 6.% -9% 45.7% 53.9% -5% % of total assets 4.4% 4.% 3.7% +3% 4.4% 3.7% +3% ROA (%) 4.4% 3.8% 4.% +9% 3.8% 3.% +7% 3,,5,,5, 5 Net Income (SARmn) +68%,,96 7 4Q 6 3Q 7 4Q 7 Management Commentary 4Q 7 net income rose 68% YoY driven principally by 5% operating income growth, a % improvement in operating efficiency and improvement in collections. NSCI for 4Q 7 improved by % YoY due to a 5% increase in retail financing and higher current account growth. Fee income increased by 3% in 4Q 7 YoY, mainly from financing-related activity. 4Q 7 operating expenses improved by % and the cost to income ratio improved 9% YoY to 43.8%, reflecting continued digitisation and productivity initiatives. 4Q 7 impairments improved by SAR 98mn QoQ but rose by SAR 9mn YoY. FY 7 net income improved by 33% to SAR 4,45mn on rising operating income (+8% ) and improved cost productivity (-8% ). FY 7 Investor Presentation 5
Corporate Banking 4Q 7 net profits declined due to lower NSCI on account of repayments, while FY 7 net profits deteriorated due to higher impairments,5, Total Operating Income (SARmn) -8% Summary Financial Performance SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 Total assets 33,5 43,378 39,74-4% 33,5 39,74-4% YoY % change,5, 5,87,4,9 353 8 35 834 76 74 4Q 6 3Q 7 4Q 7 Net special commission income Fee and other income Total operating income,9,4,87-8% 4,477 4,387 +% Net special commission income 74 76 834 -% 3,5 3,8 +% Fee income from banking services, net 93 43 33-6%,46,66 -% Operating expenses (57) (6) (83) -9% (998) (,7) -% Impairment charge (43) (465) (9) -5% (,5) (69) +83% Other income (expenses) () (6) (5) -75% (4) (8) +88% Net income 69 3 78 -%,35,763-5% Cost to income (%) 3.5% 5.% 3.8% -%.3% 3.% -3% % of total assets 3.% 3.% 3.5% -5% 3.% 3.5% -5% ROA (%).%.9%.7% +5%.7%.% -%,8,6,4,, 8 6 4 Net Income (SARmn) 78 -% 3 69 4Q 6 3Q 7 4Q 7 Management Commentary 4Q 7 net income declined % YoY as improvements in operating expenses (-9% ) and impairments (-5% ) were more than offset by lower operating income (-8% ). NSCI for 4Q 7 declined % YoY from both a 6% decline in corporate financing balances and lower commission resulting from lower SAIBOR rates. Fee income decreased by 6% YoY. 4Q 7 operating expenses improved by 9% and the cost to income ratio decreased % YoY to 3.5%. The 4Q 7 impairment charge declined 5% YoY and 69% QoQ due to higher NPL inflow during 3Q 7. FY 7 net income fell 5% to SAR,35mn, primarily due to higher impairment charges (+83% ) more than offsetting growth in operating income (+% ). FY 7 Investor Presentation 5
Treasury Lower NSCI and investment gains impacted profitability Total Operating Income (SARmn) Summary Financial Performance SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 YoY % change, -36% Total assets 6,79 53,8 56,88 +4% 6,79 56,88 +4%,5, 5,, 8 6 4 97 37 763 56 64 4 663 67 48 4Q 6 3Q 7 4Q 7 Net special commission income Fee and other income Net Income (SARmn) 79-38% 656 455 4Q 6 3Q 7 4Q 7 Total operating income 64 763 97-36% 3,333 3,745 -% Net special commission income 48 67 663-7%,5,4-7% Fee income from banking services, net 4 6 33-8% 97 3-4% Other operating income 8 3 74-57% 985, -9% Operating expenses (8) (97) (58) -3% (445) (433) +3% Impairment charge (7) () (75) -5% (76) (4) -65% Other income (expenses) (8) (9) -5% (9) () -5% Net income / (loss) 455 656 79-38%,84 3,87-9% Cost to income (%) 7.3%.7% 6.% +6% 3.3%.6% +6% % of total assets 36.7% 34.6% 35.3% +4% 36.7% 35.3% +4% ROA (%).%.7%.% -4%.8%.% -% Management Commentary Treasury reported a 38% YoY drop in net income in 4Q 7 due to a 36% reduction in operating income, partly offset by a 3% improvement in operating expenses. Operating income in 4Q 7 declined 36% YoY mainly due to lower NSCI and a reduction in gains on non-trading investments from repositioning the investment portfolio. Investment impairments were at similar levels to 4Q 6 at SAR 7mn. FY 7 net income was 9% lower than the previous year, largely attributable to lower NSCI on investments and a reduction of investment related income from repositioning the investment portfolio, partially offset by lower impairment charges. FY 7 Investor Presentation 53
Capital Markets Growth driven by asset management 3 5 5 5 Total Operating Income (SARmn) +9% 6 54 74 59 53 7 4Q 6 3Q 7 4Q 7 Fee and other income Net special commission income Summary Financial Performance SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 Total assets,388,56,34 +6%,388,34 +6% YoY % change Total operating income 74 54 6 +9% 636 58 +9% Net special commission income +38% 4 +9% Fee income, net 7 48 49 +5% 69 56 +% Operating expenses (9) (79) (98) -8% (344) (35) -% Impairment charge Other income (expenses) 8 +48% 4 +6% Net income 9 76 63 +46% 33 34 +9% Cost to income (%) 5.7% 5.4% 6.4% -6% 54.% 6.4% -% % of total assets.3%.4%.3% +5%.3%.3% +5% ROA (%) 5.%.% 7.5% +43%.4% 4.7% +5% Net Income (SARmn) Management Commentary 8 6 +46% 4Q 7 net income increased by 46% (SAR 9mn) YoY due to higher operating income and improved operating efficiency. 4 8 6 63 76 9 Operating income in 4Q 7 rose 9% (SAR 4mn) YoY due to higher fee and other income, mainly resulting from asset management. NCB Capital increased its full year net income to SAR 33 million (+9% ) by growing its net operating revenue that increased to SAR 636 million (+9% ). 4 4Q 6 3Q 7 4Q 7 FY 7 Investor Presentation 54
International Operating income impacted by depreciating Turkish currency but strong net income growth from lower impairment charges,, Total Operating Income (SARmn) -9% Summary Financial Performance SAR (mn) 4Q 7 3Q 7 4Q 6 YoY % change FY 7 FY 6 Total assets 38,4 38,998 4,89-6% 38,4 4,89-6% YoY % change 8 6 4 5 46 45 59 48 56 4 358 48 4Q 6 3Q 7 4Q 7 Net special commission income Fee and other income Total operating income 45 46 5-9%,595,3-8% Net special commission income 48 358 4 +3%,7,677-4% Fee income from banking services, net 67 7 84 -% 8 384-7% Operating expenses (4) (4) (69) +6% (867) (,99) -% Impairment charge (83) (8) (4) -6% (3) (83) -63% Other income (expenses) 79 (7) () -46% 37 (35) -6% Net Income 87 94 6 +6% 463 83 +64% Cost to income (%) 5.9% 5.8% 33.8% +56% 54.4% 49.3% +% % of total assets 8.6% 8.8% 9.% -7% 8.6% 9.% -7% ROA (%).9%.%.% +83%.%.6% +87% 3 5 5 5 Net Income (SARmn) +6% 87 6 94 4Q 6 3Q 7 4Q 7 Management Commentary 4Q 7 net income increased 6% YoY on improving credit quality, despite declining operating income and higher expenses. 4Q 7 operating expenses rose 6% YoY. This resulted from legislative inflationary increases in staff costs more than offsetting the ongoing progress made in costoptimisation initiatives as well as the cessation of intangible assets amortisation from the start of 7. The impairment charge for 4Q 7 declined 6% due to limited new NPL formation in the Turkish subsidiary during the year, further aided by the Turkish Lira depreciation. FY 7 net income rose by 64% to SAR 463 million as lower impairment charges (-63% ) and operating expenses (-% ) more than offset a 8% decline in operating income from higher foreign exchange trading losses. FY 7 Investor Presentation 55
National Commercial Bank Additional Information FY 7 Results FY 7 Investor Presentation
Additional Information Please don t hesitate to contact NCB Group Investor Relations Mr. Abdulbadie Alyafi Head, Investor Relations P: +966 646 3988 E: investorrelations@alahli.com National Commercial Bank P.O. Box 3555 48 Jeddah, Kingdom of Saudi Arabia More information Download copies of National Commercial Bank s: Financial statements Earnings release Investor presentation Financial data pack (Excel) Visit: http://www.alahli.com/en-us/investor_relation FY 7 Investor Presentation 57