annual report 2017 - alfransi.com.sa · 2020. 7. 26. · given the present situation, the loans and...

AnnualReport2017

بسـم اهلل الرحمـن الرحيـم

King Salman Bin Abdulaziz Al SaudCustodian of the Two Holy Mosques

His Royal Highness PrinceMohammed Bin Salman Bin Abdulaziz Al-Saud

Crown Prince, Deputy Prime MinisterAnd Minister of Defense

TABLEOF CONTENTS

Chairman Statement 10Managing Director Statement 14Board of Directors 18Management Team 20Finance and Strategy 22

Senior Executive Director Business Statement 26Corporate Banking Group 28Business Banking Group 30Global Markets Group 32High Networth & Wealth Management 34 Global Transaction Business 36 Islamic Banking 38 Head Of Retail Statement 40Retail Banking Group 42

Risk Management 46Senior Executive Director Statement 50Corporate Operations Division 52

• Information Systems Group 56• Property Management Division 62• Procurement Division 66• Sakan Company 68• Transformation and Organization Division 70

Business Continuity 72Human Resources 74Legal Division 84Compliance 86Audit Division 90Saudi Fransi Capital 94Allianz Saudi Fransi 96Saudi Fransi Leasing 98

TABLEOF CONTENTS

2017YEAR AT A GLANCE

Total Liabilities(SAR-in Million)

2013 2014 2015 2016 2017

130,000

140,000

150,000

160,000

170,000

180,000

161,268

173,730

156,240

162,306

146,840

Net Income(SAR-in Million)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2013 2014 2015 2016 2017

3,5323,510

4,036

3,516

2,406

2013 2014 2015 2016 2017

5,000

10,000

15,000

20,000

25,000

30,000

35,00031,661

29,69927,48426,471

23,217

Total Equity(SAR-in Million)

0

Total Assets(SAR-in Million)

2013 2014 2015 2016 2017

150,000

160,000

170,000

180,000

190,000

200,000

210,000

192,929

203,429

183,724188,777

170,057

Total Loans & Advances(SAR-in Million)

2013 2014 2015 2016 2017

100,000

105,000

110,000

115,000

120,000

125,000

130,000

135,000

121,940

129,458

123,769

111,307

116,541

2013 2014 2015 2016 2017

0

50,000

100,000

150,000

200,000

150,954158,458

141,852145,275

131,601

Customers’ Deposits(SAR-in Million)

Total Liabilities(SAR-in Million)

2013 2014 2015 2016 2017

130,000

140,000

150,000

160,000

170,000

180,000

161,268

173,730

156,240

162,306

146,840

Net Income(SAR-in Million)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2013 2014 2015 2016 2017

3,5323,510

4,036

3,516

2,406

2013 2014 2015 2016 2017

5,000

10,000

15,000

20,000

25,000

30,000

35,00031,661

29,69927,48426,471

23,217

Total Equity(SAR-in Million)

0

Total Assets(SAR-in Million)

2013 2014 2015 2016 2017

150,000

160,000

170,000

180,000

190,000

200,000

210,000

192,929

203,429

183,724188,777

170,057

Total Loans & Advances(SAR-in Million)

2013 2014 2015 2016 2017

100,000

105,000

110,000

115,000

120,000

125,000

130,000

135,000

121,940

129,458

123,769

111,307

116,541

2013 2014 2015 2016 2017

0

50,000

100,000

150,000

200,000

150,954158,458

141,852145,275

131,601

Customers’ Deposits(SAR-in Million)

PerformanceNet Income SAR 3,532 millionTotal Liabilities SAR 161,268 millionTotal Assests SAR 192,929 millionCustomers’ Deposits SAR 150,954 millionTotal Loans & Advances SAR 121,940 millionTotal Equity SAR 31,661 million

Annual Report 20178

2017YEAR AT A GLANCE

Net Income

3,532SARMillion

Annual Report 2017 9

CHAIRMAN’S

STATEMENT

InvestmentsIncreased By

5.20%

Annual Report 201710

Despite the economic slowdown faced by the banking sector in 2017,

Banque Saudi Fransi was able to maintain its level of performance It gives me great pleasure to present to you, on behalf of my colleagues, members of the Board of Directors of Banque Saudi Fransi (BSF), and myself, the Annual Report and financial statements for the financial year ended 31/12/2017.

Despite the economic slowdown faced by the banking sector in 2017, BSF was able to maintain its level of performance, achieving a net profit of SAR 3,532 million at the end of 2017 compared to the SAR 3,510 million achieved in 2016, with an increase of 0.63% as a result of the increase in Total Operating Income by 2.75%, amounting to SAR 6,576 million. This increase was mainly due to the increase in Net Special Commission Income and Trading Income which was partly offset by lower fees, commission income, foreign exchange income, dividend income, non-trading investments and other operating incomes.

Compared to last year, investments increased by 5.20% reaching SAR 25,325 million, the loan portfolio decreased by 5.81% amounting SAR 121,940 million, the deposits reached SAR 150,954 million, a decrease of 4.74%, and assets decreased by 5.16% standing at SAR 192,929 million.


The total cash dividends for the 2017 financial year reached SAR 1.40 per share, divided into SAR 1.05 per share distributed in the first half of the year, and 0.35 halalas per share distributed in the second half.

Moreover, the Bank continued enhancing and upgrading its infrastructure while providing outstanding services to clients. BSF also invested in its human capital through development programs for senior and middle management levels, and training programs tailored for all employee levels.

In conclusion, on behalf of the members of the Board of Directors and myself, I extend to the Custodian of the Two Holy Mosques and the Crown Prince, my thanks and gratitude for their constant support of the banking sector. Gratitude is also extended to all the relevant government agencies for their positive and effective role in supporting the Bank, particularly the Ministry of Finance, Saudi Arabian Monetary Agency, Saudi Capital Market Authority, Ministry of Commerce and Investment and the Saudi Arabian General Investment Authority.

I would also like to thank BSF customers and shareholders for their trust, and the Board of Directors, my colleagues, as well as all the Bank employees for their devoted efforts which contributed to these achievements.

Sulaiman Abdulrahman Al GwaizChairman


MANAGING DIRECTOR

STATEMENT

We AchievedA Net Profit

3,532SARMillion


Total Operating Income for 2017 stood at SAR 6,576 million growing

by 2.7% compared to 2016It gives me great pleasure to review Banque Saudi Fransi’s performance for 2017 wherein the bank achieved a net profit of SAR 3,532 million compared to the SAR 3,510 million attained in 2016.

Total Operating Income for 2017 stood at SAR 6,576 million growing by 2.7% compared to 2016 and the Special Commission Income increased by 10.43% amounting to SAR 4,700 million. This reflects the outstanding performance of the bank despite the economic challenges faced in 2017.

With a slight increase in interest rates and despite a relative decrease in lending activities, BSF was able to maintain a steady growth rate shown by its profitability indicators. This is due to the revenues from special commissions/investments and the income from cash deposits.

Given the present situation, the loans and advances portfolio amounted to SAR 121,940 million in 2017 with the assets reaching SAR 192,929 million and the customer deposits standing at SAR 150,954 million. Moreover, investments increased to reach SAR 25,325 million, growing by 5.2%.


As regards the securities business, Saudi Fransi Capital focuses on largely enhancing the supply of products to customers.

Due to economic challenges internationally as well as locally, the None Performing Loans grew from 1.29% in 2016 to 2.73% in 2017. With the bank’s conservative risk management, the None Performing Loans volume remained within previously built up provisions. This conservative approach and the well diversified portfolio has been well accepted by the rating agencies who have continued their classification of Banque Saudi Fransi, once again, as investment-grade.

In 2018, we will further implement our balanced strategy between retail banking and corporate banking activities, focusing particularly on revenues from assets and cash deposits, as we expect continued rise in high interest rates. Looking at the quality and commitment of the BSF staff, I am more than confident that the bank is capable of overcoming all future challenges inevitably faced by the banking industry in regards to both clients and regulations.

I reiterate my gratitude to all our customers for their trust in Banque Saudi Fransi, and I assure them that the bank will always ensure customer satisfaction and work on enhancing communication with them.

I would also like to thank Saudi Arabian Monetary Authority and the Capital Market Authority (CMA) for their support, guidance, and on-going assistance.

Finally, I would like to express my appreciation to all BSF employees for their lasting commitment and involvement in achieving BSF goals, thus enabling the bank to pursue its growth and move forward with confidence.

Ammar A. Al-KhudairyManaging Director

MANAGING DIRECTOR STATEMENT


TotalOperating Income

6,576SARMillion


Mr. Jacques PROSTBoard Member

Mr. Mazin Al RomaihBoard Member

Mr. Mosa Al OmranBoard Member

Eng. Rayan FayezCEO & Board Member

BOARD OF

DIRECTORS


Mr. Abdulrahman Al RashedVice chairman

Mr. Suliman Al GwaizChairman

Mr. Bader Al IssaBoard Member

Mr. Ammar Al KhudairyBoard Member

Dr. Khaled MutabaganiBoard Member


MANAGEMENT

TEAM

Ammar A. Al-KhudairyInterim Managing Director

Mazen TamimiSenior Executive Director Business

Adel MallawiCFO - Head of Finance and Strategy Group

Muneer KhayatChief Human Capital Officer

Ravishanker VisvanathanChief Risk Officer

Thamer YousefSenior Executive Director Operations

Abdulmohsen AlrayesChief Audit Officer

Abdulaziz AlbaniChief Compliance Officer

Ismail Al-OrainiCorporate Secretary Division

Kamal Khodr Corporate Banking Group Ahmad HadeedGlobal Markets Group

Jameel Al Hamdan Business Banking Group


Ahmad JawdatHigh NetWorth Group

Khaled Al-Toukhi Global Transaction BusinessChief Innovation Officer

Mazen El-RayesIslamic Banking Division

Firas AlwohabeProperty Management Division

Shahid NaseemAccounting and Financial Control Division

Faisal AlDossaryRetail Banking Group

Abdulaziz Al Molhem Eastern Region Manager

Abdullah Al Mejrad Procurement Division

Amer OthmanWealth Management Group


FINANCE AND

STRATEGY


This overall results of the Net Income allowed

Banque Saudi Fransi to continue reinforcing the key financial indicators

I Overall PerformanceNet Income for the year ended 31 December 2017 reached to SAR 3,532 million, an increase of 0.63% against SAR 3,510 million achieved in 2016.

This overall solid result allowed Banque Saudi Fransi to continue reinforcing key financial indicators in capital, liquidity and risk areas demonstrating an overall healthy financial position providing capacity to implement its Medium Term Plan.

I Balance SheetTotal Assets decreased by 5.16% to SAR 192,929 million. This decrease was mainly due to low growth in loan portfolio by 5.81% stands at SAR 121,940 million and interbank lending decrease by 26% to 18,758 million.

Total Customer Deposits positioned at SAR 150,954 million, a decrease of 4.74% due to prevailing market conditions and the loan to deposit ratio is very healthy around 79%.

I Operating IncomeOperating Income increased by 2.75% reached to SAR 6,576 million. This growth in income came from solid increase of Net Special Commission Income by 10.43% reached to SAR 4,700 million,while Non Special Commission Income decreased by 12.46% to SAR 1,876 million primarily due to low fee and exchange income.


I Risk ProfileCost of risk decreased to 0.53 bp from 58 bp last year. The impairment charges for credit losses was SAR 661 million, and the Total provision for impairment of credit losses reaching to SAR 3,424 million covering 100% level of Non-Performing Loans, while Collective Provision stands above 1% of the Loans portfolio.

I Capital AdequacyDue to solid result, Banque Saudi Fransi Board of Directors was able to recommend distribution of a total dividend of SAR 1.40 per share compared to 1.05 per share in 2016.

With prudent risk strategy and low loan growth reduced the Risk Weighted Assets by 5.07% to SAR 182,088 million.

The solid capital generation over the year translated into robust Capital Adequacy Ratios standing at 19.39% (Tier I + Tier II ratio) and 17.52% (Tier I ratio) providing strong capital base to pursue the future development of the bank.

I Accounting & Financial Control DivisionAFCD ensures the disclosure of financial and regulatory information is in compliance with the International Financial Reporting Standards (IFRS) and the regulatory guidelines set by Saudi Arabian Monetary Authority (SAMA). AFCD is in charge of development and maintenance of Bank’s accounting system. Its control functions encompass general expenses, reconciliation of bank accounts, fixed assets and insurance control. AFCD worked closely with other divisions and business lines for the implementation of the new regulatory reporting requirements and smooth implementation of IFRS9 and VAT projects, effective 1st January, 2018. The primary task was to implement the accounting setup for IFRS 9 according to the classification and requirements of the business model. In addition, AFCD lead the implementation of VAT by conducting the impact assessment, setting up & configuring the accounting system, fulfilling the reporting requirements, sponsoring staff training and awareness sessions as well as technical support on VAT matters.

I Asset Liability ManagementALMD is responsible for managing interest rate risk in the banking book (IRRBB) and liquidity risk in accordance with pre-defined and Board-approved risk appetite and limit frameworks. ALMD also supports the capital planning and management process, which is an integral part of the bank’s Internal Capital Adequacy Assessment Plan (ICAAP).

FINANCE AND STRATEGY


I Financial Planning & Management Control DivisionFPMCD is primarily in charge of the budget preparation and follow-up and provides management with relevant tools to assess and steer performance. It also supervises the implementation of the 2017-19 Medium term Plan. In 2017, the department continued the enhancement of its systems relating to budget, client profitability and expense monitoring so as to provide faster and more accurate data to all its internal clients - management, business lines and support functions.

Operating IncomeIncreased By

2.75%


SENIOR EXECUTIVE DIRECTOR

BUSINESS STATEMENT


Despite 2017’s challenging economic environment

the business lines were able to generate additional production 2017 was the first year of the 2017 - 2019 Medium Term Plan. A plan that aspires to continue the measured growth of all business lines and remain a dominant player in the corporate activities in line with the country’s 2030 Vision.

Despite 2017’s challenging and changing economic environment, the business lines were able to generate additional production. Thanks to a strong control on direct expenses, the bank was able to cover the significant increase in general expenses and was able to close with a growth in the bottom line.

The Corporate Banking, including Treasury, remains the strength of Banque Saudi Fransi. Despite subdued oil prices and the consequent rationalization in government spending, these two business lines continued their growth, albeit at a lower growth trajectory.

On the Retail Group and in spite of increased production and reduction in direct expenses, the general expenses somewhat reduced the annual results.

Wealth Management successfully closed their targets thanks to a portfolio of very loyal clients supported by Saudi Fransi Capital’s high quality products and services. With a plethora of new products, 2018 seems to be an exciting and promising year for the Wealth Management clientele.

Going forward, with special attention and synchronization to the Government’s initiatives, it is expected that results will be augmented. The focused Housing Strategies of the Government will be a vast opportunity for Retail Group who have met very short deadlines in launching new structures to service this need. On the Corporate Group, the teams are maneuvering to service the Privatization and Public-Private Partnerships.

Banque Saudi Fransi plans to be a material and integral partner in the Vision 2030 and is committed to Delivering Excellence.


CORPORATE

BANKING GROUP

Corporate Banking Group maintained its unweaving

commitment to the Saudi market in a more challenging environmentDespite the challenges, our commitment to cement existing client relationships and establish new long-term ties continued to position us as a ‘bank of choice’ for a large number of corporate clients.

Structured Finance Division maintained its leadership role in syndicated transactions in Healthcare, Infrastructure, Metals & Mining, Oil & Gas, Petrochemicals, Real Estate, and Telecoms sectors. In addition, the award of financial advisory mandates for the procurement of two industrial-scale power and water projects, under the Saudi Government’s Vision 2030 positions us well in growing fee based revenues.

Banque Saudi Fransi participated as a Platinum Sponsor in the 5th Annual Saudi Trade Finance Summit held in November 2017 in AlKhobar. This facilitated our continued engagement with clients to provide them our best trade finance sales & solutions services.

Ultimately in 2018, we aim to expand (maintain) our market share and cement our position as a leading Corporate bank in the Kingdom, this is backed by our dedication to innovate & introduce new products and solutions tailored to meet our clients’ diverse needs. We’ll also strive to strengthen our bonds with existing clients and continue to focus on cross-selling and improving returns.


The bank of choice for corporate client


BUSINESS

BANKING GROUP

Vision & mission statement is: To be the preferred bank for selected business clients

through providing quality service in an efficient time.To strive for mutually beneficial long term business relationships

Business Banking Group activities and achievements for 2017 are as below:• Business Banking Group has completed another successful year and exceeded both

the Volume and Profitability targets for 2017.• Government Institutions Department also had a successful year in providing both

NCBDs/CBDs deposits, thus maintaining / improving the bank’s liquidity position.• The Medium Term Plan for 2019 to 2020 for Business Banking Group was finalized and

completed during the budget exercise. • Business Banking Group plans to consolidate its growth for the next three years as

projected in the medium term plan and are geared to exceed its budgeted targets for 2018 and beyond.

• The Small & Medium Enterprise (SME) was on target in its volume targets for 2017. Since its spin-off from the Business Banking Group Regions four years ago, SME has been growing steadily and reaching new milestones every year.


Volume& Profitability

Exceeding The

TargetsFor 2017


GLOBAL

MARKETS GROUP


Well experienced Trading & Structuring and Sales teams

Global Markets Group delivered another consecutive year of outstanding results Despite the challenging economic and geopolitical situation, the Global Markets Group maintained the momentum, endured and delivered outstanding results for another consecutive year.

The experienced Structuring, Sales and Trading teams, along with excellent cross selling efforts supported by strong mix of Islamic and conventional banking base, provided the bank’s clients with a rich and wide mix of conventional and Islamic products for all their hedging, investment and business needs.

We Achieved Outstanding ResultsFor Another Consecutive Year


HIGH NETWORTH &

WEALTH MANAGEMENT

Personalized products were developed to fulfill

the balanced income and capital growth strategiesWealth Management and High Net-worth Groups continued their excellent performance via their bespoke and personal products and services. By remaining very close to their clients and their families, they are able to tailor products and solutions befitting their needs.

With the clients’ needs being the center of attention, personalized products were developed to fulfill the balanced income and capital growth strategies. Structures and funds were launched in the past 3 years that have secured the loyalty of many Ultra High Net Worth Individuals. With this tailored approach, they have secured a large contingent of loyal clients who have further established accounts for their family and children.


Despite a low interest rate environment, the Wealth Managers have successfully delivered returns as well as Capital Gain. This was done through the leveraging of the group’s Investment arm, Saudi Fransi Capital, as well as the bank’s Treasury Services, offering highly innovative and specialized products that were very much in demand.

Thanks to the above clear and synergic environment, Wealth and High Net Worth Groups had grown their market share and maintained their excellent reputation for delivering excellence.

Offering HighlyInnovative& SpecializedProductsthat Reflect our Outstanding performance


GLOBAL TRANSACTION

BUSINESS


2017 was a challenging year,

we are making changes to adapt to the new realitiesIn 2017, Global Transaction Business faced margin pressure in a number of key channels. Regulatory requirements and the international scheme fees put upward pressure on cost, posting a lower commissions revenue by -6% by the end of the year, while the channels collected a sizeable NCBDs of SAR 77.6 Billion gaining SAR 66.2 Million in Net Interest.

Specific to such accomplishments are: • Installation of 6,137 POS terminals complying SAMA target. POS Acquiring business

brought in SAR 17 Billion (+6% increase) of NCBD and +38% increase in transactions compared to previous year.

• Continuous enhancement of Corporate channels, FransiGlobal, FransiTrade, B2B-MA-CUG, Payroll, Ejar, e-Commerce, SADAD-Account pave the way to get key corporate client on board, resulting to +64% increase in revenue and a 50% channel migrated transactions.

• Payroll card fees dropped by -24% due client account activity and manpower downsizing in construction sector.

Global Transaction Business’s priority for 2018 flow naturally from the bank’s set goals and objectives (MTP) and regulatory changes across the banking industry. Through technology-driven innovation, we can empower our clients, cut costs and improve risk management, reinventing every aspect of the business.

64%IncreaseIn Revenue


ISLAMIC

BANKING


Implementing the developmental goals of the

2017- 2019 medium term plan The Islamic Banking Division (IBD) completed the year on course in implementing the developmental goals of the 2017-2019 medium term plan for Islamic Banking in Banque Saudi Fransi, with 20 business lines initiatives being endorsed by the Sharia Board in 2017. In addition, the sharia framework/structures for 14 new Islamic products was initiated by Islamic Banking Division in coordination with the bank’s business line and sharia advisors, planned for introduction in 2018/2019. Finally, an update of the legal framework for all corporate/business Islamic banking products was undertaken to accommodate the evolving legal and regulatory landscape.

20Being Endorsed By Sharia Board 2017

BusinessLinesIntiatives


HEAD OF RETAIL

STATEMENT


Ready to reap

the rewards of transformation efforts The transformation of Retail Banking provides an important platform that supports business growth, and the development of its contribution to overall profitability of the bank. Building on the progress achieved in 2017, Retail Banking Group today is well positioned to advance into the next phase of development and to take advantage of the opportunities with the innovations that are so far completed.

In the past year, we reshaped our client segmentation and aligned our branch organization accordingly with efficiency and high quality service in mind. The customer’s banking experience has been enhanced with a better account opening process and improved branch services. Our unique loyalty program “Jana” has been enriched with wider reward choices and easier accessibility to members through mobile. We reassessed our delivery channels and took steps toward effectiveness and competence.

Furthermore, we are challenging ourselves to hit aggressive goals and to raise the bar across everything we do. The work we have begun and the progress we have made at a short time gives me confidence that we are making the right moves to be better positioned for a long term. It is time to reap the rewards of our transformation efforts. The time has come to deliver the intended results.

To Raise The Bar

ChallengingOurselves

Across Everything We Do


RETAIL

BANKING

Growth

Through TransformationRetail banking’s financial performance has been commendable in a year characterized by difficult market situation and slowdown in economic growth. The progress made by Retail in deposits and consumer assets in 2017 indicates its strength in rising above its operating environment conditions. Retail banking group’s consumer assets have grown this year by 2.1% or about SRmn 200 while deposit base (NCBD) also climbed by 0.9%, from SRbn 33.2 last year to SRbn 33.5 this year.

Behind these achievements are the efforts made on various transformation initiatives designed to strengthen customer relationship and to provide convenient access to both its products and services. Some of these programs are outlined below.

• New segmentation: With the objective to “be the main bank of clients”, Retail banking group has enhanced its segmentation program to facilitate sharper focus on client relationship and cater to their unique banking needs. This also entailed the branch network to reshape into a more customer-centric organization while equipping them with a new tool to support in managing relationship with clients. Trainings were also held to ensure everyone is on-board and ready to handle the strategic change.

• Better account opening experience: Our most experienced relationship managers in the branches are now handling the account opening process to better understand client needs, ensure quality service while offering relevant products during the course of onboarding. On top of that, a welcome call has been put in place to thank them for entrusting their banking relationship with Banque Saudi Fransi while surveying their satisfaction to the whole process.

• Focus on Home Finance: This initiative, handled by the Retail transformation team, delivered a number of quick wins in terms of process, tools, risk policy and offers. As initial result of this project, sales ranking of Banque Saudi Fransi among all KSA banks improved by 2 notches and sales production has doubled compared to 2016 output.

• Improved branch efficiency: Closely linked to the new Retail segmentation program, the branch organization has been restructured to have more commercial staff to support sales objectives while right-sizing the operation staff that is appropriate to the number of transactions handled in the branches.


2.1%GrowthIn Retail Banking Group’sConsumer Assets


• JANA enhancements: The Banque Saudi Fransi loyalty program “Jana” is unique and innovative in the Saudi banking sector. In 2017, we further pushed its advancement by launching JANA mobile application that made the program more easily accessible to our clients. We also signed cooperation agreement with Disabled Children Association (DCA) that shows our commitment to social responsibility. DCA is non-profit organization that provides comprehensive care for disabled children. By end of 2017, more than 68,500 customers have subscribed to Jana membership which exceeded our expectations.

• Focus on the youth: Cultivating the banking journey of the next generation of customers has been one of retail banking’s key initiatives. The “Jeel” program, specifically designed for individuals aged 25 and below, customizes our client communication, banking offers and customer care to bring about development of long-term relationship of young clients with Banque Saudi Fransi. FransiJeel, our new mobile application for the youngsters, will be available for download in the first quarter of 2018.

• Enhanced services: The instant issuance of credit cards enabled us to distribute fully functioning cards onsite providing a better customer experience by issuing cards in minutes instead of days. The pilot results are proven outstanding and now ready for full implementation in the branch network.

• New products: Retail has widened its product offering on savings accounts by launching Recurring Deposits and Save-to-own-Home to help promote savings culture among clients and help them develop personal financial wellness.

• New branch concept: With rapid change in customer preference towards digital distribution, we have integrated a new concept called “Smart Zone” within our branch in Qatif. This branch offers a unique client experience with its self-service terminals like (ITM) Interactive Teller Machines and Kiosk. Digital solutions such as tablets and touch screens are available for use by customers while in the branch. The concept also reflects our strategy on new segmentation and improved customer journey onsite.

• ATM strategy: Recognizing the integral role of ATM in the omni-channel banking experience, Retail banking group has reviewed and modified its existing ATM policy and procedure.in order to better utilize the ATM network, this includes relocating low performance ATMs, increasing ATM availability and replacing old ATMs.

As we shift to another year, Retail banking group will continue to implement strategies that optimize its products and improve the quality of services. The retail banking transformation work is still in progress and we are witnessing the beginning of its rewards. There are more initiatives that Retail is working on which are expected to bring further growth. The landscape is changing in many ways and Retail Banking is ready to adapt and face the challenges it may bring.

RETAIL BANKING


RISK

MANAGEMENT

To Maintain A

Credit Portfolio

Diversified& Healthy


Promoting the operational risk culture across the bank

by creating awareness through academy-based training programs and business workshops

I Risk Appetite FrameworkThe Risk Appetite framework of the Bank is approved by the Board of Directors and reviewed at annual intervals. Its objective is to set the tone from the top in giving risk tolerance direction to the Bank’s management and providing business lines with guidance regarding the quantum and profile of risk that the bank is prepared to accept.

Defined limits and thresholds to trigger review are articulated in the Risk Appetite Statement covering a range of risk parameters from solvency, capital adequacy, credit quality, credit concentration, market risk, operational risk and liquidity management.

The Chief Risk Officer monitors adherence to the approved Risk Appetite Statement. Deviations -if any- from the acceptable tolerance bands are flagged for further action by Senior Management. At quarterly intervals, the Executive Committee of the Board reviews the actual position of the risk indicators vis-a-vis the approved limits and thresholds.

I Credit Risk Management The Bank aims to maintain a well-diversified and healthy credit portfolio. This is achieved by setting credit policy guidelines and concentration limits for different segments of the Bank’s business. Target customers and risk strategy are prepared by the business lines, reviewed by risk management, and approved by the Board Risk Committee in line with the Risk Appetite approved by the Board of Directors.

The credit granting and approval process is performed through credit committees with differing levels of credit approval delegation. The Credit Risk Department is responsible for providing independent risk opinions on the credit requests from business lines for consideration by the credit committees in the approval process.

Decision making in the credit committees of the bank is aided by internal credit rating models developed and maintained for different segments of the banking book and subject to re-validation at periodical intervals.


I Market Risk ManagementThe bank has clearly defined policies & procedures related to market risk activity as well as a comprehensive set of market risk limits (with loss alert triggers) which are reviewed at least annually. Market risk positions are monitored on a daily basis by a dedicated Market Risk department.

In order to manage market risk in the trading book, the bank applies a daily basis a VaR (Value-at-Risk) methodology in order to assess the market risk positions held and also uses stress scenarios to estimate the potential economic loss based on a set of assumptions and changes in market conditions.

I Operational Risk ManagementOperational Risk and Permanent Control department’s (OPRC) objectives include the management and mitigation of operational risksand key controls across the Bank’s operations.

Loss and Incident Management framework ensures completeness of coverage and timely reporting of incidents & losseswhich are centralized within an Operational Risk Management System (ORMS).

Risk & Control Self-Assessment (RCSA) is carried out at a process level ensuring bank-wide coverage. The risk ratings are subject to Operational Risk and Permanent Control department validation and control testing. Furthermore, the Risk & Control Self-Assessment is enhanced with bespoke assessments also covering outsourcing of essential activities, fraud risk assessment, branch control review, issue based assessments, and data synthesis. Second Level of Controls have been defined across the bank. Key Risk Indicators are defined and implemented for all domains; reported and monitored on a regular basis. Action Plans are agreed for any breaches and monitored via remediation management. Operational Risk and Permanent Control department presents the Operational Risk Profile of each Business Line and Support function during their respective Local Internal Control Committee sessions. The Risk Profile provides a holistic view on the risk exposure with 360-view of related risks which are aggregated and presented to a senior management level Internal Control Committee periodically.

Operational Risk and Permanent Control department’s coverage also extends to assessments of critical IT services and change management processes, reflecting the emphasis on Technology Risk & Digital Banking in the Bank’s operations.

Operational Risk and Permanent Control department is actively engaged in promoting the operational risk culture across the bank by creating awareness through academy-based training programs and business workshops.

RISK MANAGEMENT


I IFRS 9 ImplementationIn line with SAMA’s requirement for banks to implement IFRS 9 regulation by 1st January 2018, Finance and Risk Management, with the assistance of Information Technology Department, have completed work on adoption of requisite policies, processes, and systems to adopt the IFRS9 standard.

Implementation effort covered the following areas:• Classification, measurements, and reporting which embeds Business model

assessment, Solely for Purpose of Principal & Interest (SPPI) testing, New Product approval process, application & disclosure requirements.

• Impairment to identify & formalize staging criteria, amendments to credit policies & procedures, risk models development & calibration, computation of Expected Credit Loss (ECL), & documentation.

• IT implementation covering front office & other systems enhancements, data warehouse enrichment, datamart & data staging area setup, implementation of IFRS 9 solution / engine (vendor platform), impairment and ECL computation together with reporting requirements.

A vendor provided IFRS 9 system (ECL engine) has been implemented. Data from the bank’s data warehouse feeds the relevant inputs for computation of Expected Credit Loss (ECL) components namely Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD). The bank has developed macroeconomic regression models for its loan portfolio using KSA macroeconomic explanatory variables and the same has been configured in the IFRS 9 ECL engine. The engine enables computation of ECL and required provisions for the full portfolio, including drill down capability to the granular transaction level.

In order to ingrain the risk awareness culture and sensitize the business line personnel on IFRS 9 regulation across the bank, dedicated programs were carried out for an audience of business line relationship officers and risk managers. The awareness program covered key concepts of IFRS 9 regulation, the staging concepts, components of the ECL computation and drivers for significant increase in credit risk for stage 2 classification. Adoption of IFRS9 standard is expected to further enhance the credit underwriting and monitoring standards within the bank.


SENIOR EXECUTIVE DIRECTOR

OPERATIONS STATEMENT


Agile and robust support functions engaging

with their internal and external clients The support functions have embarked in 2017 on a number of strategic changes and initiatives to meet the internal and external clients’ needs, and to drive cost efficiency. Several key achievements have been made in each area, reflecting the COO’s ambition to ensure the «One Operating Model» culture by harmonizing processes and services in Banque Saudi Fransi.

2018 year will be focusing on structuring the transformation of the bank in order to align the change to the Banque Saudi Fransi strategy.

Operational

Excellence

DeliverOur Focus Is To


CORPORATE

OPERATIONS

Banque Saudi Fransi was awarded as

“The Best Trade Finance Bank 2017” Corporate Operations Group had delivered various projects and enhanced its controls to adapt to any regulatory changes and supported as well the bank’s project - Transforming Together.

In addition, Corporate Operations Group received awards and recognition, increased revenue and cost savings by continuously improving the bank’s operational efficiency, security, and controls.

I Awards and RecognitionBanque Saudi Fransi was awarded as “The Best Trade Finance Bank 2017” by the Banker Middle East. Furthermore, Banque Saudi Fransi was once again recognized by international banks for its Straight-Through-Processing (STP) Excellence on Commercial and Treasury Payments in 2017.

Straight-Through-

Processing (STP)

AWARDS & RECOGNITION

The Best Trade

Finance Bank 2017


We Trained

94%Of Our Staff For 2017


I Revenue and Cost SavingsBanque Saudi Fransi was the first bank to Lead on a Public Offering for Real Estate Investment Trust (REIT). In addition, Banque Saudi Fransi is continuing to be the major SARIE Clearing bank for the large international institution. Banque Saudi Fransi also had continuously earned commission income from its Cross Selling and other Trade Finance services during the year.

I Completion of ProjectsCorporate Operations Group (COG) delivered major projects ahead of schedule during the year and continuously enhanced Banque Saudi Fransi systems performance and reliability.

ONLINE POSTING

EMIR

Cards

L&D P3

SPV

IPP

KEY PROJECTS were delivered such as Trade Finance Transactions Online Posting, EMIR derivatives clearing, Special Purpose Vehicle (SPV), Loans and Deposit (L&D) Portal Phase III Rollout, IPP performance phase 2, Airline Co-Branded Credit Card for Air France and the Royal Dutch, moreover Visa SAR Settlement Currency, Corporate Cards, Lady Debit Card and Lady Diamond Card, Visa and MasterCard system been upgraded to 17.1, POS Offline and purchase limit changes.

AD-HOC PROJECTS were also completed for regulatory compliance and to provide more security to its customers, Banque Saudi Fransi Staff Credit Card was upgraded, BankWORKS Miscellaneous was updated, VISA mandates currency code updated, PIN changed from E-channels, POS offline purchase limit changed as per SAMA mandate.

CORPORATE OPERATIONS

Cross Selling

Payments Transfers Income

IPO Projects

Visa & Master CardsAUDIT

EPP

SAMA

JANA e-Channels


SAMA Dormancy Rules were implemented, Atheer enhancement as per SAMA mandate, BNP percent change implementation in BankWORKS for JANA Loyalty Program, JANA Cashback Automation, VCL account and credit card limit clean up in BankWORKS, Banking Tariff was updated as per SAMA mandate, Automation of Card status change in BankWORKS as per Audit Finding, Credit Card statement updates for e-channels, MasterCard Data Integrity Compliance (Trace ID), SAMA Issuer Security mandates testing completed, Client Tariff update for privilege customers, Tariff update for EPP service charges (MasterCard), 4 eye validation process implementation.

I Improvement in Operational Efficiency and ControlsThe enhanced operations efficiency and controls of Corporate Operations Group had exceeded the set target by SAMA for ATM availability kingdom-wide. AlHasa New Cash Center has been launched to support a number of ATMs and branches in the area. The Main Cash Centers sorting machines were upgraded to accept the 6th edition banknotes. Introduced new ATM service – the Aptra Connection System in which fund transfers to International and Local accounts became available. Straight-Through-Processing (STP) threshold for SWIFT Outgoing payments increased. Prevented possible fraud losses for Banque Saudi Fransi. Implemented the SAMA Dormancy regulation and blocking the Prepaid Cards automatically. Maturity process for IRS products was enhanced to cover five business days to efficiently manage Settlement Process.

I Internal and External Training ProgramsBanque Saudi Fransi today has the highest Certified Document Checkers versus other banks - Corporate Operations Group had successfully certified eleven (11) staff for Certified Documentary Credit Specialist (CDCS) and Certified Specialist Demand Guarantee (CSDG) during the year. Moreover, Corporate Operations Group in cooperation with Human Resources Group Training Academy, had trained 94% of its staff for 2017. More certifications and training are planned to cover more resources in 2018.


Transforming IT to produce more value for the business

served as an instrument for business transformation

I Strategic Alignment & Transformation Over the past year, there has been an increased focus on the strategic alignment of IT. It has ascended from two viewpoints: to be in line with the Bank’s strategy and emphasis on Business priorities. This has served as an element of change. Transforming IT to produce more value for the business, served as an instrument for business transformation & resulted in increased marketplace competitiveness.

In order to support the Banque Saudi Fransi Mid-Term Plan (MTP 2017-19), largely supported & contributed by Information Systems Group (ISG) during its development. Information Systems Group is converging & playing an important part to achieve the strategic goals attached to it.


INFORMATION

SYSTEM

Vision

MissionAction Plan

Strategy


Focusing On

Industry Best PracticesAnd Globally Recognized Standards


I AchievementsInformation Systems Group has completed a number of strategic & high-impact projects in major areas such as:• Applications and services development to support business development and

operations.• IT infrastructure to run the bank within criteria of performance and availability in a

secure environment.• IT Security, in-line with SAMA guidelines, Banque Saudi Fransi has achieved many

regulatory projects to cover the approved security roadmap by SAMA.

I Regulatory and Control linesTo comply with the regulation and ensure a proper applicability of IT Policies & Procedures, a special effort was made on implementing almost all internal and SAMA recommendations identified in the previous audit missions. A significant achievement has been reached with the effort of all Information Systems Group entities and support from Control Lines units such as CISD, Internal Audit, and Compliance.

In accordance to the management direction, a special focus was made on IT budget with a close monitoring and control in order to optimize all investments and to reduce our expenses.

Information Systems Group has successfully implemented Team Foundation Server (TFS) which is an Application Life Cycle (ALM) tool, this will serve as a key tool for User Test Cases (UAT) & Source Code Management, it will also serve as a collaboration platform between technical team & business users, the aim is to enhance the efficiency & quality the development & testing, resulting in delivering quality products.

Information Systems Group Development team have delivered some of the most strategic & significant projects within the year, in one side it has successfully delivered regulatory & mandatory projects in form of IFRS9, VAT implementation, Ejar, SADAD online payment, GACA, SAMA intraday liquidity reporting, Compliance management program etc.

While on the other front some key business value projects delivered in form of Fransi Jeel (New Fransi Mobile Application), the Fransi Mobile – Apple watch, Mobile Payment, Corporate CRM, New Segmentation, Credit Card instant issuance (along with other card products as well), New Corporate Site, iAgent implementation, ATM Aptra Connection, Algo Enhancements, IRB Implementation, New Budgeting System (WAFI), New Retail liabilities product, Contracts & Finance System etc.

That’s just to designate a few from the complete list of projects delivered in this period, clearly symbolizing the Business-IT strategic alignment to venture into new Horizons.

INFORMATION SYSTEM



I Technological & Infrastructure Breakthrough• Oracle Exadata Machine & High Availability: Exadata is a powerful machine that hosts

all Oracle critical databases, it is built by Oracle to improve performance and recovery. The project of migration has started in 2017.

• IT Service Management (ITSM): Information Systems Group progresses with the Overall IT Service Management enhancement project - it aims to enhance the alignment of enterprise IT processes and focuses on delivering the best services to Banque Saudi Fransi. The project will also address numerous audit recommendations. Implementation of the essential processes (Change Management, Incident & Problem Management, Release & Deployment Management, Asset & Configuration Management, & Service Request Fulfillment Management) on the testing environment has completed as well as documentation of the respective processes. Service Request Fulfillment Management has just been completed whereas Change Management, Incident & Problem Management, Release & Deployment Management is currently being tested in UAT. Information Systems Group progresses with IT Asset Discovery Management (ASM) - it aims to maintain a centralized repository of all information technology assets. This solution compliments IT Service Management, as the IT Configuration Items shall be updated by each of the IT Service Management processes. The project will also close numerous audit findings. In order to leverage the project implementation, ASM has been combined with IT Service Management. An initial discovery of all online IT assets is being collected. The assets discovered shall be mapped to applications and services, as planned.

Fransi Jeel

SAMA GACA

Ejar IFRS9

Sadad

Coin Deposit Int.

Corp CRM New Corporate Site

VAT


• Network Infrastructure Improvement: Information Systems Group has initiated projects to enhance the data center network infrastructure. The network backbone is to be upgraded in order to provide extra capacity. The project also aims to deliver network enhance feature, better performance, and redundancy. Firewall consolidation is also ongoing - these would facilitate future capacity demand and high availability initiatives; Effort in networks segmentation are also ongoing – these are aimed to group servers and its associated servers together in separate network segments called VLAN in order to minimize exposure to malicious threat and risk.

• System Capacity Review: Information Systems Group has also initiated a system capacity review and high availability considerations. These are in the area of both Windows and AIX infrastructure. As of the current date, core banking services running on AIX infrastructure are configured to facilitate high availability. Re-shuffle of AIX and Windows resources are also ongoing in order to re-assign them to DRC. Server Virtualization strategy is being studied to complement this initiative. Virtualization is supposed to reduce the server footprint in the data center. Information Systems Group is targeting to bring the DRC Capacity at 80% by year end 2018. Storage Infrastructure capacity is also being analyzed to address future growth and address current compliance recommendations. These are also being aligned with an ongoing Backup technology roadmap study.

• System Security Initiatives: Information Systems Group in coordination with CISD has also launched numerous security-related projects. Identity Management aimed to replace the obsolete access management system which is currently ongoing. The infrastructure has been built already and integration with existing systems proceeded. This is a 3-year project. Remote Access security is complete and just waiting to be published. This aims to allow data and applications to be accessed remotely from outside Banque Saudi Fransi in a highly secured manner. Several privilege management projects have been completed such as Centralized authentication, and password management high availability. Projects such as NIPS (network intrusion prevention), email quarantine and vulnerability management all contributing to enhanced Data protection are near completion. Logging and monitoring solutions are also being implemented to enhance the said area. Application logging and ArcSight high availability and DRC are being implemented to optimize monitoring these projects.

• Disaster Recovery Exercise: Systems and Production Division has validated the infrastructure and applications in Jeddah Disaster Recovery Center with Wealth Management Group from their workspace on Tue 11th April 2017, and has validated 187 systems/applications with Banque Saudi Fransi, SFC and SFL business lines on Saturday, 21st Oct 2017.

INFORMATION SYSTEM



Property Management & Security Division

delivered major projects ahead of schedule during the year During 2017, Property Management & Security Division provided full support to all business and services sectors through the implementation of several major projects as well as maintenance activities throughout the Kingdom at the highest level of quality, in a timely and cost-effective manner.

I Cost SavingsProperty Management & Security Division in 2017 had accomplished a total saving of 9.4 Million SAR as follows:• Value engineering 1.3 Million SAR through projects.• By renegotiating and optimization an annual saving of 3.4 Million SAR in the Soft

Services and maintenance contracts in addition to 2.7 Million in Security guards contracts.

• By implementing the energy saving methods 1.7 Million in utility expanse.

I Accomplishments and ProjectsProperty Management & Security Division delivered major projects ahead of schedule during the year, and continuously enhanced Banque Saudi Fransi systems performance and reliability.• New head office building No. 2 project has been successfully completed in the central

region, which is one of the strategic projects of the bank.• Completion of the additional parking area at Head Office NO. 1 to accommodate more

parking space for BSF employees.• New Qatif smart digital branch which is the first in BSF which has the self-service

machines to serve the client’s 24/7.• Completion of several facelift/rebranding projects at the ladies’ branches for BSF

premises in all regions.


PROPERTY

MANAGEMENT


TotalSaving Of

9,4MillionSAR


• The renovation of 3 floors in Head Office building has been successfully completed with the latest amenities

• Completion of Eastern Regional Building 4th Floor Renovation, and Western Regional Building 3rd Floor Renovation.

• Completion of Building Management Systems in HO and ER & WR Regional Buildings.• Completion of 214 ATM installation projects throughout the Kingdom.• Attended 133 police and 106 SAMA request for CCTV recording.• Attended 17,000 Service request for maintenance, 68,000 operators calls, 1250

purchase request, and 2100 payment request.

I Improvement in Operational Efficiency and ControlsThe enhanced Operations Efficiency and Controls of Property Management & Security Division had exceeded set target by Banque Saudi Fransi for project delivery. Infrastructure upgrade ( Building Management System ) Various Construction & Renovation projects has been completed in record time with the highest quality and cost efficiency.

I Internal and External Training ProgramsProperty Management & Security Division had successfully completed 28 training courses during the year. Moreover, Property Management & Security Division in cooperation with Human Resources Group Training Academy, had trained 70% of its staff for 2017. More certifications and training are planned to cover more resources in 2018.

I Property Management & Security Division StrategyTo provide the Banque Saudi Fransi costumers, visitors and staff with the best & safest experience in the bank premises while maintaining a well-optimized cost.

Our team collaborates across a complete spectrum of integrated services to help Banque Saudi Fransi achieve optimal property management and physical security by:• Best space utilization/optimization in order to reduce the wasted spaces across the

office buildings and branches, which ultimately will contribute to rental cost reduction. • Implanting the most modern designs, and furniture, applying value engineering

methods in all projects, and selecting the most efficient equipment for Banque Saudi Fransi property.

• Delivering the bank capital investment projects ahead of schedule.• Saving initiatives to minimize and offset consumption of power, water, and other

resources by engaging in a number of projects (Building Management systems, heat protection films, electrical timers), in addition to implementing the LED lighting in all renovation projects.


PROPERTY MANAGEMENT


• Providing the best and most efficient security coverage of guards, CCTV for Branches & Main Buildings, and GPS tracking the ATM and upgraded the Security Command Center.

• Safety training in all Banque Saudi Fransi premises for the fire evacuation procedures and implementing fire drills kingdom wide.

For 2018 Property Management & Security Division will continue the Energy, and Water Saving initiatives, and will continue the cost control activity by contracts optimization and negotiation, and is working on major projects as follow:

• Property Management & Security Division is studying the possibility of building a tower next to HO building in order to bring all business lines (SFC, SFLL, SAFIA and Human Resources Group Academy) under one roof and close to the managemen, which will reduce the rental costs by 11 Million/year.

• Initiating the Olaya Building renovation project which will become a Banque Saudi Fransi landmark in Riyadh as it is in the main shopping and business district and in front of Riyadh Main Metro Station.

• Studying the possibility of purchasing an office building in north Riyadh for all the back office functions from (Annex 1 & 2 and AlRasheed Building) which will reduce the risk of evacuating the non-complaint buildings Annex 1 & 2 by the government. That also will provide a security against rental costs inflation and will increase Banque Saudi Fransi assets.

• Studying the purchase of a new land in Eastern Region to serve as parking for the main building in order to cover the staff needs and to eliminate the need for the rented parking.

• Initiating the enhancement and upgrade of Eastern and Western Regions main buildings in order to increase the space utilization and increase the power and water consumption, efficiency and to apply the same interior finishing and furniture standard of HOB.



PROCUREMENT

DIVISION


Successful implementation of

the various bank projects and operationsProcurement Division has maintained its strong internal alignments with business lines and relationships with suppliers. Applying its robust purchasing methodologies and the effortless operations of the automated Procurement Management Systems, it has contributed mainly to achieving cost optimization to benefit the Bank financially and assists the successful implementation of the various bank projects and operations.

Procurement Division is proud of its commitments to excellence. The following provides a brief insight into our accomplishments/initiatives:• Implementation of Phase 2 of Procurement Management System (PMS): centralized

purchasing, payments, contracts & tender management, delivery of projects on time and within budget, system integration with other stakeholders for cost optimization.

• Updating the Bank’s Assets (Kingdom-wide) through physical inventory. • Stable, transparent procurement operation and control through centralization.• Full alignment with stakeholders and third parties.• Realization of significant cost reduction by continuous improvement.• Strengthen procurement: In/outsourcing, purchasing and tender management of

services and materials.

Doubling our efforts to achieve cost optimization anticipated in 2018 is positive due to successful implementation and enhancement of Procurement Management System and facilitate the development of tactical sourcing strategies.



POA 500Auth 500APP 1,300SAMA 700

SAKAN

COMPANYIn 2017, SAKAN had upgraded the portfolio of the Real Estate Evaluation Companies and doubled its numbers to meet the demands for Banque Saudi Fransi business lines. The company launched the mortgage project in the 4th quarter of 2017.

I SAKAN Projects1. Real Estate Evaluation Companies, SAKAN upgraded

the portfolio of the contractors for real estate evaluation where the number of companies are doubled to meet the demands of Banque Saudi Fransi business lines.

2. Adjusting the Title Deeds Portfolio into Mortgage Type, SAKAN completed its action plan of transforming the entire title deeds into a mortgage (6,300 Title Deeds with a value of SAR 50 Billion). The plan will be completed before mid of 2020.

I AchievementsSAKAN as the director for Real Estate Portfolio services in Banque Saudi Fransi especially for government entities interactions, SAKAN had communicated 500 Power of Attorney for various type of collaterals successful pledging at Notary Public kingdom wide. SAKAN Received 700 Queries from the regulator (SAMA) upon real estate documentary (replacements) issues and all were finalized within the grace period. Additionally, the company had executed 1,300 evaluation requests.

For the authorization letter, the company received and generated 500 requests to both business lines of corporate and retail customers.

SAKAN was able to organize the communication of real estate actions with corporate banking by developing a new mechanism for more control and security. Moreover, SAKAN is handling the responsibility of the legal documentation setup that related to the configuration of Bank management authority in terms of commercial registration/MOC update and power of attorney delegation.

Central

54%Western

22%

Eastern

24%


I BackgroundTransformation and Organization Division (TOD) is a new division created in Dec 2017. The primary focus of Transformation and Organization Division was to design the roadmap for the division and to coordinate the main 2017/2018 transformation program of Banque Saudi Fransi called “Transforming Together”.

I AchievementsThe scope of intervention of Transformation and Organization Division was designed in 2017 for an implementation in 2018. This scope includes 3 departments which will start to be staffed in 2018:• Change Delivery: this department will mainly manage the strategic programs/ projects,

select and monitor all the Programs & Projects activity of the Bank, and structure the Project Management process for the whole bank.

• Business Process Reengineering: the main objective is to Identify, understand, document and continuously improve/redesign all the key processes of the bank. This department will be also in charge of the tracking of the operational KPIs attached to these processes. At last, it will centralize all Banque Saudi Fransi policies and procedures to ensure that they are complete, adequate, covering the relevant regulations and are timely reviewed, and approved by the relevant authorities.

• Data Governance: this department will define the Data Governance model, including common data norms and standards, and roles and responsibilities within Banque Saudi Fransi.

The second main achievement of Transformation and Organization Division was the coordination of the “Transforming Together Program”. This program consisted of seven projects:

• Operations Excellence: opportunities for centralization and industrialization of back-office operations. The implementation is scheduled for 2018.

• Credit Process: process re-engineered to reduce lead-times and simplify organizations across Banque Saudi Fransi departments. The implementation is scheduled for 2018.

• ISG production activity: performance management system installed to manage and improve activities.

• MIS activity: all financial reports consolidated under FSG and duplicated reports for deletion identified.

• Contact Center: new organization implemented of the workforce and SLAs adopted to introduce flexibility amongst teams and improve workload utilization.

• KYC process: process analyzed and optimization action plan defined. The implementation is scheduled for 2018.

• Project Management: a new process for selection and management of projects are designed. The implementation is scheduled for 2018.


TRANSFORMATION AND ORGANIZATION

DIVISION


BUSINESSCONTINUITY

Banque Saudi Fransi Business Continuity is committed

to implement best practices and standards In 2017, Business Continuity Department has added additional success milestones to Banque Saudi Fransi resiliency and sustainability of critical functions, through the expansion of Banque Saudi Fransi’s central recovery site space and seating capacity to hold up to 270 staff in a single shift during major crisis. This is in addition to the existing 50 staff workplace prepared at each Banque Saudi Fransi region (Eastern Region at Dammam Branch and Western Region at Palestine Branch).

Furthermore, Business Continuity has conducted Banque Saudi Fransi annual comprehensive test on October 21, 2017 that showcased Banque Saudi Fransi capability to resume more than 90% of its mission critical functions, and aiming toward LIVE transactions test by Second Quarter 2018 (LIVE test is mandatory by SAMA for all banks).

Exercising, awareness and training have been embedded as normal business continuity practice throughout 2017, and shall continue onward with further material and content enhancement.


Training and awareness have been provided by Business Continuity staff, as well as through Human Resources Group Academy, while incorporating additional awareness information within the mandatory compliance and risk courses.

Business Continuity has satisfied recommendations emerged from Internal Audit, Compliances and Risk reviews. It has also addressed findings conducted by Operational Risk, CA-CIB, and SAMA ( internal and external Audit missions ).

Banque Saudi Fransi Business Continuity is committed to implement best practices and standards, putting in place all necessary risk indicators and controls, while being monitored by Senior Management through multiple committees, such as Business Continuity Management Committee, Internal Control Committee, Enterprise Incident Management Committee and Board of Directors reports.


HUMAN

RESOURCES

We strive to be

“The First Choice”and“The Number One Banking School”for Saudi Competencies in Saudi Banking Sector

Some of the most important achievements of the Human Resources Group (HRG) for the year 2017 are as follows:

I Employee EngagementIn 2017, Human Resources Group continued to work on implementing the main themes identified in the results of the Employee Engagement Survey (Your voice), which was launched in 2014 achieving a high participation rate of 83%.

I Break Time @ Your VoiceAfter completing the Employee Engagement Survey, and in order to maintain the momentum of its results, the Human Resources Group held, in the three regions, several town-hall meetings attended by Senior Management and staff. The aim of these meetings was to discuss the results of the study and the actions undertaken in this regard, in addition to providing employees with the opportunity to communicate and ask questions, a participation that reflected very positively on these events.

I “Saudization” PlanWith a view to completely align the Saudization strategy with Banque Saudi Fransi’s strategy and business plan, and in order to ensure organizational continuity for Saudization, Banque Saudi Fransi focuses, through its nation-wide network, on developing the capabilities of Saudi national cadres. By implementing Saudization activities, Banque Saudi Fransi has reached the Saudization target of 90%set for 2017, hence substantially enhancing the Saudization level. Moreover, Banque Saudi Fransi always aspires to increase the level of Saudization through various activities aiming at attracting, developing, and retaining qualified Saudi youths.


We Reached TheSaudizationTarget Of

90% Set For 2017


I Strong Relationships with Government Entities Banque Saudi Fransi has built strong relationships with key government entities such as the Ministry of Labor, Foreign and local embassies, international universities, educational institutions, the Human Resources Development Fund, the Passport Department, and others. These strong relationships have enabled Banque Saudi Fransi to realize its vision of being the «Banque of Excellence» by meeting the current and future needs of the organization, keeping abreast of market changes, rules and regulations, as well as ensuring compliance with all government mandates in a proactive manner.

I Performance ManagementIn line with its medium-term plan, the Bank aspires to promote a strong performance-driven culture based on equity and transparency. Accordingly, Banque Saudi Fransi has continued this year with the same successful performance management procedures implemented three years ago.The Performance Management Model was first introduced by assessing the work of each group/division based on the Business Assessment Fact Sheet. The results of the business assessment were then linked to the performance of the employees in each group/division. Finally, the Senior Management reviewed and verified staff performance levels to ensure consistency and fairness of the results.

I Talent AcquisitionThe Talent Acquisition team remained committed to providing high-quality recruitment services, thereby reducing the time-to-fill while focusing on acquiring top quality Saudi candidates. The staffing requirements for the various business sectors of Banque Saudi Fransi have been met by implementing the recently revamped internal sourcing and selection capabilities,substantially decreasing the costs related to the use of external recruitment agencies. The 2017 workforce plan has been gradually incorporated in recruitment timeline enabling Banque Saudi Fransi to supply its business lines with therequired talents in order to facilitate growth and avoid business interruption. The implementation of recruitment plans reflected positively in building closer partnerships with the different business sectors at Banque Saudi Fransi and helped minimize the time and cost of the recruitment process.

I Graduate Recruitment and Career Fairs Graduate Recruitment activities in 2017 focused on identifying and attracting the best graduates through participating in local and international Career Fairs. The purpose of these activities was to strengthen the Banque Saudi Fransi position as the «Employer of Choice» and to attract Saudi young potentials to join the Banque Saudi Fransi staff by means of direct recruitment or graduate training programs such as “The Banker.”

HUMAN RESOURCES


I Exit Interviews In order to enhance the Employee Value Proposition at Banque Saudi Fransi and to identify employee views about practices and offerings, Banque Saudi Fransi carried on the “Exit interviews”, which started in January 2015 and targeted all employees who had left the Bank. These interviews are conducted by the assigned HR business partner for each of the business lines of the Bank.

The following main subjects are addressed in the interviews which are then reviewed and utilized in their entirety while maintaining the confidentiality of the interviews:

1. Work Organization2. Rewards and Recognition3. Employee Development4. Teamwork and Cooperation5. Optimal Management Practices6. Other Comments and Constructive Suggestions.

I Rewards ManagementBanque Saudi Fransi is continuously monitoring the best market practices as regards to rewards. Banque Saudi Fransi participates annually in market surveys conducted by major institutions to determine the Bank’s current position and to ensure that the best competitive conditions for employees are maintained within the Saudi financial sectors and in the GCC countries.

I Medical and Life Insurance Benefits• Enhancing medical insurance benefits for Banque Saudi Fransi employees.

As part of Banque Saudi Fransi’s ambition to become the «Employer of Choice», the Bank has conducted its annual review of Medical Insurance and Life/Personal Accident policies, and negotiated with top service providers to offer its staff better levels of service and insurance coverage while maintaining competitive pricing rates.

• Medical Insurance for Parents

In addition to the above, Banque Saudi Fransi renegotiated with medical insurance providers to attain competitive medical insurance rates for employees who wish to cover their parents at their own expense, and that, in order to increase Banque Saudi Fransi’s competitiveness and positioning as regards to providing employees with rewards and increasing their satisfaction.


I Training and Development … Banque Saudi Fransi AcademyIn line with Banque Saudi Fransi’s vision to be the «Bank of Excellence», the Banque Saudi Fransi Academy has maintained its commitment to provide its employees with high quality training and development programs as part of a plan to support and develop their professional capabilities and in order to become the number one banking school in the Saudi financial sector.

I Training Needs Analysis (TNA)In conformity with the Human Resources Group vision that the Banque Saudi Fransi Academy becomes the number one banking school in the Saudi financial sector, it conducted a Training Needs Analysis for 2017, and worked on developing training solutions suitable to meet employees’ needs and management expectations of better performance. This analysis focused on four main areas:• Quality of training - The best training will be conducted bythe most qualified in-house,

local, or international trainers and training providers.• “Bespoke” methodology - The content of the training will be tailored to the Bank’s

needs.• Effectiveness - Training is aligned with the Bank’s orientation through conducting

Training Needs Analysis.• Competitiveness – The aim of Banque Saudi Fransi is to be the Leading Bank in

training employees and developing their capabilities, so that Banque Saudi Fransi can be the “Employer of Choice’’.

I Talent Management and Succession PlanningIn line with Banque Saudi Fransi’s desire to train and develop Saudi competencies across all business lines and levels within the Bank, Banque Saudi Fransi carried on its market leadership practices for talent management.It also maintained last year’s success in identifying high potential talents and elaborating a succession plan based on implementing executive and leadership development programs through designing an integrated training plan for each participant.Furthermore, the Banque Saudi Fransi Academy conducted development tests for Saudi Fransi Capital employees to set a succession planning strategy based on employees’ development.

As a result of Banque Saudi Fransi’s hard work, it received the Award for Best Talent Management and Succession Planning in the Kingdom for the year 2017.

I The Banker Leadership Program (INSEAD)As part of Banque Saudi Fransi’s leadership development and talent management initiatives, the Bank partnered with INSEAD Business School to design and deliver “The Banker Leadership Program”. This program was designed to develop the leadership skills of Banque Saudi Fransi’s future leaders and provide them with a unique learning experience, strategic insights, and a deep understanding of the global business context in order to enable the participants to drive growth and profitability in a high-performing organization. A new batch of leaders graduated in December 2017.

HUMAN RESOURCES


I The Banker -Executive Banking Program –4th Graduating ClassTo build on the success and achievements that were accomplished in previous years, and in order for Banque Saudi Fransi to be the “Employer of Choice”, the Banque Saudi Fransi Academy conducted Performance Assessment as a final stage before the start of the Executive Banking Program. The latter is a development program for fresh graduates in the Saudi financial sector, and it will begin its fourth session in early 2018 at the Banque Saudi Fransi Academy.

I Teamwork ProgramBuilding on last year’s success, Banque Saudi Fransi Academy continued to actively implement the “Teamwork” program at all levels of the Bank.In 2017, this program targeted Executive Directors with the aim of strengthening teamwork and focusing on the most important leadership elements which will help Banque Saudi Fransi achieve its results with excellence. The main reasons behind the implementation of this program were: • Employees’ emphasis on the importance of a having a culture of teamwork throughout

all levels at Banque Saudi Fransi.• The need to work as a team to achieve Banque Saudi Fransi’s medium-term plan. • Creating synergy across all the Bank’s segments and enhancing cross-selling between

business lines (selling several products and providing several services to the client in the same branch).

I Banque Saudi Fransi E-Learning AcademyIn line with Banque Saudi Fransi’s vision to be the “Banque of Excellence” and in pursuit of its aspiration to be “The Number One Banking School”, Banque Saudi Fransi Academy launched the “Banque Saudi Fransi E-Learning Academy”. The E-Learning Academy platform adopted by Banque Saudi Fransi is used by all staff and covers a wide array of topics such as capital markets, risk management, wealth management, Compliance and others. It contains over 450 online courses, and offers a unique blended learning experience for Banque Saudi Fransi professionals through case studies, videos, financial modelling, simulations, practical exercises and others, providing them with opportunity to train anywhere, anytime.


I Women of Excellence ProgramBanque Saudi Fransi launched the successful and globally renowned “Women of Excellence”, My Growth Program for the third year in a row. The program was developed and implemented to equip ambitious women with confidence, expertise and skills to realize their full potential and enable their success. My Growth program is a high-level global program which has won several awards for its innovative approaches and high quality. More than 230,000 women have joined the program in more than 30 countries worldwide.

I SAIFI ProgramThe Banque Saudi Fransi Academy launched the “Saifi” Training Program Day for the third year in a row in collaboration with the Human Resources Development Fund.

«Saifi» is a training program that targets students from the families of employees among others, and through which the Banque Saudi Fransi Academy aims to develop students’ skills and knowledge and promote their personal effectiveness.

I Taaleem ProgramIn line with Banque Saudi Fransi’s vision to be the “Bank of Excellence” and develop social responsibility and community service,and in conformity with its strategy and continuous commitment to share the community’s responsibilities in a manner that simultaneously serves all segments of society, the Banque Saudi Fransi Academy launched the Educational Program “Taaleem” in collaboration with the Private Education Agency at the Ministry of Education.This integrated development program consists of providing the Private Education Agency employees with training offered by a group of highly experienced coaches. “Taaleem” is considered as part of the social responsibility that Banque Saudi Fransi holds towards the Kingdom.

I “Let’s be Part of their Future” ProgramAs part of the Human Resources Group’s initiatives to serve the Kingdom and society, and in line with the Banque Saudi Fransi’s vision to develop social responsibility, the Banque Saudi Fransi Academy launched the “Let’s be Part of their Future” program in collaboration with the Charitable Society for the Care of Orphans (Ensan). This developmental program consists of training orphans during summer vacation, providing them with the necessary skills and knowledge, and helping them set short and long-term personal and professional goals.

HUMAN RESOURCES


I HR PolicyIn line with Banque Saudi Fransi’s objectives to align the HR Policies and practices with the business needs and the best market practices, Banque Saudi Fransi completely renewed the HR Policy Manual. The new HR Policy aims to ensure the following: • Linking the HR Policy to the Business Strategy.• Applying policies that support sound people management practices.• Creating a positive work environment through consistent and fair HR policies.• Engaging employees to achieve the planned business results.

I Banque Saudi Fransi’s Social ResponsibilityBanque Saudi Fransi considers Corporate Social Responsibility an indispensable and fundamental value, and that comes in line with the Bank’s commitment to its national duty to boost development and promote social and economic growth, as well as to serve the people of this prosperous Kingdom through supporting social and charitable activities and programs in order to achieve the Saudi Vision 2030.

Among the most important activities that Banque Saudi Fransi strived to achieve was the organization of a special event for children with cancer on the International Childhood Cancer Day in collaboration with King Fahad Medical City (KFMC). More than 50 children enjoyed the event leaving positive feedback.

The bank launched “Let’s be part of their future” program in collaboration with the Charitable Society for the Care of Orphans (Ensan) and Banque Saudi Fransi Academy. This integrated training and development program provides training by highly experienced coaches to orphan students during summer vacation.

As part of Banque Saudi Fransi’s social responsibility towards the Kingdom and its contribution to the economic development, the Bank sponsored and participated in the Ninth National Forum and Exhibition for Productive Families, which features the most important Saudi homemade goods such as clothes, accessories, incense, and various food types. Around 300 families participated in the forum, which aims to strengthen and activate the role of productive families in Medina.

HUMAN RESOURCES


Banque Saudi Fransi also collaborated with leading charitable associations (Efada Center for Down Syndrome) to support the “I Can” program aiming at enabling children with Down syndrome to lead normal lives within the community. This program played an important role in helping the families of children with Down syndrome by explaining to parents about the syndrome, answering many questions, and providing more than 250 free consultations.

Banque Saudi Fransi sponsored the Saudi-American Health Care Forum as part of the bank focus on the health sector. This event is the first of its kind in this sector, which aims to develop health care through exchanging knowledge, benefitting from the best practices and experiments in the global health care field, and transferring state-of-the-art health care technologies to the Kingdom. The forum included various programs, workshops, lectures, and discussions related to health care.

At Banque Saudi Fransi, we work hard to support and encourage graduates to accomplish their dreams, hence the Bank’s initiative to sponsor «Jarf» Exhibition, an art exhibition that was held at Princess Nourah bint Abdulrahman University in collaboration with (Wmdah ArtSpace). The exhibition showcased graphic design and digital media projects and creations made by more than 2000 graduates.

Finally, Banque Saudi Fransi’s contribution in areas of social responsibility is considered a vital social equation that raise the level of humanitarian contributions to create a balance with the society where the bank operates.


Main objective is to control legal affairs

to ensure effective control and mitigation of legal risks

Legal Division is an independent division reported directly to MD, and its main objective is to control Banque Saudi Fransi’s legal affairs to ensure effective and efficient oversight, control and mitigation of legal risks.Legal Group Division mitigates legal risks of Banque Saudi Fransi through appropriate review, and oversight of legal processes, and by ensuring consistent quality of advice from its advisors.

Legal Group Division is staffed by legal experts with experience in all areas of banking and financial law including securities, Islamic law and products, financial and information technology contracts, capital markets, mergers and acquisitions, treasury, securitization, product finance, litigation and structured finance.

Legal Group Division achieved the following:• Prepared the original draft of Banque Saudi Fransi Bylaws and Saudi Fransi Leasing

Bylaws with the insertion of the mandated amendments by the New Companies Law (approved by MOCI, CMA and SAMA).

• Amended the internal Employee Bylaw to accommodate the new amendments of new Labor Law.

• Reviewed, amended and approval of standard and non-standard forms of legal documentation and agreements.

• Provided legal advice and opinions to Banque Saudi Fransi business lines and support functions.

• Oversighted and managed all litigation and contentious issues involving Banque Saudi Fransi.

LEGAL

DIVISION


EnsuringConsistent QualityOf Advice From Its Advisors


COMPLIANCE

The primary aim of our Compliance Division is to make

Banque Saudi Fransi a role model in Compliance culture Compliance with laws and regulations is the top most priority for Banque Saudi Fransi. Banque Saudi Fransi firmly believes that adherence to compliance laws, rules and regulations in its daily operations with transparency and accountability supports its prosperity, together with that of its shareholders, customers, other stakeholders, employees and society in general. With the tireless efforts of our country’s leadership to ensure the economic prosperity of the nation with the launch of Saudi Vision 2030 Program to build a thriving economy with international competitiveness, our regulators are working continuously to ensure robust regulatory regime to protect the consumers and the financial industry as a whole.

Banque Saudi Fransi has established a fully resourced Compliance division consisting of: Regulatory Compliance, Financial Crimes (AML & CTF), Control and Monitoring, Quality Assurance, Tax Compliance, Compliance Risk Advisory and Reporting, Anti Bribery and Corruption and Corporate Governance departments. The Compliance function at Banque Saudi Fransi is a fully independent function and has all the support from the Board of Directors and Senior Executive management to carry out its activities effectively and efficiently. The primary aim of Banque Saudi Fransi Compliance Division is to make Banque Saudi Fransi a role model in Compliance culture and maintaining a top position in the banking industry. The Chief Compliance Officer (Head of Compliance Division) reports to Audit Committee functionally and administratively to the CEO & Managing Director and has full access to the Board of Directors. Banque Saudi Fransi maintains good relations with its regulators and comply with all laws and regulations in letter and spirit.


Our Adherence To

Compliance Laws,Rules & RegulationsBoostThe Bank Prosperity


Compliance

In line with Banque Saudi Fransi’s vision to be Bank of Excellence, Compliance Division has taken a number of key initiatives to reinforce compliance culture. With this strategic aim, a major transformation work stream has been established to make Banque Saudi Fransi Compliance Division a best in class compliance function. To ensure transparency and accountability in all of its activities and encourage reporting of misconduct and compliance breaches, a well formulated whistle blowing policy and reporting process has been established. An enhanced Code of Conduct has been approved by the Board of Directors mandating all employees to apply highest standards of professional practices in the conduct of day to day business with personal integrity and customer care.

Compliance Division performs its functions to maintain the reputation and credibility of the Banque Saudi Fransi brand, to protect the interests of the shareholders, depositors and other stakeholders. Compliance Division supports all Business Lines & Functional Heads with necessary training, tools and resources to achieve strict adherence and strong compliance risk management as part of their key responsibility.

With the Kingdom’s participation in G20 Summit and the Observer status to the FATF since 2015, the financial regulations have evolved considerably with the development of a robust financial industry and its supervision by the regulatory authorities. With the regulatory reforms high on their agenda, new regulations as well as changes and enhancements to the existing rules are promulgated to safeguard the financial institutions. This regulatory evolvement has enhanced the role of Compliance.

Compliance Division at Banque Saudi Fransi is the focal point to maintain constructive relationships with the regulators, seek guidance and clarifications in the implementation of regulatory rules and required enhancements.

Compliance Division gives independent advice to the Board of Directors and Senior Executive management on the matters related to Compliance risks. In addition, Compliance Division conducts control and monitoring reviews and performs Quality Assurance assessments to ensure compliance with regulatory rules, mitigate financial crimes, bribery & corruption risks, and implement corrective actions on Banque Saudi Fransi’s non-compliant matters and any perceived violations of the rules and regulations. Compliance Division also interprets the Code of Conduct and investigates cases of breach of the Code of Conduct. Chief Compliance Officer (Head of Compliance Division) participates in the Board of Directors, Audit Committee and various management committees meetings, and regularly updates to the Board of Directors and Audit Committee on the status of Compliance in the Bank, and the measures required to ensure high level of Compliance with the applicable laws, rules and regulations.


AUDIT

DIVISION

Internal Audit role is based on

the philosophy of adding value to improve the operations of the Bank

I Internal AuditInternal Audit Division (IAD) is the third line of defense and provides an independent assurance to senior management and the Board of Directors through the Board Audit Committee. Its role is based on the philosophy of adding value to improve the operations of the Bank. Internal Audit Division also provides consulting services to various functions of the Bank upon request.

Internal Audit Division is established by the Audit Committee of Board of Directors. Internal Audit responsibilities are defined and authorized by the Audit Committee as part of their oversight role. Chief Audit Executive reports functionally to the Audit Committee.

The scope of Internal Auditing encompasses, but is not limited to, the examination & evaluation of the adequacy and effectiveness of the Bank’s governance, risk management, and internal controls as well as the quality of performance in carrying out assigned responsibilities to achieve the Bank’s defined goals and objectives.

The Internal Audit activity, with strict accountability for confidentiality and safeguarding records and information, is authorized to full, free, and unrestricted access to any and all of Bank’s systems, records, physical properties, and personnel pertinent to carrying out any engagement.

Internal Audit Division complies with the Bank’s Audit Charter that is supplemented by the Code of Ethics defined by The Institute of Internal Auditors (IIA). The main pillars of standards of conduct are:• Independence• Integrity• Objectivity• Confidentiality• Competency.


Specialized TeamsTo Increase Efficiency And Enhance The Value Of The Bank

We Appointed


I Internal Audit ActivitiesInternal Audit Division hired an independent consultant to perform an external quality assessment of the Internal Audit Activity against IIA Standards and Best Practices. There has been a lot of focus in terms of enhancing the state of Internal Audit function through reorganization and transformation. Internal Audit Division appointed specialized teams for credit, operations, subsidiaries areas in order to be more efficient and to provide value to the Bank, and quality assurance team in order to ensure Internal Audit function is in compliance with global standards and best practices.

Internal Audit Charter was updated to be clear, concise and in line with SAMA requirements and IIA standards. Internal Audit Division has also introduced a revised Internal Audit Framework based on risk based audit methodology.

Internal Audit performed roadshow presentations to Bank’s staff in Central, Eastern, and Western Regions, aimed to deliver a clear understanding of Internal Audit Activity and the revised audit framework.

Internal Audit initiated the planning process by developing a bank-wide risk assessment exercise including all subsidiaries, to identify key risks for all auditable entities and prioritized high risk entities in accordance with the revised risk based audit methodology. Accordingly, Internal Audit Division developed the 3 Years’ Strategic Audit Plan, and the 2018 Annual Audit Plan, taking into consideration Audit Committee’s expectations, Bank’s mid-term strategic plan, and regulatory requirements along with results of the risk assessment.

Several key projects, initiatives, and mandatory audits were launched and successfully completed by Internal Audit Division. Internal Audit also performed follow-ups on implementing the recommendations related to the Internal Control Review (ICR) and other SAMA inspection reports. Internal Audit Division, as an independent function within Banque Saudi Fransi, also performed certain special investigations upon the request of SAMA and senior management during 2017.

I Effectiveness of Internal ControlOn an overall basis, the Board is responsible for the Internal Control system in the Bank, and for reviewing its effectiveness. The framework of policies and key procedures that the Board approved are designed to provide effective internal control framework within the Bank for managing risks within the defined risk appetite. Such framework can provide reasonable assurance on the effectiveness and efficiency of the controls within the Bank.

AUDIT DIVISION


The Bank’s management is responsible for implementing and reviewing the effectiveness of its internal control framework as approved by the Board. Banque Saudi Fransi Management has adopted an integrated internal controls framework in accordance with SAMA guidelines. The internal controls system (which follows the Three lines of defense concept) begins with corporate governance that defines the roles and responsibilities of the Board of Directors, board management committees that support the Board of Directors in monitoring and addressing key risks associated with strategy, financial performance, technology, asset and liability management, credit, operations, legal, regulatory, and information security.

Efforts are made by all of the Bank’s business lines to improve the efficiency and effectiveness of the internal control environment at process levels, through continuous reviews and consistent and integrated procedures, to prevent and rectify control deficiencies. Each business (First line of defense), under the supervision of senior executive management, is entrusted with the responsibility to oversee modification of control deficiencies, identified by its own risk and control self-assessment process and by other control functions (Second line of defense) such as: Compliance, Risk Management, Human Resources and Finance. Internal and External auditors perform the assurance function (Third line of defense).

Internal Audit Division monitors the effectiveness of the internal control system, in terms of design and implementation, across the Bank following a risk-based audit approach. Internal Audit accomplishes this by independently reviewing the design, effectiveness, and operating efficiency of internal controls. All significant and material findings of Internal Audit are reported to the Audit Committee on a quarterly basis. The Audit Committee actively monitors the adequacy and effectiveness of the internal control system to ensure that identified risks are mitigated to safeguard the interest of the Bank.

In order to ensure that a sound internal control environment is in place and in line with SAMA guidelines on internal controls, Internal Audit Division at the request of the Audit Committee has initiated a bank’s wide review on internal control system, with the help of an external consultant to evaluate the current state and effectiveness of internal controls within each function.

Based on the results of the ongoing evaluation of internal controls carried out during the year, the management considers that the Bank’s existing internal control system is adequately designed, effectiveness of operating is improving and monitored consistently. Nevertheless, the management continuously endeavors to enhance and further strengthen the internal control system of the Bank.


SAUDI

FRANSI CAPITALwe remain uniquely positioned to service our clients’

needs, provide new and innovative products and strong distribution capabilities 2017 was a year of significant accomplishments, in spite of the difficult economic conditions amidst rapidly evolving political, structural and social changes. The foundations of our organization continue to get stronger each year, allowing us to set even more ambitious targets by counting on the diversity and strength of our client services and investment solutions.

Investment Banking maintained its top position in Equity Capital Markets by successfully completing the only premium Initial Public Offering (IPO) on TASI. The Initial Public Offering was very well received by the market as both institutional and retail tranches were oversubscribed. We also secured an agreement on a landmark transaction where a foreign strategic investor is set to increase its stake to majority in a publically listed insurance company. We remained highly engaged in all Investment Banking areas, and signed a substantial number of mandates across equity, debt, and mergers and acquisitions.

Asset Management continued to experience healthy growth. Most importantly, investment performance continued to be strong, as endorsed by the ReutersLipper Award for our performance over 10 years in 3 equity categories: Global Islamic, MENA Markets and MENA Markets – Domestic. In terms of product innovation, we expanded our best of breed product platform with entry into new segments, as witnessed by the launch of Taleem Real Estate Investment Trust (REIT) and the first fund within the American real estate sector.

Our Securities business continued its focus on providing value-added products and services. The growth witnessed over the last year has positioned us as one of the leaders in the market especially in the institutional brokerage space. We have also executed the majority of special deals, gaining considerable market share despite the overall decline in average market value traded. We continued to leverage our research capability and hosted our inaugural Equities Investment Forum with the successful outcome of bringing together more than 30 listed companies and more than 100 institutional investors. The KSA Equities Outlook providing our Top Picks for 2018 was well received by our clients. We are proud to be a one stop shop for institutions and individual investors who would like to access capital markets through multiple interfaces and obtain research as well as sales and trading services.

In addition to ensuring our position as one of the leading players in the industry, we are committed to the ongoing development of the market and addressing regulatory requirements. Expense management remains a key focus in parallel with developing a technologically leading environment.In a continued period of rapid change in the Kingdom, we remain uniquely positioned to service our clients’ needs, provide new and innovative products and strong distribution capabilities.


EnsuringOur Position AsOne OfThe LeadingPlayers In The Industry


ALLIANZ

SAUDI FRANSI

We have adjusted our strategies to ensure

ongoing “Profitable–Growth” development Market conditions were more challenging in 2017 with limited growth compared to the previous years. Nevertheless, the Company adjusted its strategies to these conditions in order to ensure ongoing “Profitable–Growth” development.

Customer Centricity is at the center of our strategy. To improve the services provided to our clients, the Company introduced a new Customer Excellence Unit that is analyzing customer journeys in order to identify possible pain points, to resolve them systematically and to improve the customer experience.

In 2017, we also developed an Online Motor Fast Quotation tool. It allows the customers to issue an instant third party motor insurance quote based on customer’s loss experience with only limited parameters being captured. The Company also started its online motor sales through an aggregator website.

As part of our Multi-distribution strategy, we expanded our sales channels in the 3 main regions of the country to better serve our customers and partners.

Within our Technical Excellence Program, new training tools were introduced for Property and Casualty Insurance, as well as, for Medical and Life Insurance. These programs, which are leading to certification, are combining both online and classroom trainings with the objective to further enhance the technical capabilities of our employees.

These initiatives supported us in order to achieve in 2017 an Operating ProfitNet Income before Tax & Zakat of SAR 34.9 Million, the highest since establishment in 2007. This increase represents a growth of 43% compared to 2016. This also shows how efficient the company’s underwriting policies have been over the past few years.

In addition to that, Allianz Saudi Fransi launched two CSR Campaigns in 2017. At the beginning of the School Year, Company Employees distributed 900 bags complete with stationery to students in 9 schools. The Company also collaborated with King Fahad Medical City (KFMC) to organize a Blood Donation Campaign through which 52 units of donated blood were collected by the blood bank.


In October 2017, Allianz Group reached an agreement with Banque Saudi Fransi to purchase an 18.5% shareholding in Allianz Saudi Fransi from the Bank. This agreement raises Allianz Group’s share capital in Allianz Saudi Fransi to 51%, and strengthens its commitment to develop operations in the Kingdom of Saudi Arabia.

In 2018, the Company will continue to focus on further enhancing customer services, developing Online sales and SME business.

Developing our employees, promoting diversity and inclusion will remain key success factors in increasing our capacity to deliver our strategy.

Expertise, Integrity and Sustainability Create Trust - Deliver Excellence from A to Z.


SAUDI FRANSI

LEASING

Saudi Fransi for Finance Leasing has an extensive dealer network covering

all automobile brands in the Kingdom Saudi Fransi for Finance Leasing-SFL, in its 6th year of continuous successful journey still stands as one of the fastest emerging finance leasing companies in the Kingdom of Saudi Arabia. During which, Saudi Fransi for Finance Leasing was able to exhibit visible growth in its market share, surpassing SAR 2.5 billion portfolio mark, that consisted of 37 thousand active lease contracts.

During 2017, the Saudi leasing market witnessed intense competition amongst the market players in terms of pricing, quick execution of decision & after sales services, where there was a decrease in the economic growth. With the rising cost of living, Saudi Fransi for Finance Leasing was able to maintain the pace of its expansion in the business by focusing more on the associated risk factors in line with the Boards’ directions to minimize its risk exposures.

Saudi Fransi for Finance Leasing, with its market reputation, has an extensive dealer network covering all automobile brands in the Kingdom. Being supported by the E–channel services such as, FransiMobile, FransiSmart, and by offering a range of customer service features, Saudi Fransi for Finance Leasing was able to meet the satisfaction of its customers at all levels.

In 2018, Saudi Fransi for Finance Leasing will continue to focus on the distribution channels, including cross selling with Banque Saudi Fransi retail, corporate and business banking in order to further expand its customer base to achieve its set of goals for 2018 and the subsequent years to come. The company set its strategic plans, mainly focusing on risk factors and increasing the profitability growth development, with an aim to maintain its solid market position as one of the leading auto leasing companies in the Kingdom, and hence striving further to introduce innovative finance lease solutions to meet the needs of the various retail customer segments, as well as, the corporate.


We Were Able To Exhibit Visible GrowthSurpassing

2.5SARBillion


King Saud Road • P,O,Box 56006 Riyadh 11554 • Tel: +966 11 289 9999 • Fax: +966 11 404 2311 • Kingdom of Saudi ArabiaPublished by: Banque Saudi Fransi

annual report 2017 - alfransi.com.sa · 2020. 7. 26. · given the present situation, the loans and...

Documents