samba 17 eng rev p.samba financial group - formerly saudi american bank - was incorporated by royal...

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Samba Financial Group Annual Report & Accounts 2017

Section Heading 1

Review 02 A History of SAMBA 04 Chairman’s Statement 06 Our Locations 08 Business Review 20 Corporate Governance 22 Directors’ Report 42 International Recognition Financial Statements 43 Auditors’ Report 48 Statements of Consolidated Financial Position 49 Statements of Consolidated Income 50 Statements of Consolidated Comprehensive Income 51 Statements of Consolidated Changes in Equity 52 Statements of Consolidated Cash Flows 53 Notes to the Consolidated Financial Statements 88 Branches / Overseas Branches Samba SpeedCash Centres

Contents


Section Heading 01

The Custodian of the Two Holy Mosques King Salman Bin Abdulaziz Al Saud

His Royal Highness Prince Mohammad bin Salman bin Abdulaziz Al Saud

Crown Prince, Deputy Premier, Minister of Defence

Samba Financial Group - formerly Saudi American Bank - was incorporated by royal decree number M/3 on 12 February 1980. It was formed to take over the two branches of Citibank N.A. in Jeddah and Riyadh, which were opened in 1955 and 1966 respectively. The creation of Samba was partly the result of a program that was in place in the Kingdom in the 1980s, which encouraged banks to sell their majority stake to Saudi nationals. Samba began business on 12 February 1980 and ended its first fiscal year on 31 December 1980. Under the takeover deal, 44.5% of the equity was sold to the Saudi public for cash. The share allocations favoured small subscribers and created a base of 166,000 individual subscribers. Another 15.5% of the equity was sold for cash to a selected group of Saudi founders, including the original Saudi members of the Board of Directors. The arrangement helped transfer 60% of the equity to Saudi nationals. Citibank acquired the remaining 40% of the equity in exchange for the assets of the Riyadh and Jeddah branches.

The new entity entered into a technical management agreement with Citibank, under which Citibank agreed to manage Samba’s operations. Citibank seconded staff to the new bank and provided technical support. It was not eligible to receive any compensation for the service (other than its entitlement as a shareholder) apart from reimbursement for the actual expenses it incurred. By the end of 1991, Citibank sold part of its equity holding in Samba to two Saudi national agencies for social welfare. This move ensured that Saudi nationals held 70% of Samba’s equity, while Citibank retained 30%. Over the years since then, Citibank has gradually reduced its foreign holdings in the institution until they reached zero percent. In 1999, Samba merged with the United Saudi Bank (USB). The merged bank retained the Samba name and there was no change in the composition of the Board of Directors. Samba moved to full local management on 31 October 2003. An Extraordinary Shareholders’ Meeting, held on 14 December 2003, adopted the name “Samba Financial Group”.

A History of Samba: 1955-2017


A History of Samba 02

1980 Citibank Saudi Arabia moves to

majority local ownership and becomes Saudi American Bank.

1984 Samba Financial Group opens its first

overseas branch in London.

1999 Samba Financial Group merges with

United Saudi Bank, creating one of the largest financial institutions in the Middle East.

1955 Citibank opens its first branch in Jeddah.

It opens another branch in Riyadh in 1966.

On 9 March 2005, the Extraordinary Shareholders’ Meeting increased the share capital of Samba from SR 4,000,000,000 to SR 6,000,000,000, divided into 120,000,000 of equal nominal value of fifty Saudi Riyals cash shares, all of which will be ordinary and as one class in all respects. On 8 April 2006, in accordance with the directive of Capital Market Authority, each of the bank’s issued shares was split into five shares. As a result, the number of shares the bank has issued has now increased to 600,000,000 ordinary shares at a nominal value of SR 10 for each share. On 1 January 2008, Samba Capital and Investment Management Company (Samba Capital) was incorporated to act as the investment arm of Samba Financial Group. Samba Capital provides services in brokerage, asset management, investment and financial consultation. On 5 March 2008, the Extraordinary Shareholders’ Meeting determined that the share capital of the company be increased from SR 6,000,000,000 to SR 9,000,000,000, divided into 900,000,000 of equal nominal value of SR 10 cash shares, all of which will be ordinary and as one class in all respects.

In 2008, Samba Financial Group officially launched Samba Dubai. It also finalized the majority stake acquisition of Crescent Commercial Bank in Pakistan and re-branded it as Samba Bank Limited. In the same year, Samba also acquired a license from the Indian authorities to operate as a foreign institutional investor in India. In early 2010, Samba acquired a license from Qatar Financial Center Authority to operate in Qatar. It opened its first branch in the Qatari capital, Doha, becoming the first Saudi bank to establish a presence in the State of Qatar. On 20 March 2014, the Extraordinary Shareholders’ Meeting determined that the share capital of the company be increased from SR 9,000,000,000 to SR 12,000,000,000, divided into 1,200,000,000 of equal nominal value of SR 10 cash shares, all of which will be ordinary and as one class in all respects. On 18 March 2015, the Extraordinary Shareholders’ Meeting determined that the share capital of the company be increased from SR 12,000,000,000 to SR 20,000,000,000, divided into 2,000,000,000 of equal nominal value of SR 10 cash shares, all of which will be ordinary and as one class in all respects.

A History of Samba: 1955-2017


A History of Samba 03

2003 October 31, 2003 Saudi American Bank moves

to full local management. To mark this important milestone, the bank officially adopts the name its loyal customers have been using.

2007 Samba acquires a majority stake in Crescent

Commercial Bank in Pakistan, obtains a license to operate in Dubai and creates SambaCapital, a new specialized investment house in Saudi Arabia which started operation in January 1, 2008.

2008 Samba launches in Dubai and launches

Samba Bank Limited branches across Pakistan. Samba also acquires licenses to operate in Qatar and as FII in India.

2010 Samba becomes the first Saudi Bank to

establish a presence in Qatar with core operations including corporate and investment banking.

It is a pleasure for me to present to you Samba Financial Group’s annual report for the year ended 31 December 2017, which summarizes the major achievements and results of the group during the year. In 2017, the global economy experienced remarkable activity that highlighted the support of its strength and expansion potential, with both developed and emerging markets continuing to perform well. Trade and investment activity saw a recovery over last year, in combination with growing business confidence. Unemployment declined and oil prices rebounded and held steady at around $60/barrel. Both OPEC production cuts and a growth in demand are paving the way for a more balanced global oil market. In parallel, global financial markets have also performed well, contributing to the expansion of economic activity, the adoption of flexible monetary policies in the development of asset returns, and record highs in the stock and financial markets. Both the UK and Eurozone appear to be coping well with the shock of Brexit, suggesting that growth will be seen this year. The US is set to continue posting a modest growth, and with a new political administration in control, emerging markets have started to revive, supported by stronger commodity prices and stimulus policies. China appears to have achieved the desired effect, with some concerns remaining over continuing imbalances in the economy. The Kingdom adopted a new domestic economic reform policy in 2017. As a result, the Saudi economy is on the verge of a turning point that could move the Kingdom into a new era of diversified income sources, increased productivity, greater competitiveness, new foreign investment, and more investment in national resources. A mix of domestic and foreign debt issues will help to support this activity, raising the efficiency of the state’s operating expenditure, streamlining the expenditure of government agencies, employing the best use of technology in the provision of government services, and developing and activating control mechanisms. The National Transformation program 2020 and Vision 2030 provide a broad framework for enhancing the contribution of the non-oil sector to the economy and are expected to support a balanced budget for the Kingdom by 2020. The banking sector in the Kingdom remains sound, strong, and well capitalized. Credit risks continue to overshadow the growth of Saudi banks, however. Although we expect continued liquidity pressures in 2018, the bank’s budgets will be resilient thanks to their strong asset quality, good capital adequacy ratios, and strong profitability. Against this backdrop, Samba Financial Group has once again achieved a balanced financial performance this year. Thanks to its prudent strategy, the group has turned in a solid performance coupled with excellence in customer service, optimal risk management, financial strength, sustainable profitability, liquidity strength, and capital adequacy. The group achieved a net income of SR 5,024 million, with total revenues of SR 7,892 million. The net special commission income of SR 5,732 million for the year showed a solid 16.5% increase over last year, while total equity increased to SR 44.7 billion, reflecting 5% growth over last year. Alhamdulillah, today we stand in front of our customers and shareholders as a leading bank with a strong balance sheet – liquid, well-funded, and adequately capitalized.

Chairman’s Statement


Chairman’s Statement 04

Eisa M. Al-Eisa Chairman

Based on our strong financial results and solid performance during 2017, we have decided to distribute SR 3,614 million in gross cash dividends, representing a net dividend of SR 1.50 per share after the deduction of Zakat for our Saudi shareholders. This is a 58% increase over last year. It is a matter of great pride for me to be able to say that, despite a challenging business environment, we have kept the interests of our shareholders at the forefront by providing them with robust cash dividends on a semi-annual basis. This is just one small way of expressing our gratitude to our shareholders for the trust they have bestowed on us over the years. Our pursuit of excellence is clearly reflected in our external credit ratings, which continued to place Samba at the top of all the international ratings agencies in 2017: Moody’s (A1), S&P (BBB+), Fitch (A-) and Capital Intelligence (A+). We are extremely proud and honoured by these independent endorsements, which give us a unique and distinctive position within the Saudi banking sector. We are grateful to our partners and stakeholders who have placed their trust and confidence in our abilities. In line with the Kingdom’s Vision 2030, a main objective of which is to increase the contribution of small and medium-sized enterprises to GDP, the group is interested in this sector of companies. The group has developed a special credit program to meet the specific market requirements of all business sectors. This division achieved significant growth in revenues and assets during the year, with no credit losses. This is a testament to prudent risk management practices, which surmounted the general economic slowdown and unfavorable market conditions. The group continued to strengthen its roots within the community and fulfil its national responsibilities by launching more development initiatives. These initiatives were carefully selected to highlight Samba’s role as an active partner that contributes to the development of the community and strives to improve the lives of its members. In 2017, Samba continued to adopt various community programmes and initiatives that support “sustainable development”. These include the housing support program, by which Samba is providing 500 furnished housing units over five years. These homes will go to needy families in various Kingdom regions. Samba is working in collaboration with the Ministry of Housing on this project. Samba’s attention to education, training, and employment is the cornerstone of its community service programs. The group participated actively in several career days at educational institutions and universities in the community and sponsored career days at the Institute of Public Administration and King Fahd University of Petroleum and Minerals, Samba participates in a program to support needy families to support and develop the humanitarian and social role of a long list of charities and social institutions during the year. Samba’s also contributed to the health care program as well as other other community programs.

In 2017, Samba upheld its award-winning record, sealing its reputation as the most highly recognized financial institution, both locally and regionally. Global Finance named Samba the “best bank in Saudi Arabia” for the twelfth year in a row, “best bank for payments and collections in the Middle East” for the third time in a row, “best foreign exchange provider in Saudi Arabia” for the ninth time, and “best Islamic retail bank”, “best Islamic investment bank”, “best Islamic financial institution for large corporates”, “best corporate/institutional digital bank in Saudi Arabia”, “best trade finance services in the Middle East”, and “best integrated corporate bank site in the Middle East”. The Asian Banker named Samba the “strongest bank in the Middle East” and the “strongest bank in Saudi Arabia”. The American Economic Institute honoured Samba for “Excellence in Client Solutions” and the Union of Arab Banks selected the chairman of Samba Financial Group as Arab Banker of 2017. Global Finance recognized Samba globally with several awards for its investment arm, Samba Capital, including “best investment company in the Middle East” and “best investment company in Saudi Arabia”. Samba Capital also received the following accolades from EMEA Finance: “best structured finance house in the Middle East”, “best refinancing in EMEA: Rabigh1 IPP’s US$1.8bn and SAR facilities”, “best refinancing in the Middle East: Dhuruma Electricity’s US$1.138bn conventional and Islamic facilities”, “best IPO in the Middle East: Middle East Healthcare Company”, “best syndicated loan house in the Middle East”, and “best syndicated loan in the Middle East: DP World’s US2$bn loan”. I would like to take this opportunity to express my sincere gratitude to the Custodian of the Two Holy Mosques, King Salaman bin Abdul Aziz, and the Crown Prince His Royal Highness Prince Mohammed bin Salaman bin Abdul Aziz, for their support, guidance, and initiatives in providing a stable and prudent policy framework that promotes a healthy and stable economic environment and sustained growth in the Kingdom. For all of this, we remain indebted. Finally, it is my pleasure to express my sincere appreciation to our customers and shareholders for their loyalty, the board of directors for its continued support, the entire management team at Samba for its continued dedication and service during the year, and to our employees for their wholehearted efforts. The achievements and the solid position we enjoy today could not have been realized without their dedication and loyalty, and to them we extend our grateful thanks.


Chairman’s Statement 05

Eisa M. Al-Eisa Chairman, Samba Financial Group selected as Arab Banker of 2017

Our Locations


Our Locations 06

SAUDI ARABIA

Samba’s primary business is conducted through its head office in Riyadh. The Group

also has 73 branches, 28 SpeedCash centers, and 21 centers for ladies’ banking outlets all over the Kingdom brining the total number of banking

service outlets to 122.

DUBAI

Samba Dubai offers a full range of consumer banking, corporate banking, trade finance, and treasury services for

individuals and companies.

Our Locations


Our Locations 07

PAKISTAN

Samba Bank Limited (SBL) continued to outperform banking industry growth

rates, thus making a healthy contribution to the profits of the group.

QATAR

Samba Qatar offers a full spectrum of corporate and investment banking,

private banking, trade finance, and treasury services for corporate and High Net Worth

Individuals.

Corporate Banking Group The Corporate Banking Group (CBG) continues to build on the enviable brand and solid infrastructure of the Samba franchise. Samba’s solid balance sheet underpinned large-scale financing and the bank’s leading role in several large structured and syndicated finance deals. It remains committed to providing exceptional customer service experience through its superior product portfolio and service delivery. During the period under review, which presented a challenging macroeconomic environment, CBG maintained a strong asset portfolio, including a strong focus on balance sheet consolidation and asset quality. Our clientele is central to the underlying business model. Our customer coverage and product teams cater to the multi-dimensional needs of our clients across geographies and market segments. We will continue to leverage our widespread coverage of medium and large corporate clients in KSA and the wider GCC region. Corporate Customer Coverage Samba caters to all levels of corporate clients, ranging from government and public sector organizations, financial institutions, top-tier private sector companies, and global corporations, to mid-sized enterprises. CBG remains the focal point of Samba’s corporate related activity, with coverage of over 2,000 corporate clients and 90% penetration of the top 100 Saudi companies, testament to its extensive market penetration, strong portfolio quality, and efficient risk management and credit processes. CBG covers the entire spectrum of banking services, including project finance, syndicated finance, Islamic banking, cash management, trade and electronic banking, and risk management solutions. Our priority remains maintaining our high portfolio quality, supported by sophisticated technology that delivers the best in class service to our clientele. Samba has consistently stayed ahead in a highly competitive and regulated environment and received numerous awards independent industry experts for its sophisticated structuring and execution capabilities. Full corporate banking services are also provided through Samba’s branches in the UAE, Pakistan, and Qatar.

Public Sector Public Sector (PS) is a specialised business unit within the Corporate Banking Group. It provides a comprehensive range of products, services, and innovative technological solutions to clients in partnership with various product teams. With its presence in central, eastern, and western regions, PS actively manages government and quasi-government relationships with the objective of helping clients to evolve and automate in line with government objectives. Despite the economic challenges, PS continued to deliver a strong business performance during 2017 by leveraging its balance sheet, providing comprehensive electronic collection and payment solutions, and offering innovative treasury products. Financial Institutions The Financial Institutions (FI) Division manages Samba Financial Group’s relationship with correspondent banks in multiple geographies. It assesses the credit risk of all financial institution relationships and establishes counterparty facilities for other business segments of the bank on either a customer or proprietary basis. In addition, FI also maintains relationships with Saudi domiciled multilateral and non-bank financial institutions (NBFI), covering insurance, brokerage, and asset management. Through its network of relationships, FI facilitates cross-border payments and mediates trade flows between Samba’s customers and beneficiaries across all continents. Domestically, FI efficiently uses Samba’s multiproduct capabilities in the areas of cash management, treasury, Islamic banking, brokerage, and asset management to provide bespoke business solutions to its NBFI client base. The political and economic environment in key emerging markets remained volatile and challenging during 2017, which required prudent and proactive management of the demand for credit and cross border business. Despite these challenges, FI delivered strong business performance by innovative cross selling and market penetration. Corporate Finance During 2017, syndicated loan volumes in Saudi Arabia fell considerably compared to the previous year. The specialized lending unit (SLU) in Samba Financial Group was involved in arranging SAR 17 billion of syndicated debt financing. Select syndicated debt transactions during 2017 include the SAR 8 billion debt refinancing of Etihad Etisalat (Mobily) and the SAR 3 billion financing to Yamama Cement Company for the relocation of its plant and facilities.

Business Review Providing strength and stability


Business Review 08


Business Review 09

CORPORATE BANKING GROUP

Our clientele is central to the underlying business model. Our customer coverage and product teams cater to the

multi-dimensional needs of our clients across geographies and market segments. We will continue to leverage our widespread

coverage of medium and large corporate clients in KSA and the wider GCC region.

+16.5%

Growth in the Net Special Commission Income to SR 5,732 million

Corporate Banking Group (continued) Global Transaction Services Through its Global Transaction Services (GTS) business, Samba provides outstanding solutions to customers in all areas of cash management and trade finance. These solutions focus on quick turnaround, accuracy of transactions, the structuring of complicated deals, advisory services, and the structuring/rationalization of trade facilities that suit customers’ needs. GTS has a dedicated team of product sales managers who are the main point of contact for all cash services from prepaid payroll cards, payments, collections and reconciliation, B2B, Swift-Net and liquidity management, and trade finance products and services. These sales managers work closely with customers to discuss their specific needs on an individual basis, particularly for solution structuring. Sharing of knowledge and expertise is vital and regular in-house training sessions are conducted for customers, which focus on developing their basic trade finance and service awareness, as well as enhancing their structuring and risk management skills. The core theme of the GTS online-banking platform “Samba Access” strategy is “innovate - inquire - initiate - integrate”. The strategy and execution methodology is to constantly enhance the value proposition across receivables, payables, liquidity, and account management modules through innovation in functions and processes; to acquire customers on the online banking platform for product inquiry; to interact with the customer to gain a greater sense of trust in the platform; and to integrate with customers’ business processes and address their specific needs. In line with Basel-II and III guidelines, transparent and appropriate pricing is an integral part of Samba’s Trade Finance & Services offering, which efficiently supports our trade assets origination and distribution process and enables other partners/banks to participate in these assets. We also leverage our regional footprint to source primary and secondary trade transactions. Through our branch in the UAE, we acquire transactions for blue-chip multi-national companies and large local corporates with direct business interests and/or involvement in core infrastructural projects. In addition, we actively work with our subsidiary in Pakistan to participate in oil and non-oil trade flows between Saudi Arabia and Pakistan. These offerings enable us to offer our corporate clients value added cash management and end-to-end trade solutions that help them to manage their risks better and more efficiently. Islamic Banking Products and Services The Islamic banking market is currently estimated to have close to US$ 1.5 trillion in assets globally, with GCC dominating its core market share. Islamic banking continues to evolve in the Kingdom and a distinct investor base has developed in both the institutional and retail domains. Significant large-scale corporate financing, project finance, and debt capital market deals continue to be structured in compliance with Shariah to achieve the widest possible distribution in core markets. As a major player in the region, Samba is poised to expand its role and increase its contribution to this strategic and growing market. Samba houses a dedicated Islamic Banking Division (IBD) within its infrastructure that covers all major banking products, including consumer, corporate, institutional, treasury, and asset management. IBD offers the best of Islamic finance expertise combined with an established corporate finance and capital market platform at Samba Capital. It covers a broad range of market segments, including corporate level financing, project financing, and capital markets (Sukuk). New additions to the product suite include innovative Shariah-compliant investment and swap structures for institutional clients. Our structured Islamic treasury products are placed at the high-end spectrum of product sophistication. In 2017, the prestigious Global Finance journal gave Samba awards for the Best Islamic Bank for Large Corporates, Best Islamic Retail Bank, and Best Islamic Investment Bank.

IBD is overseen by Samba’s Shariah supervisory board, which comprises eminent Shariah scholars. IBD also undertakes Shariah compliance and audit functions, which are critical to ensuring our ongoing adherence to Shariah principles. Consumer Banking In 2017, customers needed more than ever a reliable partner to provide the stability and financial solutions that would enable them to pursue their dreams and lifestyle goals. Samba’s investments in innovative and accessible financial solutions further strengthened its standing as a powerful enabler of customer aspirations. Samba’s high quality products and services, risk management, and financial solutions were instrumental in maintaining the trust and appreciation of our customers. The consistency of our performance, strengthened by strong fundamental principles and operating efficiencies, have helped Consumer Banking deliver strong performance during the year. From priority banking to credit cards, personal finance, home financing, and multi-channel banking, Samba delivered on its promise to enable customers meet lifestyle and transaction needs instantly, anytime, every time, anywhere. As a result, Samba has earned customer relationships that are among the deepest and most enduring among Saudi banks. Samba now enjoys highest level of customer recommendations among Saudi banks and the highest appeal among affluent customers. By continuing to offer an expanding range of innovative solutions, unique value-added banking experiences, and significantly enhanced service delivery platforms, Samba fulfils its promise of helping customers live life to the fullest, even during challenging times. Customers Serving customers well means staying ahead of their evolving needs. Samba’s state-of-the-art customer data integration systems and processes help us to understand customer needs better and, as a result, design and provide timely and well-considered Islamic and conventional financial solutions. Our single-minded focus on financial solutions that enable the fulfilment of goals is backed by business intelligence that enables our front-line staff to deliver on this promise. For example, Samba’s innovative credit initiation system has made us the first bank in the Middle East to allow customers to apply for and get a Samba credit card on the spot, or to get Samba personal finance or home finance approved immediately, at any Samba branch. Being there for our customers day and night is important to us. But providing engaging avenues in which customers can interact, provide feedback, and communicate with us is equally important. In 2017, Samba held a high-profile Saudi National Day campaign that launched its Twitter and Facebook pages. These social media channels have quickly built a growing number of followers, with interactions led by product and service inquiries. Our social media launch went hand-in-hand with higher visibility for our dedicated customer service unit, “SambaCare”, both on Twitter and Facebook as well as other internal Samba channels. Our customers can contact us easily to have any issues addressed promptly.



Business Review 10


Business Review 11

TREASURY

Our focus is on building long-term relationships with our clients by offering innovative products and solutions that meet their business

requirements. We invest in our business and systems to improve our services and drive long-term value for our stakeholders. We have

started a strategic project to replace our current treasury system with a more advanced system that will enable us to enhance our business, expand our capabilities, maintain our edge over

competition, and support our client base. +5%

Growth of Total Equity to SR 44.7 billion

Consumer Banking (continued) Branch banking Branch banking continues to underpin Samba’s stable liquidity, which contributes to the bank’s overall growth. The business continues to live up to its goal of being a diverse and cost-efficient delivery platform for the entire range of Samba products. These products play a central role in enabling Samba to provide a premium banking experience and offer a solid platform for acquisition, cross-selling opportunities, and ready access to world-class financial solutions. Our high and ultra-high net worth segments – SambaGold and Samba – continued to provide a strong, stable, and growing base for our liabilities and premium consumer products. Branch efficiency remains high in terms of deposits, assets, and high net worth customers per branch. As Samba invests in its multi-channel service delivery strategy, its network of state-of-the-art branches continues to define the ultimate in branch banking services in the Kingdom. Samba branches feature dedicated, luxuriously appointed SambaGold and Samba Diamond centres, which provide elite, one-on-one priority banking services. Samba also operates a network of dedicated Islamic branches, part of our commitment to bring world class Islamic products and services closer to customers. These branches offer a full range of Shariah-approved products, which offer greater financial convenience with complete peace of mind. Samba debit cards Powered by mada’s enhanced domestic network and MasterCard’s global payment network, Samba Mada debit cards have become a powerful companion for Samba customers everywhere they go. Samba debit cardholders can now shop at millions of shops and locations in the Kingdom and around the world, withdraw cash anywhere, get special deals on shopping, dining, travel, and hotels, and enjoy many special privileges, such as free access to airport lounges, global fraud and purchase protection, and more. In 2017, Samba introduced the Samba Payroll Card for household employees. An easy way to pay the salaries of domestic staff, it conveniently allows employers to pay salaries directly to staff payroll accounts via Sambaphone or at the branch. Household staff can then get access to their salary anytime at the nearest ATM, or use their debit card at any POS machine and send money home directly at Samba ATMs or on the phone using SpeedCash. Round the clock global banking services Constantly available to its customers and able to provide round-the-clock access to financial solutions and services when they need it, Samba continued to enhance its SambaOnline, SambaMobile and SambaPhone channels. Samba customers enjoy unrivalled access to a full range of financial solutions and can fulfil all their banking needs anytime, anywhere – with more functionality and ease – on any of their devices. This level of service has helped Samba to cement its reputation as the most highly acclaimed 24-hour banking service provider in the Kingdom.

SambaOnline Samba’s award-winning online banking platform has established the bank as a leader in consumer Internet banking in Saudi Arabia. A full service menu and straight through processing, combined with robust security features and full integration with SambaMobile, deliver a secure 24/7 online banking experience for Samba customers. In 2017, Samba continued to add more powerful features and functionalities to SambaOnline, making it more user-friendly with a revamped look and interface. SambaOnline now lets customers automate utility and other bill payments with a Samba Sadad Scheduler, while our Priority customers can chat online with Samba to make inquiries or request assistance, view charts that give a snapshot of their financial position and activity, shop online at the Samba e-mall for thousands of international brands, and more. All these functions work hand-in-hand with a faster, more intuitive, and fully integrated design, giving customers easy access to Samba services and enabling them to manage their Samba accounts anywhere in the world. SambaMobile Completely integrated with SambaOnline, our mobile platform makes all of SambaOnline’s functionalities available on any smartphone or tablet. Samba customers can bank, send money, make automated Sadad payments, pay government fees, make credit card payments, and perform all their everyday banking transactions on the go. SambaOnline also enables location-based services, letting customers find the best offers at shops, restaurants and hotels anywhere in the world, and locate the nearest Samba ATMs and branches. Samba credit cards Samba credit cards are the leading credit card suite in the Kingdom. They dominate key market indicators, including share of cards in force and share of spends. Samba credit cards simultaneously helped the bank to expand its customer base while achieving the highest spend per cardholder. Samba’s instant credit card service helped power customer acquisition during the year. Samba is the first and only bank in the Middle East with the ability to issue a credit card instantly. Now, even a non-Samba customer can walk into a Samba branch and apply for and walk out with a new Samba credit card in just minutes. With the widest selection of credit cards, designed to match every lifestyle, Samba credit cards earn lifestyle reward points with every spend. Together with non-stop usage promotions and year-round exclusive offers and discounts at thousands of shops, hotels and establishments around the world, the benefits of our credit cards have helped Samba to achieve the highest levels of cardholder usage, solidifying our dominance of the credit card market. Samba’s partnership with FCBarcelona, one of the world’s foremost football teams, remained strong in 2017, adding to the success and growth of the Samba FCBarcelona credit card, which provides additional rewards for committed FCBarcelona fans in Saudi Arabia. Samba continues to explore ways to redefine the credit card experience with innovative reward schemes and value-added services. The Samba Bonanza Holidays portal for Samba Visa cardholders also lets Samba customers enjoy preferential hotel discounts in addition to existing offers at the world’s top destinations.



Business Review 12

PRIVATE BANKING

The extensive experience of our staff and their commitment to high service standards, coupled with Samba’s innovative and well

diversified products, contribute significantly to the high level of customer satisfaction and loyalty that Samba enjoys.

+170%

Growth of FVIS


Business Review 13

Consumer Banking (continued) Personal finance The personal finance business posted another year of solid results, with healthy business indicators and solid credit quality despite a challenging market environment. With a suite of Islamic personal and home finance solutions, Samba simplified its range of financial products and tailored them to suit individual customer needs. Customers are able to fulfil their goals, such as buying a new house, paying for a child’s education, getting married, or taking their family on a dream holiday. Samba also bundled personal finance and home finance into complete personal finance packages, making it easier for customers to buy a new house and furnish or complete their new property. Mortgages With its wide range of flexible Shariah-compliant Bayt Alkhair home finance products for apartments, villas, plots, and self-constructed homes, Samba is well positioned to take advantage of new government initiatives and regulations aimed at raising the level of home ownership in Saudi Arabia and alleviating the housing shortage. Samba launched a buy-out campaign, inviting customers to transfer their home finance from other banks to Samba at no extra cost, and enabling them to take advantage of Samba’s fixed mortgage rates. For our customers, that means no more changing rates and rising instalments. Combined with a higher maximum loan-to-value ratio for home finance plus a new agreement with STC, this campaign has allowed Bayt Alkhair to post positive growth in booking and volumes. Samba continues to concentrate on intelligent responsible lending and strict controls, keeping performance healthy and stable in a highly competitive market. Remittances Despite market and environmental pressures, Samba’s SpeedCash remittance services weathered the ongoing challenges well. Continuous service enhancements and multi-channel integration were key to transforming the way in which our diverse range of customers send money home to their families. In addition to dedicated SpeedCash remittance centres, Samba has integrated SpeedCash services on electronic banking channels, allowing customers to send money home anytime, from anywhere, via SambaPhone, SambaOnline, SambaMobile and at Samba ATMs.

Local Corporate and SME Services Local Corporate Banking In response to the requirements of the Kingdom’s Vision 2030 to promote the growth and performance of the private sector with its components of national companies and institutions in all of its activities and categories as one of the main drivers of the national economy in general, the Local Corporate Banking division (LCB) of Samba Financial Group attaches utmost importance to meeting the needs of its corporate clients, through the adoption of an integrated system of banking and credit services, which gives them exceptional experience to support their growth, enhance their vital economic role, and meet their requirements. This year, the Local Corporate Banking division (LCB) consolidated its position further and maintained stable revenue and asset growth in a challenging economic, while continuing to actively contribute to the corporate banking portfolio. With its dedicated liabilities unit, LCB is self-sufficient in raising funds for its growing asset base. Its expertise in ensures continued and sustainable growth. Small & Medium scale business In parallel, Samba gives priority to SME sector through its dedicated SME division. The leadership of the Kingdom envisages a much larger role for local and young entrepreneurs in the SME space and is hence developing a platform of opportunity to develop their businesses and generate opportunities that will expand the base of such companies and enhance their share in the local market, based on the importance of this sector as a key contributor in the development of the economy. Samba SME business has been established in line with the Royal Vision that will move the enterprise alongside the growth of opportunity for small and medium businesses. Samba is a committed partner in the initiatives being launched by the government to support this national goal through the successful Kafala program. Samba has also developed a comprehensive range of financing, consulting and banking solutions to meet the aspirations of Saudi small and medium sector as well as individual entrepreneurs and small business owners, develop their businesses and enhance their productivity. Private Banking Group Samba was the pioneer of private banking in Saudi Arabia in the early 1970s. Now considered to be among the best providers of private banking in Saudi Arabia, Samba offers an extensive range of personalized and professional private banking and wealth management services. The Samba team of professional staff serves the Kingdom’s wealthiest individuals and their families and is well recognized within the private banking sector. The extensive experience of our staff and their commitment to high service standards, coupled with Samba’s innovative and well diversified products, contribute significantly to the high level of customer satisfaction and loyalty that Samba enjoys. 2017 was a tough year for the financial sector, with low liquidity in the market and pressure on revenue growth. Throughout the tough market conditions, Samba Private Banking progressed steadily across all revenue lines with a remarkable zero credit loss. At the core of this achievement are our robust credit-program and our defined risk acceptance criteria, combined with the experience and expertise of our private bankers, a wide range of sophisticated products, high value investment opportunities in the local and international markets, and close collaboration with Samba’s investment specialists in Asset Management, Brokerage and Treasury. It is the combination of these resources that makes us uniquely equipped to provide the insight, advice, and solutions our clients need to achieve their financial objectives. Samba Private Bank remains committed to improving its standards and to exceeding customer expectations. We have a bright outlook on the future and we will continue to use our strengths to sustain our impressive growth, in tandem with the strong economy of Saudi Arabia, in the years to come.



Business Review 14


Business Review 15

SAMBA CAPITAL

The investment banking team, which is considered a one-stop shop for all capital market-related activities, retained its pre-eminent

position by working on a number of mandates involving top tier local corporate, public sector, and international corporates.

+118%

Growth of income from other operations

Samba Capital Samba Capital remains a dominant player in investment banking, corporate finance, brokerage, and asset management in the Kingdom and wider GCC region, despite a challenging year for the industry as a whole. In 2017, Samba Capital continued to garner several prominent industry awards and accolades, including the 2017 Global Finance “Best Investment Bank in the Middle East”, “Best Investment Bank in Saudi Arabia” awards, the emea Finance “Best Syndicated Loan House in the Middle East” and “Best Structured Finance House in the Middle East” awards. In its leadership role, Samba Capital advises clients on a number of transactions across equity capital markets (including the emerging real estate investment traded funds), debt capital markets, and mergers and acquisitions. The investment banking team, which is considered a one-stop shop for all capital market-related activities, retained its pre-eminent position by working on a number of mandates involving top tier local corporate, public sector, and international corporates. Syndicated loan volumes in Saudi Arabia fell significant in 2017 in comparison to the previous year. Working closely with the specialized lending unit in Samba Financial Group, Samba Capital arranged approximately SAR 21 billion in syndicated deal volumes across the GCC, including SAR 17 billion in Saudi Arabia. Select transactions for 2017 include the ~SAR 8 billion refinancing of Etihad Etisalat (Mobily) and the SAR 3 billion Yamama Cement Company financing in which Samba Capital also acted as a financial advisor. Despite a highly challenging investment environment, Samba Capital’s asset management business continued to deliver best-in-class investment solutions to clients across all products and asset classes, both conventional and Shariah-compliant. SambaCapital’s money market funds continue to outperform the benchmark, while its equity funds performance is robust. The asset management division continues to provide customers with innovative investment solutions and is focused on expanding the product suite by adding bespoke investment strategies. This approach is exemplified by the launch of the Al Jood GCC Equity Fund in 3Q17. Samba Capital Brokerage business also remains focused on product innovation, particularly cutting-edge technology upgrades that were introduced to enhance the client experience. Brokerage successfully launched a number of projects during 2017 that were primarily focused on the launch of streaming prices trading application upgrades for IOS and Android, aimed at meeting traders’ needs for simultaneous streaming prices and trading execution on smart phones.

Treasury Treasury performed very strongly in 2017 and delivered an excellent set of results, with an increase in treasury-related core income. However, client activity and flows were lower than expected, probably the result of the challenging operating environment. Our focus is on building long-term relationships with our clients by offering innovative products and solutions that meet their business requirements. We invest in our business and systems to improve our services and drive long-term value for our stakeholders. We have started a strategic project to replace our current treasury system with a more advanced system that will enable us to enhance our business, expand our capabilities, maintain our edge over competition, and support our client base. We have also started another project to upgrade SAMBA STEP, our pioneering and market-leading online FX dealing platform, still the only FX e-trading platform to be implemented across all bank branches in the Kingdom. These investments will enhance the quality of service we provide to clients, improve our ability to capture new and profitable growth opportunities, and differentiate us from our competitors. This move is in line with our strategy to enhance our core activities with the aim of strengthening and deepening our client relationships. We continue to maintain a strong liquidity position and a highly liquid balance sheet, which remains a key source of competitive strength for us. Our capital and liquidity profile also reflects the strong financial position of the bank and the success of our business model. We expect operating conditions to remain challenging. Interest rates are at the early stage of normalization. There are some new uncertainties ahead, the result of growing globalization and the impact of regulations. However, we are well positioned to grow and meet our strategic business objectives. Risk Management Samba maintained its disciplined risk management culture during 2017. It also updated and enhanced its systems and policies so that they remain compliant with regulatory requirements and operate within best international practices. In addition, several initiatives were undertaken to address or anticipate new regulatory requirements pertaining to capital adequacy measurement, frequency of liquidity reports, and intra-day liquidity. In line with the strategy established by the board of directors, the Risk Management Group helps Samba to guard against the uncertainties and volatilities inherent in the external environment. Critical capabilities are provided through a well-defined governance structure and underpinned by a comprehensive policy framework, automation, a team of experienced risk professionals, and sophisticated risk-measurement and monitoring tools. With capital adequacy and liquidity ratios well above regulatory-prescribed minimum levels, Samba is well positioned to sustain its growth and maintain prudent ratios and flexibility in the management of its balance sheet. Our policy of building countercyclical portfolio loan loss reserves has been enhanced by the development of complex expected credit loss models that are being set up in preparation for the introduction of IFRS 9 impairment requirements in 2018. Our sound risk management practices include regular stress testing and ad-hoc reviews of our credit portfolios. These procedures enable us to identify potential vulnerabilities at an early stage and take pre-emptive actions where required. Mitigation of risks is achieved by ensuring that our exposure is sufficiently diversified. Samba’s continued investment in human resources, technology, training, and processes related to information security helps to protect the bank and its customers from the increasingly sophisticated and organized attempts to compromise financial institutions’ information assets.



Business Review 16

Hiring, Training and Development Samba Financial Group made consistent and rigorous efforts to identify, attract, and retain the best Saudi talent during 2017. As part of this organizational goal, the bank sponsored and participated in several career fairs and events that held at several educational institutions across the country. Samba’s brand, excellent infrastructure for growth and development, progressive HR policies, and excellent talent management practices resulted in the bank hiring and retaining several highly talented Saudi nationals. The bank has attained 94.1% Saudization and continues to rank in the Netakat Platinum category. More than 4,290 employees across all functions actively participated in developmental programs during the year, resulting in more than 12,847 training days. Training continues to be a core part of our strategy to develop and retain talent at Samba. Several additional human resources initiatives were undertaken as part of our HR strategy, including talent and succession management programs and the revision and refinement of many policies and procedures. The bank has adhered to, and remains fully compliant with, all regulatory requirements related to HR. The first phase of the new and advanced Human Resources Management System has been successfully completed, which will enhance the effectiveness and efficiency of HR recruitment processes. As part of our commitment to corporate social responsibility, the bank offered several co-op programs to Saudi students in different educational institutes in the Kingdom of Saudi Arabia. This program continues to be a successful channel for recruiting new young Saudi graduates, resulting in the hiring of a number of nationals. Technology Group Samba Technology helps Samba business groups to manage customer and regulatory requirements through well-defined processes and the effective use of technology. 2017 was another productive year for Samba Technology, filled with enhancements to operational capabilities and efficiency, with the objective of addressing the constantly evolving needs of clients. After the successful replacement of its new core banking platform in Dubai in 2016, Samba implemented the same platform in Qatar as well as in Samba Global Markets Limited in the Cayman Islands. These achievements have brought Samba closer to the full replacement of its legacy platform. Once the new platform is fully implemented in KSA over the next two years, Samba will be able to leverage the new technology and architecture fully to increase innovation across its business offerings and gain an additional competitive edge in global markets.

In addition, Samba Technology delivered more than 70 additional technology projects during 2017. These include: • VAT capabilities were implemented in line with the 2018 VAT KSA and UAE mandate. These were

put in place in a record time of two months, including major changes to core banking and transaction processing systems and customer interaction channels. Both the KSA legacy systems and the new core banking platform in Dubai were affected by the implementation.

• Additional changes were made to the core systems to address new regulatory mandates, such as the Citizen’s Account, the handling of dormant, unclaimed and abandoned accounts, and changes in fee structure.

• Changes were made to e-channels and other systems, targeted at improving customer satisfaction, reducing operational risks, and addressing regulatory requirements.

• Improvements to products and services were offered to major corporate customers and new services were introduced.

• Enhancements and additions were made to the Samba award-winning consumer banking BI platform, targeted at improving our analysis and understanding of customer behavior.

• After the successful implementation in 2016 of the 3-D secure one-time-password for debit and credit cards in KSA, the same capability was introduced in Dubai to provide improved security over Internet transactions.

• Version upgrades were made to some business technology solutions, to future-proof these systems and provide additional business and operational capabilities.

• Technology infrastructure upgrades were made to help future-proof and enhance IT operations and maintenance, increase capacity, and provide more agility and new functionality.

• Further consolidation and virtualization of existing server, storage and networking hardware took place to decrease the cost of capital, power, and cooling, and to accelerate IT service delivery.

In addition to these projects, Samba Technology implemented a number of IT governance improvements, in line with the COBIT 5 framework. These include improved project governance, resource optimization and financial planning, and the establishment of a strategic technology PMO focused on enabling transformation. Samba Technology continues to improve its strong Business Continuity Management (BCM) process, which helps us to assess, plan, and strengthen the resilience of Samba value chain. Samba has conducted tests on its technology and business operations from its disaster recovery centres to ensure the continuity of all its capabilities in the event of future disasters. Samba is also building a new Tier 4 data centre to ensure future technology scalability and reliability.



Business Review 17

Operations Group Samba Operations provides banking and treasury operations support and service quality management to various business functions within Samba, including corporate, consumer, and private banking, treasury business, transaction banking, Islamic banking, and financial institutions. A mix of decentralized and centralized centres of excellence, powered by fully integrated multi-channel platforms, has been in the works and developed into becoming powerhouse for business growth, client satisfaction and talent attraction. The year 2017 was an eventful one for Samba Operations. Regulatory requirements and Central Bank inspections took place which confirm that Samba’s performance meet current operating standards. Key protocols were introduced in the service delivery, which saw several KPIs and KRIs get rolled out. Customer experience feedback for cash management and trade has been at an all-time high. The corporate customer satisfaction survey has seen the ratings go up at an average of 4.6 out 5 per centre of This increase can be attributed to the real-time transaction processing tellers now have available, high STP rates, and client empowerment through e-channels. Key process improvement initiatives were introduced, which relate to productivity management and service quality goals. Workshops were held for robotics to automate high volume transaction processing. This project is being piloted in card operations and will be rolled out to other operating areas in the future. The plan is that it will be fully integrated with processes in 2018. In addition, Samba Operations is working with Fintech to build and deploy digital platforms in trade finance, the enterprise payment hub, new treasury platform, and P2P. Samba Operations continues to gain recognition from leading financial institutions for its service delivery. This year, Citibank, JP Morgan and Deutsche Bank presented Samba with straight-through processing awards for its performance in US and Euro cross-border payments. International branch operations have stabilized following the successful implementation of a new core banking platform in Samba Dubai, Qatar, and Samba Global Markets Limited in the Cayman Islands. This new platform establishes a solid base for business growth and expansion in the UAE markets. Our new core Temenos T24 banking platform supports multi-country, multi-channel, and multi-currency capabilities. Samba London operations wound down during the year and branch closure activities took place with no problems.

Some of the main projects and initiatives Samba Operations undertook during the year include: • Cash management operations held workshops and tours so that large corporate clients could get

first-hand experience into the work of operations. The operations team and the Samba quality team visited major customers.

• New trade finance e-learning tools/materials were launches for the first time to educate and enhance staff knowledge.

• The SWIFT system was upgraded and strengthened, particularly with regard to access controls and inactive relationships. This was carried out in response to reports of hacking attempts on SWIFT protocols.

• A new set of due diligence forms for high risk country transfers was introduced. These forms need to be completed by the client and the Samba relationship manager.

• Markitwire was set up for electronic deal matching and clearing through the London Clearing House, in accordance with EMIR regulations.

Samba Bank Limited Pakistan Samba Bank Limited (SBL) in Pakistan continued to face increasingly tough competition from the other financial institutions that are also striving for growth in this market. Shrinking spreads were another concern. Despite these challenges, SBL posted annual profit before tax of PKR 931mn, slightly higher than in 2016. The bank continues to strengthen its earning assets, and its assets base currently stands at PKR 116.9bn, a rise of 13.8% over last year. Corporate and Investment Banking Group Growth in loans, deposits, and new client acquisition was encouraging. Gross loans increased by 22%, a record high. SBL continued to deepen its service and delivery levels, and the cash management team is continuing to increase SBL’s reach by adding more clients and products. A leading technological platform will be in place by 1HY18, allowing further expansion and business growth. The Investment Banking Group won SBL’s first ever debt syndication mandate and successfully closed its first Sukuk transaction. Retail Banking Group The deposit book recorded growth of nearly 15%, while the group continued to focus on increasing the current account portfolio, resulting in growth in fee and commission income. Major contributors included the cross-sale of Banc Assurance products and higher FX and transactional charges-related income. Solicitation of the Hajj Group Operators Business in Pakistan in coordination with Samba Financial Group also proved to be instrumental towards non funded income of the Group. SBL also ventured into the consumer assets business by launching the Personal Installment Loan and we extended our digital presence with the launch of a new website and Facebook page.



Business Review 18

Global Markets The financial markets witnessed heightened volatility amid political uncertainty, however, net interest income increased by 22% over last year. Total revenue remained unchanged, while profit before tax was up 5% over 2017. Dividend income recorded a growth of 22% during the year. Global Markets increased its business by diversifying into corporate bond instruments and the introduction of a margin trading product. FX sales witnessed decent growth in client volumes and revenue. Commercial Banking Group and Small & Medium Enterprises Banking The reach of the Commercial Banking Group was expanded in Lahore, Karachi, and Faisalabad. Its diversified and high-yielding portfolio recorded a growth of 131% during the year. The SME business has also registered a growth in advances of around 600% during the year. This is a new lending initiative, aimed at catering to the financial needs of SMEs. SBL plans to continue to increase its capacity in this lucrative market. Information Technology During 2017, SBL successfully implemented the new core banking system, Temenos T24, together with all allied systems. SBL is now able to serve its customers better with faster turn-around times. SBL is exploring new digital banking options and features to offer customers. Credit Rating JCR-VIS, a premier credit rating agency, has reaffirmed SBL’s medium to long-term credit rating at AA (Double A) and the short-term rating at A-1 (A-One). These long and short-term ratings respectively are indicative of the bank’s high credit quality, moderate risk factors, record of timely payments, and excellent liquidity. Future Outlook FDI inflows for Pakistan have risen, indicating growing confidence in the economy. Progress on CPEC-related projects will be instrumental in managing the overall balance of payments deficit. SBL is doing its part to uphold Samba’s highly respected brand image by offering high quality services in project financing, trade financing, private and investment banking, and other innovative products. Samba Dubai Samba Dubai offers a full range of consumer and corporate banking, trade finance, and treasury services for individuals and companies. Corporate Banking The Corporate Banking Division offers a wide array of financing solutions aimed at large corporates, covering both the private and public sectors and a broad range of economic and industry segments. The strength of our balance sheet, coupled with our structuring expertise and customized solution-based approach, underpins our ongoing ability to price risk competitively. In 2017, CBG continued to strengthen its relationships and expand its support to key clients, catering for both their domestic and international financing requirements. Service excellence and client responsiveness are the building blocks of our business. Our CBG liabilities management team meets the needs of small and medium-sized enterprises as well as large corporates. During 2017, we continued to expand our customer base and provided clients with the highest levels of personalized global transaction services.

Consumer Banking The Consumer Banking Division offers a full suite of banking products, including credit cards, personal finance, liability, and wealth management. Through Samba Gold and Samba Diamond, Samba Dubai provides personalized wealth management services to its high net worth customers. With our new core banking platform now in place, the customer experience has been vastly improved by Samba’s improved state-of-the-art IVR, call centre, CRM system, and new website. To meet the growing needs of our target segment, Samba launched the Supercharged Titanium Credit Card, which offers customers a competitive value proposition to save on their everyday purchases. We further enhanced our credit cards by providing ongoing merchant offers through high quality brand alliances and a dedicated marketing mobile app that offers customers over 1000 partner discounts and 0% installment plans for purchases. Treasury Samba Dubai Treasury is a fully-fledged treasury that provides innovative structured products and tailor-made solutions to corporate and retail customers. In 2017, the Treasury Division focused on interest rate risk positioning against a backdrop of rising interest rates and a flattening yield curve, while ensuring that the bank meets all regulatory requirements related to the liquidity and stability of its funds structure. The treasury sales desk was active in the derivatives secondary market during the year. Samba Qatar Samba was the first Saudi bank to establish a presence in Qatar. Licensed by the QFCRA, it provides its customers with world-class services across a full spectrum of corporate and investment banking, private banking, trade finance, and treasury services for large corporate and high net worth clients. Samba Qatar faced a challenging operating environment in 2017 because of the volatile geo-political situation in the region. Despite this challenging backdrop, the branch continued to perform strongly by following a prudent business strategy. As in 2016, the Samba Qatar experienced no credit losses, a testimony to its prudent risk management practices. In 2017 Samba Qatar successfully migrated to the best-of-breed, industry-leading Temenos T24 core banking platform. Samba’s longstanding expertise in structuring and pricing risk has helped the branch to maintain a very healthy loan portfolio, characterized by excellent quality and growth.



Business Review 19

The board of directors and management of Samba Financial Group strongly uphold the highest standards of corporate governance and believe firmly that good corporate governance is vital to the continuous growth of the group. The board and management team are committed to uncompromised integrity and performance, and to delivering long-term sustainability and economic value for shareholders and stakeholders. The board is dedicated to ensuring that the highest standards of corporate governance are observed. It is important that all aspects of Samba’s business are conducted in a transparent and responsible manner, with full accountability and integrity. The objective is to safeguard shareholders’ investments and, ultimately, to enhance their value. The board is responsible for the overall governance of Samba, ensuring the strategic guidance and succession plan of the group, the effective monitoring of management goals, accountability to the group and shareholders, and ensuring that the group’s internal controls, risk management, and reporting procedures are well in place and functioning as they should. Board members exercise due diligence and care in discharging their duties, ensuring that high ethical standards are achieved through compliance with the relevant rules, regulations, directives, guidelines, and best practices in the industry. The board members apply high ethical standards in their decision-making process, taking into account the interests of all stakeholders. The board consists of ten members, all of whom are non-executive directors. There are six independent directors, in line with Capital Market Authority (CMA) corporate governance regulations. The present composition complies with composition requirements for both SAMA and CMA regulations. In view of the size of Samba Group and its business complexity, the size of the board is optimum for effective deliberations and efficient conduct at board meetings. The directors do not engage in the day-to-day management of the group. This means that they can discharge their duties and responsibilities effectively and avoid any conflict of interest situations. The directors also provide independent and objective assessments and advice in the deliberations of the board and ensure that there are effective checks and balances in its functioning. The Samba board ensures that it is made up of individuals whose backgrounds reflect the diversity required for the board. Each director contributes to the board’s overall diversity by providing a different perspective, professional experience, and background, as well as other characteristics, such as global and international business experience. In reviewing and assessing suitable candidates for the board and in performing annual assessments on each director, the board and Nomination and Remuneration Committee (NRC) are guided by the diversification requirements. During the year, the NRC performed annual assessments and independence assessments on all individual directors to ensure that they meet relevant regulatory requirements and internal policies. The NRC also annually assesses the performance of the board and its members.

The chairman leads the board and sets its tone. Mr. Eisa Al-Eisa, the chairman of Samba Financial Group, is widely acclaimed both domestically and internationally as a banking grandmaster. He has received numerous awards for his achievements as a banker, managing director and CEO, and business leader, and in recognition of his signi¬ficant contributions to the banking and fi¬nance industries, both locally and abroad. As chairman, he is responsible for the effective organization and conduct of the board’s affairs. He builds and maintains an effective working relationship with the group’s management, encourages all board members to contribute, and represents the bank to shareholders and the wider community. The board meets regularly, as scheduled by the chairman of the board in conjunction with the corporate secretary. Board meetings for subsequent financial years are scheduled before the end of the current financial year to enable the directors to schedule them in. Board members are given the agenda and relevant documents in advance of each board meeting so that they can prepare and request any clarification needed ahead of the meeting date. Urgent papers may be presented for tabling at the board meetings under supplemental agenda. At its meetings, the board reviews management reports on the business performance of Samba and its subsidiaries, and reviews, inter-alia, the results compared to the preceding period, year-to-date, and against the industry. As part of the integrated risk management initiatives, the board reviews the decisions and salient issues deliberated by the various board and management committees by receiving their updates and reports. The board members also review and evaluate the feasibility of business propositions and corporate proposals, the principal risks that would have a significant impact on Samba’s business, and the measures to mitigate such risks. The directors have a duty to make an immediate declaration to the board if they have any interests in transactions to be entered into directly or indirectly with Samba Financial Group. The corporate secretary attends all board meetings and ensures that accurate and adequate records of the proceedings of board meetings and decisions made are properly kept. Minutes of board meetings are circulated to all directors for review prior to their confirmation. The board has direct access to senior management and full and unrestricted access to any information relating to Samba’s operations in the discharge of its duties. The directors are regularly updated on the new statutory and regulatory requirements relating to directors’ duties and responsibilities and the discharge of their duties as directors of Samba.

Corporate Governance


Corporate Governance 20

Board committees The board has established several board committees, the composition and terms of reference of which are in accordance with the regulatory requirements and best practices of corporate governance. The functions and terms of reference of the board committees and the authority delegated by the board to these committees are clearly defined by the board. Samba currently has five board committees: strategy, executive, audit, nomination and remuneration, and risk management. All of these committees operate according to SAMA and CMA guidelines. Strategy committee: Reviews Samba’s strategy, submitted by senior management, approves it, and oversees its implementation and performance. Executive committee: Deals with matters referred to it by the board or its chairman, within the powers determined for it by the board. Audit committee: Helps the board to monitor the financial reporting and internal control systems, controls the work of the external and internal auditors, reviews the interim and annual financial statements, monitors the accounting policy in force, and reviews compliance with regulations. Nomination and remuneration committee: Helps to identify skill requirements for membership of the board and review the board and its structure. It is also responsible for establishing and reviewing Samba’s compensation policies regarding rewards and employee retention incentives. Risk management committee: Oversees the implementation of Samba’s risk management policies and reviews management’s periodic reports on risk management activities. Together with good corporate governance practices, Samba is committed to providing stakeholders with comprehensive, accurate, and quality information on a timely basis. It provides clear, comprehensive, and timely information through several readily accessible channels, including direct communication with shareholders, publication of relevant group information on the website and major newspapers, as well as “Tadawul”. Shareholders are encouraged to attend the annual general meeting (AGM) and any general shareholder meetings, at which they are able to raise questions or concerns. These meetings also give shareholders the ability to speak directly to the board. Samba provides notices of any general meeting of the shareholders and related information to shareholders before the meeting, unless otherwise required by laws. The outcome of the AGM is announced through “Tadawul”. Samba’s board, management team, and auditors are present at the AGM to answer shareholder questions or concerns. The board of directors recognizes the importance of an effective corporate governance framework to the sustainable profitability and strong asset quality of the group, which in turn enhances the group’s value to its shareholders.

Corporate Governance continued


Corporate Governance 21

BEST

CO

RP

OR

ATE

BANK SITE • MIDDLE

EA

ST • 2017

Best Integrated Corporate Bank Site in the Middle East 2017

The board of directors of Samba Financial Group is pleased to present its annual report for the year ended 31 December 2017. 1. Principal activities Since its incorporation as a joint stock company, Samba Financial Group has strived to reach the highest levels of growth and prosperity by providing distinctive banking services that keep pace with economic growth in the Kingdom and customer aspirations. Today, the group is one of the Kingdom’s largest financial institutions, with high international ratings. The group remains committed to providing high quality, innovative, and industry-leading banking services so that our customers benefit from the highest levels of convenience and confidence. The group also provides world-class investment services through its investment arm, SambaCapital, a wholly owned subsidiary that is licensed by the Capital Market Authority (CMA) in Saudi Arabia. Underpinned by sound economic principles and supported by experience, expertise, and research, the group has consistently expanded the range of products and services customers receive. It provides a full range of conventional banking products, including loans, trade finance, cash management, personal finance, credit cards, and treasury products, to customer segments ranging from individuals and companies to institutions and agencies of all sizes. The group also excels in Islamic banking. It offers a full suite of Shariah-compliant banking products, which are approved by the Shariah Supervisory Board of the Islamic banking services of Samba, the activities of which are managed independently. The group is keen to promote its brand, communicate with its customers, and actively seek out their comments and feedback through electronic means and social networking sites Samba is organized into the following four main business segments: Consumer Banking: offers services to individual customers, including time deposits; current, call, and savings accounts; credit cards, consumer and home mortgage loans; and fast money transfer services (SpeedCash). Corporate Banking: offers services to corporate and institutional customers, including corporate time deposits; current and call accounts; overdrafts; loans; and other credit facilities. Treasury: principally manages money market, foreign exchange, commission rate trading, and derivatives for corporate and institutional customers and high net worth individuals. It is also responsible for funding the group’s operations, maintaining liquidity, and managing the group’s statement of financial position. Investment Banking (SambaCapital): deals in investment management services, such as brokerage, mutual funds, asset management activities, and corporate finance and investment banking services related to dealing, managing, arranging, advisory services, and custody businesses. Samba’s primary business is conducted through its head office in Riyadh. The group has 73 branches, 28 SpeedCash centres, and 21 centres for ladies’ banking all over the Kingdom, bringing the total number of banking service outlets to 122 in addition to overseas branches in London, Dubai, and Qatar. Samba has a majority shareholding of 84.51% in Samba Bank Limited, a banking company incorporated in Pakistan that conducts commercial banking and related services through its 37 branches. Samba Bank Limited is listed on Pakistan’s stock exchange. In line with the Kingdom’s Vision 2030, a main objective of which is to increase the contribution of small and medium-sized enterprises to GDP, the group is interested in this sector of companies. The local corporate banking division caters to the SME banking needs in Saudi Arabia and this division has developed a special credit program to meet the specific market requirements of all business sectors. This division achieving significant growth in revenues and assets during the year, with no credit losses.

This is a testament to prudent risk management practices, which surmounted the general economic slowdown and unfavorable market conditions. The local corporate banking division contributed significantly to the growth of the group’s investment portfolio. This division currently has 84 staff members at Samba’s head office and regional offices. The retail banking group provides services to, and meets the needs of, micro businesses through a specialized unit that is dedicated to meeting the needs of these customers. Samba Financial Group continues to support and promote this sector through its innovative programs and services. Samba has held training courses and workshops covering 245 training days for employees and 104 training days for its SME clients. In addition to promoting and supporting the Kafala program, Samba has met with and provided staff training to the Agricultural Development Fund and the Saudi Export Program. The details of loans to this sector are as follows. SR’000 Micro Small Medium Total 2016 2017 2016 2017 2016 2017 2016 2017

Micro, small and medium enterprises loans

- on the balance sheet 334 347 436,311 194,019 1,375,195 1,332,722 1,811,841 1,527,088


- off-balance sheet (nominal value) - - 160,560 160,273 1,946,071 1,802,406 2,106,631 1,962,679


- on the balance sheet as a percentage (%)

of total loans in the balance sheet - - 0.35% 0.16% 1.10% 1.13% 1.45% 1.30%


- on the balance sheet as a percentage (%)

of total loans - - 0.34% 0.36% 4.16% 4.03% 4.50% 4.38%

Number of loans

(both on and off the balance sheet) 1 1 157 155 449 436 607 592

Number of loan customers

(both on and off the balance sheet) 1 1 153 105 445 193 599 299

Number of secured loans in Kafala program

(both on and off the balance sheet) - - 41 42 - - 41 42

Value of secured loans in Kafala program

(both on and off the balance sheet) - - 17,633 23,528 - - 17,633 23,528

According to the SAMA definition, micro businesses are companies with revenues up to SR 3 million, small-sized companies are those with revenues ranging from SR 3 to SR 40 million, and medium-sized companies are those with revenues ranging from SR 40 to SR 200 million 2. Financial performance, operations review and financial results After a weaker performance in 2016, the global economy is expected to be on track for steady growth in the current year, although with higher risks from heightened political and policy uncertainty. Both the UK and Eurozone appear to be coping well with the shock of Brexit, suggesting that growth will be seen this year. The US is set to continue posting a modest growth, although with a new political administration in control, investors eagerly await new policy-making in anticipation of a fiscal stimulus to promote higher growth, inflation, and interest rates. Importantly, emerging markets have started to revive, supported by stronger commodity prices and stimulus policies. China appears to be having the desired effect, with some concerns remaining over continuing imbalances in the economy. The heavily leveraged emerging markets also appear vulnerable to the protectionist policies of the new US administration and the stronger US dollar, and there is the expectation of capital outflows to the US as the result of rising interest rates. Oil prices have so far had little impact on the strengthening US dollar, with markets focusing on the supply side following OPEC and non-OPEC members’ decision to make production cuts. Higher prices are expected in the near to medium term.

Directors’ Report


Directors’ Report 22



SAUDI ARABIA

Samba’s primary business is conducted through its head office in Riyadh. The Group also has 73 branches,

28 SpeedCash centers, 21 centers for ladies’ banking outlets all over the Kingdom bringing the total number of banking service

outlets to 122. 122

Service outlets

2. Financial performance, operations review and financial results (continued) Notwithstanding the recent rebalancing of markets and recovery in oil prices, the Saudi authorities have continued to focus on fiscal consolidation, supported by a mix of domestic and external debt issuance, the rationalizing of public spending and the implementation of other prudent austerity measures, and the development of control measures. These wide-ranging efforts have had the desired effect and pressures on the Saudi economy appear to have faded. The current account is ready to return to surplus, which means that pressure on the exchange rate peg will continue to abate. The National Transformation Plan and Vision 2030 together provide an ample framework for an increased contribution from the non-oil sector and are expected to support a balanced budget for the country by 2020. The banking sector in the Kingdom remains sound and well capitalized, reinforced by strong fundamentals. Although we foresee continued tightening of liquidity in 2018, the overall balance sheets of the groups will withstand the downturn, thanks to strong asset quality, sufficient capital adequacy, and robust profitability. Against a weak economic backdrop, Samba has successfully achieved good returns for shareholders by overcoming the overall macro impediments. Guided by a prudent strategy, the group has raised its levels of performance, thereby ensuring an enhanced level of customer service and financial stability. The group has achieved excellent financial results, with a strong net income of more than SR 5 billion thanks to 16.5% growth in the Net Special Commission Income over last year. Total operating income for the year stood at SR 7,892 million. The operating expenses remained well under control during the year at 1%. On the balance sheet, Samba has shifted its focus to consolidation and the protection of asset quality, given the increasing volatility in the markets. Both investment and loan portfolios have been closely reviewed and focus placed on the risk management process to avoid any credit or impairment cost for the group. The portfolio of loans and advances and investments closed at SR 117.7 billion and SR 63.9 billion respectively. Deposits amounted to SAR 168 billion, giving rise to one of the most liquid balance sheets in the Saudi banking sector and placing the group in an ideal position to take advantage of future growth opportunities. Total assets amounted to SR 227.6 billion by the end of 2017 and total shareholder equity reached SAR 44.6 billion, with an increase of 5% over last year. The group’s balance sheet is well protected by a strong capital base, with total capital adequacy ratios of 21.1% by the end of 2017.

Ratings and recognition: Samba was successful in maintaining its leadership position during 2017 with the best set credit ratings from the major international rating agencies. It continues to enjoy the distinction of being the most highly rated bank in Saudi Arabia. Our long-term ratings have been endorsed by international agencies, including Moody’s (A1), Capital Intelligence (A+), and Fitch (A-) with a stable outlook. These ratings from all major international agencies are a testament to the strength of the group’s financial position, outstanding levels of liquidity, sustainable profitability, high quality assets, and capital adequacy, despite the challenges the world banking and financial sector has faced. The agencies have also commended Samba’s resilience and ability to cope with financial crises, thanks to our strong franchise and excellent financial position. These strengths have helped us to avoid the worst of the most recent crisis. In 2017, Samba won several international, regional, and local awards, sealing its reputation as the most highly regarded financial institution in the Middle East. Global Finance named Samba “best bank in Saudi Arabia” for the twelfth year in a row, “best bank for payments and collections in the Middle East” for the third time in a row, “best foreign exchange provider in Saudi Arabia” for the ninth time, “best Islamic financial institution for large corporates”, “best Islamic investment bank”, “best corporate/institutional digital bank in Saudi Arabia”, “best trade finance services in the Middle East”, and “best integrated corporate bank site in the Middle East”. The Asian Banker named Samba “strongest bank in the Middle East”, and “strongest bank in Saudi Arabia”. Additionally, Samba was awarded “Excellence in Client Solutions” by the American Economic Institute. In The Banker’s list of the top 1000 world bank rankings, Samba ranked 119th globally and sixth in the Middle East. Samba’s efforts in the investment services sector were recognized globally with several awards for its investment arm, Samba Capital, including “best investment company in the Middle East” and “best investment company in Saudi Arabia” by Global Finance. Samba Capital received also the following accolades from EMEA Finance: “best structured finance house in the Middle East”, “best refinancing in EMEA: Rabigh1 IPP’s US$1.8bn and SAR facilities”, “best refinancing in the Middle East: Dhuruma Electricity’s US$1.138bn conventional and Islamic facilities”, best “IPO in the Middle East: Middle East Healthcare Company”, “best syndicated loan house in the Middle East”, and “best syndicated loan in the Middle East: DP World’s US2$bn loan”. Financial results for Samba business sectors are summarized below:

(SR’MM) Consumer Corporate Treasury Investment Total 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 Difference Total revenues 2,789 2,773 2,776 2,998 1,606 1,667 589 454 7,761 7,892 2% Total expenses 1,625 1,625 616 637 130 131 183 187 2,555 2,580 1% Net income 1,015 1,009 2,109 2,213 1,476 1,536 406 266 5,006 5,024 0.40% Total assets 35,982 33,446 105,514 100,998 89,903 92,996 90 171 231,489 227,611 -2% Total liabilities 98,867 92,160 77,580 81,293 12,395 9,357 102 119 188,944 182,929 -3%

Directors’ Report continued



PAKISTAN

Growth in loans, deposits, and new client acquisition was encouraging. Gross loans increased by 22%, a record high.

SBL continued to deepen its service and delivery levels, and the cash management team is continuing to increase SBL’s reach by

adding more clients and products.



The contributions from revenues, expenses, and net income are as follows:

The growth of assets and liabilities with respect to consumer, corporate, and treasury business is as follows:

The five-year summary financial results of Samba are as follows: SR’ MM 2013 2014 2015 2016 2017 Investments, net 60,341 64,516 69,952 51,393 63,912 Loans and advances, net 113,455 124,079 130,001 125,234 117,685 Total assets 205.037 217,399 235,243 231,489 227,611 Customer deposits 158,337 163,795 171,805 172,076 167,988 Total equity 34,931 38,912 40,360 42,781 44,583 Total operating income 7,001 7,385 7,755 7,761 7,892 Total operating expenses 2,137 2,233 2,398 2,555 2,580 Net income 4,510 5,010 5,214 5,006 5,024 Growth of Financial Position

3. Geographical analysis of turnover Samba’s 2017 total revenue of SR 7,892 million is largely the result of its activities in Saudi Arabia, which account for SR 7,529 million. The regional distribution of revenue is as follows: Central region 73.2%, Western region 14.6%, and Eastern region 12.1%. Central region’s revenues include revenues relating to investment and treasury activities that are not connected to a specific geographical region in Saudi Arabia. The revenues from overseas operations are SR 363 million and are distributed as follows: GCC (excluding Saudi Arabia) SR 252 million, Europe SR 2 million, and South Asia SR 109 million. 4. Future plans The group recognizes that consolidating its leading position within the banking industry, both locally and regionally, and its serious efforts to achieve its long-term strategic vision of transforming itself into a leading banking model, require sustainable commitment. Our ongoing commitment has resulted in the provision of full range of high quality banking products and financial services, giving customers a distinct banking experience that more than fulfils their expectations and makes the group an ideal banking option. In pursuit of our vision, the group adopts the best professional practices and builds effective development plans to achieve harmony between achieving its aspirations to meet growing customer needs, and seizing the best investment opportunities consistent with its risk management policy and profitability goals. The group also developed a balanced and prudent strategy aimed at deepening stability and enhancing the strength of its capital base. This strategy allows for the short and long-term challenges facing the financial market. The group’s approach is reflected positively in its performance and has helped to protect it from the recent challenges and difficulties the global financial markets have recently experienced. The group’s strategy is largely based on expanding all segments of its customer base, relentlessly pursuing added value products that meet customer aspirations, promoting investment in alternative banking channels that embody the future of the banking industry, expanding its local and regional presence, efficiently contributing to local community development, and deepening its commitment to social responsibility. To achieve these strategic goals, the group has gone a long way to nationalize its jobs and qualifications. The group has attracted and trained young Saudis, qualifying a generation in national banking competencies and developing their skills through training programs that will enable the group to meet its future needs for talented and promising banking leaders. To support both conventional and Islamic banking activities, the group adopted a methodology to develop its business base by upgrading its branch network and alternative banking channels, acquiring state-of-the-art automated teller machines (ATMs) and point of sale (POS) equipment, in keeping with evolving banking industry standards and smart and innovative applications.




26663

7

2017 Business Performance

Consumer

Revenues Expenses Net income

Corporate Treasury Investment

2,77

3

1,62

5

1,00

9

2,99

8

2,21

3

1,66

7

131 1,

536

454

187

34,4

46

35,9

82

Assets

Consumer

2016 2017

Corporate Treasury

105,

514

100,

998

89,9

03

92,9

96

48161

6

2016 Business Performance

Consumer

Revenues Expenses Net income

Corporate Treasury Investment

2,78

9

1,62

5

1,01

5

2,77

6

2,10

9

1,60

6

130 1,

476

681

200

92,1

60

98,8

67Liabilities

Consumer

2016 2017

Corporate Treasury

77,5

80

81,2

93

12,3

95

9,35

7

100000

150000

200000

250000

2013 2014 2015 2016 2017

Balance Sheet Growth SAR Million

Total Assets

Customer Deposits

Loans and Advances

DUBAI

The Consumer Banking Division offers a full suite of banking products, including credit cards, personal finance, liability, and

wealth management. Through Samba Gold and Samba Diamond, Samba Dubai provides personalized wealth management services to

its high net worth customers.



4. Future plans (continued) In line with its strategy of geographical expansion and broadening its customer base, the group opened its first branch in the Qatari capital of Doha in 2010, becoming the first Saudi bank to establish a presence in the State of Qatar. The Qatar Financial Centre Authority (QFCA) licensed Samba as a Category One financial institution, authorizing it to conduct financial activities within the Qatar Finance Centre (QFC), including taking deposits; dealing in investments; arranging deals in investments; providing credit facilities; arranging credit facilities; providing custody services; managing investments, and advising on conventional and Islamic investments. Prior to the Doha opening, Samba launched its operations in Dubai in 2008, where it provides a full range of banking services in the UAE. Samba was the first Saudi bank to establish a branch in the country. Our services in Dubai include consumer, corporate, and private banking, as well as investment advice. In London, work is underway in the final stages to close this branch as its operations are no longer consistent with the business strategy of the group. Samba has notified the British PRA and Financial Conduct Facility (FCA) of its intentions. The closure process will be conducted according to the regulatory rules in the United Kingdom. The financial impact of this closure will not be material to the overall operations of the group. In another international move, Samba acquired a majority stake in Crescent Commercial Bank in Pakistan. It was rebranded Samba Bank Limited and its number of branches has grown to 37, which are distributed across the major cities Pakistan. These expansions are part of Samba’s medium and longer-term growth strategy. After strengthening our position in the domestic market, we moved to expand Samba’s presence internationally. We will continue to monitor growth opportunities in promising markets so that we can continue to diversify geographically and enhance returns to our shareholders, foster profitability, and enhance Samba’s reputation and position.

5. Risk management The group recognizes the importance of having a clear and comprehensive methodology and carefully designed programs for risk management. In line with the best international practices, the group closely focuses on the risks that could affect the group business. The board of directors has developed and approved a general framework for risk governance, which is subject to the supervision of the executive and risk committees, emanating from the board. The framework includes risk policies, basis of capital evaluations, ways of identifying and measuring risks, and appropriate limits commensurate with the group’s acceptable risk management processes. It also includes guidelines for controlling and monitoring compliance within the approved limits, control methods for risk management in general, and internal control guidelines, information technology, and rules of information security. Senior management committees and independent regulatory functions within the group oversee the implementation of the tasks relating to risk management. Listed below are the main risks associated with the business of the group: Credit risk Credit risk is the risk that a customer, guarantor, or counterparty will fail to discharge its financial obligation to the group relating to any financial instrument and will cause the group to incur a financial loss. Market risk Market risk is the risk that the fair value or future cash flows of the financial instruments will fluctuate as the result of changes in market variables, such as special commission rates, foreign exchange rates, equity prices, and commodity rates. Liquidity risk Liquidity risk is the risk that the group will be unable to meet its net funding requirements. Liquidity risk can be caused by market disruptions or credit downgrades, which may cause certain sources of funding to be less readily available. Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and technology systems and/or devices. Notes 28-31 of the accompanying audited consolidated financial statements and quantitative and qualitative disclosures under Pillar 3 of the Basel Committee recommendations, published on the group’s website, include more details on the main risks the group faces, together with the measures to mitigate those risks.






QATAR

Samba’s longstanding expertise in structuring and pricing risk has helped the branch to maintain a very healthy loan portfolio,

characterized by excellent quality and growth.

6. Corporate social responsibility The group continued its efforts to deepen its community membership and fulfill its national responsibilities by launching more development initiatives that highlight the group’s role as a leading partner, one that is keen to contribute to the development of the community and improve the lives of its members. The group’s contributions extended to more than one level and took into consideration the focus on sectors that are most relevant to the needs of the members of the community and have the potential to stimulate development and positive change in the Kingdom. Samba allocated SAR 37 million in the fiscal year 2017 as donations and contributions to social programs. In 2017, Samba continued to adopt various community programs and initiatives that support sustainable development as a platform for guiding the group’s socially responsibility efforts. These efforts are in line with the principle of social solidarity, which is a key value underlying Samba’s humanitarian mission and contribution to society. In pursuit of its community service strategy, Samba boosted its role as a trusted partner, sponsored several social, humanitarian, charitable, and development institutions in the Kingdom, and provided extensive support for a wide variety of community and charitable programs and activities. Below is a list of the main social activities and services the group supported during 2017: • Housing support program: Samba launched an initiative to support housing in the Kingdom, which

has been received positively. This leading community-based project includes the provision of 500 furnished housing units over the next five years. These will go to needy families in various Kingdom regions and help to give them a decent and more stable life. Samba is working in collaboration with the Ministry of Housing, where Samba spent SAR 8.150 million during the year 2017. The program has benefited about 400 citizens and citizenship since its inception.

• Samba’s education support program: Samba’s attention to “education, training and employment”

forms the cornerstone of its community service programs. This program reflects the group’s the belief that investing in Saudi Arabia’s people and developing their knowledge and professional capabilities will lead to the greater prosperity of the community. Samba has developed a list of programs that are designed to attract fresh young Saudi graduates and prepare a new generation of national talent and leadership. In 2017, SAR 3.4 million was dedicated to helping Samba establish promising partnerships with several academic and university institutions to support the education sector and developing its output. Samba participated actively in the career days these institutions hosted, both locally and internationally. This included sponsoring career days at the Institute of Public Administration and King Fahd University of Petroleum and Minerals.

• Samba’s program to support needy families: This program includes a wide range of in-kind and financial assistance worth SAR 5.7 which was used to support and develop the humanitarian and social role of a long list of charities and social institutions. The program reflects Samba’s commitment to community service and its close attention and interaction with local community issues and requirements.

• Health care program: Health care continued to be an important part of Samba’s community-based

initiatives. The group’s contributions reached SR 1.66 million during the year to improve quality of care standards and overcome health challenges. Awareness efforts were aimed at achieving a healthy society free of the epidemics that threaten the safety of community members. Samba’s contributions supported the care programs of therapeutic and rehabilitation institutions, such as King Salman Center for Disability Research, Disabled Children’s Association, Down Syndrome Society, Zahrat Breast Cancer Society, Saudi Cancer Society, and the Society for Support of Turbulence, Hyperactivity and Attention Disorder.

• SME support program: As a leader in the Saudi banking and financial sector, Samba recognizes the

importance of small and medium-size enterprises (SMEs) to the health and development of the national economy. Samba’s contribution to the SME financing program (Kafala) helps to support business start-ups and the owners of SMEs. Samba is working within the framework of this program, which has state support, to provide the financing and advisory solutions needed to improve the underlying environment for this sector, stimulate its performance, and expand its contribution to the landscape and competitiveness of the national economy.

• Samba launched an advanced program to raise awareness of the rules of sound financial conduct.

This program is aimed at families, to teach them about the best ways of controlling expenses, managing the family budget, and encouraging saving and investing as an alternative to consumer trends that deplete family savings and incomes.




7. Board of Directors The board of Samba Financial Group is composed of 10 directors, categorized according to the guidelines of Saudi Arabian Corporate Governance Regulations, articles 1 and 20, issued by the Capital Market Authority. The board is composed as follows: Mr. Eisa M. Al Eisa (chairman – non-executive), Mr. Ahmed M. Al-Omran (non-executive), Mr. Ali H. Alireza (non-executive), Mr. Khaled A. Al Abdulkareem (independent), Mr. Fahd I. Almufarrij (independent), Mr. Fahad H. AlSedairy (independent), Mr. Abdullah A. AlRowais (independent), Mr. Alaa M. AlHarthi (independent), Engineer Mousa A. AlRubaian (non-executive) and Mr. Hamad S. AlQasoumi (non-executive), In accordance with the group’s articles of association, the board of directors is selected by the shareholders of the group for a term of three years. The term of office of the current board of directors began on 20 January 2016. The board held four meetings during the year. The following is the record of attendance: Meeting Attendees 1st meeting / 19 February Mr. Eisa M. Al Eisa, Mr. Ahmed M. Al-Omran, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahd I. Almufarrij, Mr. Fahad H. AlSedairy, Mr. Alaa M. AlHarthi, and Mr. Hamad S. AlQasoumi. 2nd meeting / 11 April Mr. Eisa M. Al Eisa, Engineer Mousa A. AlRubaian, Mr. Ahmed M. Al-Omran, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahd I. Almufarrij, Mr. Fahad H. AlSedairy, Mr. Alaa M. AlHarthi, Mr. Abdullah A. AlRowais, and Mr. Hamad S. AlQasoumi. 3rd meeting / 26 September Mr. Eisa M. Al Eisa, Mr. Ahmed M. Al-Omran, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahd I. Almufarrij, Mr. Fahad H. AlSedairy, Mr. Alaa M. AlHarthi, and Mr. Hamad S. AlQasoumi. 4th meeting / 26 December Mr. Eisa M. Al Eisa, Engineer Mousa A. AlRubaian, Mr. Ahmed M. Al-Omran, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahd I. Almufarrij, Mr. Fahad H. AlSedairy, Mr. Abdullah A. AlRowais, and Mr. Hamad S. AlQasoumi

The significant board of directors committees, their roles, and their current members are as follows: Strategy Committee: The Strategy Committee reviews the strategy proposed by the senior management and main projects, approves it, and oversees its performance and implementation. The Strategy Committee comprises four directors: Messrs. Eisa M. Al Eisa (chairman), Ahmed M. Al-Omran, Mousa A. Al Rubaian, and Hamad S. AlQasoumi It held its meeting during the year. The following is the record of attendance: Meeting Attendees 26 December Mr. Eisa M. Al Eisa, Mr. Ahmed M. Al-Omran, Engineer Mousa A. AlRubaian, and Mr. Hamad S. AlQasoumi. Executive Committee: The Executive Committee deals with matters referred to it by the board or its chairman within the powers determined for it by the board. This committee comprises five directors: Messrs. Eisa M. Al Eisa (chairman), Ali H. Alireza, Khaled A. Al Abdulkareem, Fahad H. AlSedairy, and Alaa M. AlHarth. The committee held six meetings during the year. The following is the record of attendance: Meeting Attendees 1st meeting / 22 January Mr. Eisa M. Al Eisa, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahad H. AlSedairy and Mr. Alaa M. AlHarthi. 2nd meeting / 19 February Mr. Eisa M. Al Eisa, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahad H. AlSedairy and Mr. Alaa M. AlHarthi. 3rd meeting / 11 April Mr. Eisa M. Al Eisa, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahad H. AlSedairy and Mr. Alaa M. AlHarthi. 4th meeting / 12 June Mr. Eisa M. Al Eisa, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahad H. AlSedairy and Mr. Alaa M. AlHarthi. 5th meeting / 15 September Mr. Eisa M. Al Eisa, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahad H. AlSedairy and Mr. Alaa M. AlHarthi. 6th meeting / 25 December Mr. Eisa M. Al Eisa, Mr. Ali H. Alireza, Mr. Khaled A. Al Abdulkareem, Mr. Fahad H. AlSedairy and Mr. Alaa M. AlHarthi. Nominations and Compensations Committee: This committee’s responsibilities include identifying the skills required for membership of the board of directors and preparing a description of the capabilities and qualifications for such membership. The committee conducts annual assessment for the performance of the board and its members using the appropriate assessment forms. The committee is also responsible for establishing and reviewing Samba’s directors and staff compensation policy. The committee comprises three directors, two independent and one non-executive, headed by an independent director: Messrs. Fahad H. AlSedairy, as chairman, and Ali H. Alireza and Fahd I. Almufarrij, as members. The committee held two meetings during the year. The following is the record of attendance: Meeting Attendees 1st meeting / 12 February Mr. Fahad H. AlSedairy, Mr. Ali H. Alireza and Mr. Fahd I. Almufarrij. 2nd meeting / 26 December Mr. Fahad H. AlSedairy, Mr. Ali H. Alireza and Mr. Fahd I. Almufarrij.




7. Board of Directors (continued) In accordance with the group’s articles of association, article 18, the group has a clear policy of compensation and remuneration through which the compensation and remuneration of board members and the group’s executive management have been determined. The compensation policy is in full compliance with SAMA’s regulatory requirements and the international standards of the Financial Stability Forum. In accordance with the established policy, the performance and achievements of key employees should be measured, taking into consideration their financial performance and level of risk management. Samba’s variable compensation is linked to risk adjusted net income after calculating the material current or potential risks to ensure adequacy of the bank’s capital and to reduce future potential risks. Variable compensation of eligible primary employees is paid in cash and shares in three installments, the first of which is awarded after the third year of the grant. The percentage of compensation to be paid in cash or in the form of stock options is determined by the degree of responsibility, the role, and the work of each employee commensurate with his or her ability to carry out supervisory activities or activities involving risk. There are also arrangements for the recovery of bonuses paid in the event of future adverse performance. Samba does not allow for the guarantee of any rewards. Following these measures, Samba has successfully achieved its objectives by calculating the future negative impact of decisions made during the current period. The Nomination and Remuneration Committee oversees the overall design and supervision of the compensation system for both employees and board members. It ensures that the compensation paid to them is consistent with applicable laws and regulations. The committee shall also make recommendations to the board of directors on the level and components of compensation after considering the financial controller’s views and risk management. The committee periodically reviews the implementation of the compensation policy and the achievement of the objectives set in the light of the directives issued by the competent bodies to which periodic reports are submitted. The remuneration for 2017 is in line with the group’s remuneration policy. Directors’ annual remuneration for 2017 totaled SR 4,350 thousand for non-executive members (including independent directors), which complies with SAMA directives relating to annual remunerations for Saudi banks’ board members. Allowances for the non-executive members (including independent directors) stood at SR 440 thousand. Remuneration for non-board audit committee members was SR 120 thousand. Samba paid SR 9,646 thousand in salaries and related benefits to its top six executives, including the GM and the CFO. Samba also paid SR 4,312 thousand in allowances, SR 20,200 thousand in annual rewards, and SR 2,220 thousand in incentive plans. Expenses, including travel and lodging costs, incurred by non-executive directors (including independent directors) totaled SR 80 thousand.

Audit Committee: The Audit Committee helps the board of directors meet its responsibility to monitor Samba’s financial reporting and internal control systems, control the work of the external and internal auditors, review the interim and annual financial statements, review the accounting policy in force, and review compliance with regulations. The internal audit and risk group assesses and reports on the effectiveness of internal control structures across the whole of SFG, and this information is included in internal audit department reports, reflecting a risk-based approach. Risk assessment of business units determines the timeframe for audits during the development of the annual audit plan. While the Audit Committee adopts the audit plan, it also receives all audit reports and reviews quarterly the updates relating to the implementation of the audits, notes resulting from the audits, and corrective actions taken by the relevant business units. Following the successful completion of the 2016 audit plan, the audit committee confirms that SFG’s system of internal control is sound, adequately implemented, and operating effectively. No material or systemic breakdown of the control environment occurred during the year 2017. The Audit Committee comprises three members: Mr. Fahd Al-Mufarrej as chairman, and Messrs. Bader I. Al-Swailem (from outside the board) and Saleh M. AlKhalaf (from outside the board) as members. There were five meetings of the Audit Committee during the year. The following is the record of attendance: Meeting Attendees 1st meeting / 18 January Mr. Fahd I. Almufarrij, Mr. Bader I. Al-Swailem and Mr. Saleh M. AlKhalaf 2nd meeting / 18 January Mr. Fahd I. Almufarrij, Mr. Bader I. Al-Swailem and Mr. Saleh M. AlKhalaf 3rd meeting / 18 April Mr. Fahd I. Almufarrij, Mr. Bader I. Al-Swailem and Mr. Saleh M. AlKhalaf 4th meeting / 20 June Mr. Fahd I. Almufarrij, Mr. Bader I. Al-Swailem and Mr. Saleh M. AlKhalaf 5th meeting / 17 October Mr. Fahd I. Almufarrij and Mr. Bader I. Al-Swailem Risk Committee: The purpose of the Risk Committee is to help the board oversee the group-wide risk management framework by following up on various risk management operations, including those relating to credit and information security. It ensures that the established internal control framework is in line with the strategy and objectives of risk management. The committee comprises three directors: Mr. Khaled A. Al Abdulkareem as chairman, and Messrs. Abdullah A. AlRowais and Alaa M. AlHarthi as members. The committee held three meetings during the year. The following is the record of attendance: Meeting Attendees 1st meeting / 11 April Mr. Khaled A. Al Abdulkareem and Mr. Alaa M. AlHarthi and Mr. Abdullah A. AlRowais 2nd meeting / 25 September Mr. Khaled A. Al Abdulkareem, Mr. Alaa M. AlHarthi and Mr. Abdullah A. AlRowais 3rd meeting / 26 December Mr. Khaled A. Al Abdulkareem and Mr. Abdullah A. AlRowais All companies in which the group’s board members are members of their current and former boards of directors or their managers or have direct or indirect ownership or managerial powers and authorities, whether listed or not listed in the financial market, and whether inside or outside the Kingdom as at 31/12/2017 are as follows:







Director Current Companies Previous Companies Ali H. Alireza Alalamiya Cooperative Insurance Co. Gulf One Bank (joint stock company – listed in the Kingdom) (joint stock company – not listed – outside the Kingdom The Arabian Petroleum Supply Company (APSCO) (joint stock company – not listed in the Kingdom) Haj Hussein Alireza & Partners Co. (limited liability company – in the Kingdom) Al Wasila Rent A Car Company (limited liability company – in the Kingdom) National Computer Systems Company (Natcom), (limited liability company – in the Kingdom) Hussein Alireza Sons Co. (limited liability company – in the Kingdom) Mousa A. Al-Rubaian Societé Generale Saudi Arabia Saudi Paper Manufacturing Company (joint stock company – not listed in the Kingdom) (joint stock company –listed in the Kingdom) La Pace Medical Claims Management Cooperative Insurance Company (limited liability company – in the Kingdom) (joint stock company –listed in the Kingdom) Marsh Insurance and Reinsurance Brokers Saudi Export Company (limited liability company – in the Kingdom) (joint stock company –listed in the Kingdom) and Saudi Arabia’s Marche Insurance Consultants Saudi Re (limited liability company – in the Kingdom) (joint stock company – listed in the Kingdom) Dar Mousa Real Estate and Commercial Investment Company Najm Insurance Services Holdings (limited liability company – in the Kingdom) (limited liability company – in the Kingdom) Dar Mousa Consulting (limited liability company – outside the Kingdom) Dar Mousa Holdings (limited liability company – outside the Kingdom) Fahd I. Almufarrij Saudi Printing and Packaging Company (joint stock company –listed in the Kingdom) Khaled A. Al Abdulkareem Saudi Cement Company Gulf Union Cooperative Insurance Company (joint stock company – listed in the Kingdom) (joint stock company – listed in the Kingdom) Al-Abdulkareem Holding (limited liability company – in the Kingdom) Al-Nayzak Engineering Systems International (limited liability company – in the Kingdom) Metsu Plant Saudi Arabia (limited liability company – in the Kingdom) Education Services Company (limited liability company – in the Kingdom) Alaa M. AlHarthi Fanar Marine Service, LLC (limited liability company – outside the Kingdom) Vega Ship Management DMCC (limited liability company – outside the Kingdom) Abdullah A. AlRowais Mobily (joint stock company – listed in the Kingdom) Ahmed M. Al-Omran Saudi Cement Company Saudi Industrial Investment Group (joint stock company – listed in the Kingdom) (joint stock company – listed in the Kingdom) Saudi Electricity Company (joint stock company – listed in the Kingdom) Takamul Company (limited liability company – in the Kingdom) Saudi Energy Procurement Company (limited liability company – in the Kingdom) Fahad H. AlSedairy Saudi Electricity Company for Project Development (limited liability company – in the Kingdom) Dhaweat Telecommunications Company (limited liability company – in the Kingdom)

7. Board of Directors (continued) The following is a summary of the board directors and committee members and their qualifications and experience: Eisa Mohammed Al-Eisa Chairman Mr. Eisa Mohammed Al-Eisa has been the chairman of Samba Financial Group since January 2010. Over 37 years, he advanced his career from junior banker to the chairman of the board of directors of one of the largest and most important financial institutions in the Middle East. Mr. Al-Eisa is one of the financial and banking sector leaders in the Middle East region. His last position was managing director and chief executive officer of Samba Financial Group, where he worked and led its various sectors. Mr. Al-Eisa also played also a prominent role in the development of the financial and banking sector of Saudi Arabia. Al-Eisa is and was a prominent member of several key bodies. He is a member of the advisory board of the Supreme Economic Council, board member of the Technical and Vocational Training Corporation, member of the Investment Committee at the Public Pension Agency, member of the Council of Competition Protection, member of the board of trustees of the American University of Beirut, member of the Supreme Committee for the endowment of King Saud University, member of the board of directors of the Endowment Fund to Support Research and Educational Programs of the King Fahad University of Petroleum and Minerals, vice chairman of Visa International for Eastern & Central Europe, the Middle East and Africa, board member of Saudi Electricity Company, board member of the International Chamber of Commerce, and board member of Saudi Arabian Investment Fund (SAIF). Ali Hussein Alireza (representative of the Public Pension Agency): Mr. Alireza has been a board member of Samba Financial Group since 2004. He is the managing director of Al Haj Hussein Alireza & Partners Co. Ltd. and chairman of the board of directors of the National Computer Systems Company (Natcom), Al Wasila Rent A Car Company Limited, and Alalamiya Cooperative Insurance Company. He is board member of Arabian Petroleum Supply Company (APSCO). Mr. Ali previously held several positions, including chairman of Car Agents Committee in Jeddah and the Chamber of Commerce and Industry for the 15th session. He has also served as member of the commercial committee and the national committee of Jeddah Chamber of Commerce and Industry, member of the national committee for cars at the Saudi Chamber of Commerce and Industry, board member of Makkah region, chairman of the board of directors of Ford Middle East, and Gulf One Bank in Bahrain. He holds an MBA degree from the University of Southern California. Mousa AbdulKareem AlRubaian Engineer Mousa AbdulKareem AlRubaian has been a board member of Samba Financial Group since 2016. He is the president of Dar Mousa Consultancy and Dar Mousa Real Estate and Commercial Investment Company. He is a board member of Saudi Société Générale, La Pace Medical Claims Management, Marche Insurance and Reinsurance Brokers, and Saudi Arabia’s Marche Insurance Consultants. Eng. Mousa previously held several positions, including board member and CEO of the Cooperative Insurance Company, board member of Saudi Paper Manufacturing Company, Saudi Export Company, Najm Insurance Services, and president of Dar Musa Insurance Consulting Company. He holds a bachelor’s degree in electrical engineering from the University of Petroleum and Minerals. He completed a management course at Harvard Business School and a financial analysis course from Chase Manhattan Bank in New York.

Khalid Abdulrahman Al-Abdulkareem Mr. Al-Abdulkareem has been a board member of Samba Financial Group since 2010. Mr. Khalid is the CEO of Al-Abdulkareem Holding and Al-Nayzak Engineering Systems International. He is a founding partner of Metsu Plant Saudi Arabia. He is also a board member of Saudi Cement Company, Al-Abdulkareem Holding Company, Al-Nayzak Engineering Systems, Metsu Plant Saudi Arabia, and Education Services Company. Mr. Khalid previously served as a member of Gulf Union Cooperative Insurance Company. He has wide commercial and industrial expertise in contracting and providing services to the oil and gas, petrochemicals, energy, control and communications sectors and providing engineering and construction consultancy services for oil plants, power substations, and universities. He holds a bachelor’s degree and an MBA from the United States of America. Alaa Mohammed AlHarthi Board member of Samba Financial Group since 2016. Mr. Alaa is a businessman in the Kingdom. He owns Al Fanar Marine Services Company outside the Kingdom as well as Vega Ship Management DMCC. Mr. Alaa previously held several positions, most recently as consultant to SABIC, which he worked with for more than 23 years. He served as president of SABIC’s International Shipping Company. He holds a bachelor’s degree in business administration from the University of Tampa, USA. He also received the London Business School Executive Certificate, completed an insurance course at Cambridge Academy, UK, took courses in budget preparation and budgeting from Myrick in London, and studied finance and cost analysis at Euromatch, Dubai. Abdullah Abdulrahman AlRowais Mr. AlRowais has been a board member of Samba Financial Group since 2016. He is head of Mobily’s Internal Audit function. Previously, Mr. Khalid worked as an auditor at Saudi Arabian Monetary Agency. He holds a bachelor’s degree in accounting from King Saud University and an MBA in business systems from the University of Detroit, USA. Ahmed Mohammed Al-Omran (Representative of the General Organization for Social Insurance) Mr. Al-Omran has been a board member of Samba Financial Group since 2007. He is the deputy governor of Information Technology at the General Organization for Social Insurance. He is a board member of Saudi Cement Company and Takamul Company. Previously, Mr. Ahmed held several positions, including membership of the board of directors of the Saudi Industrial Investment Group and Saudi Cement Company. He holds a bachelor’s degree in information systems and a masters in computer science and has over 22 years of experience in the development of IT systems and business intelligence systems.




Fahad Hussein AlSedairy Board member of Samba Financial Group since 2016, Mr. Fahd is the deputy CEO and chief financial officer at Saudi Electricity Company. He is a board member of Saudi Energy Procurement Company, Saudi Electricity Company for Project Development and Dhaweat Telecommunications Company. He is the chairman of Samba Capital’s Audit Committee. Previously, Mr. Fahad held several positions, including treasury manager of Saudi Electricity Company, as well as several positions in treasury management at Riyad Bank and Saudi American Bank. He holds a bachelor’s degree in accounting from the University of North Dakota, USA. He completed financial training programs at HSBC in London, Chemical Bank in New York, and several financing programs. He enjoys more than 30 years of experience in the banking and financial industry. Fahd Ibrahim Almufarrij Board member of Samba Financial Group since 2013. Mr. Fahd is the managing director of the Saudi Printing and Packaging Company. Mr. Fahd previously held several positions at the Saudi Arabian Monetary Agency, where he worked for 30 years and last served as manager of the banking supervision department. He was a representative of SAMA at the meetings of the Basel Committee and banking supervision meetings at the GCC and Arab states level. He was a member of the banking supervision committee, Saudi Riyal committee, the supreme mutual committee of SAMA, and CMA. He holds a bachelor of business administration. Hamad Sulaiman AlQasoumi (representative of the Public Investment Fund) Board member of Samba Financial Group since 2016. Mr. Hamad previously, held several positions in the General Directorate of Customs. He was a board member of the Saudi Telecom Company. He holds a master’s degree in information systems from the United States of America. Bader I. Al-Swailem (member of the Audit Committee from outside the board): Mr. Bader has been a member of the audit committee since 2010. He is the CEO of Saudi Orix. Previously, Mr. Bader held several positions at Al Faisaliah Group, most recently managing director of the retail electronics division, CEO of the Electronics Systems Holding, and chief financial officer of the group. He also worked as a finance manager at Saudi Chemical Company and an internal auditor at SABIC. He holds a bachelor’s degree in accounting from King Saud University. He is a certified public accountant (CPA) from both the American Institute of Certified Public Accountants and SOCPA and is a member of several Saudi and international associations. Saleh M. AlKhalaf (member of the Audit Committee from outside the board) Mr. Saleh has been a member of the audit committee since 2016 and a member of Samba Capital’s audit committee. Mr. Saleh previously, held several positions, including head of the internal audit at the National Water Company, manager of the Financial Policy Department of STC and the senior auditor at the Industrial Development Fund. He holds a bachelor’s degree in accounting from King Saud University and he is a certified public accountant (CPA) by the California Board of Certified Public Accountants in the United States and the Saudi Organization of Certified Public Accountants (SOCPA). He is a member in several Saudi and international associations.

Rania Mahmoud Nashar CEO of Samba Financial Group since February 2017. Ms Nashar is a board member of Samba Capital, Samba Bank Limited in Pakistan, and Samba Global Markets Limited. She has held several positions in the group where she worked for more than 20 years, most recently as the general manager of the Internal Audit and Risk Group. She has worked in several departments, including private banking, retail banking, AML/CFT, compliance, and internal audit. She holds a bachelor’s degree in computer science and information technology from King Saud University and completed a Leadership Development Program from the Darden School of Business at the University of Virginia. She earned a certificate in governance, risk management and compliance in collaboration with George Washington University School of Business. In addition, she is a certified anti-money laundering specialist of the American Anti-Money Laundering Association. Zaki Abdulmohsin Al-Mousa Chief operating officer since 2003 and chairman of the Saudi Energy Procurement Company. He has held several positions in the group, where he has worked for over 33 years, most recently as the general manager of the branch network and the acting general manager of the retail banking group. He has worked in various departments, including private banking, retail banking, treasury and investment. He has also served on the board of directors of the group, Samba Bank Limited in Pakistan, and Co-Invest Offshore Capital Limited. He holds a bachelor’s degree in industrial management from the University of Arizona, United States of America. Beji T. Tak-tak General manager of risks and credit since 2007. He is a board member of Samba Capital and Samba Bank Limited in Pakistan. His last positions were regional manager of credit and risk manager for Islamic structured and banking products. He has held several positions at Citibank in the risk, corporate, investment and financial departments, where he worked for more than 23 years before moving to Samba. He has also worked in several countries in Europe, Africa, and the Middle East. He holds a BA in political science from the Institute of Political Studies in Paris, France and a bachelor of business administration from the Senior School of Business Studies in Paris, France. Shujaat Nadim General manager of treasury since 2003, chairman of Samba Bank Limited in Pakistan and Samba Global Markets Limited. Mr. Nadim held several positions at Citibank, where he worked for more than 20 years before moving to Samba, where he has held positions in the treasury and investment departments in many countries in America, Europe, the Middle East and North Africa. He holds a PhD in science from the Massachusetts Institute of Technology in the United States of America. Mohammed A. Al-Sheikh General manager of the retail banking group since 2014. He held several positions in the group, where he has worked for over 25 years, most recently as general manager of strategy and chief of staff in retail banking. Mr. Al-Sheikh has worked in many departments and units, including corporate banking, the branch network, operations, and internal audit. He holds a bachelor’s degree in administrative and financial sciences from King Saud University. He completed a leadership development program from Citibank in New York. Saleh M. Al-Qathami General manager of private banking group since 2014. He joined private banking services in 1994 with Saudi United Commercial Bank, which later merged with Samba Financial Group. Mr. Al-Qathami previously worked for the Saudi British Bank. He studied business administration at King Saud University.




7. Board of Directors (continued) Anthony Mujabber General manager of the corporate banking group since 2011. He is a board member of Samba Bank Limited in Pakistan. Previously, he held several positions at the group, including general manager of Samba branches in Dubai and the UK, as well as holding several corporate banking positions. Mr. Mujabber has previously served as managing director and chief executive officer of the National Bank of Kuwait in London and Lebanon. He holds a bachelor of science in commerce and business administration from the American University of Beirut. Abdul Haleem Sheikh CFO since 2008, Mr. Sheikh joined the group as a chartered planning and control manager since 2001. Prior to that, he held several positions at PricewaterhouseCoopers and Deloitte & Touche. He is a member of several supervisory committees and he worked with the supervisory authorities to develop several strategies for the Saudi financial sector. He holds professional certificates in accounting, costs and management and has a bachelor of commerce from Karachi University. Ayman M. Gusti General manager of internal audit group since 2017. Prior to that, he was manager of the internal audit program for the treasury, investment, and financial markets. Mr. Gusti has over 26 years of banking experience and has held several positions at treasury departments of the National Commercial Bank, Al-Enma Bank and Saudi American Bank. He holds a master’s degree in mathematics from King Fahd University of Petroleum and Minerals. Athal S. Al Harbi General manager of the group’s compliance since 2015. He has more than 14 years of experience in the fields of governance, combating money laundering and terrorism financing. Prior to joining the group, he was head of compliance at Saudi Fransi Capital, Riyad Capital and Samba Capital. He also worked for the Capital Market Authority and was a financial analyst at the Al Faisaliah Group. He holds a master’s degree in accounting from the United States of America. Fadi El-Khouri General manager of Samba UK since 2006. He has held several positions with Samba Financial Group, most recently as general manager of private accounts and asset management. He has held several positions at Citibank before moving to the group in private banking, corporate banking and operations in Europe and the Middle East. He holds a master’s degree in banking and finance. Manbir Singh Dillon General manager of Samba branch in Dubai since 2012. He was previously the head of banking services of the branch. He has more than 16 years of experience in banking. Prior to joining the group, he worked for Citibank in project management, branches and wealth management in Egypt, India and the United Arab Emirates. He holds a master’s degree in administration sciences.

8. Shareholder relations The board of directors has taken the necessary action to inform all its members of the shareholders’ suggestions and observations regarding the group. The general secretariat of the board receives the shareholders’ suggestions and observations and informs the members of the board of them, if any. The members attend the meetings of the general assembly to hear the shareholders’ comments and respond directly to their queries. The group also discloses its activities in financial reports that are published periodically on the Tadawul website as well as through disclosures posted on the group’s website, which contains additional information and news about the group. In accordance with the group’s articles of association, the general assembly meets at least once a year during the six months following the end of the fiscal year. The assembly held one meeting during 2017. The following is the record of attendance of this meeting: Meeting Members present 30 April Mr. Eisa M. Al Eisa, Mr. Ahmed M. Al-Omran, Mr. Ali H. Alireza, Mr. Fahd I. Almufarrij, Mr. Fahad H. AlSedairy, Mr. Abdullah A. AlRowais, Mr. Alaa M. AlHarthi, and Mr. Hamad S. AlQasoumi. The group has made nine requests for shareholders’ registers in 2017 as follows: Date Reason of Request 1/1/2017 Annual request from the auditors for the top 50 shareholders 31/1/2017 Periodic demand for changes in ownership of shares 1/3/2017 Periodic demand for changes in ownership of shares 11/4/2017 Periodic demand for changes in ownership of shares 26/4/2017 Preparing for the general assembly on 30/4/2017 27/4/2017 Preparing for the general assembly on 30/4/2017 30/4/2017 Meeting of the general assembly on 30/4/2017 2/5/2017 Distribution of dividends for the second half of 2016 9/8/2017 Distribution of dividends for the first half of 2017




9. Corporate governance The group is in overall compliance with the Corporate Governance Regulations issued by the Capital Market Authority (CMA). The exceptions are as follows: Article No. Article requirements Reasons for non-compliance 22-3 Setting forth specific and explicit The group adopts clear and specific policies, standards and procedures criteria for membership in the board for membership in the board, without and is consistent with the regulatory prejudice to the mandatory provisions requirements. These standards have of these regulations, and implementing been previously adopted by Samba them following approval by the general general assembly. The policy was assembly. approved by the board and will be adopted at the first general assembly meeting 61-1 Mandate of remuneration committee: The group has a clear policy for the Preparing a clear policy for the remuneration of directors and remunerations of the board members committees of the board and the and its committees and the executive executive management, approved management, and presenting such by the nomination and remuneration policy to the board in preparation for committee and by the board of approval by the general assembly, directors. It complies with regulator provided that such policy follows requirements and is disclosed annually standards that are linked to in the board of directors’ report. The performance, and disclosing and policies will be adopted at the first ensuring the implementation of meeting of the general assembly. such policy;

10. Notification of significant shareholding and interest in shares or debt instruments The group has not received notification from any person (other than board members, senior executives, and their spouses and children) relating to changes in his/her ownership of the group shares, as required by article 45 of the CMA listing rules. The numbers of shares held by the major shareholders, along with shares held by the group’s directors, senior executives, and their spouses and minor children as of 31 December 2017, are given below: Major shareholders: Number of Number of shares held at shares held Percentage the beginning at the end Net change of holding of the year of the year* during the year at year end Public Investment Fund 458,269,500 458,269,500 0 22.91% Public Pension Agency 300,926,675 300,926,675 0 15.05% GOSI 235,363,820 235,363,820 0 11.77% Eisa Al-Eisa 5,452,736 5,452,736 0 0.27% Ali Alireza 300,000 300,000 0 0.015% Mousa Al-Rubaian 61,221 61,221 0 0.0031% Fahd I. Almufarrij 32,633 32,633 0 0.0016% Khalid Al-Abdulkareem 31,276 31,276 0 0.0016% Abdullah A. AlRowais 5,000 5,000 0 0.00025% Alaa M. AlHarthi 3,300 5,521 2,221 0.00027% Fahad H. AlSedairy 1,000 1,000 0 0.00005% Hamad S. AlQasoumi 1,000 1,000 0 0.00005% Rania Nashar 12,244 14,627 2,383 0.00073% Zaki Al Mousa 367,886 375,942 8,056 0.019% Nader Gadourah* 291,128 291,128 0 0.015% Mohammed Al-Alsheikh 0 3,006 3,006 0.00015% Saleh Al Qathami 9,254 11,400 2,146 0.00057% Beji Tak-tak 48,813 48,813 0 0.0024% Abdul Haleem Sheikh 57,267 61,612 4,345 0.0031% Shajaat Nadim 0 3,215 3,215 0.00016% Antony Mujabbar 3,973 0 (3,973) 0% Sajjad Razvi** 4,164 0 (4,164) 0% * Resigned in January 2017

** Resigned in February 2017

11. Departure from accounting standards mandated by the Saudi Organization for Certified Public Accountants The board is pleased to confirm that Samba Financial Group is fully compliant with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). The consolidated financial statements for Samba are prepared as per the IAS/IFRS and the accounting guidance provided by the Saudi Arabian Monetary Authority (SAMA). It also prepares its consolidated financial statements in accordance with both Banking Control Law and the Companies Regulations in the Kingdom of Saudi Arabia. No departure from any of these accounting standards was noted during 2017.




12. Subsidiaries The principal subsidiaries included in the consolidated financial statements of the group are as follows: Samba Capital and Investment Management Company (Samba Capital): A wholly-owned subsidiary of Samba Financial Group (at 100%), with capital of SR 500 million. Samba Capital is incorporated in Saudi Arabia and licensed by the Capital Market Authority (CMA) to undertake dealing, arranging, managing, advising, and custody businesses. Samba Capital began operations on 19 January 2008. Samba Bank Limited, Pakistan (SBL): Samba Bank Limited is a majority-owned subsidiary of Samba Financial Group. The ownership of the group stood at 84.51% of SBL capital, comprising 852,040,531 shares of PKR 10 each. SBL is incorporated as a banking company in Pakistan and is engaged in commercial banking and related services. SBL is listed on the Pakistan Stock Exchange. At 31 December 2017, the SBL had issued a total of 1,008,238,648 shares of PKR 10 each with total paid-up capital of PKR 10.082 billion. Samba Real Estate Company: Samba Real Estate Company is a wholly-owned subsidiary of Samba Financial Group (100%) with capital of SR 500,000. It was incorporated in Saudi Arabia on 24 June 2007. The company conducts its business in Saudi Arabia and it was formed to manage real estate properties that are transferred to the group as a security or to Samba Real Estate Funds, which are managed by Samba Capital. Co-Invest Offshore Capital Limited (COCL): COCL is a wholly-owned company of Samba Financial Group (at 100%) with capital of US $50,000, incorporated under the laws of the Cayman Islands for the purpose of managing certain overseas investments through an entity, Investment Capital (Cayman) Limited (ICCL), which is fully owned by COCL. ICCL has invested in approximately 41.2% of the share capital of Access Co-Invest Limited, also a Cayman Island limited liability company, which manages these overseas investments. Samba Global Markets Limited: This is a wholly owned company of Samba Financial Group (at 100%) with capital of US $50,000, which is incorporated under the laws of Cayman Islands, with the objective of managing certain treasury related transactions. The company conducts its operations in the Cayman Islands.

13. Dividends Samba Financial Group’s dividend policy conforms to the Banking Control Law and is calculated as follows: 1. The calculation of sums required for the payment of Zakat due on Saudi shareholders and tax due

on non-Saudi shareholders is as prescribed by the laws in force in Saudi Arabia. The company pays such amounts to the competent authority. Zakat paid by Saudi shareholders shall be deducted from their share of the net profit, and the tax paid by non-Saudi shareholders shall also be deducted from their share of the net profit.

2. A sum of at least 25% of the remainder of the net profit after the deduction of Zakat and tax, as

indicated in point 1 above, shall be allocated to the statutory reserve until this reserve equals at least the paid-up share capital.

3. Out of the remainder of (1) and (2) above, an amount not less than 5% of the paid-up capital shall

be allocated to Saudi and non-Saudi shareholders. This amount will be distributed in proportion to the paid-up part of the shares, as recommended by the board of directors and approved by the General Meeting. The General Meeting shall declare no larger dividend than is recommended by the board of directors.

4. The remaining amount out of (1) (2) and (3) above shall be used in accordance with the

recommendations of the board of directors and approved by the General Meeting. 5. The respective percentage of the shareholdings of each of the Saudi and non-Saudi shareholders

shall be observed when calculating the sums to be allocated as statutory reserves and other reserves out of the net profit, after deducting Zakat and tax.

The board of directors is pleased to recommend to the general assembly a dividend of 75 Halala per share, net of Zakat, for the second half of 2017, totaling SAR 1.5 billion, representing 7.5% of the share nominal value, in addition to the dividends of 75 Halala per share, net of Zakat, for the first half of 2017, totaling SAR 1,5 billion, representing 7.5% of the share nominal value. As a result, a total of SR 3 billion will be distributed to Saudi shareholders for the year ended on 31 December 2017 and will yield a net total dividend of SR 1.5 per share to the Saudi shareholder, an increase of 58% over last year. Dividends shall be available for distribution after shareholder approval at the Annual General Meeting, the timing of which will be announced at a later date. 14. Borrowings & debt investments In the ordinary course of its business, the group borrows and lends money in the interbank market and with SAMA. These transactions, which are usually short-term and carry a special commission rate, are reflected in the group’s consolidated financial statements. The group has no loans except as required by the normal course of business. No changes have taken place during the year and the group did not issue shares or debt instruments to any of its subsidiaries in 2017. 15. Material contracts The group did not execute any material contracts during the year in which any of its directors, the chief executive officer, the chief financial officer, or any associate had any interest, apart from what is mentioned in note 33 of the 2017 audited consolidated financial statements.




16. Waiver of interest by a Director, Senior Executive or Shareholder of the Group The group is not aware of any arrangement or agreement whereby a director, senior executive, or a shareholder of the group has waived any interest or rights to the dividends or remuneration. 17. Transactions with related parties During its normal course of business, the bank deals with related parties. Transactions with related parties are subject to the ratios stipulated in the Banking Control Law and the instructions issued by the Central Banks. The year-end balances resulting from such transactions are shown in the consolidated financial statements as follows: 2017 2016 SAR’000 SAR’000 Members of the board of directors, other major shareholders, and their affiliates: Loans and advances 113,503 486,573 Customer deposits 19,302,051 8,998,300 Contingent liabilities 12,316 14,335 Samba Investment Funds Customer deposits 329,152 1,256,152 Other major shareholders are those who own more than 5% of the issued and paid up share capital of the bank and what is listed on Tadawul. The following is an analysis of the income and expenses relating to transactions with related parties included in the consolidated financial statements: 2017 2016 SAR’000 SAR’000 Special commission income 10,466 10,657 Special commission expenses 297,377 186,566 Fees and commission income, net 155,674 212,773 Directors’ remuneration 5,109 4,260 The following is an analysis of the total remuneration paid to senior management officers during the year: 2017 2016 SAR’000 SAR’000 Short-term employee benefits 59,111 56,806 Post-employment benefits, employee end-of-service benefits and equity-based incentive 6,940 6,804 Senior management officers shall mean those persons, including the chief executive officer, who have the authority and responsibility to carry out the planning, direction and supervision activities of the bank, directly or indirectly. The group declares that there are no acts or contracts to which it is a party or in which there is an interest of a board member, senior executive, or any person related to any of them.

18. Statutory payments Zakat accrued in respect of Saudi shareholders this year stood at SR 592 million for 2017, income tax accrued in respect of foreign shareholders stood at SR 33 million. The bank expects to make these payments to government entities when they become due (details can be found in the group’s consolidated financial statements for 2017). GOSI payments for 2017 totaled SR 120.7 million. 19. Human resources The group has attached great importance to the recruitment of promising Saudi youth. It has also consistently sought to support its various business sectors with Saudi competencies, contributing to a steady growth in its job nationalization rates, which reached 94.1% of its total workforce. With its long-term vision of people as the true capital of the group, Samba is able to create an attractive working environment that stimulates human capabilities and professional capabilities. Comprehensive programs help to develop functional skills and raise the quality of staff performance, while a commitment to equal opportunity and career progression helps to promote staff loyalty. The group has continued to develop qualified banking leaders of both genders to prepare them to assume the highest executive positions and can then advance the group to greater success and leadership in financial services. In harmony with the group’s community role and commitment to provide job opportunities to Saudis, Samba launched several initiatives and job nationalization programs in partnership with academic institutions in the Kingdom and was involved in career and graduate days for young Saudi graduates, both locally and further afield. The group continues to sponsor many events for new graduates, such as career and graduate days at the Institute of Public Administration in Riyadh, Jeddah, and Dammam, King Fahd University of Petroleum and Minerals, Al-Faisal University, and King Saud University. The group also consistently sponsors and participates in career days for the graduates of the Custodian of the Two Holy Mosques program for Foreign Scholarships in the United Kingdom, USA, and Canada. Samba regards career and graduate days as an effective channel of communication between business sectors and new graduates. The aim is to form an integral link between national institutions with groups of young Saudi graduates that will enrich the nationalization programs these institutions adopt. Several initiatives were launched to support Samba’s human resources strategy, including talent programs and career replacement management. The group is committed to the new risk-based compensation requirements of the Saudi Arabian Monetary Agency. Community social responsibility is also an area in which we are making strides, demonstrated by the cooperative training programs (co-op) we have offered Saudi students at different educational institutions in the Kingdom. The group is committed to the payment of benefits and compensation to its employees, according to Saudi labor law, and the requirements of statutory payments due in foreign bank branches and subsidiaries. The total reserves for end-of-service indemnities as at 31 December 2017 amounted to SR 436.6 million. In addition, Samba continues to provide its staff with an equity-settled, share-based incentive plan that offers eligible employees the opportunity to own Samba shares at a pre-determined benchmark price for a fixed time, subject to the completion of certain conditions. Training and development have been a core part of the group’s strategy, enabling it to invest in human capital as part of its vision of sustainable excellence and quality upgrades. A total of 4,290 employees were trained during 2017, representing 12,847 training man-days. This included specialized training that the Samba Centre of Banking and Financial Studies provided, as well as the Institute of Banking and overseas institutions.




20. Treasury shares The bank provides its eligible staff with incentive programs calculated on the basis of shares (programs) and approved by the Saudi Arabian Monetary Agency (SAMA). Under the terms of this program, the bank grants its eligible staff stock options at predetermined purchase prices and for a specified period. Upon maturity of the program, the bank delivers the respective allocated shares when the relevant staff members exercise the options in accordance with the terms and conditions of the program. The costs of such programs are measured at fair value at the date of grant of options or equity. The fair value of the long-term bonus program is determined by referring to the market value of the shares at the beginning of the program using the discounted cash flow method. The cost of the program is recognized over the period during which the service condition is satisfied that expires at the date on which the concerned employees are entitled to the equity or equity option (maturity date). Cumulative expenses - calculated under these programs at the date of preparation of all financial statements until maturity - show the extent to which the maturity period has expired and the bank’s best estimate of the number of shares to be granted at the end. The amount charged or credited to the consolidated statement of income for a period represents the movement in cumulative expenses recognized at the beginning and end of that period. The bank, having obtained the approval of the Saudi Arabian Monetary Agency (SAMA), entered into an agreement with a neutral third party to purchase the relevant shares only to manage the price risks related to those shares under these programs. Under the terms of such an agreement, the bank shall at no time be the legal owner of the shares in question.

The bank has the following incentive programs for share and year-end payments. The following are important characteristics of these programs: Number of outstanding programs Date of grants Between June 2013 and April 2017 Due date (maturity) Between June 2018 and April 2022 The number of shares granted on the grant date, adjusted for free shares issued 1,716,185 The purchase price/the indicative price per share on the date of the grant, after being adjusted by the issued free shares Between SAR 20.94 and SR 25.8 Maturity period 5 years Conditions of entitlement Retain participating staff Method of payment Stocks Evaluation method used Discounted cash flows Fair value of the shares on the grant date, adjusted for the free shares issued Between SR 17.5 and SR 22.5. The fair value of shares granted during the year amounted to SAR 7.4 million (2016: SAR 6.9 million). The inputs used to calculate the fair value of shares granted during the year are market price at the grant date, duration of the program, expected dividend, and the annual risk-free rate of return. Shares are granted on the condition that the staff member shall remain on the job without considering the prevailing market conditions. The total expenses included in the consolidated financial statements for share-based payment programs for 2017 amounted to SAR 4.7 million (2016: SR 4.0 million). 21. Book of accounts, system of internal control and financial systems We confirm that: • proper books of account have been maintained. • the system of internal control is sound in design and has been effectively implemented. • there are no significant doubts concerning the group’s ability to continue as a going concern.




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Best Corporate/Institutional Digital Bank In Saudi Arabia 2017

23. Appropriation of income The board of directors recommends that net income for the year be appropriated/distributed as follows: SR’000 Shareholders’ net income for the year 5,021,065 Interim dividend 1,807,000 Final dividend - Total dividend 1,807,000 Transfer to statutory reserve (1,256,073) Transfer to general reserve - Transfer to retained earnings 1,957,992 24. Auditors At the Annual Ordinary General Meeting of Samba’s shareholders, held on 30 April 2017, Messrs. Ernst & Young and Pricewaterhouse Coopers were appointed as joint auditors for the fiscal year ending 31 December 2017. There is no conflict between the recommendations of the audit committee and the decisions of the board of directors on the appointment of auditors, the determination of their fees, the evaluation of their performance or the appointment of the internal auditor. The forthcoming Annual Ordinary General Meeting of shareholders will consider the reappointment of the existing auditors or appoint other auditors and determine their remuneration for the audit of the group for the year ending 31 December 2018.

22. Penalties Samba Financial Group has not faced any significant penalties or fines during the 2017 financial year. Most of these fines are operational and they were addressed in a timely manner. These fines are as follows: Violation category No. Amounts Imposition agency Causes of violation Measures taken Violating SAMA instructions 1 120,000 SAMA Instructions for opening and operating SAMA’s request includes introducing some relating to due diligence bank accounts improvements to the account opening process and corrective action has been taken Violating SAMA supervisory 11 1,019,000 SAMA Instructions for banking judicial procedures, Measures taken to avoid their recurrence included instructions security safety instructions, Sarei’ system updating internal procedures, establishing instructions, data request instructions, branch monitoring procedures, follow-up procedures, opening, processing, installation and transfer procedures for verifying the status of the automatic of ATMs. Sarei’ closure system, applying procedures for mandatory closure of the system, installation of all coin deposit machines, staff awareness and other procedures. Violating SAMA instructions 2 70,000 SAMA SAMA instructions on the performance level of Follow-up, awareness and assistance measures regarding the performance ATMs and point-of-sale machines have been developed for traders level of ATMs and point-of- sale machines Others - 797,000 Ministry of Municipal Fines on the group’s branches and ATMs and Rural Affairs




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Best Bank for Payments and Collections in the Middle East 2017 for the third time in a row

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Best Foreign Exchange Provider in Saudi Arabia 2017 for the ninth time

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Samba Capital Best Investment Bank in the Middle East 2017

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Best Bank in Saudi Arabia 2017 for the twelfth year in a row

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INTERNATIONAL AWARDS 2015

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I N T E R N AT I O N A L A W A R D S 2 0 1 7

Independent Auditors’ Report


Financial Statements 43

Independent Auditors’ Report Continued



2017 2016 Notes SAR’000 SAR’000 Assets Cash and balances with Central Banks 3 25,195,066 37,344,514 Due from banks and other financial institutions 4 11,031,480 9,599,656 Investments, net 5 63,912,410 51,392,810 Derivatives 9 6,514,708 4,442,059 Loans and advances, net 6, 33 117,684,729 125,234,330 Property and equipment, net 7 2,638,884 2,510,180 Other assets 8 633,802 965,038 Total Assets 227,611,079 231,488,587 Liabilities and Equity Liabilities Due to banks and other financial institutions 10 6,551,464 10,880,778 Customer deposits 11, 33 167,987,571 172,075,716 Derivatives 9 3,976,298 1,485,629 Other liabilities 12 4,413,594 4,501,696 Total Liabilities 182,928,927 188,943,819 Equity Equity attributable to equity holders of the Bank Share capital 14 20,000,000 20,000,000 Statutory reserve 15 15,811,044 14,554,971 General reserve 15 130,000 130,000 Other reserves 98,514 (78,428) Retained earnings 9,564,853 7,884,606 Proposed dividend 25 - 997,753 Treasury stocks (1,021,743) (1,045,623) Total equity attributable to equity holders of the Bank 44,582,668 42,443,279 Non-controlling interest 99,484 101,489 Total Equity 44,682,152 42,544,768 Total Liabilities and Equity 227,611,079 231,488,587 The accompanying notes 1 to 39 form an integral part of these consolidated financial statements

Statements of Consolidated Financial Position As at December 31, 2017 and 2016



2017 2016 Notes SAR’000 SAR’000 Special commission income 18 6,927,740 6,691,752 Special commission expense 18 1,195,515 1,309,468 Special commission income, net 5,732,225 5,382,284 Fees and commission income, net 19 1,422,735 1,584,807 Exchange income, net 298,702 563,920 Income from investments held at FVIS, net 150,073 49,396 Trading income (loss), net 20 94,377 (14,538) Gains on non-trading investments, net 21 29,037 35,767 Other operating income,net 22 164,417 158,821 Total operating income 7,891,566 7,760,457 Salaries and employee related expenses 23 1,310,354 1,339,059 Rent and premises related expenses 353,941 350,504 Depreciation 7 123,565 121,341 Other general and administrative expenses 792,250 743,744 Provision for credit losses, net of recoveries 6 287,166 200,146 Total operating expenses 2,867,276 2,754,794 Net income for the years 5,024,290 5,005,663 Attributable to: Equity holders of the Bank 5,021,065 5,002,912 Non-controlling interest 3,225 2,751 5,024,290 5,005,663 Basic and diluted earnings per share for the year (SAR) 24 2.51 2.50 The accompanying notes 1 to 39 form an integral part of these consolidated financial statements

Statements of Consolidated Income For the years ended December 31, 2017 and 2016



2017 2016 Notes SAR’000 SAR’000 Net income for the years 5,024,290 5,005,663 Other comprehensive income for the year – items that may be reclassified subsequently to the statements of consolidated income: - Exchange differences on translation of foreign operations (27,399) (11,135) Available for sale financial assets: - Change in fair values 130,481 (109,273) - Transfers to statements of consolidated income (29,037) (39,495) Cash flow hedges: - Change in fair values 153,826 (82,789) - Transfers to statements of consolidated income (56,159) (51,761) Other comprehensive income (loss) for the years 171,712 (294,453) Total comprehensive income for the years 5,196,002 4,711,210 Attributable to: Equity holders of the Bank 5,198,007 4,718,977 Non-controlling interest (2,005) (7,767) Total 5,196,002 4,711,210 The accompanying notes 1 to 39 form an integral part of these consolidated financial statements

Statements of Consolidated Comprehensive Income For the years ended December 31, 2017 and 2016



Attributable to equity holders of the Bank Other reserves Exchange Non- Share Statutory General translation AFS financial Cash flow Retained Proposed Treasury controlling Total capital reserve reserve reserve assets hedges earnings dividend stocks Total interest equity 2017 Notes SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 Balance at the beginning of the year as originally reported 20,000,000 14,554,971 130,000 (168,991) 217,056 (126,493) 7,884,606 1,234,000 (1,045,623) 42,679,526 101,489 42,781,015 Effect of change in accounting policy 37 - - - - - - - (236,247) - (236,247) - (236,247) Balance at the beginning of the year as restated 20,000,000 14,554,971 130,000 (168,991) 217,056 (126,493) 7,884,606 997,753 (1,045,623) 42,443,279 101,489 42,544,768 Transfer to statutory reserve 15 - 1,256,073 - - - - (1,256,073) - - - - - Net changes in treasury stocks - - - - - - 34,855 - 23,880 58,735 - 58,735 Dividend paid for 2017 (interim) and 2016 (final) 25 - - - - - - (1,494,400) (997,753) - (2,492,153) - (2,492,153) Subtotal 20,000,000 15,811,044 130,000 (168,991) 217,056 (126,493) 5,168,988 - (1,021,743) 40,009,861 101,489 40,111,350 Net income for the year - - - - - - 5,021,065 - 5,021,065 3,225 5,024,290 Other comprehensive (loss)/income for the year 16 - - - (22,169) 101,444 97,667 - - - 176,942 (5,230) 171,712 Total comprehensive income for the year - - - (22,169) 101,444 97,667 5,021,065 - - 5,198,007 (2,005) 5,196,002 Provision for zakat & income tax 25 - - - - - - (625,200) - - (625,200) - (625,200) Balance at end of the year 20,000,000 15,811,044 130,000 (191,160) 318,500 (28,826) 9,564,853 - (1,021,743) 44,582,668 99,484 44,682,152 2016 Balance at the beginning of the year as originally reported 20,000,000 13,303,555 130,000 (168,374) 365,824 8,057 6,523,875 1,134,000 (1,046,336) 40,250,601 109,256 40,359,857 Effect of change in accounting policy 37 - - - - - - - (239,110) - (239,110) - (239,110) Balance at the beginning of the year as restated 20,000,000 13,303,555 130,000 (168,374) 365,824 8,057 6,523,875 894,890 (1,046,336) 40,011,491 109,256 40,120,747 Transfer to statutory reserve 15 - 1,251,416 - - - - (1,251,416) - - - - - Net changes in treasury stocks - - - - - - 43,235 - 713 43,948 - 43,948 Dividend,zakat and income tax paid for 2016 (Interim) and dividend paid for 2015 (final) 25 - - - - - - (1,200,000) (894,890) - (2,094,890) - (2,094,890) Proposed final dividend 2016 - - - - - - (997,753) 997,753 - - - - Subtotal 20,000,000 14,554,971 130,000 (168,374) 365,824 8,057 3,117,941 997,753 (1,045,623) 37,960,549 109,256 38,069,805 Net income for the year - - - - - - 5,002,912 - - 5,002,912 2,751 5,005,663 Other comprehensive loss for the year 16 - - - (617) (148,768) (134,550) - - - (283,935) (10,518) (294,453) Total comprehensive income for the year - - - (617) (148,768) (134,550) 5,002,912 - - 4,718,977 (7,767) 4,711,210 Provision for zakat & income tax 25 - - - - - - (236,247) - - (236,247) - (236,247) Balance at end of the year (Restated) 20,000,000 14,554,971 130,000 (168,991) 217,056 (126,493) 7,884,606 997,753 (1,045,623) 42,443,279 101,489 42,544,768 The accompanying notes 1 to 39 form an integral part of these consolidated financial statements

Statements of Consolidated Changes in Equity For the years ended December 31, 2017 and 2016



2017 2016 Notes SAR’000 SAR’000 Operating activities Net income for the years 5,024,290 5,005,663 Adjustments to reconcile net income to net cash from operating activities: Amortization of premium and accretion of discount on non-trading investments,net net 30,036 (45,136) Income from investments held at FVIS, net (150,073) (49,396) Gain on non-trading investments, net 21 (29,037) (35,767) Depreciation 7 123,565 121,341 Gain on disposal of property and equipment, net 22 (7,792) (73) Provision for credit losses, net of recoveries 6 287,166 200,146 Net (increase) / decrease in operating assets: Statutory deposits with Central Banks 318,040 266,597 Due from banks and other financial institutions maturing after ninety days (5,289,215) 2,016,017 Investments held for trading 674,255 728,276 Derivatives (2,072,649) (1,835,927) Loans and advances 7,262,435 4,566,754 Other assets 331,236 (264,867) Net increase / (decrease) in operating liabilities: Due to banks and other financial institutions (4,329,314) (8,316,452) Customer deposits (4,088,145) 271,182 Derivatives 2,490,669 875,728 Other liabilities (559,954) 798,545 Net cash from operating activities 15,513 4,302,631 Investing activities Proceeds from sale of and matured non-trading investments 6,794,354 80,447,570 Purchase of non-trading investments (19,737,691) (62,634,939) Purchase of property and equipment, net of exchange adjustments (252,521) (370,028) Proceeds from sale of property and equipment 8,044 5,792 Net cash (used in) / from investing activities (13,187,814) 17,448,395 Financing activities Dividends paid (2,575,233) (2,283,938) Treasury stocks, net 58,735 43,948 Net cash used in financing activities (2,516,498) (2,239,990) (Decrease) / increase in cash and cash equivalents (15,688,799) 19,511,036 Cash and cash equivalents at the beginning of the year 26 36,662,047 17,151,011 Cash and cash equivalents at the end of the year 26 20,973,248 36,662,047 Special commission received during the year 6,793,429 6,661,570 Special commission paid during the year 1,526,606 834,029 Supplemental non-cash information: Net changes in fair value and transfers to Statements of Consolidated Income 199,111 (283,318) The accompanying notes 1 to 39 form an integral part of these consolidated financial statements

Statements of Consolidated Cash Flows For the years ended December 31, 2017 and 2016



1. General Samba Financial Group (the Bank), a joint stock company incorporated in the Kingdom of Saudi Arabia, was formed pursuant to Royal Decree No. M/3 dated 26 Rabie Al-Awal 1400H (February 12, 1980). The Bank commenced business on 29 Shaa’ban 1400H (July 12, 1980) when it took over the operations of Citibank in the Kingdom of Saudi Arabia. The Bank operates under commercial registration no. 1010035319 dated 6 Safar 1401H (December 13, 1980) through its 73 branches (2016: 72 branches) in the Kingdom of Saudi Arabia and three overseas branches (2016: three branches). The Bank including its overseas branches employed 3,360 full time direct staff at the year-end (2016: 3,560). The Bank is listed on the Saudi Arabian stock exchange and its head office is located at King Abdul Aziz Road, P.O. Box 833, Riyadh 11421, Kingdom of Saudi Arabia. The objective of the Bank is to provide a full range of banking and related services. The Bank also provides Shariah approved Islamic banking products to its customers. The consolidated financial statements include financial statements of the Bank and its following subsidiaries, hereinafter collectively referred to as “the Group”: Samba Capital and Investment Management Company (Samba Capital) In accordance with the securities business regulations issued by the Capital Market Authority (CMA), the Bank has established a wholly owned subsidiary, Samba Capital and Investment Management Company under commercial registration number 1010237159 issued in Riyadh dated 6 Shaa’ban 1428H (August 19, 2007), to manage the Bank’s investment services and asset management activities related to dealing, arranging, managing, advising and custody businesses. The company is licensed by the CMA and has commenced its business effective January 19, 2008. Samba Capital was converted from a limited liability company to a closed joint stock company on 28 Rajab 1438H (April 25, 2017), which is the date of commercial registration of the closed joint stock company. During the current year, Samba Capital has formed a wholly owned subsidiary “Samba Investment Real Estate Company” which is incorporated in the Kingdom of Saudi Arabia under commercial registration number 1010715022 issued in Riyadh dated 23 Shawaal 1438H (July 17, 2017). The company has been formed as a limited liability company (sole ownership) and is engaged in managing real estate projects for on and on behalf of a mutual fund managed by Samba Capital. Samba Bank Limited, Pakistan (SBL) An 84.51% owned subsidiary incorporated as a banking company in Pakistan and engaged in commercial banking and related services, and listed on Pakistan Stock Exchange. Co-Invest Offshore Capital Limited (COCL) A wholly owned company incorporated under the laws of Cayman Islands for the purpose of managing certain overseas investments through an entity; Investment Capital (Cayman) Limited (ICCL) which is fully owned by COCL. ICCL has invested in approximately 41.2% of the share capital of Access Co-Invest Limited, also a Cayman Island limited liability company, which manages these overseas investments. Samba Real Estate Company A wholly owned subsidiary incorporated in Saudi Arabia under commercial registration no. 1010234757 issued in Riyadh dated 9 Jumada II, 1428H (June 24, 2007). The company has been formed as a limited liability company with the approval of Saudi Arabian Monetary Authority (SAMA) and is engaged in managing real estate projects on behalf of the Bank. Samba Global Markets Limited A wholly owned company incorporated as a limited liability company under the laws of Cayman Islands on February 1, 2016, with the objective of managing certain treasury related transactions. The company started its commercial operations during the fourth quarter of 2016. 2. Summary of significant accounting policies The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. 2.1 Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as modified by SAMA for the accounting of zakat and income tax (See note 2.2 below).The Group prepares its consolidated financial statements also to comply with the Banking Control Law, the Regulations for Companies in the Kingdom of Saudi Arabia and its Articles of Association. 2.2 Basis of preparation and presentation The consolidated financial statements of the Group have been prepared: • in accordance with “International Financial Reporting Standards (IFRS) as modified by SAMA for the accounting of zakat and income tax”, which requires, adoption of all IFRSs as issued by the International Accounting Standards Board

(“IASB”) except for the application of International Accounting Standard (IAS) 12 - “Income Taxes” and IFRIC 21 - “Levies” so far as these relate to zakat and income tax. As per the SAMA Circular no. 381000074519 dated April 11, 2017 and subsequent amendments through certain clarifications relating to the accounting for zakat and income tax (“SAMA Circular”), the Zakat and Income tax are to be accrued on a quarterly basis through shareholders equity under retained earnings; and

• in compliance with the provisions of Banking Control Law, the Regulations for Companies in the Kingdom of Saudi Arabia and the Article of Association of the Bank. Further, the above SAMA Circular has also repealed the existing Accounting Standards for Commercial Banks, as promulgated by SAMA, and are no longer applicable from January 1, 2017. Refer note 2.26 for the accounting policy of zakat and income tax and note 37 for the impact of change in the accounting policy resulting from the SAMA Circular. The consolidated financial statements are prepared under the historical cost convention except for the measurement at fair value of derivatives, available for sale and FVIS financial assets and liabilities. In addition, as explained fully in the related notes, financial assets and liabilities that are hedged under a fair value hedging relationship are adjusted to record changes in fair value attributable to the risks that are being hedged. Under article 37 of the Bank’s Articles of Association, the Gregorian calendar is observed for reporting the consolidated financial statements. These consolidated financial statements are expressed in Saudi Arabian Riyals (SAR) and are rounded off to the nearest thousands.

Notes to the Consolidated Financial Statements For the years ended December 31, 2017 and 2016


Notes to the Consolidated Financial Statements 53

2. Summary of significant accounting policies (continued) 2.3 Consolidation These consolidated financial statements include the financial position and results of Samba Financial Group and its subsidiary companies. The financial statements of subsidiaries are prepared for the same reporting period as that of the Bank, using consistent accounting policies except for Co-Invest Offshore Capital Limited (COCL) whose financial statements are made up to the previous quarter end for consolidation purposes to meet the group reporting timetable. However any material changes during the interim period are adjusted for the purposes of consolidation. In addition, wherever necessary, adjustments have been made to the financial statements of the subsidiaries to align with the Bank’s consolidated financial statements. Significant intragroup balances and transactions are eliminated upon consolidation. Subsidiaries are the entities that are controlled by the Group. The Group controls an entity when it is exposed, or has a right, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over that entity. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which the control is transferred from the Group. The results of subsidiaries acquired or disposed-off during the year are included in the statement of consolidated income from the date of acquisition or up to the date of disposal, as appropriate. Non-controlling interest represents the portion of net income or loss and net assets not owned, directly or indirectly, by the Group in subsidiaries and are presented in the statements of consolidated income and within equity in the statements of consolidated financial position separately from the equity holders of the Bank. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Bank. The cost of acquisition is measured at the fair value of the consideration given at the date of exchange. The acquired identifiable assets, liabilities and contingent liabilities are measured at their fair value at the date of acquisition. The excess of the cost of acquisition over the fair value of the Bank’s share of identifiable net assets acquired is recorded as intangible asset – goodwill. In addition to the subsidiaries stated above under note 1, the Bank is also party to certain special purpose entities which are formed with the approval of SAMA solely to facilitate certain Shariah complaint financing arrangements. The Bank has concluded that these entities cannot be consolidated as it does not control these entities. However, the exposures to these entities are included in the Bank’s loans and advances portfolio. 2.4 Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest. The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price or dealer price quotations. For all other financial instruments not traded in an active market, the fair value is determined by using valuation techniques deemed to be appropriate in the circumstances. Valuation techniques include the market approach (i.e. using recent arm’s length market transactions adjusted as necessary and with reference to the current market value of another instrument that is substantially the same) and the income approach (i.e. discounted cash flow analysis and option pricing models making as much use of available and supportable market data in a reasonably possible manner). A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between the levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy. 2.5 Critical accounting judgments and estimates The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates, assumptions and judgements that affect the reported amounts of assets and liabilities. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Such estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including obtaining professional advice and expectations of future events that are believed to be reasonable under the circumstances. Significant areas where management has used estimates, assumptions or exercised judgements are as follows: (a) Impairment for credit losses on loans and advances The Group reviews its loan portfolios to assess impairment on a quarterly basis. In determining whether an impairment loss should be recognized, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows. This evidence may include observable data indicating that there has been an adverse change in the payment of borrowers in a group. Management uses estimates based on historical loss experience for loans with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when estimating its cash flows. The methodology and assumptions used for estimating both the amount and the timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. (b) Fair value of unquoted financial instruments The fair values of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation techniques including models are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area that created them. All models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data, however areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. (c) Impairment of available for sale equity investments The Group exercises judgment to consider impairment on its available for sale equity investments. This includes determination of a significant or prolonged decline in the fair value below its cost. In making this judgment, management evaluates among other factors, the normal volatility in share price. In addition, management considers impairment to be appropriate when there is evidence of deterioration in the financial position of the investee, industry and sector performance, changes in technology, and operational and financing cash flows.




2. Summary of significant accounting policies (continued) 2.6 Settlement date accounting All regular way purchases and sales of financial instruments are recognized and derecognized on the settlement date. Regular way purchases or sales are purchases or sales of financial instruments that require delivery of assets within the time frame generally established by regulation or convention in the market place. For financial instruments held at fair value, the Group accounts for any change in fair values between the trade date and the reporting date. 2.7 Derivative financial instruments and hedge accounting Derivative financial instruments are measured at fair value. Fair values are generally obtained by reference to quoted market prices, discounted cash flow models and other pricing models, as appropriate. Derivative financial instruments are designated as held for trading unless they are part of an effective hedging relationship. Any changes in the fair values of derivatives that are held for trading purposes are taken directly to the statements of consolidated income. Hedge accounting Hedges are classified into two categories: (a) fair value hedges which hedge the exposure to changes in the fair value of a recognized asset or liability; and (b) cash flow hedges which hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability. In order to qualify for hedge accounting, the hedge is required to be highly effective at inception i.e. the changes in the fair value or the cash flows of the hedging instrument should effectively offset corresponding changes in the hedged item, and should be reliably measurable. At the inception of the hedge, the risk management objective and strategy is documented including the identification of the hedging instrument, the related hedged item, the nature of the risk being hedged, and how the Group will assess the effectiveness of the hedging relationship. Subsequently, the hedge is required to be assessed and determined to be an effective hedge on an ongoing basis. Hedge accounting is discontinued when the designation is revoked, the hedging instrument is expired or sold, terminated or exercised, or no longer qualifies for hedge accounting. In relation to fair value hedges that meet the criteria for hedge accounting, any gain or loss from re-measuring the hedging instruments to change in fair value is recognized immediately in the statements of consolidated income. The corresponding change in fair value of the hedged item is adjusted against the carrying amount and is recognized in the statements of consolidated income. Where the fair value hedge of a special commission bearing financial instrument ceases to meet the criteria for hedge accounting, the adjustment to the carrying value resulting from fair value changes is amortized to the statements of consolidated income over the remaining life of the hedged item. In relation to cash flow hedges that meet the criteria for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized initially in other reserves under equity and the ineffective portion, if any, is recognized in the statements of consolidated income. A hedge is expected to be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated were offset by the the hedging instrument in a range of 80% to 125% and were expected to achieve such offset in future periods. Hedge ineffectiveness is recognized in the statements of consolidated income in Net trading income. Gains or losses recognized initially in other reserves are transferred to the statements of consolidated income in the period in which the hedged item impacts the statements of consolidated income. 2.8 Foreign currencies The consolidated financial statements are denominated and presented in Saudi Arabian Riyals, which is also the functional currency of the Bank. Transactions in foreign currencies are translated into Saudi Arabian Riyals at exchange rates prevailing at transaction dates. Monetary assets and liabilities denominated in foreign currencies at the end of the year (other than monetary items that form part of the net investments in a foreign operation) are translated into Saudi Arabian Riyals at the exchange rates prevailing at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value is determined. Translation gains or losses on non-monetary items carried at fair value are included as part of the fair value adjustment either in the consolidated statement of income or in equity, depending on the underlying financial asset. Non-monetary assets and liabilities denominated in a foreign currency that are measured in terms of historical cost are translated using the spot exchange rates as at the date of the initial transaction. Realized and unrealized gains or losses on exchange are credited or charged to the statements of consolidated income. The assets and liabilities of overseas branches and subsidiaries are translated at the rate of exchange prevailing at the reporting date. The statements of income of overseas branches and subsidiaries are translated at the average exchange rates for the year. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to equity through the statement of consolidated comprehensive income. 2.9 Offsetting Financial assets and liabilities are offset and reported net in the statements of consolidated financial position when there is a legally enforceable right to offset the recognized amounts and the Group intends to settle on a net basis, or to realize the asset and settle the liability simultaneously. 2.10 Revenue recognition Special commission income and expense including the fees which are considered an integral part of the effective yield of a financial instrument, are recognized in the statements of consolidated income using the effective yield method, and include premiums amortized and discounts accreted during the year. Special commission income on loans and advances which is received but not earned is netted off against the related assets. Fee from banking services are recognized on an accrual basis when the service has been provided. Commitment fees for loans that are likely to be drawn down are deferred and, together with the related direct cost, are recognized as an adjustment to the effective yield on the loan when it is drawn down. Portfolio and other management advisory and service fees are recognized based on the applicable service contracts, usually on a time-proportionate basis. Fee received on asset management, wealth management, financial planning, custody services and other similar services that are provided over an extended period of time, are recognized rateably over the period when the service is being provided. Dividend income is recognized when declared and right to receive is established. Any fee income received but not earned is classified as “other liability”. The calculation of the effective commission rate includes all fees and points paid or received, transaction costs, and discounts or premiums that are an integral part of the effective commission rate. Transaction costs are incremental costs that are directly attributable to the acquisition or the issue of financial asset or liability. Exchange income is recognized as and when it arises. For presentation purposes, “Exchange income, net” includes exchange related gains and losses from derivative financial instruments and translated foreign currency assets and liabilities.




2. Summary of significant accounting policies (continued) 2.11 Sale and repurchase agreements Securities sold with a commitment to repurchase at a specified future date (repos), continue to be recognized in the statements of consolidated financial position and are measured in accordance with related accounting policies for trading, FVIS, available for sale and other investments at amortized cost. The counterparty liability for amounts received under these agreements is included in due to banks and other financial institutions or customer deposits, as appropriate. The difference between the sale and the repurchase price is treated as special commission expense and is recognized over the life of the repo agreement on an effective yield basis. Assets purchased with a corresponding commitment to resell at a specified future date (reverse repos), are not recognized in the statements of consolidated financial position, as the Group does not obtain control over the assets. Amounts paid under these agreements are included in cash and balances with Central Banks, due from banks and other financial institutions or loans and advances, as appropriate. The difference between the purchase and the resale price is treated as special commission income and is recognized over the life of the reverse repo agreement on an effective yield basis. 2.12 Investments All investment securities are initially recognized at fair value and except for investments held at FVIS, include the acquisition costs associated with the investment. Transaction costs if any are not added to fair value measurement at initial recognition of investments held at FVIS and are included in the statement of consolidated income. Premiums are amortized and discounts are accreted using the effective yield method and are taken to statements of consolidated income. For securities that are traded in organized financial markets, fair value is determined by reference to the prevailing quoted market bid prices at the close of business on the reporting date. Fair value of managed assets and investments in mutual funds are determined by reference to declared net asset values. For securities where there is no quoted market price, a reasonable estimate of the fair value is determined by reference to the current market value of another instrument which is substantially the same, or is based on the expected future cash flows or the underlying net asset base of the security. Following initial recognition of investment securities, subsequent transfers between the various classes of investment are not ordinarily permissible. Subsequent measurement for each class of investments are determined as follows: a) Held at fair value through income statement (FVIS) Investments in this category are classified as either held for trading or those designated as FVIS upon initial recognition. Investments classified as trading are acquired principally for the purpose of selling or repurchasing in short term. An instrument which is part of a portfolio classified as held for trading, may include items held for a longer period of time due to market conditions or position management. An investment may be designated as FVIS by the management if it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as “an accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on different bases; or a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the Group’s key management personnel. After initial recognition, investments are measured at fair value and gains and losses arising from any change in the fair value are recognized in the statements of consolidated income for the period in which it arises. b) Available for sale Investments that are classified as available for sale are subsequently measured at fair value. For available for sale investments where fair value has not been hedged, any gain or loss arising from a change in the fair value is recognized directly through the statements of consolidated comprehensive income in fair value reserve under equity until the investment is derecognized or considered impaired, at which time the cumulative gain or loss previously recognized in equity is included in the statements of consolidated income for the period. Any gain or loss arising from a change in the fair value of available for sale investments that are part of an effective hedging relationship is recognized directly in the statements of consolidated income to the extent of the changes in fair value being hedged. c) Other Investments held at amortized cost Investments with fixed or determinable payments that are not quoted in an active market, other than those purchased with the intent to be sold immediately or in the short term and are not classified as available for sale, are classified as other investments held at amortized cost. Such investments where fair value has not been hedged are stated at amortized cost, less provision for any impairment. Any gain or loss is recognized in the statements of consolidated income when the investment is derecognized or impaired. d) Held to maturity Investments having fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity other than those that the Group designates as FVIS, available for sale and those that meet the definition of other investments held at amortized cost are classified as held to maturity. Held to maturity investments are subsequently measured at amortized cost, less provision for impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition on an effective yield method. Any gain or loss on such investments is recognized in the statements of consolidated income when the investment is derecognized or impaired. Investments classified as held to maturity cannot ordinarily be sold or reclassified without impacting the Group’s ability to use this classification and cannot be designated as a hedged item with respect to special commission rate or prepayment risk, reflecting the longer-term nature of these investments.




2. Summary of significant accounting policies (continued) 2.13 Loans and advances Loans and advances are non-derivative financial assets having fixed or determinable payments that are not quoted in an active market. All loans and advances are initially measured at fair value including acquisition charges associated with the loans and advances, if any. Following initial recognition, subsequent transfers between the various classes of loans and advances is not ordinarily permissible. Loans and advances that are not quoted in an active market and for which fair value has not been hedged are stated at amortized cost. For loans and advances which are hedged, the related portion of the hedged fair value is adjusted against the carrying amount. For presentation purposes, provision for credit losses is netted from loans and advances. 2.14 Impairment of financial assets An assessment is made at each reporting date to determine whether there is objective evidence that a financial asset or group of financial assets may be impaired. Objective evidence of impairment may include indications that the borrower is experiencing significant financial difficulty, default or delinquency in special commission or principal payments, the probability that it will enter bankruptcy or other financial reorganization and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in economic conditions that correlate with defaults. If such evidence exists, the estimated recoverable amount of that asset is determined and an impairment loss, based on the net present value of future anticipated cash flows, is recognized for changes in its carrying amounts. Financial assets are written off only in circumstances where effectively all possible means of recovery have been exhausted. Once a financial asset has been written down to its estimated recoverable amount, special commission income is thereafter recognized based on the rate of special commission that was used to discount the future cash flows for the purpose of measuring the recoverable amount. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in the statements of consolidated income. Renegotiation activity is designed to manage customer relationships, maximise collection opportunities and, if possible, avoid foreclosure or repossession. Such activity may involve extending the payment arrangements and/or the agreement of new loan conditions. Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. (a) Impairment of financial assets held at amortized cost A financial asset is classified as impaired when there is an objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. A specific provision for credit losses due to impairment of a loan or any other financial asset held at amortized cost is established if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the specific provision is the difference between the carrying amount and the estimated recoverable amount. The estimated recoverable amount is the present value of expected future cash flows, including amounts estimated to be recoverable from guarantees and collateral, discounted based on the original effective special commission rate. In addition to specific provision for credit losses, a provision for collective impairment is made on a portfolio basis for credit losses where there is an objective evidence that unidentified losses exist at the reporting date. This provision is estimated based on various factors including credit ratings allocated to a borrower or group of borrowers, the current economic conditions, the experience the Group has had in dealing with a borrower or group of borrowers and available historical default information. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions. For financial assets at amortised cost, the carrying amount of the asset is adjusted either directly or through the use of an allowance account and the amount of the adjustment is included in the statements of consolidated income. (b) Impairment of financial assets held as available for sale For financial assets held as available for sale at fair value, where a loss has been recognised directly under equity, the cumulative net loss recognised in equity is transferred to the statements of consolidated income when the asset is considered to be impaired. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to credit event occurring after the impairment loss was recognised in the consolidated statement of income, the impairment loss is reversed through the consolidated statement of income. However, for equity investments held as available for sale, a significant or prolonged decline in fair value below its cost represents objective evidence of impairment. The impairment loss against available for sale equity instruments cannot be reversed through the statements of consolidated income as long as the asset continues to be recognised i.e. any increase in fair value after impairment can only be recognised in equity. On de-recognition, any cumulative gain or loss previously recognised in equity is included in the statements of consolidated income for the period. 2.15 Other real estate owned The Group, in the ordinary course of business, acquires certain real estate against settlement of loans and advances. Such real estate are considered as assets held for sale and are initially recorded at the lower of the net realizable value of related loans and advances or the current fair value of the related real estate, less any cost to sell. Subsequent to the initial recognition, these other real estate owned are periodically revalued and are carried at lower of their carrying values or the related net realizable value. Rental income, realized gains or losses on disposal and unrealized losses on revaluation are credited or charged to the statements of consolidated income.




2. Summary of significant accounting policies (continued) 2.16 Property and equipment Property and equipment are stated at historical cost net of accumulated depreciation. Freehold land is not depreciated. The cost of other property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets as follows: Buildings 33 years Leasehold improvements Over the lease period or economic life (10 years), whichever is shorter Furniture, equipment and vehicles Up to 7 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposals of property and equipment are included in the statements of consolidated income. 2.17 Intangible assets - goodwill Goodwill represents the excess of the cost of acquisition over the fair value of the Bank’s share of identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill is stated at cost less any accumulated impairment losses, which are charged to the statements of consolidated income. An impairment test for goodwill is carried out annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment loss recorded against goodwill cannot be reversed. 2.18 Financial liabilities All financial liabilities including customer and money market deposits and debt securities issued are initially recognized at fair value less transaction costs except for financial liabilities measured at FVIS where transactions cost, if any, are not deducted from the fair value measurement at initial recognition, and are included in the statements of consolidated income. Subsequently, all special commission bearing financial liabilities other than those held at FVIS are measured at amortized cost. Amortized cost is calculated by taking into account any discount or premium on settlement. Special commission bearing deposits for which there is an associated fair value hedging relationship are adjusted for fair value to the extent hedged. Financial liabilities held at FVIS comprise market linked financial liabilities which are customer deposits where the rate of return is benchmarked to the performance of underlying instruments such as currencies, equities or commodities. At maturity, the repayment of principal amount to the customers is in accordance with the contractual terms. After initial recognition these deposits are measured at fair value and any gains or losses arising from the change in fair value are included in the statements of consolidated income for the year. 2.19 Financial guarantees In the ordinary course of business, the Group extends credit related commitments consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognized in the consolidated financial statements at fair value in other liabilities, being the value of the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the unamortized premium and the best estimate of expenditure required to settle any financial obligation arising as a result of guarantees. The premium received is recognized in the statements of consolidated income over the life of the guarantee. 2.20 Provisions Provisions are recognized when a reliable estimate can be made for a present legal or constructive obligation as a result of past events and it is more likely than not that an outflow of resources will be required to settle the obligation. 2.21 Cash and cash equivalents For the purpose of the statements of consolidated cash flows, cash and cash equivalents comprise cash, balances with Central Banks and reverse repos (excluding statutory deposit) and due from banks and other financial institutions having an original maturity of three months or less. 2.22 De-recognition of financial instruments A financial asset is derecognized, when the contractual rights to the cash flows from the financial asset expire or the asset is transferred and the transfer qualifies for de-recognition. In instances where the Group is assessed to have transferred a financial asset, the asset is derecognized if the Group has transferred substantially all the risks and rewards of ownership. Where the Group has neither transferred nor retained substantially all the risks and rewards of ownership, the financial asset is derecognized only if the Group has not retained control of the financial asset. The Group recognizes separately as assets or liabilities any rights and obligations created or retained in the process. A financial liability is derecognized only when it is extinguished, that is when the obligation specified in the contract is either discharged, cancelled or expires.




2. Summary of significant accounting policies (continued) 2.23 Equity-based payments The Bank offers its eligible employees an equity-settled share-based payment plan (the “Plan”) as approved by SAMA. Under the terms of the Equity Based Long Term Bonus Plan, eligible employees of the Bank are offered shares at a predetermined benchmark price for a fixed period of time. At the vesting dates determined under the terms of the plan, the Bank delivers the underlying allotted shares to the employees, subject to the satisfactory completion of the vesting conditions. The cost of these plans is measured by reference to the fair value at the date on which the shares are granted. The fair value of the plan is determined with reference to the market value of the shares at the inception of the plan using the discounted cash flow model. The cost of the plans is recognized over the period in which the service condition is fulfilled, ending on the date on which the relevant employees become fully entitled the shares (“the vesting date”). The cumulative expense recognized for these plans at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and the Bank’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the statements of consolidated income for a period represents the movement in cumulative expense recognized as at the beginning and end of that period. The Bank, with the approval from SAMA, has entered into an agreement with an independent third-party to acquire a beneficial interest in the underlying shares solely to manage the price risks associated with the above plans. Under the provisions of such agreement, the Bank, at no point, becomes the legal owner of the underlying shares. 2.24 Employee benefit obligations The Bank operates an end of service benefit plan for its employees. The provision under this plan is made based on an actuarial valuation of the Bank’s liability under the Saudi Arabian Labour Law and in accordance with the local statutory requirements of the foreign branches and subsidiaries. 2.25 Treasury stock Treasury stocks are recorded at cost and presented as a deduction from the equity as adjusted for any transaction costs, dividends and gains or losses on sale of such stocks. Subsequent to their acquisition, these stocks are carried at the amount equal to the consideration paid. These stocks are acquired by the Bank with the approval of SAMA, primarily for discharging its obligation under its equity-based payment plans and also include stocks acquired in settlement of customer debt. 2.26 Zakat and income taxes Under Saudi Arabian Zakat and Income tax laws, Zakat and income taxes are the liabilities of the Saudi and foreign shareholders, respectively. Zakat is computed on the Saudi shareholders’ share of equity or net income using the basis defined under the Zakat regulations. Income taxes are computed on the foreign shareholders’ share of net income for the year. Zakat and income taxes are not charged to the Bank’s statements of consolidated income. They are paid on behalf of and are deducted from the dividends paid to the shareholders. Please refer to Note 2.29 for change in accounting policy. Overseas branches and subsidiaries are subject to income tax as per rules and regulations of the country in which they reside. 2.27 Investment management services The Bank offers certain investment management and advisory services to its customers through its subsidiary. These services include portfolio management on discretionary and non-discretionary basis and management of investment funds in consultation with professional investment advisors. The Bank’s investment in these funds is included in the FVIS or available for sale investments and fees earned are disclosed under related party transactions. Determining whether the Bank controls such an investment fund usually depends on the assessment of the aggregate economic interests of the Bank in the fund and the investors’ right to remove the fund manager. Based on the assessment carried out by the Bank, it has concluded that it acts as an agent for the investors in all the cases and therefore it has not consolidated these funds in these financial statements. In addition, the assets held in a trust or fiduciary capacity are not treated as assets of the Bank or that of its subsidiary and accordingly are not included in the Group’s statements of consolidated financial position. 2.28 Shariah approved banking products In addition to conventional banking, the Bank offers its customers certain Shariah compliant banking products, which are approved by its Shariah Board. All Shariah compliant banking products are accounted for using IFRS and are in conformity with the accounting policies described in these consolidated financial statements.




2. Summary of significant accounting policies (continued) 2.29 Change in accounting policies The accounting policies adopted are consistent with those of the previous financial year except for the: • amendment to accounting policy relating to Zakat and income tax. The Bank now accrues liabilities for Zakat and income tax on a quarterly basis. Previously, Zakat and income tax were deducted from dividends upon payment of dividend

to the shareholders and were recognized as liabilities at that time. The above change in accounting policy has been retrospectively accounted for in these consolidated financial statements and therefore, corresponding figures have been restated and the effects of the above change are disclosed in note 37 to the consolidated financial statements. Consistent with previous years, Zakat and income tax continues to be charged to retained earnings as required by SAMA circular relating to accounting for Zakat and Income tax.

• amendments to IAS 7: Statement of cash flows on disclosure initiative - This amendment introduces an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities.

This amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved. This did not have any significant impact on the financial position or the performance of the Group. 3. Cash and balances with Central Banks 2017 2016 SAR’000 SAR’000 Cash in hand 1,214,448 1,395,760 Statutory deposit 9,242,179 9,560,219 Current account 665,026 405,159 Money market placements 14,073,413 25,983,376 Total 25,195,066 37,344,514 In accordance with the Banking Control Law and regulations issued by SAMA, the Group is required to maintain a statutory deposit with SAMA and other Central Banks at stipulated percentages of its demand, savings, time and other deposits, as calculated at the end of each month. Money market placements represent securities purchased under an agreement to re-sell (reverse repos) with SAMA. 4. Due from banks and other financial institutions 2017 2016 SAR’000 SAR’000 Current accounts 3,230,367 4,553,282 Money market placements 7,801,113 5,046,374 Total 11,031,480 9,599,656 The qualitative analysis of due from banks and other financial institutions is as follows: 2017 2016 SAR’000 SAR’000 Investment grade 10,643,643 9,253,863 Non Investment Grade 387,837 345,793 Total 11,031,480 9,599,656




5. Investments, net a) Investment securities are classified as follows: i) Held at fair value through income statement (FVIS) Domestic International Total 2017 2016 2017 2016 2017 2016 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 Fixed rate securities 262,159 127,676 53,187 733,888 315,346 861,564 Structured credits - - 62,784 90,645 62,784 90,645 Hedge funds - - 1,898,941 1,848,775 1,898,941 1,848,775 Equities - - - 269 - 269 Total Held at FVIS 262,159 127,676 2,014,912 2,673,577 2,277,071 2,801,253 FVIS investments above include investments held for trading of SAR 312.8 million (2016: SAR 861.8 million). The designated FVIS investments included above are so designated when the financial instruments include one or more embedded derivatives or are being evaluated on a fair value basis and are in accordance with the documented risk management strategy of the Group. ii) Available for sale Domestic International Total 2017 2016 2017 2016 2017 2016 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 Fixed rate securities 2,378,119 2,399,443 7,369,155 6,727,937 9,747,274 9,127,380 Floating rate notes 4,227,774 2,689,583 6,791,386 4,563,371 11,019,160 7,252,954 Private equity - - 620,956 671,500 620,956 671,500 Equities 2,918,704 2,661,369 80,492 31,911 2,999,196 2,693,280 Total Available for sale 9,524,597 7,750,395 14,861,989 11,994,719 24,386,586 19,745,114 iii) Held to maturity International Total 2017 2016 2017 2016 SAR’000 SAR’000 SAR’000 SAR’000 Fixed rate securities 3,178,930 2,981,574 3,178,930 2,981,574 Total Held to maturity 3,178,930 2,981,574 3,178,930 2,981,574 iv) Other investments held at amortized cost, net Domestic International Total 2017 2016 2017 2016 2017 2016 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 Fixed rate securities 18,148,605 10,640,725 157,452 137,214 18,306,057 10,777,939 Floating rate notes 15,294,513 14,923,715 - - 15,294,513 14,923,715 Mudaraba investments - - 469,253 163,215 469,253 163,215 Total other investments held at amortized cost 33,443,118 25,564,440 626,705 300,429 34,069,823 25,864,869 Total investments, net 43,229,874 33,442,511 20,682,536 17,950,299 63,912,410 51,392,810 b) The composition of investments is as follows: 2017 (SAR’000) 2016 (SAR’000) Quoted Unquoted Total Quoted Unquoted Total Fixed rate securities 12,584,217 18,963,390 31,547,607 12,435,562 11,312,895 23,748,457 Floating rate notes 10,852,760 15,460,913 26,313,673 7,110,269 15,066,400 22,176,669 Equities 3,003,504 616,648 3,620,152 2,697,975 667,074 3,365,049 Mudaraba investments - 469,253 469,253 - 163,215 163,215 Others 62,784 1,898,941 1,961,725 90,645 1,848,775 1,939,420 Total 26,503,265 37,409,145 63,912,410 22,334,451 29,058,359 51,392,810 Unquoted securities principally comprise Saudi government development bonds, Saudi floating rate notes, sukuks, treasury bills, hedge funds and private equities. In view of the nature of the market for such securities, carrying values are determined either by using an appropriate pricing model or net asset values, as provided by independent third parties. Included in fixed rate securities above are securities pledged under repurchase agreements with other banks and customers whose carrying value at December 31, 2017 was SAR 4,867 million (2016: SAR 2,967 million). Also see note 17(d). Mudaraba is an arrangement approved by the Shariah Board under which the Bank provides funds to customers for a specified business activity. The returns under such arrangements are shared between the Bank and customer on a predetermined basis. Mudaraba investments are included under “Other investments held at amortized cost”. The fair values of these Mudaraba investments are not expected to be significantly different from their carrying values.




5. Investments, net (continued) c) The analysis of unrecognized gains and losses and fair values of held to maturity and other investments held at amortized cost are as follows: 2017 (SAR’000) 2016 (SAR’000) Gross Gross Gross Gross Carrying unrecognized unrecognized Carrying unrecognized unrecognized value gain loss Fair value value gain loss Fair value Held to maturity: Fixed rate securities 3,178,930 82,454 - 3,261,384 2,981,574 150,313 - 3,131,887 Total held to maturity 3,178,930 82,454 - 3,261,384 2,981,574 150,313 - 3,131,887 Other investments held at amortized cost: Fixed rate securities 18,306,057 3,155 (434,785) 17,874,427 10,777,939 3,655 (267,553) 10,514,041 Floating rate notes 15,294,513 - - 15,294,513 14,923,715 - - 14,923,715 Mudaraba investments 469,253 - - 469,253 163,215 - - 163,215 Total other investments held at amortized cost 34,069,823 3,155 (434,785) 33,638,193 25,864,869 3,655 (267,553) 25,600,971 Grand total 37,248,753 85,609 (434,785) 36,899,577 28,846,443 153,968 (267,553) 28,732,858 d) Credit quality of investments The credit quality of investment portfolio is as follows: 2017 2016 SAR’000 SAR’000 Saudi government, government backed bonds and treasury bills 38,946,758 30,035,993 Investment grade 21,535,824 17,878,650 Non-investment grade 401,570 422,586 Others 3,028,258 3,055,581 Total 63,912,410 51,392,810 The Bank uses its internal ratings to rate the credit quality of the investment portfolio. Investments classified under investment grade above comprise of credit exposures equivalent to Aaa to Baa3 ratings under Moody’s ratings methodology. Investments classified as “Others” mainly comprise of equities and hedge funds which are not rated. e) The investments by counter-party are as follows: 2017 2016 SAR’000 SAR’000 Government and quasi government 46,416,280 37,739,592 Banks and other financial institutions 12,326,385 8,568,277 Corporate 2,197,525 2,091,666 Hedge funds 1,898,941 1,848,775 Others 1,073,279 1,144,500 Total 63,912,410 51,392,810




6. Loans and advances, net a) Loans and advances are classified as follows: Commercial Credit Consumer loans & 2017 (SAR’000) cards loans advances Others Total Held at amortized cost: Performing loans and advances 1,549,623 17,021,699 99,786,440 174,273 118,532,035 Non-performing loans and advances - 13,363 1,103,460 10,492 1,127,315 Total held at amortized cost 1,549,623 17,035,062 100,889,900 184,765 119,659,350 Provision for credit losses (52,442) (226,693) (1,688,678) (6,808) (1,974,621) Loans & advances, net 1,497,181 16,808,369 99,201,222 177,957 117,684,729 Commercial Credit Consumer loans & 2016 (SAR’000) cards loans advances Others Total Held at amortized cost: Performing loans and advances 1,389,502 18,267,992 105,944,113 428,207 126,029,814 Non-performing loans and advances - 14,565 1,050,178 11,448 1,076,191 Total held at amortized cost 1,389,502 18,282,557 106,994,291 439,655 127,106,005 Provision for credit losses (41,028) (227,337) (1,586,270) (17,040) (1,871,675) Loans & advances, net 1,348,474 18,055,220 105,408,021 422,615 125,234,330 Loans and advances, net includes Shariah-approved banking products in respect of Murabaha, Ijara and Tawarruq finance, which are stated at amortized cost less provision for credit losses amounting to SAR 71,079 million (2016 :SAR 74,953 million). b) Movement in provision for credit losses are as follows: Commercial Credit Consumer loans & 2017 (SAR’000) cards loans advances Others Total Balance at the beginning of the year 41,028 227,337 1,586,270 17,040 1,871,675 Provided during the year, net 11,414 592 165,858 (9,418) 168,446 Bad debts written off - (115) (43,816) (30) (43,961) Recoveries of amounts previously provided - (325) (16,535) (274) (17,134) Exchange adjustment - (796) (3,099) (510) (4,405) Balance at the end of the year 52,442 226,693 1,688,678 6,808 1,974,621 Commercial Credit Consumer loans & 2016 (SAR’000) cards loans advances Others Total Balance at the beginning of the year 42,867 207,190 1,735,167 32,526 2,017,750 Provided during the year, net (1,839) 21,236 66,874 (14,638) 71,633 Bad debts written off - (213) (210,780) (481) (211,474) Recoveries of amounts previously provided - (876) (7,314) (392) (8,582) Exchange adjustment - - 2,323 25 2,348 Balance at the end of the year 41,028 227,337 1,586,270 17,040 1,871,675 During the year, the Group has charged an amount of SAR 287.2 million (2016: SAR 200.1 million) to the statements of consolidated income on account of provision for credit losses which is net of recoveries of amounts previously provided and net direct write-offs.




6. Loans and advances, net (continued) c) Credit quality of loans and advances i) Ageing of loans and advances past due but not impaired Commercial Credit Consumer loans & 2017 (SAR’000) cards loans advances Others Total Less than 90 days 101,917 779,080 1,259,391 - 2,140,388 90 days and more 31,795 93,983 118,039 - 243,817 Total 133,712 873,063 1,377,430 - 2,384,205 Commercial Credit Consumer loans & 2016 (SAR’000) cards loans advances Others Total Less than 90 days 106,554 763,243 1,033,313 - 1,903,110 90 days and more 40,564 99,286 - - 139,850 Total 147,118 862,529 1,033,313 - 2,042,960 ii) Economic sector risk concentration for the loans and advances and the related credit loss provision as follows: Credit loss Loans & 2017 (SAR’000) Performing Non-performing provision advances, net Government and quasi government 681,854 - 242 681,612 Banks and other financial institutions 5,028,716 - 19,627 5,009,089 Agriculture and fishing 4,050,608 440 9,415 4,041,633 Manufacturing 18,761,309 192,262 251,697 18,701,874 Mining and quarrying 1,436,027 - 7,019 1,429,008 Electricity, water, gas and health services 12,059,269 20,048 46,908 12,032,409 Building and construction 16,648,939 710,701 1,001,986 16,357,654 Commerce 18,110,827 165,672 161,264 18,115,235 Transportation and communication 9,153,683 1,402 38,011 9,117,074 Services 2,775,771 941 26,165 2,750,547 Consumer loans and credit cards 18,571,322 13,363 279,135 18,305,550 Other 11,253,710 22,486 133,152 11,143,044 Total 118,532,035 1,127,315 1,974,621 117,684,729 Credit loss Loans & 2016 (SAR’000) Performing Non-performing provision advances, net Government and quasi government 818,687 - - 818,687 Banks and other financial institutions 4,053,931 - 22,422 4,031,509 Agriculture and fishing 4,621,550 318 13,733 4,608,135 Manufacturing 19,215,021 102,842 288,997 19,028,866 Mining and quarrying 1,323,914 - 6,874 1,317,040 Electricity, water, gas and health services 11,523,444 21,172 47,187 11,497,429 Building and construction 16,130,496 734,208 769,642 16,095,062 Commerce 22,220,294 175,890 187,153 22,209,031 Transportation and communication 11,065,763 1,402 55,743 11,011,422 Services 2,983,367 2,481 45,786 2,940,062 Consumer loans and credit cards 19,657,494 14,565 268,365 19,403,694 Other 12,415,853 23,313 165,773 12,273,393 Total 126,029,814 1,076,191 1,871,675 125,234,330




6. Loans and advances, net (continued) iii) Analysis of loans and advances which are neither past due nor impaired: 2017 2016 SAR’000 SAR’000 Investment grade loans and advances 17,077,301 17,711,182 Consumer loans and credit cards 17,095,016 18,647,846 Non-investment grade 80,974,644 86,859,155 Unrated 1,000,869 768,671 Total 116,147,830 123,986,854 The Bank uses its internal ratings to rate the credit quality of the loans and advances portfolio. Loans and advances classified under investment grade above comprise of credit exposures equivalent to Aaa to Baa3 ratings under Moody’s ratings methodology. d) Collateral Fair value of collateral held by Bank against loans and advances by each category are as follows: 2017 2016 SAR’000 SAR’000 Neither past due nor impaired 63,021,343 57,879,057 Past due but not impaired 1,952,858 12,862,323 Impaired 244,755 249,125 Total 65,218,956 70,990,505 The collateral consists of deposits, financial guarantees, marketable securities and real estate. Those collaterals which are not readily convertible into cash (i.e. real estate) are accepted by the Bank with the intent for them to be disposed of in case of default by the customer. 7. Property and equipment, net Furniture, Land Leasehold equipment & 2017 2016 & buildings improvements vehicles Total Total (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) Cost Balance at the beginning of the year 915,033 656,067 1,345,904 2,917,004 2,846,823 Additions 3,459 22,571 70,396 96,426 87,739 Disposals - (2,668) (4,118) (6,786) (16,279) Exchange adjustment - - (1,048) (1,048) (1,279) Balance at the end of the year 918,492 675,970 1,411,134 3,005,596 2,917,004 Accumulated depreciation Balance at the beginning of the year 574,769 536,984 1,209,166 2,320,919 2,210,579 Charge for the year 11,166 35,150 77,249 123,565 121,341 Disposals - (2,516) (4,018) (6,534) (10,560) Exchange adjustment (12) - (152) (164) (441) Balance at the end of the year 585,923 569,618 1,282,245 2,437,786 2,320,919 Net book value as at December 31, 2017 332,569 106,352 128,889 567,810 Net book value as at December 31, 2016 340,264 119,083 136,738 596,085 Capital work in progress 2,071,074 1,914,095 Total 2,638,884 2,510,180




8. Other assets 2017 2016 SAR’000 SAR’000 Accounts receivable 158,871 160,776 Other real estate, net 4,757 11,415 Goodwill 21,404 22,604 Other 448,770 770,243 Total 633,802 965,038 9. Derivatives In the ordinary course of business, the Group utilizes the following derivative financial instruments for both trading and hedging purposes: Swaps are contractual agreements to exchange one set of cash flows for another. For commission rate swaps, counterparties generally exchange fixed and floating rate commission payments in a single currency without exchanging principal. For currency swaps, fixed commission payments and principal are exchanged in different currencies. For cross currency commission rate swaps, principal, fixed and floating commission payments are exchanged in different currencies. Forwards and futures are contractual agreements to either buy or sell a specified currency, commodity or financial instrument at a specified price and date in the future. Forwards are customized contracts transacted in the over the counter market. Foreign currency and commission rate futures are transacted in standardized amounts on regulated exchanges. Forward commission rate agreements are individually negotiated commission rate futures that call for a cash settlement for the difference between a contracted commission rate and the market rate on a specified future date, based on a notional principal for an agreed period of time. Options are contractual agreements under which the seller (writer) grants the purchaser (holder) the right, but not the obligation, to either buy or sell at a fixed future date or at any time during a stipulated period, a specified amount of a currency, commodity, equity or financial instrument at a pre-determined price. Swaptions are options on swaps and entail an option on the fixed rate component of a swap. An option on a swap provides the purchaser or holder of the option the right, but not the obligation to enter into a swap where it pays fixed rates against receipt of a floating rate index at a future date. Derivatives held for trading purposes Most of the Group’s derivative trading activities relate to sales, positioning and arbitrage. Sales activities involve offering products to customers in order to, inter alia, enable them to transfer, modify or reduce current and future risks. Positioning involves managing market risk positions with the expectation of profiting from favourable movements in prices, rates or indices. Arbitrage involves identifying, with the expectation of profiting from, price differentials between markets or products. Derivatives held for hedging purposes As part of its asset and liability management, the Group uses derivatives for hedging purposes in order to adjust its own exposure to currency and commission rate risks. This is generally achieved by hedging specific transactions as well as by strategic hedging against overall statements of financial position exposures. Strategic hedging does not qualify for special hedge accounting and the related derivatives are accounted for as held for trading. The Group uses forward foreign exchange contracts and currency swaps to hedge against specifically identified currency risks. In addition, the Group uses commission rate swaps and commission rate futures to hedge against the commission rate risk arising from specifically identified fixed commission rate exposures. The Group also uses commission rate swaps to hedge against the cash flow risk arising on certain floating rate exposures. In all such cases, the hedging relationship and objective, including the details of the hedged items and hedging instrument are formally documented and the transactions are accounted for as fair value or cash flow hedges. The table below shows the positive and negative fair values of derivative financial instruments, together with the notional amounts analyzed by the term to maturity. The notional amounts, which provide an indication of the volumes of the transactions outstanding at the year-end, do not necessarily reflect the amounts of future cash flows involved. These notional amounts, therefore, are neither indicative of the Group’s exposure to credit risk, which is generally limited to the positive fair value of the derivatives, nor to market risk. All derivatives are reported at fair value on the statements of consolidated financial position. In addition, where applicable, all such contracts covered by master netting agreements are reported net. Gross positive or negative fair values are netted with the cash collateral received from or paid to a given counterparty pursuant to a valid master netting agreement.




9. Derivatives (continued) The analysis of derivative financial instruments and the related fair values together with the notional amounts classified by the term to maturity is as follows: Notional amounts by term to maturity Positive Negative Notional Within fair value fair value amount 3 Months 3-12 Months 1-5 Years Over 5 Years 2017 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 Held for trading Commission rate swaps 6,231,314 4,970,558 141,672,493 9,823,864 15,498,684 91,988,025 24,361,920 Commission rate futures and options 35,455 40,300 12,404,532 5,933,629 840,500 4,972,220 658,183 Forward foreign exchange contracts 139,574 186,108 29,118,406 11,719,330 12,350,851 5,048,225 - Currency options 120,316 121,395 8,000,585 3,838,029 3,890,739 271,817 - Swaptions 16,537 233 4,498,310 - 4,498,310 - Equity and commodity options 115,618 115,618 1,342,478 77,478 - 1,265,000 - Held as cash flow hedges Commission rate swaps 43,218 14,261 4,747,500 - 770,000 952,500 3,025,000 Sub-total 6,702,032 5,448,473 201,784,304 31,392,330 37,849,084 104,497,787 28,045,103 Cash collateral received / paid (187,324) (1,472,175) Total 6,514,708 3,976,298 Notional amounts by term to maturity Positive Negative Notional Within fair value fair value amount 3 Months 3-12 Months 1-5 Years Over 5 Years 2016 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 SAR’000 Held for trading Commission rate swaps 3,788,223 3,388,485 111,190,682 903,214 19,325,706 63,252,704 27,709,058 Commission rate futures and options 25,100 30,368 5,011,454 226,938 28,125 3,597,408 1,158,983 Forward foreign exchange contracts 231,433 104,650 34,929,272 18,314,824 13,768,804 2,845,644 - Currency options 318,614 297,223 39,767,990 13,170,387 19,038,140 7,559,463 - Swaptions 61,141 53,710 5,625,000 - 5,625,000 - - Equity and commodity options 119,700 119,700 1,847,442 125,053 226,059 1,496,330 - Held as fair value hedges: Commission rate futures and options - 10,378 1,613,625 1,613,625 - - - Held as cash flow hedges Commission rate swaps 47,301 90,999 7,003,200 - 280,700 4,660,000 2,062,500 Sub-total 4,591,512 4,095,513 206,988,665 34,354,041 58,292,534 83,411,549 30,930,541 Cash collateral received / paid (149,453) (2,609,884) Total 4,442,059 1,485,629 The tables below show a summary of hedged items, the nature of the risk being hedged, the hedging instrument and their fair values: Nature Hedging Positive Negative Description of hedged items Fair value of hedge instrument fair value fair value 2017 (SR ‘000) Floating rate notes 4,756,723 Cash flow Commission rate swaps 43,218 14,261 Nature Hedging Positive Negative Description of hedged items Fair value of hedge instrument fair value fair value 2016 (SR ‘000) Floating rate notes 7,000,158 Cash flow Commission rate swaps 47,301 90,999 Fixed rate notes 1,411,406 Fair Value Commission rate futures and options - 10,378




9. Derivatives (continued) Cash flow hedges The Group is exposed to variability in future cash flows on non-trading assets and liabilities which bear special commission at a variable rate. The Group generally uses special commission rate swaps as hedging instruments to hedge against these special commission rate risks. Also, as a result of firm commitments in foreign currencies, the Group is exposed to foreign exchange and special commission rate risks which are hedged with cross currency special commission rate swaps. Below is the schedule indicating as at 31 December, the periods when the cash flows arising from the hedged item are expected to occur and when they are expected to affect statements of consolidated income: 2017 (SAR’000) Within 3 months 3-12 months 1-5 Years Over 5 years Total Cash inflows 17,828 86,830 489,780 422,518 1,016,956 2016 (SAR’000) Within 3 months 3-12 months 1-5 Years Over 5 years Total Cash inflows 36,494 120,666 799,943 339,177 1,296,280 Approximately 25% (2016: 37%) of the positive fair value of the Group’s derivatives are entered into with financial institutions and less than 13% (2016: 10%) of the positive fair value contracts are with any single counter-party at the reporting date. 10. Due to banks and other financial institutions 2017 2016 SAR’000 SAR’000 Current accounts 580,665 459,948 Money market deposits 5,970,799 10,420,830 Total 6,551,464 10,880,778 Money market deposits include deposits against the sale of fixed rate securities of SAR 3,823 million (2016: SAR 2,403 million) with an agreement to repurchase the same at fixed future dates. 11. Customer deposits Customer deposits comprise of the following: 2017 2016 SAR’000 SAR’000 Demand 99,546,112 103,678,452 Savings 7,224,513 7,009,304 Time 54,884,115 53,407,586 Other 6,332,831 7,980,374 Total 167,987,571 172,075,716 Time deposits include deposits accepted under Shariah approved banking product contracts of SAR 29,201 million (2016: SAR 27,716 million). Time deposits include deposits against sale of fixed rate securities of SAR 681 million (2016: SAR 630) with agreements to repurchase the same at fixed future dates. Other customer deposits include SAR 1,322 million (2016: SAR 1,308 million) of margins held against facilities extended to customers. Included in time deposits are market linked customer deposits amounting to SAR 560 million (2016: SAR 444.2 million), which are designated FVIS liabilities. The deposits are so designated when they include one or more embedded derivatives or are being evaluated on a fair value basis in accordance with the documented risk management strategy of the Group. The above include foreign currency deposits as follows: 2017 2016 SAR’000 SAR’000 Demand 10,610,726 12,468,112 Savings 941,626 813,406 Time 10,917,618 10,194,982 Other 338,124 283,022 Total 22,808,094 23,759,522




12. Other liabilities 2017 2016 SAR’000 SAR’000 Accounts payable 976,380 834,116 Employee benefit obligations (note 13) 436,604 375,405 Unearned fee income 279,529 321,284 Customer initial public offering deposits 21,340 36,818 Other 2,699,741 2,934,073 Total 4,413,594 4,501,696 13. Employee benefit obligations The Bank operates an End of Service benefit plan for its employees based on the Saudi Arabian Labor Laws. Accruals are made in accordance with the actuarial valuation under projected unit credit method while the benefit payments obligation is discharged as and when it falls due. The amounts recognized in the statement of consolidated financial position and movement in the obligation during the year based on its present value are as follows: 2017 2016 SAR’000 SAR’000 Balance at the beginning of the period 373,257 368,834 Current service cost 78,343 32,857 Special commission expense 15,475 13,915 Benefits paid (38,549) (42,349) Balance at the end of the period 428,526 373,257 An independent actuarial valuation is carried out every year for position ending October 31st. Provision held against actuarial valuation as of the end of year is SR 436.6 million (2016: SR 375.4 million). There are various assumptions used in determination of present value of defined benefit obligation of which discount rate and salary increase level are principal which are assumed to be at 4% (2016: 4%) and 2% (2016: 2%) respectively. The actuarial liability would be increased to SR 451.3 million (2016: SR 394.5 million) had the discount rate used in the assumption been lower by 1% and the liability would be decreased to SR 408.1 million (2016: SR 354.2 million) had the discount rate used in the assumption been higher by 1%. Similarly, the actuarial liability would be increased to SR 439.9 million (2016: SR 383.8 million) had the salary increase rate used in the assumption been higher by 1% and the liability would be decreased to SR 418.3 million (2016: SR 363.7 million) had the salary increase rate used in the assumption been lower by 1%. The weighted average duration of the defined benefit obligation is approximately 4 years. 14. Share capital The authorized, issued and fully paid share capital of the Bank consists of 2,000 million shares (2016: 2,000 million shares) of SAR 10 each. 15. Statutory and general reserves In accordance with the Banking Control Law of the Kingdom of Saudi Arabia and the Articles of Association of the Bank, a minimum of 25% of the net income for the year is required to be transferred to a statutory reserve until this reserve equals the paid up capital of the Bank. The statutory reserve is currently not available for distribution. During the year, the bank transferred SAR 1,256 million (2016: 1,251 million) to the statutory reserve from the retained earnings. In addition, as and when considered appropriate, the Bank makes an appropriation to general reserve for general banking risks. 16. Fair value reserves The movement in fair value reserves during the year attributable to the equity shareholders of the Group is set out below: Available for Cash flow sale financial 2017 (SR’000) hedges assets Total Balance at beginning of the year (126,493) 217,056 90,563 Change in fair value during the year 153,826 130,481 284,307 Transfer to statements of consolidated income (56,159) (29,037) (85,196) Balance at end of the year (28,826) 318,500 289,674 Available for Cash flow sale financial 2016 (SR’000) hedges assets Total Balance at beginning of the year 8,057 365,824 373,881 Change in fair value during the year (82,789) (109,273) (192,062) Transfer to statements of consolidated income (51,761) (39,495) (91,256) Balance at end of the year (126,493) 217,056 90,563




17. Commitments and contingencies a) Legal proceedings No provision has been made in relation to legal proceedings existing as at December 31, 2017 and 2016 as no material costs are expected to be incurred. b) Capital commitments The Group’s capital commitments as at December 31, 2017 amounted to SAR 242 million (2016: SAR 166 million). These commitments represent contractual obligations in respect of building, construction and equipment purchases. c) Credit related commitments and contingencies Credit related commitments and contingencies mainly comprise letters of credit, guarantees, acceptances and irrevocable commitments to extend credit. The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit, which represent irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans and advances. Documentary letters of credit which are written undertakings by the Group on behalf of a customer authorizing a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions, are generally collateralized by the underlying shipments of goods to which they relate, and therefore have less risk. Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be presented before being reimbursed by the customers. Cash requirements under these instruments are considerably less than the amount of the related commitment because the Group generally expects the customers to fulfill their primary obligation. Commitments to extend credit represent the unused portion of approved facilities to extend credit, principally in the form of loans and advances, guarantees and letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to a loss in an amount equal to the total unused commitments. However, the likely amount of loss, which cannot readily be quantified, is expected to be less than the total unused commitment as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The total outstanding commitments to extend credit do not necessarily represent future cash requirements as many of these commitments may expire or terminate without being funded. i) The contractual maturity structure for the Group’s credit related commitments and contingencies are as follows: 2017 (SAR’000) Within 3 months 3-12 months 1-5 years Over 5 years Total Letters of credit 2,882,614 2,617,101 305,504 - 5,805,219 Letters of guarantee 10,523,730 15,340,490 8,185,941 1,815 34,051,976 Acceptances 1,009,302 811,517 3,847 9,376 1,834,042 Irrevocable commitments to extend credit 1,383,172 694,508 896,147 100,000 3,073,827 Other - 8,020 71,228 607,929 687,177 Total 15,798,818 19,471,636 9,462,667 719,120 45,452,241 2016 (SAR’000) Within 3 months 3-12 months 1-5 years Over 5 years Total Letters of credit 3,137,414 2,316,020 510,234 2,250 5,965,918 Letters of guarantee 7,750,835 17,826,725 10,593,883 2,344 36,173,787 Acceptances 894,851 548,300 9,448 - 1,452,599 Irrevocable commitments to extend credit 1,341,992 1,516,984 269,746 54,302 3,183,024 Other - - 36,723 186,048 222,771 Total 13,125,092 22,208,029 11,420,034 244,944 46,998,099 The unused portion of commitments outstanding as at December 31, 2017 which can be revoked unilaterally at any time by the Group amounts to SAR 88,057 million (2016: SAR 95,823 million) ii) The analysis of credit related commitments and contingencies by counter-party are as follows: 2017 2016 SAR’000 SAR’000 Corporate 40,345,805 42,729,752 Banks and other financial institutions 4,804,294 4,121,101 Other 302,142 147,246 Total 45,452,241 46,998,099 d) Assets pledged Assets pledged as collateral with other financial institutions and others as security against borrowings are as follows: 2017 SAR’000 2016 SAR’000 Related Related Assets liabilities Assets liabilities Investments classified as available for sale and FVIS 4,867,283 4,854,533 2,967,304 3,033,470 e) Operating lease commitments There are no non-cancelable operating lease commitments as of December 31, 2017 and 2016.




18. Special commission income and expense 2017 2016 Special commission income SAR’000 SAR’000 Investments: Available for sale 658,803 604,424 Held to maturity 106,048 123,571 Other investments held at amortized cost 675,793 543,693 1,440,644 1,271,688 Due from banks and other financial institutions 352,195 201,887 Loans and advances 5,134,901 5,218,177 Total 6,927,740 6,691,752 Special commission expense on: Due to banks and other financial institutions 210,298 143,148 Customer deposits 985,217 1,166,320 Total 1,195,515 1,309,468 19. Fee and commission income, net 2017 2016 Fee and commission income: SAR’000 SAR’000 Share trading and fund management 295,544 356,552 Trade finance 378,606 387,587 Corporate finance and advisory 116,492 218,674 Other banking services 803,532 774,075 Total 1,594,174 1,736,888 Fee and commission expense on: Cards (115,462) (109,870) Other banking services (55,977) (42,211) Total (171,439) (152,081) Fee and commission income, net 1,422,735 1,584,807 20. Trading income (loss), net 2017 2016 SAR’000 SAR’000 Debt securities 15,653 16,867 Derivatives and others 78,724 (31,405) Total 94,377 (14,538) 21. Gains on non-trading investments, net 2017 2016 SAR’000 SAR’000 Available for sale 28,195 39,495 Other investments held at amortized cost 842 (3,728) Total 29,037 35,767




22. Other operating income, net 2017 2016 SAR’000 SAR’000 Gain on disposal of property and equipment 7,792 73 Gain on disposal of other real estate 2,341 6,770 Dividend income 152,772 140,496 Other income 1,512 11,482 Total 164,417 158,821 23. Salaries and employee related expenses The Bank’s compensation policy complies with the regulatory requirements of SAMA and international standards of Financial Stability Forum with respect to compensation. This policy is applicable to all businesses across the Group in the Kingdom of Saudi Arabia as well as its overseas branches and fully owned subsidiaries as far as it is consistent with the legal and regulatory requirements of respective host countries where the Group operates. SBL also has a compensation policy in place which is in line with the SAMA guidelines and the local rules and regulations The policy defines the level and categories of key employees whose goals setting, performance measurement and appraisal processes are based on a balanced scorecard approach that links the financial performance evaluation with associated risks, at the overall Bank level. Key employees consist of senior executives (officers who are in senior and leadership roles whose appointment is subject to the no objection by SAMA), Key Risk Takers (officers who may or may not be in senior roles but are directly or indirectly engaged in risk taking roles on behalf of the Group) and Key Risk Controllers (officers who may or may not be in senior roles but are directly or indirectly engaged in risk controlling roles on behalf of the Group.) Compensation structure at the Group consists of (a) fixed components viz., base salary, allowances and benefits; as well as (b) variable components viz., performance bonus and equity based scheme. These components are designed to reflect the level of responsibility and role of the employee, as well as the business area in which the employee works. The Group’s overall variable compensation pool is derived from the Risk Adjusted Net Income of the Group which takes into account significant existing and potential risks in order to protect Group’s capital adequacy and to mitigate risk of potential future losses. A process of distributing variable compensation payments over three annual instalments is in place for key employees. The proportion of deferred payments is determined based on the level and seniority and/or responsibility of the key employee. A portion of deferred variable compensation is also awarded in the form of equity based long term bonus scheme. Remuneration of employees working in control functions such as Risk Management, Credit, Compliance, Internal Audit, Financial Control, Legal etc. are determined independently from the business units monitored by them. Further, claw-back arrangements are included to address adverse future performance. No guaranteed bonuses are allowed. Through these mechanisms, the Group has successfully achieved the policy objectives of ensuring that the overall variable compensation takes into account risks associated with financial performance and adjustments to deferred compensation are considered pursuant to any negative future impact arising out of decisions made during the current period. Variable compensation is awarded to eligible employees in the form of cash, equities or a combination of both. The proportion of variable compensation to be paid in either form is determined based on the level of responsibility and role of the individual employee, as well as the business area in which the employee works and commensurate to the risk taking or controlling ability of the employee. In accordance with regulatory requirements on corporate governance, the Bank’s Board of Directors has established a Nomination and Remuneration Committee (NRC) which comprises of three non-executive directors and chaired by an independent board member. The NRC is responsible for the overall architecture and oversight of the compensation system. The committee reviews the compensation policy from time to time to ensure its adequacy and effectiveness. Accordingly, the policy was last revised in December 2017 to reflect the amended organization structure and approval hierarchy. The NRC makes its recommendations to the Board on the level and composition of remuneration after taking into account the Risk Management Group’s input. NRC also periodically reviews the progress of the compensation policy implementation and ensures that its stated objectives are achieved in line with the laid out guidelines. The following is a breakup of the compensation paid to the Group’s employees for the years 2017 and 2016: Number of Employees Fixed Compensation SAR’000 Variable Compensation Paid – SAR’000 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Category Cash Shares Total Senior executives* 19 21 28,766 30,443 29,882 32,981 3,619 3,190 33,501 36,171 Employees engaged in risk taking activities 927 895 328,602 330,704 65,429 67,753 5,182 5,285 70,611 73,038 Employees engaged in control functions 749 756 188,480 188,528 19,051 19,286 2,061 1,970 21,112 21,256 Other employees 1,665 1,888 205,755 233,059 5,075 4,858 115 214 5,190 5,072 Other outsourced employees 170 195 17,033 19,070 419 600 - - 419 600 Total 3,530 3,755 768,636 801,804 119,856 125,478 10,977 10,659 130,833 136,137 Variable compensation and other employee related cost accrued or paid during the year** 541,718 537,255 Total salaries & employee related expenses 1,310,354 1,339,059 * Senior executives are employees whose appointment requires approval from SAMA. ** Other employee related costs include insurance premium paid, GOSI contribution, relocation charges, recruitment expenses, training and development cost, employee related costs for SBL and certain other non-recurring employee related costs.




24. Basic and Diluted Earnings per Share Basic and diluted earnings per share is calculated by dividing the net income for the years 2017 and 2016 by 2,000 million shares. 25. Dividend, Zakat and income tax a) Dividend During the current year, a gross interim dividend of SR 1,807 million was approved by the Board of Directors. After deducting Zakat, this interim dividend resulted in a net payment of SR 0.75 per share to the Saudi shareholders. In 2016, the total gross dividends amounted to SR 2,434 million of which SR 1,200 was paid as interim dividend. After deducting Zakat, this resulted in a total net payment of SR 0.95 per share to Saudi shareholders for 2016 of which SR 0.45 per share was paid as interim dividend. The proposed final dividend is included within equity until approved by the shareholders’ annual general assembly. b) Zakat and Income Tax Liabilities Zakat and income taxes are the liabilities of the Saudi and foreign shareholders respectively. The zakat liability of Saudi shareholders is calculated on their share in the equity and the net income. However, the tax liability of foreign shareholders is calculated on their share in the net income. Zakat attributable to Saudi shareholders for the year is estimated at SR 592 million (2016: SR 525 million) on a shareholding of 96.44% (2016: 96.44%) which will be deducted from their share of dividend. Zakat liability for the current year has been calculated on a prudent basis considering dis-allowance of certain long-term investments held by the Bank, as advised by our external advisors based on the General Authority of Zakat and Income Tax (the “GAZT”) current practices. The Bank, however, as a matter of principle, disagrees with this calculation and intends to contest it with the appropriate authorities should the GAZT disallows long term investments in the Bank’s Zakat assessments. Income tax liability of the foreign shareholders on their current year’s share of income is estimated at SR 33 million (2016: SR 33 million) on a shareholding of 3.56% (2016: 3.56%). Unpaid income tax liability for the current year or earlier years, if any, will be deducted from their share of dividend for the year. c) Status of Zakat and Income Tax Assessments The Bank has filed its Zakat and Income Tax returns with the GAZT and paid Zakat and Income Tax for the financial years up to and including the year 2016. The Bank has received the assessment for the years upto 2009 in which the GAZT raised additional demand aggregating to SR 1,309 million for the years 2004 to 2009. These additional demands are principally on account of disallowance of long-term investments and the addition of long-term financing to the Zakat base by the GAZT. The basis for the additional Zakat liability is being contested by the Bank before the Higher Appeals Committee. The Bank is confident of a favourable outcome from the appeal process and has therefore not made any provisions in respect of the above. The assessment of the years 2010 to 2016 are yet to be raised by the GAZT. However, if long-term investments are disallowed and long-term financing is added to the Zakat base in line with the assessments finalized by the GAZT for the years referred to above, it would result in significant additional zakat exposure to the Bank which remains an industry wide issue and disclosure of which might affect the Bank’s position in this matter. 26. Cash and cash equivalents Cash and cash equivalents for the purpose of the statements of consolidated cash flows comprise the following: 2017 2016 SAR’000 SAR’000 Cash and balances with Central Banks excluding statutory deposit (note 3) 15,952,887 27,784,295 Due from banks and other financial institutions 5,020,361 8,877,752 Total 20,973,248 36,662,047 27. Operating segments The Group is organized into the following main operating segments: Consumer banking – comprises individual customer time deposits, current, call and savings accounts, as well as credit cards, retail investment products, individual and consumer loans. Corporate banking – comprises corporate time deposits, current and call accounts, overdrafts, loans and other credit facilities as well the Group’s customer derivative portfolios and its corporate advisory business. Treasury – principally manages money market, foreign exchange, commission rate trading and derivatives for corporate and institutional customers as well as for the Group’s own account. It is also responsible for funding the Group’s operations, maintaining liquidity and managing the Group’s investment portfolio and statement of financial position. Investment banking – engaged in investment management services and asset management activities related to dealing, managing, arranging, advising and custody businesses. The investment banking business is housed under a separate legal entity Samba Capital and Investment Management Company. The Group’s primary business is conducted in the Kingdom of Saudi Arabia with three overseas branches and three overseas subsidiaries. However, the results of the overseas operations are not material to the Group’s overall consolidated financial statements. On June 8, 2016, the Board of Directors of the Group has decided to close the operations of UK branch as its operations are no longer consistent with the business strategy of the Group. The management believes that the financial impact of this decision will not be material to the overall operations of the Group. Transactions between the business segments are on normal commercial terms. Funds are ordinarily reallocated between segments, resulting in funding cost transfers. Special commission charged for these funds is based on market based inter-bank rates. There are no other material items of income or expense or other internal revenues between the operating segments.




27. Operating segments (continued) a) The Group’s total assets and liabilities as at December 31, 2017 and 2016, together with special commission income net, total operating income, total operating expenses, provision for credit losses, net

income, capital expenditure and depreciation expenses for the years then ended, by operating segment, are as follows: Investment 2017 (SAR’000) Consumer Corporate Treasury Banking Totall Total assets 33,445,962 100,998,517 92,995,571 171,029 227,611,079 Total liabilities 92,159,792 81,293,041 9,356,841 119,253 182,928,927 Special commission income, net 2,128,091 2,258,283 1,317,860 27,991 5,732,225 Total operating income 2,772,732 2,998,261 1,667,113 453,460 7,891,566 Total operating expenses, of which: 1,763,693 785,330 131,131 187,122 2,867,276 - Depreciation 48,590 66,942 1,033 7,000 123,565 - Provision for credit losses 138,746 148,420 - - 287,166 Net income 1,009,039 2,212,931 1,535,982 266,338 5,024,290 Capital expenditure 112,286 107,237 28,608 5,274 253,405 Investment 2016 (SAR’000) Consumer Corporate Treasury Banking Total Total assets 35,981,789 105,514,466 89,902,651 89,681 231,488,587 Total liabilities 98,866,851 77,580,201 12,395,017 101,750 188,943,819 Special commission income, net 2,129,217 1,974,385 1,261,290 17,392 5,382,284 Total operating income 2,789,400 2,776,001 1,606,184 588,872 7,760,457 Total operating expenses, of which: 1,774,785 667,194 129,693 183,122 2,754,794 - Depreciation 48,161 62,319 823 10,038 121,341 - Provision for credit losses 149,396 50,750 - - 200,146 Net income 1,014,615 2,108,807 1,476,491 405,750 5,005,663 Capital expenditure 114,154 247,998 6,791 1,923 370,866 b) The Group’s credit exposure by operating segment is as follows: Investment 2017 (SAR’000) Consumer Corporate Treasury Banking Total Balance sheet risk assets 26,191,252 91,431,143 74,943,911 62,313 192,628,619 Commitments and contingencies 277,257 26,216,832 760,560 - 27,254,649 Derivatives 50,773 2,414,578 10,316,316 - 12,781,667 Investment 2016 (SAR’000) Consumer Corporate Treasury Banking Total Balance sheet risk assets 28,272,467 96,945,718 58,298,918 16,145 183,533,248 Commitments and contingencies 371,405 27,202,007 300,428 - 27,873,840 Derivatives 24,541 1,052,742 4,509,934 - 5,587,217 Balance sheet risk assets comprise of the carrying value of the assets at the reporting date, excluding cash and balances with central banks, derivatives, property and equipment and other assets. Credit exposures relating to commitments, contingencies and derivatives are stated at their credit equivalent amounts as prescribed by central banks.




28. Credit Risk Credit risk is the risk that a customer will fail to discharge its financial obligation to the Group and will cause the Group to incur a financial loss. The Group seeks to manage its credit risk exposure by ensuring that its customers meet the minimum credit standards defined by the Group’s management and through diversification of lending activities to ensure that there is no undue concentration of risks with individuals, or within groups of customers in specific locations or businesses. The Group continually assesses and monitors credit exposures to ensure timely identification of potential problem credits. In addition to monitoring credit limits, the Group manages the credit exposure relating to its trading activities by entering into master netting agreements and collateral arrangements with counterparties in appropriate circumstances, and by limiting the duration of exposure. In certain cases the Group may also close out transactions and settle on a net present value basis. Concentrations of credit risk arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry or geographical location. The Group limits the impact of concentration risk in exposure by setting progressively lower limits for longer tenors and taking security, where considered appropriate, to mitigate such risks. Debt instruments included in the Group’s investment portfolio are mainly sovereign risk instruments. Analysis of investments by counterparty and the composition of loans and advances is provided in notes 5 and 6 to the consolidated financial statements, respectively. The nature and extent of credit risk relating to derivative instruments and commitments and contingencies is provided in notes 9 and 17, respectively. The Group classifies its exposure into ten risk categories that are compatible with internationally recognized ratings. Of these, seven categories are for performing and three for non-performing. Each individual borrower is rated based on an internally developed debt rating model that evaluates risk based on financial as well as qualitative inputs. The risk rating categories drive the due diligence and approval process, and these ratings are reviewed at least annually or sooner if any adverse signs are visible. These categories also form the basis for managing credit concentrations and identifying problem credits. Exposures falling below a certain classification threshold are considered to be impaired, and appropriate specific provisions are made against these loans by comparing the present value of expected future cash flows for each such exposure with its carrying amount on the basis of criteria prescribed by IAS 39. Impairment and uncollectible are also measured and recognized on a portfolio basis for a group of similar credit exposure that are not individually identified as impaired. 28.1 Maximum exposure to credit risk without taking into account any collateral and other credit enhancements is as follows: 2017 2016 SAR’000 SAR’000 Assets Due from banks and other financial institutions 11,031,480 9,599,656 Investments, net 60,292,258 48,027,761 Loans and advances, net 117,684,729 125,234,330 Other assets exposed to credit risk 158,871 160,776 Total 189,167,338 183,022,523 Contingent liabilities and commitments 27,254,649 27,873,840 Derivatives 12,781,667 5,587,217 Total 229,203,654 216,483,580




29. Geographical concentration a) The distribution by geographical region for major categories of assets, liabilities, commitments and contingencies and credit exposure are as follows: Kingdom of Other GCC & North Latin South East Other 2017 (SAR’000) Saudi Arabia Middle East Europe America America Asia countries Total Assets Cash and balances with central banks 24,479,448 583,953 - - - 131,665 - 25,195,066 Due from banks and other financial institutions 3,847,983 3,490,562 776,759 2,585,031 - 5,573 325,572 11,031,480 Investments, net 44,131,875 3,236,622 6,323,621 7,367,469 63,025 152,326 2,637,472 63,912,410 Derivatives 5,988,334 151,970 - 350,702 - - 23,702 6,514,708 Loans and advances, net 108,685,805 7,058,821 426,858 102 - - 1,513,143 117,684,729 Total 187,133,445 14,521,928 7,527,238 10,303,304 63,025 289,564 4,499,889 224,338,393 Liabilities Due to banks and other financial institutions 1,095,599 535,856 3,076,489 144,488 - 4,630 1,694,402 6,551,464 Customer deposits 164,723,592 1,063,264 38,635 340,800 520 18,611 1,802,149 167,987,571 Derivatives 3,945,790 5,872 941 - - - 23,695 3,976,298 Total 169,764,981 1,604,992 3,116,065 485,288 520 23,241 3,520,246 178,515,333 Credit exposure (stated at credit equivalents) Commitments and contingencies 20,737,457 2,943,704 1,059,114 425,251 18,426 1,461,012 609,685 27,254,649 Derivatives 4,982,898 185,589 6,803,541 800,036 - - 9,603 12,781,667 Total 25,720,355 3,129,293 7,862,655 1,225,287 18,426 1,461,012 619,288 40,036,316 Kingdom of Other GCC & North Latin South East Other 2016 (SAR’000) Saudi Arabia Middle East Europe America America Asia countries Total Assets Cash and balances with central banks 36,842,978 331,439 1,292 - - 168,805 - 37,344,514 Due from banks and other financial institutions 3,471,636 2,165,529 1,650,370 1,963,663 - 10,546 337,912 9,599,656 Investments, net 34,811,912 1,113,293 3,860,987 7,711,247 59,300 2,361,746 1,474,325 51,392,810 Derivatives 4,144,460 5,064 246 286,624 - - 5,665 4,442,059 Loans and advances, net 117,892,220 5,203,930 769,680 45,024 - - 1,323,476 125,234,330 Total 197,163,206 8,819,255 6,282,575 10,006,558 59,300 2,541,097 3,141,378 228,013,369 Liabilities Due to banks and other financial institutions 1,856,504 5,647,036 1,754,250 125,819 - 787 1,496,382 10,880,778 Customer deposits 168,599,369 1,531,193 61,587 212,192 - 722 1,670,653 172,075,716 Derivatives 1,226,954 2,598 20 251,507 - - 4,550 1,485,629 Total 171,682,827 7,180,827 1,815,857 589,518 - 1,509 3,171,585 184,442,123 Credit exposure (stated at credit equivalents) Commitments and contingencies 21,878,648 2,853,474 912,302 388,099 5,432 1,127,883 708,002 27,873,840 Derivatives 2,258,980 154,652 2,760,046 403,716 - - 9,823 5,587,217 Total 24,137,628 3,008,126 3,672,348 791,815 5,432 1,127,883 717,825 33,461,057 Credit exposures are stated at their credit equivalent amounts as prescribed by SAMA. b) The distribution by geographical concentration of non-performing loans and advances and provision for credit losses are as follows: Non-performing Provision for loans and advances credit losses (SAR’000) 2017 2016 2017 2016 Kingdom of Saudi Arabia 926,914 981,378 1,834,284 1,761,998 Other GCC and Middle East 121,219 10,227 61,662 30,989 Europe - - - - Other countries 79,182 84,586 78,675 78,688 Total 1,127,315 1,076,191 1,974,621 1,871,675




30. Market Risk Market risk is the risk that the fair value or future cash flows of the financial instruments will fluctuate due to changes in market variables such as special commission rates, foreign exchange rates, and equity prices. The Group classifies exposures to market risk into either trading or non-trading / banking-book. a) Market Risk -Trading Book The Group has set limits for the acceptable level of risks in managing the trading book. In order to manage the market risk in trading book, the Group periodically applies a Value at Risk (VAR) methodology to assess the market risk positions held and also to estimate the potential economic loss based on a set of assumptions and changes in market conditions. A VAR methodology estimates the potential negative change in market value of a portfolio at a given confidence level and over a specified time horizon. The Group uses simulation models to assess the possible changes in the market value of the trading book based on historical data. VAR models are usually designed to measure the market risk in a normal market environment and therefore the use of VAR has limitations because it is based on historical correlations and volatilities in market prices and assumes that the future movements will follow a statistical normal distribution. The VAR that the Group measures is an estimate, using a confidence level of 99% of the potential loss that is not expected to be exceeded if the current market positions were to be held unchanged for one day. The use of 99% confidence level depicts that within a one-day horizon, losses exceeding VAR figure should occur, on average, not more than once every hundred days. The VAR represents the risk of portfolios at the close of a business day, and it does not account for any losses that may occur beyond the defined confidence interval. The actual trading results however, may differ from the VAR calculations and, in particular, the calculation does not provide a meaningful indication of profits and losses in stressed market conditions. To overcome the VAR limitations mentioned above, the Group also carries out stress tests of its portfolio to simulate conditions outside normal confidence intervals. The potential losses occurring under stress test conditions are reported regularly to the Group’s Asset and Liability Committee (ALCO) for its review. The Group’s VAR related information for the year ended December 31, 2017 and 2016 is as shown below. Foreign Special exchange commission 2017 (SAR’000) risk risk Total VAR as at December 31 9,756 2,499 12,255 Average VAR for the year 7,851 11,220 19,071 Foreign Special exchange commission 2016 (SAR’000) risk risk Total VAR as at December 31 11,060 6,396 17,456 Average VAR for the year 6,731 23,362 30,093 b) Market Risk – Non-Trading or Banking Book Market risk on non-trading or banking book positions mainly arises from the special commission rate, foreign currency exposures and equity price changes. i) Special Commission Rate Risk Special commission rate risk arises from the possibility that the changes in special commission rates will affect either the fair values or the future cash flows of the financial instruments. The Group has established special commission

rate gap limits for stipulated periods. The Group monitors daily positions and uses hedging strategies to ensure maintenance of positions within the established gap limits. The following table depicts the sensitivity to a reasonably possible change in special commission rates, with other variables held constant, on the Group’s statements of consolidated income or equity. The sensitivity of the income

is the effect of the assumed changes in special commission rates on the net special commission income for one year, based on non-trading financial assets and financial liabilities held as at December 31, including the effect of hedging instruments. The sensitivity of equity is calculated by revaluing the fixed rate available for sale financial assets, including the effect of any associated hedges as at December 31, for the effect of assumed changes in special commission rates. The sensitivity of equity is analyzed by maturity of the asset or swap.




30. Market Risk (continued) All the banking book exposures are monitored and analyzed in currency concentrations and relevant sensitivities are presented below: Sensitivity Increase / of special decrease commission Sensitivity of equity Total 2017 Currency in basis point income 6 months or less 6 to 12 months 1-5 years Over 5 years (SAR’000) SAR +1 bps (21,455) (1,461) (1,012) (6,486) (3,123) (12,082) -1 bps 21,455 1,461 1,012 6,486 3,123 12,082 US Dollar +1 bps (2,391) (364) (277) (1,071) (587) (2,299) -1 bps 2,391 364 277 1,071 587 2,299 Euro +1 bps 127 16 54 61 - 131 -1 bps (127) (16) (54) (61) - (131) Sensitivity Increase / of special decrease commission Sensitivity of equity Total 2016 Currency in basis point income 6 months or less 6 to 12 months 1-5 years Over 5 years (SAR’000) SAR +1 bps (18,316) (1,025) (660) (4,250) (2,126) (8,061) -1 bps 18,316 1,025 660 4,250 2,126 8,061 US Dollar +1 bps (1,585) (361) (301) (1,468) (803) (2,933) -1 bps 1,585 361 301 1,468 803 2,933 Euro +1 bps 198 57 116 28 - 201 -1 bps (198) (57) (116) (28) - (201) The Group is exposed to various risks associated with the effect of fluctuations in the prevailing levels of market commission rates on its financial position and cash flows. The table below summarizes the Group’s exposure to commission rate risks. Included in the table are the Group’s assets and liabilities at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates. The Group is exposed to special commission rate risk as a result of mismatches or gaps in the amounts of assets and liabilities and off-balance sheet instruments that mature or re-price in a given period. The Group manages this risk by matching the re-pricing of assets and liabilities through risk management strategies. Non- commission 2017 (SAR’000) Within 3 months 3-12 months 1-5 years Over 5 years bearing Total Assets Cash and balances with central banks 14,073,413 - - - 11,121,653 25,195,066 Due from banks and other financial institutions 4,153,613 3,647,500 - - 3,230,367 11,031,480 Investments, net 28,146,697 3,632,208 12,520,232 14,094,180 5,519,093 63,912,410 Derivatives 6,514,708 - - - - 6,514,708 Loans and advances, net 66,507,562 30,755,528 12,918,171 7,501,855 1,613 117,684,729 Property and equipment, net - - - - 2,638,884 2,638,884 Other assets - - - - 633,802 633,802 Total Assets 119,395,993 38,035,236 25,438,403 21,596,035 23,145,412 227,611,079 Liabilities and equity Due to banks and other financial institutions 5,920,354 34,408 2,990 13,047 580,665 6,551,464 Customer deposits 34,711,767 18,560,516 705,726 8,130,619 105,878,943 167,987,571 Derivatives 3,976,298 - - - - 3,976,298 Other liabilities - - - - 4,413,594 4,413,594 Total equity - - - - 44,682,152 44,682,152 Total liabilities and equity 44,608,419 18,594,924 708,716 8,143,666 155,555,354 227,611,079 On balance sheet gap 74,787,574 19,440,312 24,729,687 13,452,369 (132,409,942) Off balance sheet gap (5,326,950) (855,938) 6,182,888 Total commission rate sensitivity gap 69,460,624 18,584,374 30,912,575 13,452,369 (132,409,942) Cumulative commission rate sensitivity gap 69,460,624 88,044,998 118,957,573 132,409,942




30. Market Risk (continued) Non- commission 2016 (SAR’000) Within 3 months 3-12 months 1-5 years Over 5 years bearing Total Assets Cash and balances with central banks 25,983,376 - - - 11,361,138 37,344,514 Due from banks and other financial institutions 4,371,374 675,000 - - 4,553,282 9,599,656 Investments, net 20,756,525 2,445,235 10,538,666 12,438,560 5,213,824 51,392,810 Derivatives 4,442,059 - - - - 4,442,059 Loans and advances, net 66,850,844 35,271,164 14,534,891 8,567,376 10,055 125,234,330 Property and equipment, net - - - - 2,510,180 2,510,180 Other assets - - - - 965,038 965,038 Total Assets 122,404,178 38,391,399 25,073,557 21,005,936 24,613,517 231,488,587 Liabilities and equity Due to banks and other financial institutions 8,517,589 1,903,241 - - 459,948 10,880,778 Customer deposits 35,108,229 24,588,991 719,670 - 111,658,826 172,075,716 Derivatives 1,485,629 - - - - 1,485,629 Other liabilities - - - - 4,501,696 4,501,696 Total equity - - - - 42,544,768 42,544,768 Total liabilities and equity 45,111,447 26,492,232 719,670 - 159,165,238 231,488,587 On balance sheet gap 77,292,731 11,899,167 24,353,887 21,005,936 (134,551,721) Off balance sheet gap 6,917,487 (7,000,482) 82,995 - - Total commission rate sensitivity gap 84,210,218 4,898,685 24,436,882 21,005,936 (134,551,721) Cumulative commission rate sensitivity gap 84,210,218 89,108,903 113,545,785 134,551,721 The off balance sheet gap represents the net notional amounts of off-balance sheet financial instruments, which are used to manage the commission rate risk. ii) Currency risk Currency risk represents the risk of change in the value of financial instruments due to changes in foreign exchange rates. The Group manages exposure to the effects of fluctuations in prevailing foreign currency exchange rates

on its financial position and cash flows. Management sets limits on the level of exposure by currency and in total for both overnight and intra-day positions and hedging strategies, which are monitored daily. At the end of the year, the Group had the following significant net currency exposures:

2017 2016 SAR’000 SAR’000 Long/(Short) Long/(Short) United States Dollar 3,591,871 1,344,355 United Arab Emirates Dirham 298,887 256,549 United Kingdom Pound Sterling (64,337) (62,746) Pakistan Rupee 821,009 844,647 Euro (120,562) (108,488) The table below shows the currencies to which the Group has a significant exposure as at December 31, 2017 and 2016 on its non-trading monetary assets and liabilities and forecasted cash flows. The analysis calculates the effect of reasonable possible movement of the currency rate against SAR, with all other variables held constant, on the statements of consolidated income (due to the fair value of the currency sensitive non-trading monetary assets and liabilities) and equity (due to change in fair value of currency swaps and forward foreign exchange contracts used as cash flow hedges). A positive effect shows a potential increase in statements of consolidated income or equity; whereas a negative effect shows a potential net reduction in statements of consolidated income or equity. 2017 (SAR’000) 2016 (SAR’000) Change in Effect on Effect on Change in Effect on Effect on Currency exposures currency rate net income net equity currency rate net income net equity US Dollar 1% 136,575 (700) 1% 64,340 (663) Euro 1% (2,744) 349 1% 3,680 656 iii) Equity Price Risk Equity price risk refers to the risk of decrease in fair values of equities in the Group’s non-trading investment portfolio as a result of reasonable possible changes in levels of equity indices and the value of individual stocks. Assuming

all other variables are held constant, a 1% increase or decrease in the value of Group’s available for sale quoted equity investments at December 31, 2017 would have a corresponding increase or decrease in equity by SR 36.2 million (2016: SR 33.6 million).




31. Liquidity risk Liquidity risk is the risk that the Group will be unable to meet its net funding requirements. Liquidity risk can be caused by market disruptions or credit downgrades, which may cause certain sources of funding to be less readily available. To mitigate this risk, management has diversified funding sources and manages its assets with liquidity in mind, maintaining an appropriate balance of cash, cash equivalents and readily marketable securities. In accordance with Banking Control Law and the regulations issued by SAMA, the Bank maintains a statutory deposit with SAMA equal to 7% of total demand deposits and 4% of savings and time deposits (2016: 7% and 4% respectively). In addition to the statutory deposit, the Bank also maintains liquid reserves of no less than 20% (2016: 20%) of its deposit liabilities, in the form of cash, gold, Saudi Government securities or assets that can be converted into cash within a period not exceeding 30 days. The Bank has the ability to raise additional funds through repo facilities with SAMA against Saudi Government securities up to 100% (2016: 100%) of the nominal value of securities held. i) Maturity profile of Group’s assets, liabilities and equity The management regularly monitors the maturity profile to ensure that adequate liquidity is maintained. The tables below summarize the maturity profile of the Group’s assets, liabilities and equity based on the contractual maturities

as at the reporting date. For presentation purposes, the demand, saving and other deposits amounting to SAR 113,103 million (2016: SAR 118,668 million) with no contractual maturity are included under “No fixed maturity” category to correctly depict the maturity profile of such deposit liabilities.

No fixed 2017 (SAR’000) Within 3 months 3-12 months 1-5 years Over 5 years maturity Total Assets Cash and balances with central banks 14,073,413 - - - 11,121,653 25,195,066 Due from banks and other financial institutions 4,153,613 3,647,500 - - 3,230,367 11,031,480 Investments, net 4,232,368 1,112,007 17,900,875 35,148,067 5,519,093 63,912,410 Derivatives 1,236,145 1,025,097 2,995,146 1,258,320 - 6,514,708 Loans and advances, net 26,422,726 33,878,917 36,709,257 20,174,207 499,622 117,684,729 Property and equipment, net - - - - 2,638,884 2,638,884 Other assets - - - - 633,802 633,802 Total Assets 50,118,265 39,663,521 57,605,278 56,580,594 23,643,421 227,611,079 Liabilities and Equity Due to banks and other financial institutions 5,920,354 34,408 2,990 13,047 580,665 6,551,464 Customer deposits 35,617,873 18,560,516 705,726 - 113,103,456 167,987,571 Derivatives 720,541 638,566 1,877,999 739,192 - 3,976,298 Other liabilities - - - - 4,413,594 4,413,594 Total equity - - - - 44,682,152 44,682,152 Total Liabilities and Equity 42,258,768 19,233,490 2,586,715 752,239 162,779,867 227,611,079 No fixed 2016 (SAR’000) Within 3 months 3-12 months 1-5 years Over 5 years maturity Total Assets Cash and balances with central banks 25,983,376 - - - 11,361,138 37,344,514 Due from banks and other financial institutions 4,371,374 675,000 - - 4,553,282 9,599,656 Investments, net 2,219,325 1,797,998 12,634,760 29,526,903 5,213,824 51,392,810 Derivatives 145,658 573,100 2,488,852 1,234,449 - 4,442,059 Loans and advances, net 32,544,174 31,589,512 39,118,797 21,825,579 156,268 125,234,330 Property and equipment, net - - - - 2,510,180 2,510,180 Other assets - - - - 965,038 965,038 Total Assets 65,263,907 34,635,610 54,242,409 52,586,931 24,759,730 231,488,587 Liabilities and Equity Due to banks and other financial institutions 8,517,589 1,903,241 - - 459,948 10,880,778 Customer deposits 28,732,362 23,955,554 719,670 - 118,668,130 172,075,716 Derivatives 48,185 179,480 809,022 448,942 - 1,485,629 Other liabilities - - - - 4,501,696 4,501,696 Total equity - - - - 42,544,768 42,544,768 Total Liabilities and Equity 37,298,136 26,038,275 1,528,692 448,942 166,174,542 231,488,587




31. Liquidity risk (continued) ii) Analysis of undiscounted financial liabilities by remaining contractual maturities The table below summarizes the maturity profile of Group’s financial liabilities at December 31 based on contractual undiscounted repayment obligations. The totals in this table do not match with the statements of consolidated

financial position as special commission payments with contractual maturities are included in the table on an undiscounted basis. The contractual maturities of financial liabilities have been determined on the basis of the remaining period at the reporting date to the contractual maturity date. The table below does not reflect the expected cash flows indicated by the deposit retention history of the Group. Contractual maturity of the financial guarantees is shown under note 17(c).

2017 (SAR’000) Within 3 months 3-12 months 1-5 Years Over 5 years On demand Total Due to banks and other financial institutions 5,923,873 34,929 3,328 15,639 580,665 6,558,434 Customer deposits 35,692,035 18,767,371 724,188 - 113,103,456 168,287,050 Derivatives 771,689 693,508 2,049,825 1,018,427 - 4,533,449 Other liabilities - - - - 4,413,594 4,413,594 Total 42,387,597 19,495,808 2,777,341 1,034,066 118,097,715 183,792,527 2016 (SAR’000) Within 3 months 3-12 months 1-5 Years Over 5 years On demand Total Due to banks and other financial institutions 8,524,969 1,909,603 - - 459,948 10,894,520 Customer deposits 28,794,996 24,310,442 750,806 - 118,668,130 172,524,374 Derivatives 60,189 224,618 1,056,441 754,496 - 2,095,744 Other liabilities - - - - 4,501,696 4,501,696 Total 37,380,154 26,444,663 1,807,247 754,496 123,629,774 190,016,334 32. Fair values of financial instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments: Level 1 - Quoted prices in active markets for the same instrument (i.e. without modification or repacking); Level 2 - Quoted prices in active markets for similar assets and liabilities or other valuation techniques for which all significant inputs are based on observable market data; and Level 3 - Valuation techniques for which any significant input is not based on observable market data. The fair values of the financial assets, financial liabilities and the derivative financial instruments classified under the appropriate valuation hierarchy, are given below: 2017 (SAR’000) Level 1 Level 2 Level 3 Total Financial Assets: Investments held at FVIS 271,273 2,005,798 - 2,277,071 Investments available for sale 12,435,528 11,314,953 636,105 24,386,586 Investments held to maturity 3,081,404 179,980 - 3,261,384 Other investments held at amortized cost - 33,168,940 469,253 33,638,193 Derivative assets 344 6,514,364 - 6,514,708 Loans and advances, net - 118,030,004 - 118,030,004 Total 15,788,549 171,214,039 1,105,358 188,107,946 Financial Liabilities: Financial liabilities designated at FVIS - 559,543 - 559,543 Derivative liabilities - 3,976,298 - 3,976,298 Total - 4,535,841 - 4,535,841




32. Fair values of financial instruments (continued) 2016 (SAR’000) Level 1 Level 2 Level 3 Total Financial Assets: Investments held at FVIS 836,734 1,964,519 - 2,801,253 Investments available for sale 11,940,048 7,137,993 667,073 19,745,114 Investments held to maturity 2,958,548 173,339 - 3,131,887 Other investments held at amortized cost - 25,437,756 163,215 25,600,971 Derivative assets 1,487 4,440,572 - 4,442,059 Loans and advances, net - 125,484,447 - 125,484,447 Total 15,736,817 164,638,626 830,288 181,205,731 Financial Liabilities: Financial liabilities designated at FVIS - 444,203 - 444,203 Derivative liabilities 719 1,484,910 - 1,485,629 Total 719 1,929,113 - 1,929,832 During the year, there has been no transfer within levels of the fair value hierarchy. The following table shows a reconciliation from the beginning balances to the ending balances for the fair value measurements in Level 3 of the fair value hierarchy in respect of financial assets held at FVIS and available for sale: 2017 2016 SAR’000 SAR’000 Balance at the beginning of the year 667,073 804,277 Total realized and unrealized losses in statement of consolidated income and statement of consolidated comprehensive income (45,505) (58,221) Purchases 129,287 183,227 Settlements (114,750) (262,210) Balance at the end of the year 636,105 667,073 The fair values of other on-balance sheet financial instruments, except for other investments held at amortized cost and held-to-maturity investments which are carried at amortized cost, are not significantly different from the carrying values included in the consolidated financial statements. The Group’s portfolio of loans and advances to customers is well diversified by industry. More than three quarters of the portfolio reprices within less than a year and accordingly the fair value of this portfolio approximates the carrying value, subject to any significant movement in credit spreads. The fair value of the remaining portfolio is not significantly different from its carrying values. The fair values of special commission bearing customers’ deposits carried at amortised cost, due from and due to banks and other financial institutions which are carried at amortized cost, are not significantly different from the carrying values included in the consolidated financial statements, since the current market special commission rates for similar financial instruments are not significantly different from the contracted rates, and for the short duration of these instruments. The estimated fair values of held-to-maturity investments and other investments held at amortized cost are based on quoted market prices when available or pricing models when used in the case of certain fixed rate bonds respectively. The fair values of these investments are also disclosed in note 5(c). The value obtained from the relevant valuation model may differ, with the transaction price of a financial instrument. The difference between the transaction price and the model value is commonly referred to as ‘day-one profit or loss’. It is either amortized over the life of the transaction, deferred until the instrument’s fair value can be determined using market observable data, or realized through disposal. Subsequent changes in fair value are recognized immediately in the statements of consolidated income without reversal of deferred day-one profits or losses. The valuation of each publicly traded investment is based upon the closing market price of that stock as of the valuation date, less a discount if the security is restricted. Investments classified as Level 2 are fair valued using discounted cash flow techniques that generally use observable market data inputs for yield curves, credit spreads and reported net asset values of the funds. Derivatives classified as Level 2 are fair-valued using the Bank’s proprietary valuation models that are based on discounted cash flow techniques. The data inputs to these models are based on observable market parameters in which they are traded and are sourced from independent brokers. Fair values of private equity investments classified in Level 3 are determined based on the investees’ latest reported net assets values as at the reporting date. The movement in Level 3 financial instruments during the year relates to fair value movement only.




33. Related party transactions In the ordinary course of its activities, the Bank transacts business with related parties. The related party transactions are governed by limits set by the Banking Control Law and regulations issued by Central Banks. The year-end balances resulting from such transactions included in the consolidated financial statements are as follows: 2017 2016 SAR’000 SAR’000 Directors, other major shareholders, key management personnel and their affiliates: Loans and advances 113,503 486,573 Customer deposits 19,302,051 8,998,300 Commitments and contingencies 12,316 14,335 Mutual funds: Customer deposits 329,152 1,256,152 Other major shareholders represent shareholdings of more than 5% of the Bank’s issued and paid up share capital, as listed on Tadawul. Income and expenses pertaining to transactions with related parties included in the consolidated financial statements are as follows: 2017 2016 SAR’000 SAR’000 Special commission income 10,466 10,657 Special commission expense 297,377 186,566 Fee and commission income, net 155,674 212,773 Directors’ remuneration 5,109 4,260 The total amount of compensation paid to key management personnel during the year is as follows: 2017 2016 SAR’000 SAR’000 Short-term employee benefits 59,111 56,806 Post-employment, termination and share-based payments 6,940 6,804 Key management personnel are those persons, including the Chief Executive Officer, having authority and responsibility for planning, directing, and controlling the activities of the Bank, directly or indirectly. 34. Capital Adequacy The Group monitors the adequacy of its capital using the methodology and ratios established by the Basel Committee on Banking Supervision and as adopted by SAMA with a view to maintain a sound capital base to support its business development and meet regulatory capital requirement as defined by SAMA. These ratios measure capital adequacy by comparing the Group’s eligible capital with its statements of financial position assets, commitments and contingencies, notional amount of derivatives at a weighted amount to reflect their relative credit risk, market risk and operational risk. During the year, the Group has fully complied with such regulatory capital requirements. The management reviews on a periodical basis capital base and level of risk weighted assets to ensure that capital is adequate for risks inherent in it current business activities and future growth plans. In making such assessment, the management also considers the Group’s business plan along with economic conditions which directly and indirectly affect the business environment. The overseas subsidiary manages its own capital as prescribed by local regulatory requirements. SAMA has issued the framework and guidance regarding implementation of the capital reforms under Basel III and the related disclosures which are effective from January 1, 2013. Accordingly, calculated under the Basel III framework, the Group’s consolidated Risk Weighted Assets (RWA), total capital and related ratios on a consolidated group basis and on a standalone basis for its significant banking subsidiary calculated for the credit, operational and market risks, at December 31 are as follows: 2017 2016 SAR’000 SAR’000 Samba Financial Group (consolidated) Credit risk RWA 187,944,475 171,634,477 Operational risk RWA 13,303,620 13,122,515 Market risk RWA 15,165,875 11,325,363 Total RWA 216,413,970 196,082,355 Tier I capital 44,622,638 42,810,511 Tier II capital 1,126,685 1,223,471 Total tier I & II capital 45,749,323 44,033,982 Capital adequacy ratio % Tier I ratio 20.6% 21.8% Tier I + II ratio 21.1% 22.5% Capital adequacy ratios for Samba Bank Limited, Pakistan are as follows: Tier I ratio 19.16% 24.1% Tier I + II ratio 19.50% 25.1% Tier I capital comprises the share capital, statutory, general and other reserves, qualifying non-controlling interest and retained earnings less any intangible assets of the Bank as at the year-end. Tier II capital comprises of a prescribed amount of eligible provisions.




35. Investment management services The investment management services are provided by Samba Capital and Investment Management Company, a 100% owned subsidiary of the Bank. The assets under management outstanding at end of the year including mutual funds and discretionary portfolios amounted to SAR 31,708 million (2016: SAR 28,929 million). This includes funds managed under Shariah-approved portfolios amounting to SAR 14,766 million (2016: SAR 12,586 million). Assets held in trust or in a fiduciary capacity are not treated as assets of the Bank or that of its subsidiary and, accordingly, are not included in the Group’s consolidated financial statements. 36. Equity-based payments The Bank has following equity-based long term bonus plans outstanding at the end of the year. Significant features of these plans are as follows: Nature of Plan Equity Based Long Term Bonus Plan Number of outstanding plans 5 Grant date Between June 2013 and April 2017 Maturity date Between June 2018 and April 2022 Number of shares granted on the grant date, adjusted for bonus share issue 1,716,185 Benchmark price per share at grant date, adjusted for bonus share issue Between SAR 25.8 and 20.94 Vesting period 5 years Vesting conditions Participating employees to remain in service Method of settlement Equity Valuation model Discounted Cash Flow Fair value per share on grant date adjusted for bonus share issue Between SAR 17.5 and 22.5 The fair value of shares granted during the year was SAR 7.4 million (2016: SAR 6.9 million). The inputs used to calculate fair value of the shares granted during the year were the market price at the grant date, life of the plan, expected dividends and annual risk free rate of return. The shares are granted only under a service condition with no market condition associated with them. The total amount of expense recognized in these consolidated financial statements in respect of the above equity-based payment plans for the year 2017 is SAR 4.7 million (2016: SAR 4.0 million).




37. Prior period restatements and reclassifications a. The change in the accounting policy for Zakat and income tax (as explained in note 2.29) has the following impacts on the line items of statements of consolidated financial position and consolidated changes in equity: As at December 31, 2016 Balance as Effect of Balance previously reported restatement as restated Account SR’000 SR’000 SR’000 Other liabilities 4,265,449 236,247 4,501,696 Proposed dividends 1,234,000 (236,247) 997,753 As at January 1, 2016 Balance as Effect of Balance previously reported restatement as restated Statement of financial position SR’000 SR’000 SR’000 Assets Cash and balances with central banks 15,299,930 - 15,299,930 Due from banks and other financial institutions 14,415,818 - 14,415,818 Investments, net 69,952,186 - 69,952,186 Derivatives 2,606,132 - 2,606,132 Loans and advances, net 130,001,230 - 130,001,230 Property and equipment, net 2,267,212 - 2,267,212 Other assets 700,171 - 700,171 Total Assets 235,242,679 - 235,242,679 Liabilities and equity Due to banks and other financial institutions 19,197,230 - 19,197,230 Customer deposits 171,804,534 - 171,804,534 Derivatives 609,901 - 609,901 Other liabilities 3,271,157 239,110 3,510,267 Total liabilities 194,882,822 239,110 195,121,932 Equity Equity attributable to equity holders of the Bank Share capital 20,000,000 - 20,000,000 Statutory reserve 13,303,555 - 13,303,555 General reserve 130,000 - 130,000 Other reserves 205,507 - 205,507 Retained earnings 6,523,875 - 6,523,875 Proposed dividend 1,134,000 (239,110) 894,890 Treasury stocks (1,046,336) - (1,046,336) Total equity attributable to equity holders of the Bank 40,250,601 (239,110) 40,011,491 Non-controlling interest 109,256 - 109,256 Total equity 40,359,857 (239,110) 40,120,747 Total liabilities and equity 235,242,679 - 235,242,679 b. Certain other prior year balances have also been reclassified to conform to the current year presentation. The effect of these reclassifications was not material to the consolidated financial statements.




38. Accounting Standards issued but not yet effective • IFRS 9 - Financial Instruments Implementation Strategy In July 2014, the IASB issued the final version of ‘IFRS 9 - Financial Instruments’, which will replace ‘IAS 39 – Financial Instruments: Recognition and Measurement’. This new standard includes requirements for classification and

measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. The mandatory application date for IFRS 9 is from 1 January 2018. The Group considers it to be a significant project and has therefore set up an internal high-level multidisciplinary project implementation committee comprising of senior members from Financial Control, Risk Management and other business groups to oversee and direct the implementation of IFRS 9 across the Group. At the banking sector level, SAMA has provided the necessary implementation guidance to all the Saudi banks. The Group is now in the final phase of implementation, whereby a parallel run exercise is currently under process together with various levels of validation.

The significant areas impacted by application of IFRS 9 are as follows: Classification and Measurement Under IFRS 9, the classification and measurement of financial assets depends on how these are managed by the Group as per its approved business model and their contractual cash flow characteristics. These factors determine whether

the financial assets are measured at Amortized Cost (AC), Fair Value through Other Comprehensive Income (FVOCI) or Fair Value through Income Statement (FVIS). The accounting for financial liabilities will largely be the same and no major changes are expected by the Bank.

The combined effect of the application of the business model and the contractual cash flow characteristics tests may result in some reclassification of financial assets measured at amortized cost or fair value compared with the existing

standard IAS 39. However, based on an assessment of financial assets performed to date and expectations around changes to the composition of statement of consolidated financial position, the Bank expects that the overall impact of any change will not be significant.

Impairment of Financial Assets With the implementation of IFRS 9, the impairment allowances will be recognized based on a forward looking Expected Credit Loss (ECL) model applied to those financial assets that are not measured via FVIS. This mainly includes loans

and advances, investments, due from banks and other financial institutions that are measured at AC or FVOCI, financial guarantees and credit commitments. No impairment loss will be recognized on equity investments. The key inputs of measurement in an ECL model are the Probabilities of Default (PD), Loss Given Default (LGD) and the Exposure at Default. These parameters are derived from internally developed statistical models, other historical data and are periodically adjusted for forward looking information.

The Group plans to categorize its financial assets into the following three stages in accordance with the IFRS 9 methodology: Stage 1 – Performing assets: Financial assets that have not significantly deteriorated in credit quality since origination. The impairment allowance will be recorded based on a statistical model using both a twelve-month PD and an LGD

percentage. Stage 2 – Underperforming or Watch-list assets: Financial assets that have significantly deteriorated in credit quality since origination. The impairment allowance will be recorded based on a statistical model derived using both a life time

PD which takes into consideration the future outlook and an LGD percentage. Stage 3 – Impaired assets: For financial assets that are considered to be impaired, the Group will recognize the impairment allowance based on a methodology using a life time PD and the LGD is assessed based on a qualitative and

quantitative evaluation of the recovery prospects for these assets. The Bank will adopt a forward-looking approach in its assessment of ECLs. The forward-looking elements will include economic forecasts covering key macroeconomic factors (e.g. unemployment, GDP growth, inflation, special

commission rates and other market-related variables) obtained through internal and external sources. The forward looking PD used to determine the impairment allowance will be computed based on future scenarios and their respective likelihood of occurrence.

Using the impairment approaches under IFRS 9 will result in an increase in the total level of impairment allowances over the present IAS 39 determined level. This is due to major changes in the underlying methodology which include the

application of a lifetime ECL to exposures that are larger than the ones for which there is objective evidence of impairment in accordance with IAS 39. Hedge Accounting The general hedge accounting requirements under IFRS 9 aim to simplify hedge accounting by creating a stronger link with risk management strategy of the Group and permitting hedge accounting to be applied to a greater variety of

hedging instruments and risks. However, at this point they do not explicitly address macro hedge accounting strategies, which are particularly important for banks. As a result, IFRS 9 permits an accounting policy choice to remain with the current IAS 39 hedge accounting. Based on the analysis performed to date, the Group has exercised the accounting policy choice to continue with IAS 39 hedge accounting and therefore is not currently planning to change its hedge accounting.




38. Accounting Standards issued but not yet effective (continued) Expected Impact According to the transitional provisions of IFRS 9, the Group is permitted to recognize any difference between previous carrying amounts of the financial assets under IAS 39 and the carrying amounts at the beginning of the application

date through its opening balance of retained earnings. The combined impact of this initial adjustment is estimated to be a reduction of approximately 5% to the opening balance of the Group’s equity. The Group’s capital ratios will also be impacted by such an adjustment to the equity, but this impact is not expected to be greater than 0.65% of the current levels, notwithstanding the five year transitionary arrangements allowed by SAMA. Furthermore, with the implementation of IFRS 9, the Group also expects greater volatility in its annual impairment charges as compared to the existing methodology which is currently governed by IAS 39 and the prevailing SAMA guidelines. This may impact the Group’s future profitability as well as its regulatory capital levels.

It should however be noted that the above assessment is a point in time estimate and is not a forecast. The actual effect of the implementation of IFRS 9 may vary from this estimate as the Group continues to refine and recalibrate its

models, methodologies and processes with continuing related regulatory guidance and developments. The new standard also introduces extensive disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of

adoption of the new standard. Governance and Controls The governance structure and controls is currently under implementation in line with the IFRS 9 guidance document which calls for the establishment of an approved governance framework with detailed policies and controls, including

roles and responsibilities of the various stakeholders. The other Accounting standards, amendments and revisions which have been published and are mandatory for compliance for the Group’s accounting year beginning 1 January 2018 are listed below. The Group has opted not to early adopt these pronouncements and they do not have a significant impact on the consolidated financial statements. • IFRS 15: Revenue from Contracts with Customers - New revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Effective for annual periods beginning on or after

1 January 2018. • Amendments to IFRS 2: Share-based Payment - The amendments cover measurement of cash-settled share-based payments, classification of share-based payments settled net of tax withholdings, and accounting for a

modification of a share-based payment from cash-settled to equity-settled. Effective for the annual periods beginning on or after 1 January 2018. • IFRS 16: Leases - The new standard eliminates the current dual accounting model for lessees under IAS 17, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, IFRS

16 proposes on-balance sheet accounting model. Effective for the annual periods beginning on or after 1 January 2019. • Amendments to IAS 40: Investment Property - The amendments clarify that to transfer to, or from, investment properties there must be a change in use. If a property has changed use, there should be an assessment of whether

the property meets the definition and this change must be supported by evidence. • Amendments to IAS 28: Investments in associates and joint ventures - The amendments clarify that companies account for long-term interests in an associate or joint venture to which the equity method is not applied using IFRS 9. • Amendments to IFRIC 22: Foreign currency transactions and advance consideration - The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts

are made. • Annual improvements 2014 – 2016 cycle - These amendments impact two standards: • IFRS 1: First-time adoption of IFRS - regarding the deletion of short-term exemptions for first-time adopters regarding IFRS 7, IFRS 19 and IFRS 10 effective from January 1, 2018. • IAS 28: Investments in associates and joint ventures - regarding measuring an associate or joint venture at fair value effective January 1, 2018. 39. Board of Directors' approval The consolidated financial statements were approved by the Board of Directors’ on February 21, 2018 (5 Jumada II 1439H).




Central Region Riyadh Regional Office P.O.Box 833, Riyadh 11421 Tel: (011) 477 4770 Fax: (011) 479 9057 1. Head Office Branch Tel: (011) 477 4770 Fax: (011) 477 4770 Ext. 4336 2. Al-Badia Branch Tel: (011) 435 7707 Fax: (011) 435 9401 3. Naseem Branch Tel: (011) 239 1662 Fax: (011) 235 9656 4. Dahrat Al-Badiah Branch Tel: (011) 425 9218 Fax: (011) 425 9953 Ladies Unit Tel: (011) 428 4704 Fax: (011) 428 4693 5. Shefa Branch Tel: (011) 425 0017 Fax: (011) 423 9846 Ladies Unit Tel: (011) 422 9168 Fax: (011) 422 9168 Ext. 288 6. Malaz Branch Tel: (011) 476 8948 Fax: (011) 476 7731 Ladies Unit Tel: (011) 477 3739 Fax: (011) 477 9821 7. Olaya Branch Tel: (011) 215 8777 Fax: (011) 215 8778 Ladies Unit Tel: (011) 215 8666 Fax: (011) 215 8692 8. King Abdullah Road Branch Tel: (011) 454 9150 Fax: (011) 456 2817 Ladies Unit Tel: (011) 470 4715 Fax: (011) 470 2631 9. Al Rayyan Branch Tel: (011) 493 0452 Fax: (011) 493 0368 Ladies Unit Tel: (011) 208 4193 Fax: (011) 208 1534 10. Al Hamra Branch Tel: (011) 278 9885 Fax: (011) 278 9880 Ladies Unit Tel: (011) 277 1334 Fax: (011) 278 9880

11. North Ring Road Branch Tel: (011) 453 0764 Fax: (011) 455 2077 Ladies Unit Tel: (011) 453 0095 Fax: (011) 453 0488 12. Takhassusi Branch Tel: (011) 465 6052 Fax: (011) 465 3399 Ladies Unit Tel: (011) 463 1113 Fax: (011) 465 3080 13. Kingdom Center Branch Tel: (011) 211 7070 Fax: (011) 211 2138 Ladies Unit Tel: (011) 211 7070 Fax: (011) 211 2404 14. Rawdah Branch Tel: (011) 493 3250 Fax: (011) 493 3512 Ladies Unit Tel: (011) 491 9472 Fax: (011) 491 4873 15. Batha Branch Tel: (011) 405 0661 Fax: (011) 405 3604 16. King Saud University Branch Tel: (011) 468 4480 Fax: (011) 467 5676 17. King Saud University Ladies Branch Tel: (011) 805 4300 Fax: (011) 805 4311 18. Olaishah Ladies Branch Tel: (011) 435 2564 Fax: (011) 434 0659 19. Diplomatic Quarter Branch Tel: (011) 488 0271 Fax: (011) 488 0079 20. MODA Branch Tel: (011) 479 3539 Fax: (011) 478 9000 Ext. 3177 21. King Fahad Road Branch Tel: (011) 462 0547 Fax: (011) 465 7154 22. Nakheel Branch Tel: (011) 205 2460 Fax: (011) 205 2470 Ladies Unit Tel: (011) 205 2468 Fax: (011) 205 2469 23. Gornata Branch Tel: (011) 253 4912 Fax: (011) 253 4907 24. Hyper Panda Branch Tel: (011) 229 8570 Fax: (011) 229 8581 25. Sulaimania Branch Tel: (011) 464 2360 Fax: (011) 464 9873

26. West Ring Road Tel: (011) 431 4128 Fax: (011) 279 0853 Ladies Unit Tel: (011) 430 2028 Fax: (011) 430 1964 Al-Kharj 27. Al Kharj Branch Tel: (011) 544 4040 Fax: (011) 544 3220 Onaizah 28. Onaizah Branch Tel: (016) 364 8019 Fax: (016) 364 8251 Buraidah 29. Al Safra Branch Tel: (016) 325 1940 Fax: (016) 325 1943 Hail 30. Hail Branch Tel: (016) 543 1453 Fax: (016) 543 1351 Tabuk 31. Tabuk Branch Tel: (014) 421 6864 Fax: (014) 421 7769 Western Region Jeddah Regional Office Andalus Street, P.O.Box 490, Jeddah 21411 Tel: (012) 653 3555 Fax: (012) 651 3093 1. Andalus Branch Tel: (012) 653 3555 Fax: (012) 653 3555 Ext. 2393 2. Sitteen Street Branch Tel: (012) 682 5905 Fax: (012) 682 5811 Ext. 235 3. Makkah Road Branch Tel: (012) 680 9222 Fax: (012) 688 0491 4. Al-Faiha Branch Tel: (012) 669 9199 Fax: (012) 669 9114 5. King Abdulaziz Street Branch Tel: (012) 644 1831 Fax: (012) 644 6096 6. Tahlia Branch Tel: (012) 660 7700 Fax: (012) 660 7700 Ext. 124 Ladies Unit Tel: (012) 667 4272 Fax: (012) 667 4272 Ext. 195 7. Tareeq Al Malik Branch Tel: (012) 654 9598 Fax: (012) 655 2868 Ladies Unit Tel: (012) 605 4411 Fax: (012) 655 2252 Ext. 137

8. Sari Branch Tel: (012) 682 2266 Fax: (012) 683 8433 9. King Abdulaziz University Branch Tel: (012) 629 8866 Fax: (012) 629 8866 Ext. 236 10. King Abdulaziz University Ladies Branch Tel: (012) 672 2620 Fax: (012) 676 5583 11. Al-Khalidiya Branch Tel: (012) 692 8081 Fax: (012) 692 8081 Ext. 130 Ladies Unit Tel: (012) 692 8082 Fax: (012) 692 8082 Ext. 330 12. Samaria Center Branch Tel: (012) 667 2797 Fax: (012) 284 2194 13. Prince Sultan Street Branch Tel: (012) 215 3333 Fax: (012) 622 8204 Ladies Unit Tel: (012) 215 3222 Fax: (012) 215 3222 Ext. 142 Madinah Al Munawarah 14. Madinah Sultana Branch Tel: (014) 827 8888 Fax: (014) 828 9450 15. Madinah Qurban Branch Tel: (014) 823 1400 Fax: (014) 826 6521 Makkah Al Mukarramah 16. Makkah Azizia Branch Tel: (012) 558 1010 Fax: (012) 558 0486 17. Makkah Sitteen Branch Tel: (012) 548 1010 Fax: (012) 548 6134 Ladies Unit Tel: (012) 548 2020 Fax: (012) 548 6259 Yanbu 18. Yanbu Branch Tel: (014) 393 2222 Fax: (014) 392 2673 Abha 19. Abha Branch Tel: (017) 229 5050 Fax: (017) 229 5959 Khamis Mushayt 20. Khamis Mushayt Branch Tel: (017) 237 8855 Fax: (017) 223 5959 Al Baha 21. Baha Branch Tel: (017) 725 4111 Fax: (017) 725 2315

Taif 22. Taif Branch Tel: (012) 742 7555 Fax: (012) 748 5494 Najran 23. Najran Branch Tel: (017) 522 2535 Fax: (017) 522 2722 Jizan 24. Jizan Branch Tel: (017) 322 5221 Fax: (017) 322 4533 Thuwal 25. King Abdullah University of Science and Technology Branch Tel: (012) 802 4041 Fax: (012) 802 4058 Thuwal 26. Jeddah University Branch Tel: (012) 290 0702 Fax: (012) 290 0682 Eastern Region Al Khobar Regional Office P.O.Box 842, Al Khobar 31952 Tel: (013) 865 8000 Fax: (013) 865 8122 1. Regional Office Branch Tel: (013) 865 8000 Fax: (013) 865 8122 Ladies Unit Tel: (013) 865 8140 Fax: (013) 865 8144 2. Al Hada Branch Tel: (013) 835 2737 Fax: (013) 835 1742 Ladies Unit Tel: (013) 835 5092 Fax: (013) 835 1742 Dammam 3. Dammam Branch Tel: (013) 835 2888 Fax: (013) 835 3555 Ladies Unit Tel: (013) 835 2888 Fax: (013) 835 5381 4. Prince Naif Bin A.Aziz Road Branch Tel: (013) 841 0868 Fax: (013) 842 3462 5. King Saud Street Branch Tel: (013) 833 0515 Fax: (013) 833 2882 6. King A.Aziz Port Branch Tel: (013) 847 0384 Fax: (013) 847 0389 Dhahran 7. Doha Branch Tel: (013) 891 3938 Fax: (013) 891 0400

8. Dhahran Branch Tel: (013) 876 6266 Fax: (013) 330 1419 Hofuf 9. Hofuf Branch Tel: (013) 586 0717 Fax: (013) 586 3320 10. Khaldiah Branch Tel: (013) 588 3344 Fax: (013) 588 5376 Ladies Unit Tel: (013) 588 5691 Fax: (013) 588 5147 Mubarraz 11. Mubarraz Branch Tel: (013) 536 7777 Fax: (013) 531 6951 Jubail 12. Jubail Industrial City Branch Tel: (013) 341 0435 Fax: (013) 341 0437 Qatif 13. Qatif Branch Tel: (013) 855 0888 Fax: (013) 855 2015 Ladies Unit Tel: (013) 854 9304 Fax: (013) 854 9305 Ras Tanourah 14. Ras Tanourah Branch Tel: (013) 667 7183 Fax: (013) 667 7186 Saihat 15. Saihat Branch Tel: (013) 837 2424 Fax: (013) 837 7643 International Pakistan Fountain Branch Saddar 270 / 1 / A Maulana Deen Muhammad Wafai Road, Saddar, Karachi Tel: + 92-21-5685194 / 5688767 / 5689322 Fax: + 92-21-5689113 United Arab Emirates Dubai Branch Jumeirah Beach Road, Umm Sequim 2, Dubai Tel: + 9714 709 1111 Fax: + 9714 709 1122 Qatar Doha Branch Tornado Tower, Suite B, Al Funduq Street, West Bay, Doha Tel: +974 4483 7172 Fax: +974 4483 7176

Branches


Corporate Directory 88

Central Region: 1. King Fahad / Jawazat Center King Fahad Road, near Passport Office, Riyadh Tel: (011) 406 6525 Ext. 224 / 226 Fax: (011) 409 2587 2. Rawdah Center Abdulrehman Al-Ghafekieh Street, Riyadh Tel: (011) 493 0359 Fax: (011) 493 3984 3. Hara Center Al Montazah Area, Sheikh A. Rahman Bn Hassan Street, Riyadh Tel: (011) 404 4036 / 404 3436 Fax: (011) 401 2398 4. Yamama Center Batha Main Street, Ground Flr. Al-Yamama Cement Building opposite Batha Hotel, Riyadh Tel: (011) 405 0661 Ext. 221 / 226 / 228 Fax: (011) 405 3604 5. Malaz Center Al-Arbaeen Street, Riyadh Tel: (011) 477 5571 / 477 2033 / 477 0428 Fax: (011) 476 3635 6. Rayyan Center opposite Riyadh Care Hospital, near Central Vegetable Market, Rabwah, Riyadh Tel: (011) 491 1989 / 491 1910 Fax: (011) 491 0052

7. Azizia Center South Ringroad Street, Batha Road, Riyadh Tel: (011) 438 1191 Fax: (011) 438 0902 8. Manfouha Center Manfouha Main Road Tel: (011) 446 0104 / 204 3241 Fax: (011) 446 5247 9. Shumaisi Center Imam Turkey Bin Mohammed Street, Shumesi Area Tel: (011) 287 2098 / 287 6358 Fax: (011) 286 2370 10. Al-Kharj Center Al-Kharj, King Abdulaziz Road Tel: (011) 548 6011 / 548 6054 Fax: (011) 548 6084 11. Buraidah Center Al-Khobab Street, Buraidah Tel: (016) 323 9930 Fax: (016) 324 4140 12. Tabuk Center Main Road, opposite Samir Kodak Studio, Tabuk Tel: (016) 426 1093 / 426 1087 Ext. 100 / 104 / 106 Fax: (016) 423 1884 Ext. 223 13. Hail Center King Faisal Road, Hail Tel: (016) 533 1728 Fax: (016) 533 0456

Western: 1. Sammariah Center Sammariah Commercial Center, behind Jeddah International Market, Madinah Road, Jeddah Tel: (012) 667 2797 / 667 2858 Fax: (012) 667 2973 2. Al-Fayha Center Sitten Street, Beside Samba Bank, Al-Fayha, Jeddah Tel: (012) 669 9111 Ext. 29156 / 29157 Fax: (012) 669 9165 3. Makkah Center Holy Haram Street, adjacent to Ahli Clinic Al-Jumaizah, Makkah City Tel: (012) 574 6269 / 574 6400 Fax: (012) 575 1600 4. Madinah Center Sitten Street, Hashmiyah District, near Prophet Mosque, Madinah Tel: (014) 828 5325 / 826 2418 Fax: (014) 828 53465

5. Taif Center 1st Floor, Al-Agig Hotel, King Abdulaziz Street, Al-Azizia District, Taif Tel: (012) 734 7800 / 734 5367 / 732 0224 Fax: (012) 734 4282 6. Yanbu Center King Abdullaziz street, Al-Saidiah province Tel: (014) 322 4774 Fax: (014) 322 8915 7. Khamis Mushait Center Gold Market Street, behind Al-Azizia Hotel, Khamis Mushait Tel: (017) 223 3612 Fax: (017) 223 3616

Eastern Region: 1. Al-Khobar Center Mansour Street, Al-Khobar Tel: (013) 899 3206 / 899 2715 Fax: (013) 898 3024 2. Thoqba Center Makkah Street, (12th Cross), Thoqbah Area, Al-Khobar Tel: (013) 894 9791 Fax: (013) 898 0638 3. Dammam Center Daharan Street, Down Town City Center Area, Dammam Tel: (013) 835 0036 / 835 0037 Fax: (013) 835 0038 4. Dammam 2 Center King Saud St, Dammam Tel: (013) 830 4155 / 830 6531 Fax: (013) 830 6531 5. Jubail Center Al-Safaf Street, City Center Area, opposite PTT Office, adjacent Baladia, Jubail Tel: (013) 362 2024 / 362 5462 Fax: (013) 362 1926

6. Al-Hofuf Center Prince Fahad Al-Jalawi Street, Baladia, Hofuf Tel: (013) 586 5580 / 587 6709 Fax: (013) 585 3869 7. Ras Tanura Center King Saud Road, Main Commercial Street (48th Cross) Tel: (013) 667 7184 / 85 Fax: (013) 667 7186 8. Qatif Center Al-Quds Street, Qatif Tel: (013) 854 8452 / 854 8453 / 854 8454 Fax: (013) 854 8450 9. Shaybah Shaybah Field, Aramco Tel: (013) 578 8556 / 578 8557 Fax: (013) 578 8555

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Corporate Directory 89

Samba Financial GroupHead OfficePO Box 833 Riyadh 11421Kingdom of Saudi ArabiaTelephone: +966 (011) 477 4770Commercial Registration No. 1010035319

www.samba.com

samba 17 eng rev p.samba financial group - formerly saudi american bank - was incorporated by royal...

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