the national commercial bank earnings presentation · the national commercial bank (ncb) prepared...

Earnings Presentation

The National Commercial Bank

4Q & FY 2019 Results

NCB Investor Relations | 4Q 2019 Earnings Presentation

Disclaimer

2

The National Commercial Bank (NCB) prepared this presentation on a proprietary basis as general background information about the activities of NCB. The information contained herein is given in summary form and for discussion purposes only. Some of the information that is relied upon by NCB is obtained from sources believed to be reliable, but NCB (nor any of its directors, officers, employees, agents, affiliates or subsidiaries) does not guarantee the accuracy or completeness of such information, and disclaims all liability or responsibility for any loss or damage caused by any act taken as a result of the information. This presentation including the information covered therein is not intended either to be relied upon or construed as an advertisement for, or an offer, solicitation or invitation to sell or issue, or to subscribe, underwrite or otherwise acquire any securities in any jurisdiction. It should and must not be treated as giving tax, legal, investment or other specialist advice or a recommendation to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Neither shall any part of this information nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision or commitment relating thereto, nor does it constitute a recommendation regarding the subject of this presentation.

All statements included in this presentation other than statements of historical facts, including, without limitation, those regarding financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives) are forward-looking statements and may thus include words like "anticipate", "believe", "intend", "estimate", "expect", "will", "may", "project", "plan" and such other words of similar meaning. Such forward-looking statements are based on numerous assumptions regarding present and future business strategies and the relevant future business environment. Any forward-looking statements speak only as of the date of this presentation and NCB expressly disclaims to the fullest extent permitted by law any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. Due to rounding, numbers and percentages presented throughout this presentation may not add up precisely to the totals provided.

NCB is not under any obligation to update, complete, amend, revise or keep current the information contained herein, and any opinions expressed herein are subject to change materially without notice. Accordingly, no representation or warranty, express or implied, is or will be made by NCB, their respective advisors or any such persons’ directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, and any reliance you place on them will be at your sole risk. Investors must rely solely on their own examinations of the Offering and relevant documentation in making a determination as to whether to invest in the securities described. An investor should seek independent professional advice when deciding if an investment is appropriate. Securities that may be discussed herein may not be suitable for all investors. Investors are required to make their own independent investigation and appraisal of the business and financial condition of NCB and its subsidiaries, the nature of the securities and the merits or suitability of the securities or any transaction to any investor’s particular situation and objectives, including the possible risks and benefits of purchasing any securities. Any such determination should involve an assessment of the legal, tax, accounting, regulatory, financial, credit or other related aspects of the offering or the securities. Without prejudice to the foregoing, NCB, their advisors and any such persons’ directors, officers or employees expressly disclaim any liability whatsoever, in negligence or otherwise, for any loss howsoever arising, directly or indirectly, from use of, or reliance on, this presentation or its contents or otherwise arising in connection therewith.


Net income (SARbn) Financing (SARbn)

Key Messages

3

Agenda for today's FY 2019 earnings call

9.6 11.4

+19%

0

5

10

15

20

25

30

FY 18 FY 19

265 282

+6%

0

100

200

300

400

500

600

700

4Q 18 4Q 19

FY 2019 Guidance

FY 2019 Reported

Financing Growth +4-6% +6.5%

NSCI Margin 3.65% - 3.69%* 3,77%

Cost to Income Below 34% 30.7%

Cost of Risk 0.6% - 0.8% 0.51%

Tier 1 CAR 16% - 18% 18.0%

* FY 2019 outlook provided in 2Q and 3Q 2019 were at similar levels of ~3.5% Excluding the restatement impact of fee amortization, NSCI margin would have been 3.52%

Business Segments Strategic Enablers

1. Tangible progress against strategic agenda

2. Strong financial performance

3. Exceeded original guidance expectations

4. Positive momentum and outlook for 2020


LDRCost of RiskNet Income (TRYmn)AUMNet Income (SARmn)

Investment Income (SARmn)

Net Income (SARmn)

2019 Strategy Highlights

4

Strategic Priorities

RETAIL CORPORATE TREASURY

NCB CAPITAL TÜRKIYE FINANS KATILIM BANKASI (TFKB)

Net Income (SARmn)

Mortgage Financing Growth (SARbn)

Net Income

Return on Assets

2437

(5)

5

15

25

35

45

55

4Q 18 4Q 19

+57%

+32% +21%

+33ps

+2%

376 459

0

100

200

300

400

500

600

700

2018 2019

+22% +8%

445 377

0

100

200

300

400

500

600

700

2018 2019

-15% +76bps

+175%

4,3755,765

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2018 2019

1.84%

2.17%

2018 2019

3,418 3,497

0

1,000

2,000

3,000

4,000

5,000

6,000

2018 2019

514

1,411

0

500

1,000

1,500

2,000

2,500

3,000

2018 2019

SAR 156bn 2.21%

2,399 2,905

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2018 2019

-31bps76%


2019 Strategy Highlights Strategic Enablers

DIGITIZATION

Digital Transactors (% of Total) Digital Sales (% of Total)

Branch Transactions Digital Account Opening

5

LEAN DISTRIBUTION

Branches Self-Service Kiosks

Average FTE / new Branch FTE / Branch

39% 50% 62%

2017 2018 2019

+12pptsYoY

51% +23ppts

2.2% -75bps19%

71%

0

0

0

1

1

1

1

2018 2019

+52ppts

401 434

0

100

200

300

400

500

600

700

4Q 18 4Q 19

+33 315 +210

10.4 9.9 9.6

2017 2018 2019

-3%YoY

PRODUCTIVITY

Front to Back Office Ratio NOR per Employee (SARmn) Cost to Income Ratio, excl. International

72% to 28% +30bps

6

-237bps29.3%2.1 2.2 2.5

2017 2018 2019

+11%YoY


2019 Financial Highlights

6

Strong financial performance from positive trends in key driver metrics

ROE

18.4%+221 bps

ROA

2.4%+22 bps

Net Income (SAR mn)

11,401+19%

Total Assets (SAR bn)

507.3+12%

Operating Income (SAR mn)

20,607+9%

NSCI

15,807 +5%

NSCI Margin

Fee & Other Income

4,801+26%

Cost to Income Ratio

-334pbs

Cost of Risk

0.51%+0bps

NPL Coverage Ratio

138.1%-338bps

Financing(SAR bn)

+6%

Customer Deposits(SAR bn)

+11%

Investments(SAR bn)

134.1+14%

EPS (SAR)

+19%

DPS (SAR)

+10%

3.08 3.68

2018 2019

2.10 2.30

2018 2019

319 353

2018 2019

265 282

2018 2019

3.81% 3.77%

2018 2019

34.1% 30.7%

2018 2019


Asset Deployment Healthy balance sheet growth from financing and Investments

7

452.217.2

16.013.5 8.4 507.3

+12%

0.00

50.00

100.00

150.00

200.00

250.00

300.00

4Q 18 Financing Invest-ments

Cash,Bank &SAMA

Other 4Q 19

Movement in Total Assets (SARbn)

265 282

118 13448 62

21 29452 507

0

0

0

0

0

1

1

1

4Q 18 4Q 19

Total Assets Composition (SARbn)

Other Cash, Bank & SAMAInvestments Financing

452 507

0

100

200

300

400

500

600

700

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Total Assets Trend (SARbn)


265.1

13.55.5

(1.9)

1.8

(1.7)

282.3

+6%

0

10

20

30

40

50

60

70

80

90

100

4Q 18 Mortgages Other Corporate FI Inter-national

4Q 19

Movement in Financing (SARbn)

Financing Financing growth of 6% mainly from strong Retail mortgage origination

8

Retail+SAR 19bn (+18%)

Guidance+4%-6%

104 123

0

20

40

60

80

100

120

140

160

180

200

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Retail (SARbn)

131 129

0

50

100

150

200

250

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Corporate (SARbn)

21 20

0

5

10

15

20

25

30

35

40

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

International (SARbn)


Saudi Government

securities52%

Other investment grade35%

Non-investment grade5%

Equity & others8%

Investments by Credit Grade (SARbn)

Investments Continued participation in Saudi Government Issuance drives investment portfolio growth

9

118.1

13.9

(5.1)

3.04.2 134.1

+14%

0

20

40

60

80

100

4Q 18 SaudiGovernmentsecurities

Otherinvestment

grade

Non-investment

grade

Equity &others

4Q 19

Movement in Investments (SARbn)

118 134

0

20

40

60

80

100

120

140

160

4Q 18 4Q 19

118 134

0

20

40

60

80

100

120

140

160

4Q 18 4Q 19

Fixed rate securities

64%

Floating rate securities

29%Equity instruments & others7%

Investments by Type (SARbn)


CASA71%

Time25%

Others4%

Customers' Deposits Mix (SARbn)

Interbank14%

Customers' deposits81%

Debt0%

Other5%

Total Liabilities Mix (SARbn)

Funding Balance sheet growth funded by growth in time deposits and effective utilization of inter-bank markets

10

Domestic Deposits+SAR 28.4bn (+9%)

International Deposits+SAR 6.3bn (+33%) 387 437

0

100

200

300

400

500

4Q 18 4Q 19

319 353

0

50

100

150

200

250

300

350

400

450

500

4Q 18 4Q 19

452.2

(6.6)

36.7

16.2

(1.7)

2.6 3.6 0.2(8.4)

507.3

+12%

8.5 4.1

0

20

40

60

80

100

120

140

160

180

200

4Q 18 CASA Time Other CASA Time Other Inter-bank

Debt OtherLiabil-ities

TotalEquity

4Q 19

Movement in Funding (SARbn)


* Impairments include impairment charges for financing, investments and goodwill

9,594

683

996 115215 78

(327)

46 11,401

+19%

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

FY 18 NSCI Fee &Other

Income

Expenses Impair-ments*

OtherNon-

Operating

Zakat &Tax

Minorities FY 19

Net Income after Zakat and Income Tax attributed to Equity Holders (SARmn)

Net Income Strong growth in net income, driven by NSCI and Investment income, combined with controlled operating and credit costs

11

16.2% 18.4%

+221 bps

0

0

0

0

0

0

0

0

0

0

1

FY 18 FY 19

ROE (%)

3.08 3.68

+19%

0

1

2

3

4

5

6

7

8

9

FY 18 FY 19

EPS (SAR)

2.10 2.30

+10%

0

1

1

2

2

3

3

4

4

5

5

FY 18 FY 19

DPS (SAR)


15,123

1,356216

(394)

(34)(7)

15,807

+5%

3.81% +16 bps +0 bps -8 bps -10 bps -0 bps -2 bps 3.77%

(454)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY 18 Financingmix &yield

Investments Depositmix &cost

Wholesalefunding

Other International FY 19

Movement in Net Special Commision Income (SARmn) & NSCI Margin (%)

Outlook @3Q3.51%

NSCI and Margin Margin negatively impacted by change in funding mix, partly offset by positive retail mix impact

12

Domestic+SAR 717mn (+5%}

Guidance3.65%-3.69%

* Excluding the restatement impact of fee amortization

3.52%*


269

237

3,804 82

(59)

15

(18) (22) (104)

897205 4,801

4,564

3,535

+26%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY 18 Finance&

lending

Tradefinance

Inv. mgt.&

brokerage

Creditcards

Others ExchangeIncome

Investment-relatedincome

Otheroperatingexpenses

FY 19

FY 19 Fee and other Income Movement (SARmn)

Fee & Other Income Fee and other income grew by 26% YoY due to higher investment income and lower other operating expenses

13

Fees from Banking Services-SAR 2mn (-0%)

Domestic

International.


Operating Expenses Digitization, productivity enhancement and optimization delivered further expense savings

14

Domestic

International

34.1%

32.2%32.5%

32.1%

30.7%31.6%

30.1%

30.8%30.6%

29.3%

0

0

0

0

0

0

0

0

0

FY 18 1Q 19 1H 19 9M 19 FY 19

Cost to Income Ratio (YTD %)

Group (%) Excluding International (%)

6,446 59

(371)

259

(62)

6,331

5,604

727

5,506

940

-2%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

FY 18 Employee-related

Rent &premises

Deprecia-tion &amorti-zation

OtherG&A

FY 19

FY 19 Operating Expenses Movement (SARmn)

Guidance< 34%


51

(3)

9

(3)3

(1)(5)

51

+0 bps

-

5

10

15

20

25

30

35

40

FY 18 Impairments Recoveries& Other

Impairments Recoveries& Other

Other International FY 19

Movement in Cost of Risk (bps)

Cost of Risk for Financing Overall stability in cost of risk

Guidance60 - 80 bps

Corporate-8 bps

Retail+6 bps

15

0.5% 0.5%

0

0

0

0

0

0

0

0

FY 18 1Q 19 1H 19 9M 19 FY 19

Group

0.3% 0.4%

0

0

0

0

0

0

FY 18 1Q 19 1H 19 9M 19 FY 19

Retail

0.6% 0.4%

(0)

0

0

0

0

0

0

0

0

0

FY 18 1Q 19 1H 19 9M 19 FY 19

Corporate

1.5%2.2%

0

0

0

0

0

0

FY 18 1Q 19 1H 19 9M 19 FY 19

International


5,247

(54)(316)

452 5,329

+2%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

4Q 18 Retail Corporate International 4Q 19

Movement in NPLs (SARmn)

Credit Quality Credit Quality remains stable, albeit impacted by International segment

Domestic-SAR 370mn (-9%)

16

142% 138%

1.9% 1.8%

120%

130%

140%

150%

160%

170%

180%

190%

200%

0

0

0

0

0

0

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Group

264% 290%

0.6% 0.5%

200%

250%

300%

350%

400%

0

0

0

0

0

0

0

0

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Retail

136%

151%2.5% 2.3%

125%

130%

135%

140%

145%

150%

155%

0

0

0

0

0

0

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Corporate

90%62%5.5%

8.2%

20%

40%

60%

80%

100%

120%

0

0

0

0

0

0

0

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

International

NPL Ratio NPL Coverage


Capital Capital position comfortably above regulatory minima

17

16.6% 16.5%16.0%

15.4%

16.2%

18.5% 18.4%17.8%

17.2%

18.0%

20.6%

19.3%18.7%

18.0%

18.7%

0

0

0

0

0

0

0

0

0

0

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Capital Ratios (%)

CET1 ratio T1 ratio TC ratio

T1 Guidance16% - 18%

74.3 11.4

(0.4) (6.6) (0.5)(5.0)

73.2

-2%

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

FY 18 NetIncome

Tier 1Sukuk cost

Dividends T2 Sukuk Other FY 19

Movement in Total Capital (SARbn)

360.2 25.5 1.0 3.7 390.3

+8%

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

FY 18 Credit risk Operational risk Market risk FY 19

Movement in RWA (SARbn)


* Headline ratio, which does not equate to SAMA regulatory LDR ratio

Liquidity Strong and stable liquidity profile maintained

18

320 319 330 334 343

250 256 263 271 275

128.0%124.0% 125.5% 123.2% 124.4%

-

100

200

300

400

500

600

1

1

1

1

1

1

1

1

1

1

2

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

NSFR Ratio (%)

Available stable funding (SARbn)Required stable funding (SARbn)NSFR

97 98 92 92 99

55 53 50 53 59

176.0%183.9% 185.5%

173.2% 168.9%

(5)

15

35

55

75

95

115

135

1

1

1

1

1

2

2

2

2

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

LCR Ratio (%)

HQLA (SARbn)Net cash outflows (SARbn)LCR

83.2% 86.8% 84.4% 82.4% 79.9%

0

0

0

1

1

1

1

1

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

LDR Ratio* (%)

13.5% 13.6% 13.2% 12.6% 12.8%

0

0

0

0

0

0

4Q 18 1Q 19 2Q 19 3Q 19 4Q 19

Basel III Leverage Ratio (%)


Stra

tegi

cEn

able

rs

Digital Productivity

Accelerate digital transformation Increase Operational Efficiency

Digital sales Advanced analytics

Lean distribution Robotics & AI

Funding

Current Accounts

Wholesale Funding

Grow Current Accounts

Expand Funding Options

Digital & physical distribution

Cash management Customer coverage

models

Programs across maturity and seniority spectrums

Mix and cost optimization

2020 Strategy Overview

19

Strategic agenda for 2020 positions NCB for continued growth

Asset Deployment

Retail Corporate Treasury Subsidiaries

Grow Mortgages Improve Returns Sustain Investment Returns

Grow Value Contribution

Sales channels Digitization

Mega financing SME Transaction banking

Recurring revenues Portfolio liquidity &

quality

Key business lines Efficiency &

productivity


2020 Guidance

20

Economic outlook provides opportunities

Macro-Economic Outlook

2020 Outlook

Oil Price USD 60 / bbl

US Fed Rates Stable

GDP Growth Real GDP +2.3%

Budget Revenue SAR 833 bn Expenditure SAR 1.0 tr Deficit 6.4% of GDP

Inflation +2.0%

Financial Guidance

FY 2019 Reported 2020 Guidance

Financing Growth +6% 10 - 12%

NSCI Margin 3.77% 3.60% - 3.80%

Cost to Income 30.7% Below 32%

Cost of Risk 0.51% 0.6% - 0.8%

Tier 1 CAR 18.0% 16% - 18%

Q&A SESSION


ADDITIONAL INFORMATION



Contact UsThe National Commercial Bank

P.O. Box 3555

21481 Jeddah, Kingdom of Saudi Arabia

Mr. Abdulbadie Alyafi

Head Of Investor Relations

+966 12 646 3988

[email protected]

More InformationVisit: http://www.alahli.com/en-us/Investor_Relation

to access NCB’s current and previous Investor Publications including:

Financial statements

Earnings releases

Investor presentations

Financial data packs (in Excel)

NCB Contacts NCB welcomes your feedback and inquiries

23

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