INVESTOR PRESENTATION - Burgan Bank 13_Final... · 2014. 3. 10. · 5 Algeria Foreign Exchange...

1

INVESTOR

PRESENTATION Full Year 2013 |

Financial Performance

2

Operating Environment

Performance | Risk Profile

2 | Burgan Bank FY 2013 Investor Presentation

2014 in Prospect

3

Operating Environment


4

No major changes… lower growth ahead

Global GDP | Average growth (%) Advanced Economies | Output Gap (%)

Key takeaways

0

2

4

6

8

10

12

142003-2010

2011-2018

Commodities indices (2005 = 100)

% MENA


Source: IMF 2013 Data base, World Bank & Burgan Bank Economic Research.

G3: below-potential but rising growth. High debt and

unemployment to constrain prospects.

Subdued growth will hinder demand for commodities

especially in developing countries.

Overall, global disinflation is expected to continue in the

forecasted period.

MENAT growth as expected is slower, despite an urgent

need to create jobs.

GCC: Low demand and high supply are likely to keep oil

prices low throughout the year hindering economic

performance, but public spending will support demand.

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5-5

-4

-3

-2

-1

0

1

2

3

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Output gap (%) Unemployment rate (%, rhs)

0

50

100

150

200

250

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Energy Food and beverage

Subdued growth levels still persist, with weak fundamentals, lower policy rates and challenging

operating environments going forward…

OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY

5

Algeria Foreign Exchange Regulations


\

Growth at 1.8% below potential due to delays investment

spending & political uncertainty.

Growth expected to reach 2.0% below potential due to continued

delays in investment spending & lower oil prices.

Growth at 3.0% line with expectations but below potential due

to fiscal austerity & negative impact of Syrian civil war.

Growth at 3.0% line with expectations but below potential due

to lack of investments.

Growth at 4.5% lower than expected and below potential due

to lower oil production and capital expenditure.

Growth at 2.8% in line with expectations but below potential

due to fiscal austerity, low growth in EU and political tensions.

Growth at 3.3% higher than expected (due to contraction

related activities) but below potential.

OUTLOOK 2014 E

CO

NO

MIC

P

OL

ITIC

AL

RECAP 2013

Tunisia:

• Elections likely in 2Q14

• Tensions between Islamists and

seculars

Turkey:

• March: municipal elections, August: presidential elections

• Ongoing political tensions within AKP

Jordan:

• Syria Refugee

problem

Iraq:

• Domestic violence

Syria:

• Civil war

• Fragmented opposition between

moderates and Muslim extremism

Saudi Arabia:

• Succession issues for the ailing king

• Rising unease in the Shi’a dominated

Eastern provinces

Egypt:

• Elections likely in 2Q14

• High tensions betw Muslim Brotherhood and military

• Economy on life support by GCC aids

Algeria:

• Presidential elections in

April.

• President Bouteflika has not

announced his candidacy yet

• Unclear if he can outlive

another election cycle and/or

who would replace him

Kuwait: • Parliamentary in-fighting delaying

economic reforms.

• Instability in southern Iraq could

impact Kuwait

Growth expected to reach 3.5%; financing of the budget deficit.

Energy dependency reflecting negatively on the budget.

Growth expected to reach 3.2%; Declining natural gas prices,

high unemployment.

Declining economic growth potential due to slowing FDI.

GDP growth slowing down due to lack of reforms with high

current account deficit, inflation expected to slow but food

inflation may remain high.

Growth expected to reach 2.4%; Capital outflows trigger

further TRY depreciation. Rising NPLs due to higher interest

rates.

MENAT growth as expected is slow, as geopolitical tension still persist…

Source: Burgan Bank Economic Research. Note: Darker the color, higher the political risks in 2014


6

Results Overview


7

9 Months 2013: Key Highlights


REVENUE GREW BY 33.4% (FY13 VS. FY12) REACHING KD 253.6M

NIM’S ADVANCED TO REACH 2.71% IN FY13 VS. 2.45% IN FY12

OPERATING PROFIT REACHING KD 140.7M GROWING BY 18.3% (FY13 VS. FY12)

NET INCOME REACHING KD 20.1M AFTER ACCUMULATION OF ADDITIONAL PRECAUTIONARY

RESERVE OF KD52.6M

ENHANCED ASSET QUALITY; WITH IMPROVED NPA RATIO AND BETTER COVERAGE RATIO

NPA RATIO DECLINED FROM 5.6% IN FY12 TO 3.4% IN FY13 BUILD UP ADDITIONAL PRECAUTIONARY RESERVE OF KD 52.6M COVERAGE RATIO

(2) IMPROVED FROM 73% IN FY12 TO 123% IN FY13 & COVERAGE

NET OF COLLATERAL AT 256% FOR FY13

MAINTAINED GROWTH YOY & QOQ IN BALANCE SHEET; SUPPORTED BY INTERNATIONAL

OPERATIONS PERFORMANCE

LOANS GROWING BY 17.2% YOY & 11.3% QOQ

DEPOSITS GROWING BY 19.1% YOY & 7.8% QOQ

OPTIMIZING BALANCE SHEET WITH SOUND LIQUIDITY LEVELS AT 32.0% AND STABLE

CAPITAL BUFFER WITH CAR AT 15.4%

Solid Operating

Performance enabled us to accelerate

reserves build up

Healthy Balance

Sheet generating resilient

underlying earnings

Asset Quality in comfortable levels with

effective risk management

(1) NIM’s excluding BBT contribution is 2.70% for FY13. (2) Total Provisions(General + Specific) to NPA’s.


8

Performance Trends


9

Strong Financial and Operating Performance…


9.2

2.5

10.8

5.1

20.0

7.7

Q4'12 Q4'13

Net Profit | KD million(1)

Cost of Credit | KD million(1) Revenue | KD million(1)

Key Indicators(1)

190.1

229.7

14.2

23.9

190.1

253.6

FY 12 FY 13

Additional precautionary reserves.

∆ 33.4%

45.1

62.0 6.1

4.3

51.2

66.3

Q4'12 Q4'13

∆ 25.2%

1 offs Revenues items.

18.8 37.3

17.3

52.6

36.1

89.9

FY 12 FY 13

3,498 4,090

2.9

20.6 10.8

5.1 13.7

25.7

Q4'12 Q4'13

Gross Loans in KD million. Additional precautionary reserves

55.6

20.1

17.3

52.6

72.9 72.7

FY 12 FY 13

(1)Figures are reported after consolidation adjustments.(2) Excl. BBT contribution in FY13.(3) Liquid assets comprises of Cash & Cash eq., Treasury bills & bonds and Due from Banks & OFIs.

Burgan Bank Group FY 2012 FY 2013

Revenue Growth (YoY) 16.4% 33.4% | 16.8%(2)

Operating Profit Growth (YoY) 16.6% 18.3% | 19.4%(2)

Cost to Income Ratio 37.4% 44.5% | 36.1%(2)

Jaws Ratio (YoY) 0.5% (25.1%) | 2.8%(2)

Loans to Cust. Deposits 86.6% 85.2% | 77.9%(2)

Liquidity Ratio(3) 31.5% 32.0% | 35.5%(2)

NPA Ratio 5.6% 3.4%

NPA net of Collateral Ratio 1.8% 1.6%

ROE | ROE ex. Additional Provisions 12.4% | 16.3% 4.1 | 14.8%

ROTE | ROTE ex. Additional Provisions 20.2% | 26.5% 6.4 | 23.3%


Note: Other Expense grew by KD4.7m Q4’13 vs. Q3’13, due to; asset revaluation loss of Debt to Asset swap in Kuwait, deprecation cost of branches in Algeria, Licenses renewal in Jordan & prior year expenses of Bank of Baghdad Beirut branch losses in Iraq.

10

Strong Financial and Operating Performance…


(1)Figures are reported after consolidation adjustments.(2) Excl. BBT contribution in FY13.(3) Liquid assets comprises of Cash & Cash eq., Treasury bills & bonds and Due from Banks & OFIs.

Cost of Credit | KD million(1) Revenue | KD million(1)

150 160 176

230 15 4

14

24

165 163

190

254

FY 2010 FY 2011 FY 2012 FY 2013

72

13 19 37 16 17

53

72

29 36

90

FY 2010 FY 2011 FY 2012 FY 2013

3.2% 2.2%

Cost of Credit | % Additional Provisions

1.0% 1.2%

1 offs.

Operating Profit & Net Profit | KD million(1)

100 102

119

141

51 56 20

16 17 53

5

67 73 73

Additional Provisions

FY 2010 FY 2011 FY 2012 FY 2013

Operating Profit Net Profit

Key Indicators(1)

Burgan Bank Group FY 2012 FY 2013

Revenue Growth (YoY) 16.4% 33.4% | 16.8%(2)

Operating Profit Growth (YoY) 16.6% 18.3% | 19.4%(2)

Cost to Income Ratio 37.4% 44.5% | 36.1%(2)

Jaws Ratio (YoY) 0.5% (25.1%) | 2.8%(2)

Loans to Cust. Deposits 86.6% 85.2% | 77.9%(2)

Liquidity Ratio(3) 31.5% 32.0% | 35.5%(2)

NPA Ratio 5.6% 3.4%

NPA net of Collateral Ratio 1.8% 1.6%

ROE | ROE ex. Additional Provisions 12.4% | 16.3% 4.1 | 14.8%

ROTE | ROTE ex. Additional Provisions 20.2% | 26.5% 6.4 | 23.3%


11

…with improved underlying Net Interest

Income


25.6 28.0 35.0

28.7 29.9

43.0

26.8 30.8

42.2 23.5

30.2

45.2

104.6

118.9

165.4

FY 2011 FY 2012 FY 2013

Net Interest

Margins(1)

Ne

t In

tere

st

Inc

om

e | K

Dm

n

(1)FY Net Interest Margin’s figures calculated based on the Average 12 months Interest Earning Assets.

2.64% 2.45%

2.71%

Q2

Q1

Q3

Q4

No

n-I

nte

res

t In

co

me

| K

Dm

n

38.1 38.1 44.6

7.8

17.6

18.6

1.6

2.2

2.9

6.2

2.0

11.7

5.1

11.3

10.5

58.8

71.2

88.3

FY 2011 FY 2012 FY 2013Fees & Commissions FX Income DividendSecurity Gains Other Income Non-Interest Income

36.0% 37.4% 34.8%

Non-Interest

Income to

Revenues

11.2 14.9 4.8 3.1 9.0 -1.3

1 off’s items in KD million.


12

Strengthen / Diversified Balance Sheet


Cu

sto

me

r L

oa

ns

| K

Dm

n

Cu

sto

me

r D

ep

os

its

| K

Dm

n

34.9%

41.1%

International

Contribution

Loans to

Deposits

Kuwait International Customer Loans Kuwait International Customer Deposits

Customer loans and Customers deposits figures after consolidation adjustments.

1,819

2,218

2,733

977

1,677

1,907

2,796

3,895

4,640

FY 2011 FY 2012 FY 2013

1,576

2,054

2,414

676

1,321

1,541

2,252

3,374

3,955

FY 2011 FY 2012 FY 2013

30.0%

39.1% 39.0%

80.6%

86.6% 85.2%


13

…and effectively managed risk position


Non Performing Assets and Coverage Ratio | KD million

282

165 104

80

102

85

362

267

189

49% 73%

123%

FY 2011 FY 2012 FY 2013

NPA Kuwait NPA International NPA Coverage Ratio

∆ -47.8%

362

267

189

176 194 232

146

86 91

121%

226% 256%

FY 2011 FY 2012 FY 2013

NPA Total Provisions NPA net of collateral Coverage Ratio net of collateral

5.6% 5.6%

4.2%

4.7%

3.4%

Q4'12 Q1'13 Q2'13 Q3'13 Q4'13

NPA’s to Gross Facilities NPA’s net of collateral to Gross Facilities

1.8% 1.8%

1.9% 1.8%

1.6%

Q4'12 Q1'13 Q2'13 Q3'13 Q4'13

NPL KPIs

Indicators Q4’12 Q3’13 Q4’13

Gross Loans 3,498 3,673 4,090

NPL’s 247 219 174

NPL Ratio 7.1% 6.0% 4.2%

NPL, net of

collateral 1.9% 2.1% 1.9%

NPL Coverage, net

of collateral 171% 157% 178%


14

… with stable shareholder returns


Operating Profit & Net Profit(1) | KD million

12.0% 12.4%

4.1%

21.1% 20.2%

6.4%

FY 2011 FY 2012 FY 2013ROE ROTE Additional Provisions

6.7%

16.9% 3.8% 3.9%

15.8% 16.3%

14.8%

23.3%

26.5% 27.8%

6.3%

10.7%

ROE & ROTE | %

102

119

141

51 56

20

16 17

53

67 73 73

Additional Provisions

FY 2011 FY 2012 FY 2013

Operating Profit Net Profit

375 1,089

201

Jan'04 Jan'14

Adjusted Share Price (KD Fils) Cumulative Dividend (KD Fils)

TSR (Share Price Return and Dividend Yield) Growth

10 years (Jan’04 – Jan’14) 1,290

Note: Adjusted for right issue and stock dividend


15

Performance Trend – By Country


16

Healthy balance sheet growth driving

Franchisees performance……


98.1

117.6

FY 12 FY 13

43.4

46.3

FY 12 FY 13

34.7

37.9

FY 12 FY 13

12.4

17.6

FY 12 FY 13

5.2 6.2

FY 12 FY 13

Kuwait

Jordan

Algeria

Iraq

Tunisia

31.5

FY 12 FY 13Turkey

2,054

2,414

FY 12 FY 13

559 526

FY 12 FY 13

230

289

FY 12 FY 13

34

53

FY 12 FY 13

5

8

FY 12 FY 13

513

675

FY 12 FY 13

3,103

3,899

FY 12 FY 13

683

733

FY 12 FY 13

272

377

FY 12 FY 13

229

352

FY 12 FY 13

110

120

FY 12 FY 13

535

621

FY 12 FY 13

Revenue(1) Loans Total Deposits(2)

(1)Figures are reported before consolidation adjustments; Sub debt cost allocated to subsidiaries. (2)Total deposits includes; Due to Banks and Customers Deposits.


17

Performance vs. Peers


18

…Outperforming Peers – Both Local (9M 2013 vs. 9M 2012)


Burgan Bank Additional precautionary reserves impact.

(1)Burgan Bank ROTE exclude additional precautionary reserves of KD 52.6m for FY13. (2)ROTE based on Open Equity. (3)Non Performing Loans to Gross Loans based on latest reported financials, Burgan Bank Non Performing Loans net of collateral for FY 2013.

17.2%

8.5%

1.2%

8.9%

10.2%

BB

NBK

GBK

CBK

ABK

19.1%

10.2%

2.4%

16.5%

5.9%

33.4%

-3.6%

-7.1%

8.8%

-0.7%

6.4%

14.0%

7.2%

4.3%

6.9%

16.9% 23.3%

Customer Deposits

Growth %

(FY13 vs.FY12)

Customer Loans

Growth %

(FY13 vs.FY12)

ROTE(1)(2) %

(FY13)

Revenue

Growth %

(FY13 vs.FY12)

Sustained high performance vs. peers locally…


19

…and Regional (9M 2013 vs. 9M 2012)


AUB adjusted for 1 off gain of US$ 212.9mn in Q1’13 from Sale of its stake in Ahli Bank of Qatar.

Burgan Bank Additional precautionary reserves impact (1)Burgan Bank ROTE exclude additional precautionary reserves of KD 52.6m for FY13. (2)ROTE based on Open Equity. (3)Non Performing Loans to Gross Loans based on latest reported financials, Burgan Bank Non Performing Loans net of collateral for FY 2013. Note: 9M 2013 numbers for AUB, BSF and CBQ

…and regional

18.5%

6.4%

14.1%

16.9%

11.8%

16.6%

32.6%

12.4%

12.7%

14.0%

10.6%

20.2%

23.3%

Customer Deposits

Growth %

(FY13 vs.FY12)

Customer Loans

Growth %

(FY13 vs.FY12)

ROTE(1)(2) %

(FY13)

Revenue

Growth %

(FY13 vs.FY12)

17.2%

26.9%

18.8%

8.5%

10.1%

41.0%

5.9%

5.4%

33.3%

19.1%

24.2%

12.0%

10.2%

6.9%

16.0%

19.5%

4.4%

38.4%

33.4%

27.6%

18.7%

-3.6%

1.5%

-1.8%

9.5%

-1.5%

8.1%

36.8% 46.3%


20

2014 in Prospect


21

Healthy balance sheet growth driving

Franchisees performance……


Expecting defensive year with high focus on risk.

Enhancing branches network.

On alert for tactical inorganic opportunities.

Maintaining focus on growth in corporate banking and developing retail while absorbing forex loss

and LC confirmation fees cap due to new regulations.

Continue branch network development.

Organic growth with good risk balance focus.

Redefining SME and Retail business models.

Continuity of the integration to Burgan Group

Corporate Banking: Credit growth expected higher than market despite increasing competition

Private Banking: Sticking to core competencies of expanding business complemented by several new

initiatives.

Retail Banking: Increasing scale supported by launching of new products.

Treasury: Optimizing intragroup funding.

Regulatory Changes: Expected introduction of Basel III, capital optimization plan to be evaluated and

actions to be taken

New CEO in place with revamped business proposition to be introduced.

JORDAN

IRAQ

ALGERIA

TURKEY

KUWAIT


22

Summary


23

… In Summary



2014

Conditions to persist with marginal improvement in the region

Our Business proposition proven successful, even with less favorable macro-

economic conditions, we plan to continue growing with a balanced approach

towards returns and risks

2013

Good year in business fundamentals despite less favorable economic and

operating environment

Enhanced Risk Position; both asset quality and coverage ratio showing

considerable improvement

Healthy leading indicators to sustain solid operating performance

24

Thank You


25 25 | Burgan Bank FY 2013 Investor Presentation

IMPORTANT NOTICE

This presentation has been prepared by Burgan Bank and is subject to the applicable laws and regulations in the State of Kuwait. It is for information purposes only and

it shall not be reproduced or redistributed to any other person without obtaining Burgan Bank’s prior written consent. It does not and shall not constitute either an offer to

purchase or buy or a solicitation to purchase or buy or an offer to sell or exchange or a solicitation to sell or exchange any securities of Burgan Bank. Neither this

presentation nor anything contained herein shall form the basis of any contract, commitment or advice whatsoever. This Presentation must be read in conjunction with

all other publicly available information. To the maximum extent permitted by law, Burgan Bank and its directors, employees, agents ,consultants, affiliates and

subsidiaries expressly exclude all liability and responsibility for any loss or damage arising from the use of, or reliance on, the information contained in this presentation

or the website whether or not caused by any negligent act or omission. Neither Burgan Bank nor any of its directors, employees, agents, consultants, affiliates, or

subsidiaries warrant or represent the correctness, accurateness or completeness of the information provided herein. This document is not to be relied upon in any

manner as legal, tax or investment advice. Each recipient hereof shall be responsible for conducting its own investigation and analysis of the information contained

herein and shall familiarize and acquaint itself with, and adhere to, the applicable local legislations. Except where otherwise expressly indicated herein, this presentation

contains time-sensitive information which is based on currently available information to Burgan Bank as of the date stated or, if no date is stated, as of the date of this

preparation and accordingly does not guarantee specific future results, performances or achievements. The information and the opinions contained herein are subject to

change without notice. None of Burgan Bank or any of its subsidiaries or affiliates assume any obligation to update or otherwise revise any such information to reflect

information that subsequently becomes available or circumstances existing or changes occurring after the date hereof.

FORWARD-LOOKING STATEMENTS

All statements included or incorporated by reference in this presentation, other than statements or characterizations of historical fact, are forward-looking statements.

Such forward-looking statements are based on Burgan Bank’s current expectations, predictions and estimates and are not guarantees of future performance,

achievements or results. Forward-looking statements are subject to and involve risks and uncertainties and actual results, performance or achievements of Burgan

Bank may differ materially or adversely from those expressed or implied in the forward-looking statements as a result of various factors. In addition, even if Burgan

Bank’s results of operations, financial condition and the development of the industry in which it operates are consistent with forward-looking statements contained

herein, those results or developments may not be indicative of results or developments in subsequent periods. Burgan Bank does not undertake to update any forward-

looking statements made herein. Past results are not indicative of future performance.

This presentation is available at http://www.burgan.com/aboutus/SitePages/investorRelations.aspx

DISCLAIMER

http://www.burgan.com/aboutus/SitePages/investorRelations.aspx










INVESTOR PRESENTATION - Burgan Bank 13_Final... · 2014. 3. 10. · 5 Algeria Foreign Exchange...

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