National Commercial Bank Investor Presentation FY …...FY 2018 Investor Presentation 5 NCB is the...
Transcript of National Commercial Bank Investor Presentation FY …...FY 2018 Investor Presentation 5 NCB is the...
NCB Investor RelationsFY 2018 Investor Presentation 1
National Commercial Bank Investor PresentationFY 2018 Results
NCB Investor RelationsFY 2018 Investor Presentation 2
Investor Presentation
Contents
03
10
17
27
49
56
NCB Group Profile
KSA Economic Outlook
Strategy Overview
Financial Results Highlights
Segmental Review
Additional Information
35 Financial Results Details
NCB Investor RelationsFY 2018 Investor Presentation 3
NCB Group ProfileFY 2018 Results
National Commercial Bank
NCB Investor RelationsFY 2018 Investor Presentation 4
NCB is the leading banking group in Saudi Arabia (1)
Established in 1953; IPO in 2014
NCB Snapshot (FY 2018)
Jeddah HQ
7mn Clients13,058
Employees*
SAR
453bn Assets
SAR
319bn Deposits
SAR
144bn Market Cap
Wholesale branch in BahrainOffices: Singapore, Seoul, Shanghai
Subsidiary in Turkey:Türkiye Finans Katılım Bankası
Subsidiary in KSA:NCB Capital
*Includes Alahli Esnad (1,520 employees) - fully owned subsidiary engaged in recruitment services within KSA
NCB Investor RelationsFY 2018 Investor Presentation 5
NCB is the leading banking group in Saudi Arabia (2)
NCB has a strong market and financial position
459
356
228 226 189
050
100150200250300350400450500
NCB Rajhi Samba Riyad BSF
Assets (SARbn)
268 234
146 124 115
0
50
100
150
200
250
300
NCB Rajhi Riyad BSF Samba
Financing (SARbn)
325 289
170 159 147
0
50
100
150
200
250
300
350
NCB Rajhi Samba Riyad BSF
Deposits (SARbn)
Market Position by KSA
Overall banking Assets #1
Corporate banking Financing #1
Retail banking Financing #2
Treasury Investments #1
Asset Management AUMs #1
Brokerage Value Traded #3
Financial Position KSA GCC
Assets #1 #4
Financing #1 #4
Deposits #1 #4
Investments #1 #1
Total Operating Income #1 #3
Net Income #1 #3
NCB Investor RelationsFY 2018 Investor Presentation 6
NCB has a well-diversified business model
Total operating income contribution
Capital Markets
NCB CapitalLargest Asset Manager in KSA
Largest Shariah-compliant Asset Manager worldwide
Top 3 Broker22 locations
281 Employees
16.7bn88%
NCB
401 branches, 3,661 ATMs150 Remittance centers
7,596 Employees97% Saudization
100% CEO DRs are Saudi
8.9bn47%
3.9bn21%
3.9bn20%
RETAIL
CORPORATE
TREASURY
1.5bn8%
720mn4%
International
Türkiye Finans Katılım Bankası (TFKB)306 branches, 610 ATMs
3,661 employees
Notes: KSA based recruitment services firm Alahli Esnad (fully owned subsidiary) employs 1,520 personsOperating Income as of FY 2108
NCB Investor RelationsFY 2018 Investor Presentation 7
NCB has a strong financial position
Key KPIs
CAGR CAGR
LCR is based on average quarterly numbersLCR was not reported before 2015
Capital ratios are based on Pillar I RWA
435 449 443 445 453
+1%
0
100
200
300
400
500
600
700
800
2014 2015 2016 2017 2018
Total Assets (SARbn)
47 56 60 64 66
+9%
0
20
40
60
80
100
120
2014 2015 2016 2017 2018
Total Equity (SARbn)
17.2% 17.2%
19.2%20.0%
20.6%
15.1%
16.9%17.7%
18.5%
14.7%13.5%
15.3% 15.7%16.6%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
2014 2015 2016 2017 2018
Capital Ratios (%)
TC ratio T1 ratio CET1 ratio
152.3%172.5% 177.3% 176.0%
66.3%78.1% 80.3% 80.7% 83.3%
0
0
0
1
1
1
1
1
2
2
2
2014 2015 2016 2017 2018
Liquidity Ratios (%)
Liquidity coverage ratio (LCR) Financing to customers' deposit ratio
NCB Investor RelationsFY 2018 Investor Presentation 8
NCB has a strong performance track record
Key KPIs
CAGR CAGR
11.4 12.6 13.5 13.7 14.4
4.8 4.9 5.1 4.7 4.6 16.2 17.5 18.6 18.3 18.9
+4%
0
5
10
15
20
25
30
35
2014 2015 2016 2017 2018
Total Operating Income (SARbn)
Net special commission incomeFee and other income
8.7 9.1 9.3 9.8 10.7
+5%
0
2
4
6
8
10
12
14
16
18
2014 2015 2016 2017 2018
Net Income Attributed To Equity Holders (SARbn)
2.91% 3.04%3.35% 3.48% 3.61%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2014 2015 2016 2017 2018
Net Special Commission Margin (%)
39.0% 37.4% 37.7%35.0% 34.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
2014 2015 2016 2017 2018
Cost to Income Ratio (%)
20.1%19.2%
17.8% 17.4%18.1%
2.2% 2.1% 2.1% 2.2% 2.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0
0
0
0
0
0
0
2014 2015 2016 2017 2018
Returns (%)
ROE common shares (%) ROA (%)
NCB Investor RelationsFY 2018 Investor Presentation 9
NCB Group listed on Tadawul in November 2014
Ranked third in Tadawul, S&P Pan Arab and MSCI Indices with significant weightings
MSCI Saudi Arabia Index Float Adj. Mcap (USDb) Weighting (%)
SABIC 23.23 17.42
Al Rajhi Bank 18.57 13.93
National Commercial Bank 15.31 11.48
Saudi Telecom (STC) 9.79 7.34
Samba Financial Group 8.2 6.15
Ratings LT ST Outlook
National Commercial BankS&P BBB+ A-2 StableFitch A- F1 StableMoody’s* A1 P-1 StableCapital Intelligence A+ A1 StableGovernment of Saudi ArabiaS&P A- StableFitch A+ StableMoody’s A1 StableCapital Intelligence A+ Stable
*Moody’s rating is unsolicited
MSCI, 31 December 2018
Share parameters 31 Dec 2018
Closing Price (SAR) 47.8552 week range (SAR) 37-49Free Float 35.4%Shares issued (mn) 3,000Tangible Book Value (SARmn) 57.737Tangible BVPS 19.25P/TBV Ratio 2.5xP/E Ratio (FY 2018 earnings) 13.91xDiv Yield (FY 2018 dividends) 4.39%3m Avg Daily Volume (shares) 1,.85.721
Trading commenced 12/11/2014. Day 1 at SAR 33
05
10152025303540455055
Nov-14 Aug-15 May-16 Feb-17 Nov-17 Aug-18
Share price performance since IPO (SAR)(Adj price)
Dec–18
NCB Investor RelationsFY 2018 Investor Presentation
National Commercial Bank KSA Economic OutlookFY 2018 Results
NCB Investor RelationsFY 2018 Investor Presentation 11
Vision 2030Saudi Arabia continues to drive economic growth through it’s comprehensive Vision 2030 program
A Thriving Economy An Ambitious NationA Vibrant SocietyPillars
Vision Realization Programs
• National Transformation Program• Fiscal Balance Program• PIF Program• Financial Sector Development Program• Privatization Program• Quality of Life Program
• The Housing Program• Enriching the Hajj and Umrah Experience• Strategic Partnerships Program• National Industrial Development and Logistics Program• Saudi Character Enrichment Program• National Companies Promotion Program
Private sector contribution to GDP to reach 65%
Balancing the budget by 2023
Public debt to GDP to remain below 30%
Raise Saudi home ownership to 60% by 2020
SME Contribution to GDP targeted to reach 23% by 2020
Increase financial sector assets to SAR6.3 trillion by 2020
Foreign Direct Investment to reach 1.46% of GDP by 2020 (~SAR45 billion)
Key Milestones Towards 2030
NCB Investor RelationsFY 2018 Investor Presentation 12
NCB is aligned with Government prioritiesNCB is a key contributor to economic transformation and the Financial Sector Development Program (FSDP) objectives
NCB leverages competitiveness and scale
to deliver value to its stakeholders and support
the national agenda
Vision 2030 Objectives Directly Related to the
FSDP
Enabling financial institutions to support private sector growth
Developing an advanced capital market
Promoting and enabling financial planning
Leading lender for KSA companies with a 15%
Corporate market share (3Q 2018) and a portfolio of
SAR 131bn;
A leader in the SME segment, working with over
130,000 SMEs across KSA
Provided home financing for 34,000 Saudi families
with a portfolio of SAR 23.5bn
Primary Dealer in local government securities with a
SAR 55bn KSA Government Bond investment portfolio
Trusted partner and lead advisor in Capital Markets
and M&A Activities (KSA Government, ARAMCO,
Ma’aden)
Largest Corporate Savings Advisor, with more than
50,000 individual participants and full suite of Takaful
protection and savings products
Expanding participation in the financial services sector
with 6 million KSA based customers through a
comprehensive physical and digital distribution
network
NCB Investor RelationsFY 2018 Investor Presentation 13
Record Saudi Budget in 2019
Fiscal expansionary policy to underpin economic growth
Source: Thomson Reuters, Ministry of Finance, SAMA, Tadawul, and NCB Economics Forecasts
-100
-389-311
-238-136 -131
-3.5%-15.8% -12.9% -9.2% -4.6% -4.2%
-90.0%
-80.0%
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
(900)
(700)
(500)
(300)
(100)
100
300
2014 2015 2016 2017 2018P 2019F
Fiscal Balance
Fiscal Balance Fiscal Balance as % of GDP
142 247 260 305 38270
184255
296
44142
317443
560678
1.6%
5.8%
13.1%
17.2%19.1%
21.7%
-8.0%
-3.0%
2.0%
7.0%
12.0%
17.0%
22.0%
0
200
400
600
800
1,000
2014 2015 2016 2017 2018P 2019F
Government Debt (SARbn)
Domestic International Debt to GDP Ratio (%)
725 610 529 490 490
43
60 39 39 34
768 670
568 529 524
0
100
200
300
400
500
600
700
800
900
2014 2015 2016 2017 2018
Foreign Reserves (USDbn)
SAMA Banks
97
50 41
52
70 65
0
20
40
60
80
100
120
2014 2015 2016 2017 2018 2019F
Average Oil Price (USD)
Average Oil Price (USD)
913
446 334 436 607 662
131
169 186
256
288 313
1,044
616 519
692
895 975
0
200
400
600
800
1,000
1,200
2014 2015 2016 2017 2018P 2019F
Government Revenue (SARbn)
Oil Revenues Non-oil Revenues
370 264 134 208 205 246
740714
696722 825 860
1,110 978
830 930
1,030 1,106
0
200
400
600
800
1,000
1,200
2014 2015 2016 2017 2018P 2019F
Government Expenditure (SARbn)
Capex Current Expenditure (Opex)
NCB Investor RelationsFY 2018 Investor Presentation 14
Economic growth momentum continuesNon-Oil GDP pickup expected, supported by progress of ongoing Government Vision Realization Programs
Source: Thomson Reuters, Ministry of Finance, SAMA, Tadawul, and NCB Economics Forecasts
9.7 10.2 10.5 10.010.3 10.4
97.2
50.240.9
52.470.1 65.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
0
5
10
15
20
25
2014 2015 2016 2017 2018P 2019F
Oil Production
Oil Production Oil Price
11.9%
2.5%0.8% 0.2%
2.8%4.5%
(0)
0
0
0
0
2014 2015 2016 2017 2018 2019F
Monetary Supply growth
(M3) Monetary Supply growth
2.1%1.3%
0.6% 0.7%
0.6%
0.5%
0.1%
0.1% 0.5%
2.7%1.8%
0.1%0.7%
1.2%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
0
0
0
0
0
0
0
2014 2015 2016 2017 2018P
Real non-oil GDP
Non-oil Private Non-oil Public Real non-oil GDP
-2.3%
-14.8% -12.9%-9.2%
-4.6% -4.2%
9.7%
-8.7%-3.7%
2.2%
10.6% 10.5%
-25.0%
-15.0%
-5.0%
5.0%
15.0%
25.0%
2014 2015 2016 2017 2018P 2019F
Twin Balances (%)
Budget Balance / GDP Current Account Balance / GDP
0.9%2.3%
1.6%
-1.4%
1.2%
2.7%
1.8%
0.1%
0.7%
1.2%
-0.1%
-0.2%
3.7% 4.1%
1.7%
-0.7%
2.2% 2.6%
-9.0%
-7.0%
-5.0%
-3.0%
-1.0%
1.0%
3.0%
5.0%
(0)
(0)
0
0
0
0
0
0
2014 2015 2016 2017 2018P 2019F
Real GDP
Oil Sector Non-oil Sector
Import Duties Real GDP
2.2%
1.3%
2.0%
-0.9%
2.5% 2.3%
(0)
(0)
(0)
0
0
0
0
0
0
0
2014 2015 2016 2017 2018 2019F
Inflation, %
General Index…
NCB Investor RelationsFY 2018 Investor Presentation 15
Saudi banking sector growth capacity Lending capacity enables KSA banks to capture opportunities as fiscal policy offsets monetary drag from rising interest rates
Source: Thomson Reuters, SAMA, Banks’ Annual Reports
0.9%
2.98%
0.3%
2.78%
0
0
0
0
0
0
0
0
2014 2015 2016 2017 2018
Interbank Rates (%)
3M SAR SAIBOR 3M USD LIBOR
234 262 280 291 301
8%
11% 12% 11%10%
-3%
-1%
1%
3%
5%
7%
9%
11%
13%
0
100
200
300
400
500
600
700
2014 2015 2016 2017 2018F
Retail Mortgages (SARbn)
Retail Mortgage Size Mortgages to GDP, %
1,576 1,605 1,617 1,619 1,661
12.4%
1.9% 0.8% 0.1%2.6%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2014 2015 2016 2017 2018
Bank Deposits (SARbn)
Deposits Growth Rate (YoY%)
75%
80%81%
80%
77%
1
1
1
1
1
1
1
1
1
1
1
1
2014 2015 2016 2017 2018
Loans to Deposits Ratio (%)
803 903 912 888 903
402 420 440 452 4761,251 1,362 1,400 1,387 1,426
11.6%8.9%
2.9%-1.0%
2.8%
-30.0%
-25.0%
-20.0%
-15 .0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
0
500
1000
1500
2000
2500
3000
3500
2014 2015 2016 2017 2018F
Bank Lending (SARbn)
Corporate Retail Growth Rate (YoY%)
NCB Investor RelationsFY 2018 Investor Presentation 16
Saudi banking sector resilienceStrong capitalization, high credit quality, adequate coverage and a prudent regulatory environment expected to sustain banking sector profitability
Source: Thomson Reuters, SAMA, Banks’ Annual Reports
16.2% 16.2%
17.5%
18.3%18.1%
0
0
0
0
0
0
0
0
0
2014 2015 2016 2017 9M 2018
Tier 1 Capital Adequacy Ratio (%)
1.12% 1.13%1.24%
1.45%
1.63%183%
172%
178%
162%
185%
0
0
0
0
0
0
0
0
0
0
0
2014 2015 2016 2017 9M 2018
NPL & Coverage Ratios (%)
NPL Ratio NPL Coverage Ratio
- -
75.8 80.0 83.1 86.6 91.3
9.1%
5.7%3.8% 4.3%
5.4%
-9.9%
-7.9%
-5.9%
-3.9%
-1.9%
0.1%
2.1%
4.1%
6.1%
8.1%
10.1%
0
20
40
60
80
100
120
140
160
180
2014 2015 2016 2017 2018
Total Operating Income (SARbn)
Revenue (FY)
Growth Rate (YoY%)
- -
41.5 43.7 41.3 45.0 50.0
10.2%
5.4%
-5.4%
8.7%
11.1%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
10
20
30
40
50
60
70
80
90
100
2014 2015 2016 2017 2018
Profits (SARbn)
ProfitsGrowth Rate (YoY%)
NCB Investor RelationsFY 2018 Investor Presentation
National Commercial Bank Strategy OverviewFY 2018 Results
NCB Investor RelationsFY 2018 Investor Presentation
Grew Corporate loan portfolio by 9%
18
2018 Strategy update and 12M highlights
NCB delivered strong performance in 2018 in line with its strategy
Grow Residential Finance
Current Account and Capital Base Focus
Position Corporate Banking for growth
12M Updates
Grew mortgage portfolio by 19%
Grew Current Accounts by 7%
2018 Strategic Priorities
Continued to improve Branch FTE density; newest branches at an average of 6 FTEsLean Distribution
Online and Mobile transactions increased 44%; 105 Self-Service Kiosks installed in network; digital sales comprised 29% of total retail sales
Digitization
Maintained strong liquidity and capitalization levels; improved branch and employee productivityTFKB
Focused on recurring revenue; 11% increase in NSCITreasury
Net Income growth driven by AUM increase and cost disciplineNCBC
Additional Strategy Highlights 12M Updates
18
NCB Investor RelationsFY 2018 Investor Presentation 19
NCB’s 2019 Strategy Framework
Sustaining Leadership
Increase returns in Corporate Banking
Sustain Treasury revenues & diversify
funding
Expand market share in Retail Banking
Strategic Priorities Focus Areas
Vision 2030 Targeted SectorsTransaction bankingCredit Lifecycle Management
Investment returnsCross sell & liability productsContinental hubs
Current accountsMortgage / REDFCredit Card
Guiding Principles
Cost efficiency
Time to market
Customer service
Strategic Enablers
Lean Distribution
Digitization
Operational excellence
Grow value contribution of subsidiaries
NCBC: AUMs and GRE related businessTFKB: Productivity
NCB Investor RelationsFY 2018 Investor Presentation
93 99
19.5%20.8%
+7%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0
20
40
60
80
100
120
140
160
180
FY 17 FY 18
Retail Financing & Advances, net (SARbn)
Performing Market Share (%)
Retail Banking
We are positioning the retail business to expand market share
Strategic Focus Areas
Grow core deposits
Grow Lending Market Share; focus on mortgages and Credit Card
Expand branch network with lean formats enabled by digital migration
Continue to enhance customer service across all channels
20
8.1 8.9
+10%
0
2
4
6
8
10
12
14
16
FY 17 FY 18
Operating Income (SARbn)
3.9 4.6
+18%
0
1
2
3
4
5
6
7
8
FY 17 FY 18
Net Income (SARbn)
(9M)
NCB Investor RelationsFY 2018 Investor Presentation 21
Corporate Banking
Grow selectively and increase risk-adjusted returns
Strategic Focus Areas
Grow lending in V2030 target sectors
Increase cross sell focus to capture full value of relationships
Grow Kafalah-based lending
Expand collections capabilities and strengthen credit lifecycle management
Enhance client servicing model via credit process digitization
120 131
+9%
0
50
100
150
200
FY 17 FY 18
Corporate Financing & Advances, net (SARbn)
4.1 3.9
-5%
0
1
2
3
4
5
6
7
8
FY 17 FY 18
Total Operating Income (SARbn)
2.0 2.2
+13%
0
1
2
3
4
5
FY 17 FY 18
Net Income (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation
91% 91%
-0%
0
0
0
1
1
1
1
1
2
2
2
FY 17 FY 18
Saudi Government and Investment Grade Investments as % of Total
22
Treasury
Broaden and deepen liquidity access while sustaining revenues
Strategic Focus Areas
Increase recurring revenues
Optimize investment portfolio to enhance quality, liquidity and returns
Launch continental hubs to expand coverage (Singapore, UK)
Introduce innovative Shariah compliant products to diversify liquidity sources and enhance cross sell
2.4 2.7
+11%
0
1
2
3
4
5
6
FY 17 FY 18
NSCI (SARbn)
3.9 3.9
-1%
0
1
2
3
4
5
6
7
8
9
FY 17 FY 18
Total Operating Income (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 23
Lean distributionWe will continue to expand with lean distribution in Saudi Arabia by adopting a smaller branch format and implementing extensive digitization
Strategic Imperatives
Continue to expand the network in strategic locations to acquire new customers and expand market share
Expand with smaller branch format with sales and advisory focus
Digitize branch experience and implement assisted self service technologies
Optimize the cost of branch network
7,991 7,596
-5%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
FY 17 FY 18
Bank Headcount (NCB employees)
10.4 9.9
-5%
0
5
10
15
20
FY 17 FY 18
FTE / branch
71% 71%
+0%
0
0
0
1
1
1
1
1
FY 17 FY 18
Front / Back Office Ratio (%)
2,019 2,196
+9%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
FY 17 FY 18
Operating Income / FTE (SARmn)
NCB Investor RelationsFY 2018 Investor Presentation 24
DigitizationContinue to migrate to digital, drive up digital sales and improve operational excellence to deliver superior customer experiences
Strategic Focus Areas
Mobile first
Expand subscription base and grow usage
Leverage advanced data analytics and grow digital sales
Implement “digital branch” and improve customer journeys through agile digitization
Automate back office processes including robotics process automation
39%50%
0
0
0
0
0
1
1
1
1
1
1
FY 17 FY 18
Digital Penetration
60.8% 53.2%
9.6%7.6%
3.0%2.6%
26.6% 36.6%
0
0
0
1
1
1
1
FY 17 FY 18
Financial Transaction Channel Migration
ATM Phone Banking Branch Online/Mobile
12%
29%
0
0
0
0
0
0
0
0
0
FY 17 FY 18
Digital Sales as a % of Total Retail Sales
NCB Investor RelationsFY 2018 Investor Presentation
21.9% 21.3%
-0.6ppt
0
0
0
0
0
0
0
0
0
0
1
9M 17 9M 18
NCBC Share of Sector Net Income (%)
198 183
11.8%10.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0
50
100
150
200
250
300
350
400
450
FY 17 FY 18
NCBC Traded Value (SARbn) & Market Share (%)
NCBC Traded ValueMarket Share (%)
25
NCB Capital
KSA’s leading investment bank and asset manager; well positioned to capture future growth
Strategic Focus Areas
Sustain and grow market leadership in Asset Management through fundraising and product innovation
Grow recurring revenues by increasing AUMs
Grow share of brokerage revenue pool
Continue to enhance efficiency and productivity
836 871 7,226
7,827
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY 17 FY 18
Tadawul Traded Value (SARbn) & TASI Index
Tadawul Traded ValueTASI Index
123 144
+17%
0
50
100
150
200
250
300
350
FY 17 FY 18
NCBC Assets under Management (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation
39 46
+20%
0
10
20
30
40
50
60
70
80
90
FY 17 FY 18
Total Assets (TRYbn)
1,508 1,839
+22%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
FY 17 FY 18
Total Operating Income (TRYmn)
370 445
+20%
0
200
400
600
800
1,000
FY 17 FY 18
Net Income (TRYmn)
26
Türkiye Finans Katılım Bankası
We are executing a transformation program to grow TFKB’s net income
Strategic Focus Areas
Resume branch expansion and expand digital channels to drive customer acquisition
Strengthen underwriting and improve collections
Increase automation and drive capacity optimization
Instill NCB’s principles (Customer excellence, robust governance, best-in-class technology)
NCB Investor RelationsFY 2018 Investor Presentation
National Commercial Bank Financial Results HighlightsFY 2018 Results
NCB Investor RelationsFY 2018 Investor Presentation 28
Key messages
FY 2018 Results
2% increase in total assets
6% financing growth
3% investments growth
3% growth in customers’ deposits
CASA at 80% of deposits
9% growth in 2018 net income, 5% growth in NSCI
3% Fee and other income decline on lower capital gains
Stable operating expenses
Impairments improved by 17%, goodwill written – off during Q4 2018
CoR at 52bps
Group NPL ratio at 1.9% and NPL coverage at 142%
Capital: CET1 of 16.6% and T1 ratio of 18.5%; Leverage Ratio 13.5%
Liquidity; LTD ratio 83%, Average Q4 LCR 176%
Financing (SARbn) Deposits (SARbn)
Net Income Attributed to Equity Holders Movement (SARbn)
NPL & CoR (%) CET1 and LTD (%)
249 265
+6%
0
100
200
300
400
500
600
4Q 17 4Q 18
309 319
+3%
0
100
200
300
400
500
600
700
800
4Q 17 4Q 18
1.9% 1.9%
0.7%0.5%
-0.1%
0.1%
0.3%
0.5%
0.7%
0.9%
1.1%
1.3%
1.5%
0
0
0
0
0
0
4Q 17 4Q 18Group NPL ratioGroup CoR YTD
15.7% 16.6%
81% 83%
20%
30%
40%
50%
60%
70%
80%
90%
0
0
0
0
0
0
0
0
4Q 17 4Q 18CET1LTD
9.80 0.71
(0.13) (0.02)
0.33
(0.03)
10.67
0
1
2
3
4
5
6
FY 1
7
NSC
I
Non
-NSC
I
Expe
nses
Impa
ir-m
ents
Oth
er
FY 1
8
BalanceSheet
Income Statement
Asset Quality, Capital & Liquidity
NCB Investor RelationsFY 2018 Investor Presentation 29
Income Statement
Profitability Trends
SAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY % change FY 2018 FY 2017 YoY % change
Net special commission income 3,741 3,637 3,375 +11% 14,370 13,661 +5%
Fee and other income 1,015 1,094 1,140 -11% 4,557 4,684 -3%
Total operating income 4,756 4,732 4,516 +5% 18,927 18,345 +3%
Operating expenses (1,475) (1,606) (1,632) -10% (6,446) (6,424) +0%
Total impairment charge (601) (616) (357) +68% (1,635) (1,969) -17%
Income from operations, net 2,680 2,510 2,526 +6% 10,846 9,953 +9%
Net income attributed to equity holders 2,647 2,454 2,556 +4% 10,667 9,802 +9%
2018 Net income growth from higher NSCI and lower impairments
2,445 2,908 2,496 2,388 2,763
11178
83 65
2,5562,987
2,579 2,4542,647
+4%
0
1,000
2,000
3,000
4,000
5,000
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Net Income Attributed to Equity Holders (SARmn)
International net incomeDomestic net income
4,125 4,407 4,234 4,331 4,429
390 372 427 401 3274,516 4,779 4,661 4,732 4,756
+5%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Total Operating Income (SARmn)
International Operating IncomeDomestic Operating Income
NCB Investor RelationsFY 2018 Investor Presentation
Domestic Deposits94%
International Deposits6%
Customers' Deposits Mix (SARbn)
309 319
0
100
200
300
400
500
4Q 17 4Q 18
30
Balance Sheet
Balance Sheet Trends
SAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY % change
Investments, net 118,090 116,504 114,578 +3%
Financing and Advances, net 265,317 268,245 249,234 +6%
Total assets 453,390 459,080 444,792 +2%
Due to banks and other financial institutions 45,963 48,112 48,558 -5%
Customers' deposits 318,699 325,461 308,942 +3%
Debt securities issued 9,431 8,636 10,250 -8%
Total liabilities 387,721 395,805 380,516 +2%
Equity attributable to shareholders 57,737 55,504 56,041 +3%
Total equity 65,669 63,274 64,276 +2%
2% increase in total assets; excluding 20% Turkish Lira depreciation the growth would have been 5%
120 123 131 133 131
93 93 95 99 9910 12 16 16 1426 25 24 20 21
249 253 266 268 265
+6%
0
50
100
150
200
250
300
350
400
450
500
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Financing & Advances, net (SARbn)
CorporateConsumer and credit cardOthersInternational
238 237 251 258 255
58 61 53 55 5013 11 13 12 14309 309 318 325 319
+3%
0
100
200
300
400
500
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Customers' Deposits (SARbn)
CASATimeOthers
NCB Investor RelationsFY 2018 Investor Presentation
Retail49%
Corporate24%
Treasury17%
Capital Market3%
International7%
Total Operating Income (SARbn)
Retail47%
Corporate21%
Treasury20%
Capital Market4%
International8%
Total Operating Income (SARbn)
31
Segmental Information (1/3)
FY 2018 Total operating income growth mainly from retail and Capital Market segment
18,345
777
(205) (23)
84
(51)
18,927
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
FY 17 Retail Corporate Treasury CapitalMarket
International FY 18
FY 18 Total Operating Income Movement (SARmn)
4,516157
144 15
(12) (63)
4,756
0
200
400
600
800
1,000
1,200
4Q 17 Retail Corporate Treasury CapitalMarket
International 4Q 18
4Q 18 Total Operating Income Movement (SARmn)
18.3 18.9
0
5
10
15
20
25
FY 17 FY 18
4.5 4.8
0
1
2
3
4
5
4Q 17 4Q 18
NCB Investor RelationsFY 2018 Investor Presentation
Retail42%
Corporate26%
Treasury25%
Capital Market3%
International-4%
Net Income Attributed to Equity Holders (SARbn)
2.6 2.6
0
1
1
2
2
3
3
4
4Q 17 4Q 18
Retail43%
Corporate21%
Treasury31%
Capital Market4%
International1%
Net Income Attributed to Equity Holders (SARbn)
32
Segmental Information (2/3)FY 2018 Net income growth driven by all segments apart from International due to Turkish Lira depreciation and goodwill written - off
9,802
713264 3 69
(183)
10,667
0
500
1,000
1,500
2,000
2,500
3,000
FY 17 Retail Corporate Treasury CapitalMarket
International FY 18
FY 18 Net Income Attributed to Equity Holders Movement (SARmn)
2,556 42
19199
(14)
(227)
2,647
0
100
200
300
400
500
600
700
800
900
4Q 17 Retail Corporate Treasury CapitalMarket
International 4Q 18
4Q 18 Net Income Attributed to Equity Holders Movement (SARmn)
9.8 10.7
0
2
4
6
8
10
12
14
16
18
FY 17 FY 18
NCB Investor RelationsFY 2018 Investor Presentation 33
Segmental Information (3/3)
FY 2018 financing growth mainly driven by Corporate and Retail segments
117 124 126126 143 138
163 160 15538 31 33
445 459 453
+2%
0
100
200
300
400
500
600
700
800
4Q 17 3Q 18 4Q 18
Total Assets (SARbn)
RetailCorporateTreasuryCapital MarketInternational
93 99 99
120 133 13126 20 21
10 16 14249 268 265
+6%
0
100
200
300
400
500
4Q 17 3Q 18 4Q 18
Financing and Advances, net (SARbn)
Consumer and credit cardCorporateInternationalOther
Management Commentary
FY 2018 Total assets increased by 2% due to higher Corporate (+9%) and Retail (+7%) financing and investments (+3%).
Customers’ deposits increased by 3% from the Retail and Corporate segments.
Deposits mix improved with CASA balances at 80% of total deposits at 4Q 2018 compared with 77% at 4Q 2017.237 247 243
42 52 488 8 9
22 18 19309 325 319
+3%
0
100
200
300
400
500
600
4Q 17 3Q 18 4Q 18
Customers' Deposits (SARbn)
RetailCorporateTreasuryInternational
NCB Investor RelationsFY 2018 Investor Presentation 34
Outlook
Improved macroeconomic environment expected to drive growth
Average Arabian light oil price of USD 65 per barrel
Up to 2 US Fed rate hikes of 25bps in 2019
2019’s expansionary fiscal policy is expected to underpin economic growth
20% increase in Capital expenditure will support domestic lending
The budget deficit projected to improve, reaching SAR131 billion
Real GDP growth is estimated to reach 2.6%
Inflation to ease to 2.3% as energy price subsidies remain unchanged
2019 Macroeconomic Outlook
Financing growth 5% to 8% 6% 4% to 6%
FY 2018Target
FY 2018Reported
FY 2019Guidance
Tier 1 CAR 16% to 18% 18.5% 16% to 18%
Group Cost of Risk 0.6% to 0.8% 0.52% 0.6% to 0.8%
BalanceSheet
Profitability
Capitalization and Asset
Quality
NSCI margin 3.53% - 3.63% 3.61% 3.65% - 3.69%
Cost to income Below 35% 34.1% Below 34%
NCB Investor RelationsFY 2018 Investor Presentation
National Commercial Bank Financial Results DetailsFY 2018 Results
NCB Investor RelationsFY 2018 Investor Presentation 36
Operating Income Highlights
Management Commentary
FY 2018 total operating income increased by 3% YoY from 5% higher net special commission income, partially offset by the decrease in investment related income.
International operating income decreased by 5% due to 22% depreciation of the average Turkish Lira rate as compared with FY 2017.
Excluding the International business, FY 2018 total operating income was 4% higher YoY.
4Q 18 total operating income YoY growth of 5% driven by higher NSCI.
Higher FY 2018 total operating income largely attributable to net special commission income
13.66 14.37
4.68 4.56
18.35 18.93
+3%
0
5
10
15
20
25
30
35
FY 17 FY 18
18.350.72
(0.09) (0.05)
18.93
17.40
1.53
16.77
1.58
0
2
4
6
8
10
12
FY 17 NSCI Fee and other income InternationalNOR
FY 18
FY 18 Total Operating Income Movement (SARbn)
Domestic
International
Domestic
International
3.38 3.64 3.74
1.14 1.09 1.024.52 4.73 4.76
+5%
0
1
2
3
4
5
6
7
8
9
10
4Q 17 3Q 18 4Q 18
Total Operating Income (SARbn)
Fee and other income
Net special commission income
4.520.33
(0.03) (0.06)
4.76
4.43
0.33
4.13
0.39
0
1
1
2
2
3
3
4Q 17 NSCI Fee and other income InternationalNOR
4Q 18
4Q 18 Total Operating Income Movement (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 37
Net special commission income trendsFY 2018 net special commission income growth of 5%, despite 19% increase in special commission expenses
Management Commentary
FY 2018 NSCI improved by 5% on higher SCI (+8%), despite 19% increase in cost of funds due mainly to higher SAIBOR/LIBOR, while 4Q 2018 NSCI improved by 11%.
The 4Q 2018 net special commission margin increased by 23bps YoY to 3.64% due to improved yields (+48bps).
Funding cost for 4Q 2018 was 26% higher YoY mainly due to higher SAIBOR/LIBOR rates.
Net Special Commission Income
SAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY % change FY 2018 FY 2017 YoY %
change
Special commission income 4,936 4,700 4,291 +15% 18,306 16,981 +8%
Special commission expense (1,195) (1,063) (916) +31% (3,936) (3,320) +19%
Net special commission income 3,741 3,637 3,375 +11% 14,370 13,661 +5%
Commission yield (%) 4.81% 4.65% 4.33% +11% 4.60% 4.32% +6%
Funding cost (%) 1.25% 1.14% 0.99% +26% 1.06% 0.91% +17%
Net special commission margin (%) 3.64% 3.60% 3.41% +7% 3.61% 3.48% +4%
1.69%
2.31%
2.34% 2.40%
2.81%1.90%
2.27%
2.59% 2.72%2.98%
0
0
0
0
0
0
0
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
SAIBOR and LIBOR Rates (%)
3M USD LIBOR (%) 3M SAR SAIBOR (%)
3.94% 4.06% 4.10% 4.19% 4.32%
0.51% 0.51% 0.58% 0.71% 0.74%
8.54% 8.47%9.30%
11.07% 11.35%
5.94% 5.01% 5.10%6.40% 7.51%
(0)
0
0
0
0
0
0
0
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Commission Yield and Funding Cost (%)
Domestic Yields Domestic COFInternational Yields International COF
3.46% 3.59% 3.56% 3.53%
3.64%
3.41%
3.59% 3.62% 3.60%3.64%
2.89%
3.69%
4.44% 4.66%
3.87%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
0
0
0
0
0
0
0
0
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Net Special Commission Margin (%)
Domestic Group International
NCB Investor RelationsFY 2018 Investor Presentation
3,205 3,282
1,156 1,166802 514
(479) (405)
4,684 4,557
-3%
(500)
1,500
3,500
5,500
7,500
9,500
11,500
FY 17 FY 18
820 802 819
266 369 246164 22 48
(110) (100) (97)
1,140 1,094 1,015
-11%
(200)
300
800
1,300
1,800
2,300
4Q 17 3Q 18 4Q 18
Fee and Other Income (SARmn)
Other operating income (expenses), netInvestment-related incomeExchange Income, netFee income from banking services, net
38
Fee and other income trends
Management Commentary
Fee and other income for FY 2018 declined (-3%) YoY as 2% growth in fee and FX income was more than offset by lower investment income.
The higher fees from banking services in FY 2018 were mainly driven by higher fees from investment management services, credit cards and others, partly offset by lower trade finance fees.
4Q 2018 fee and other income decreased 11% YoY due to (-0.2%) lower fees from banking services, (-71%) investment-related income and (7%) lower Foreign exchange income, partly offset by lower other operating expense by 12%.
Lower FY 2018 fee and other income mainly due to lower investment income partly offset by higher fee and exchange income and lower other operating expenses
Fee IncomeSAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY %
change FY 2018 FY 2017 YoY % change
Finance and lending 367 400 409 -10% 1,483 1,537 -4%Trade finance 79 109 137 -42% 447 537 -17%Investment management services 123 129 124 -0% 549 435 +26%
Shares brokerage 38 24 50 -23% 161 183 -12%Credit cards 16 35 8 +104% 139 120 +16%Others 194 106 94 +107% 504 393 +28%Fee income from banking services, net 819 802 820 -0% 3,282 3,205 +2%
2,799
3,205 92
(54)
19
(91)
111 3,282
212
2,925
281
0
500
1,000
1,500
2,000
2,500
3,000
3,500
FY 17 Brokerage& invmnt.Mngmnt.
Finance &lending
Credit cards Tradefinance
Other FY 18
FY 18 Drivers of Fee Income from Banking Services Movement (SARmn)
Domestic
International
NCB Investor RelationsFY 2018 Investor Presentation
3,409 3,491
771 726654 607
1,589 1,622
6,424 6,446
+0%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
FY 17 FY 18
830 844 829
203 183 154153 153 144445 426 348
1,632 1,606 1,475
-10%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4Q 17 3Q 18 4Q 18
Operating Expenses (SARmn)
Other G&ADepreciation & amortizationRent & premisesEmployee-related
39
Expense highlights
Management Commentary
FY 2018 stable operating expenses YoY, while 4Q 2018 operating expenses decreased by 10% YoY.
The cost to income ratio for FY 2018 was 34.1%, lower by 96bps compared to FY 2017.
The cost base was negatively impacted by cost of living allowances to employees announced this year and the impact of VAT. These were partly offset by lower depreciation and productivity initiatives driven by continued digitization.
35.0% 35.0%35.7%
35.1%
34.1%
33.1% 33.1%
34.1% 33.9%
31.6%
0
0
0
0
0
0
0
0
FY 17 1Q 18 1H 18 9M 18 FY 18
Cost to Income Ratio (YTD %)
Group (%) Excluding International (%)
6,424 82
(45) (47)
32 6,446
5,505
942
5,557
867
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
FY 17 Employee-related Rent & premises Depreciation &amortization
Other G&A FY 18
FY 18 Operating Expenses Movement Drivers (SARmn)
Domestic
International
Despite VAT and cost of living allowances, we maintained operating expenses in 2018
NCB Investor RelationsFY 2018 Investor Presentation
Financing and Advances, net58%
Investments, net26%
Cash, bank and SAMA balances11%
Other assets, net5%
Total Assets Mix (SARbn)
Retail28%
Corporate31%
Treasury34%
Capital Market0%
International7%
Total Assets by Segment (SARbn)
40
Asset highlights and composition
2% growth in balance sheet as a result of increase in financing and Investments.
Management Commentary
6% Financing increase driven by 9% increase in domestic financing, despite 19% decline in international financing impacted by 20% Turkish Lira depreciation.
Overall financing trends were reflective of early signs of economic recovery but muted by Turkish Lira depreciation.
Investments increased by 3% as participation in Saudi Government debt issuance continued.249 268 265
115 117 11860 55 4821 20 22445 459 453
+2%
0
100
200
300
400
500
600
700
800
4Q 17 3Q 18 4Q 18
Total Assets (SARbn)
Financing and Advances, netInvestments, netCash, bank and SAMA balancesOther assets, net
445 453
0
100
200
300
400
500
600
4Q 17 4Q 18
445 453
0
100
200
300
400
500
600
4Q 17 4Q 18
NCB Investor RelationsFY 2018 Investor Presentation
Consumer financing & credit cards
37%
Commerce13%
Manufacturing12%
Services10%
Utilities & health7%
Building & construction6%
Others, across 6 sectors15%
Financing and Advances, gross by Economic Sector (SARbn)
41
Financing and advances
6% Financing growth driven by Corporate and Consumer segments
Management Commentary
Domestically, financing grew for the Corporate Segment (+9%) and Consumer segment (+7%).
Growth in the Corporate segment was driven across all economic sectors apart from Commerce.
International financing declined 19% in 2018 due principally to the weakened Turkish Lira.
93 99 99
120 133 13126 20 2110 16 14
249 268 265
+6%
0
50
100
150
200
250
300
350
400
450
500
4Q 17 3Q 18 4Q 18
Financing and Advances, net (SARbn)
Consumer and credit cardCorporateInternationalOther
256 273
0
50
100
150
200
250
300
350
4Q 17 4Q 18
256
4.9 3.8
(6.9)
4.9
6.5
0.1 3.3 273
0
5
10
15
20
25
30
35
4Q 17 Building &construction
Banking &financial
Services Consumerfinancing &credit cards
Transport &comms
Commerce Other 4Q 18
Movement Financing, gross by Economic Sector (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 42
Financing and advances credit quality (1/2)
Rise in Corporate NPLs and impairment allowances, while Consumer remains stable
2.80 2.80 2.94 3.51 3.400.57 0.52 0.53
0.51 0.561.40 1.40 1.26 1.03 1.234.77 4.72 4.75 5.06 5.25
+10%
0
2
4
6
8
10
12
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
NPL (SARbn)
CorporateConsumer and credit cardInternationalOthers
4.15 4.79 4.87 5.21 4.63
1.34 1.50 1.48 1.53 1.551.26 1.38 1.21 0.96 1.116.80
7.77 7.66 7.79 7.43
+9%
0
2
4
6
8
10
12
14
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Impairment Allowances (SARbn)
CorporateConsumer and credit cardInternationalOthers
0.14
(0.04)
0.12
0.49
0.160.03
(0.04)
0.12
0.03
0.180.08
0.06
0.11
0.14
0.05
(0.04)
0.29
(0.01)
0.34
0.610.40
+41%
(0)
0
0
1
1
1
1
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Impairment Charge (SARbn)
Corporate Consumer and credit card International Others
4.77
0.27
0.17(0.01)
0.32 0.03
(0.03)
(0.28)
5.25
0
0
0
0
0
1
1
1
1
1
1
4Q 17 Building &construction
Utilities &health
Manufacturing Transport &comms
Services Consumerfinancing &credit cards
Other 4Q 18
Movement NPLs by Economic Sector (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 43
Financing and advances credit quality (2/2)
Slightly higher NPL ratio at YE 2018, but NPL coverage remained stable
Management Commentary
NPL ratio slightly higher in 4Q 2018 vs 4Q 2017.
NPL coverage was comfortable at 142% as at 4Q 2018.
FY 18 cost of risk lower in part due to the IFRS9 adoption adjustments.
1.5% 1.4% 1.4% 1.6% 1.6%
5.1% 5.3% 5.1% 4.8%5.5%
1.9% 1.8% 1.7% 1.8% 1.9%
(0)
0
0
0
0
0
0
0
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
NPL Ratios (%)
Domestic International Group NPL ratio
164%
192% 185%170%
157%
90%99% 96% 93% 90%
143%
165% 161% 154%142%
0
1
1
1
1
1
2
2
2
2
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
NPL Coverage Ratios (%)
Domestic International Group NPL coverage ratio
0.7%
-0.1%0.1%
0.3% 0.4%
1.1% 1.0%
1.4%
2.0%1.6%
0.7%
0.0%0.3%
0.5% 0.5%
(0)
(0)
0
0
0
0
0
0
FY 17 1Q 18 1H 18 9M 18 FY 18
CoR Ratios (YTD %)
Domestic International Group CoR ratio
NCB Investor RelationsFY 2018 Investor Presentation 44
Domestic financing and advances credit quality
Corporate NPLs increased while Consumer NPLs were stable
Management Commentary
Corporate NPL ratio increased, while COR and NPL coverage ratio dropped in 4Q 2018, in part due to higher NPL inflows during the year. The FY 2018 impact on COR was limited by IFRS9 adoption adjustments and write-offs during the period.
Consumer and credit card risk metrics remained healthy during the period.
2.2% 2.2% 2.2%2.5% 2.5%
0.6% 0.5% 0.5% 0.5% 0.6%
(0)
(0)
0
0
0
0
0
0
0
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
NPL Ratios (%)
Corporate Consumer and credit card
148%171% 166%
149%136%
236%
290% 279%301%
276%
1
2
2
3
3
4
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
NPL Coverage Ratios (%)
Corporate Consumer and credit card
0.9%
-0.1%
0.1%
0.5% 0.5%
0.5%
-0.2%
0.2% 0.1%0.3%
(0)
(0)
0
0
0
0
0
0
FY 17 1Q 18 1H 18 9M 18 FY 18
CoR Ratios (YTD %)
Coorporate COR Consumer COR
NCB Investor RelationsFY 2018 Investor Presentation
Saudi Government securities47%
Other investment grade44%
Non-investment grade4%
Unrated5%
Investments by Credit Grade (SARbn)
115 118
0
20
40
60
80
100
120
140
4Q 17 4Q 18
Saudi Arabia62%
GCC and Middle East16%
Europe0%
Turkey2%
Other countries20%
Investments by Geography (SARbn)
Investments trends and compositionInvestments increased 3% and quality remains strong; ~91% of the investment portfolio remains Saudi Government and investment grade
Management Commentary
The investment portfolio is built on high quality securities with ~91% being Saudi government and investment grade.
Since the resumption of KSA government debt issuance, NCB has actively participated in issuances of longer term debt securities.
The portfolio has been re-balancing towards floating rate securities in light of the rising interest-rate environment.
45
67 64 63
43 46 495 6 6
115 117 118
+3%
0
50
100
150
200
4Q 17 3Q 18 4Q 18
Investments (SARbn)
Equity instruments, Mutual Funds, Hedge Funds and OthersFloating rate securitiesFixed rate securities
115 118
0
20
40
60
80
100
120
140
4Q 17 4Q 18
NCB Investor RelationsFY 2018 Investor Presentation
Due to banks and other financial institutions
12%
Customers' deposits82%
Debt securities issued2%
Other liabilities4%
Total Liabilities Mix (SARbn)
46
Liabilities trends and composition
Higher total liability base and a improving deposit mix towards CASA balances (80%)
Management Commentary
2% Increase in total liabilities. Excluding Turkish Lira depreciation, the growth would have been 13%.
Customers’ deposits are the main source of funding and rose by 3% during 2018.
CASA balances accounted for 80% of customers’ deposits compared to 77% at year end 2017.
Domestically, CASA balances grew by 7% and time deposits declined by 13% from 2017.
309 325 319
49 48 4610 9 9381 396 388
+2%
0
100
200
300
400
500
600
700
4Q 17 3Q 18 4Q 18
Total Liabilities (SARbn)
Customers' depositsDue to banks and other financial institutionsDebt securities issuedOther liabilities
381 388
0
50
100
150
200
250
300
350
400
450
500
4Q 17 4Q 18
231 251 248
7 7 743 44 3815 11 1213 12 14309 325 319
+3%
0
100
200
300
400
500
600
4Q 17 3Q 18 4Q 18
Customers' Deposits (SARbn)
CASA - DomesticCASA - InternationalTime - DomesticTime - InternationalOthers
NCB Investor RelationsFY 2018 Investor Presentation 47
Liquidity
NCB maintained a strong liquidity profile
Management Commentary
As at 4Q 2018, the financing to customers’ deposit ratio was 83% and comfortably below the regulatory guidelines.
HQLA balances rose by 1.5% compared to 4Q 2017.
The average quarterly LCR remained stable at 176% in 4Q 2018 as compared to 177.3% in 4Q 2017.
Basel III leverage ratio was stable at 13.5% as at 4Q 2018 relative to 13.0% at 4Q 2017.
Quarterly averages
95 97 99 98 97
177.3%198.6% 211.9%
184.4% 176.0%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
0
50
100
150
200
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
HQLA and Average Liquidity Coverage (SARbn/%)
High quality liquid assets (HQLA)Liquidity coverage ratio (LCR)
80.7%
81.8%
83.8%
82.4%83.3%
1
1
1
1
1
1
1
1
1
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Financing to Customer Deposit Ratio (%)
13.0%
13.5%
13.1%
12.9%
13.5%
0
0
0
0
0
0
0
0
0
0
0
0
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Basel III leverage Ratio (%)
NCB Investor RelationsFY 2018 Investor Presentation
72 74
0
10
20
30
40
50
60
70
80
90
100
4Q 17 4Q 18 Common equity tier 1 capital (CET1)
80%
Additional tier 1 capital (AT1)10%
Tier 2 capital (T2)10%
Total Capital Composition (SARbn) Management Commentary
Capitalization remained strong and comfortably above the regulatory minima with CET1 at 16.6% and T1 at 18.5%.
Pillar I risk weighted assets remained stable in YTD 2018 despite growth in financing, which was offset by lower charge on residential real estate financing as recently allowed by SAMA, and Turkish Lira depreciation.
Common equity Tier 1 capital (CET1) is impacted by one time IFRS9 adoption adjustment.
48
Capital
Capital position comfortably above regulatory minima
Capital ratios are based on Pillar I RWA
57 57 60
7 7 78 8 872 72 74
+3%
0
20
40
60
80
100
120
140
4Q 17 3Q 18 4Q 18
Capitalisation (SARbn)
Tier 2 capital (T2)Additional tier 1 capital (AT1)Common equity tier 1 capital (CET1)
318 314 312
34 35 359 12 13361 361 360
-0%
0
100
200
300
400
500
600
700
4Q 17 3Q 18 4Q 18
Pillar I Risk Weighted Assets (SARbn)
Credit riskOperational riskMarket risk
15.7% 16.2% 16.2% 15.9%16.6%
17.7% 18.2% 18.1% 17.8%18.5%
20.0% 20.4% 20.3% 20.0%20.6%
0
0
0
0
0
0
0
0
0
0
0
4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Capital Ratios (%)
CET1 ratioT1 ratioTC ratio
NCB Investor RelationsFY 2018 Investor Presentation
National Commercial Bank Segmental ReviewFY 2018 Results
NCB Investor RelationsFY 2018 Investor Presentation 50
NCB Bank (standalone)Strong 11% FY 2018 net income growth resulting from operating income growth and lower impairment charge
Management Commentary
FY 2018 net income rose 11% YoY driven principally by 4% operating income growth and a 36% lower impairment charge, while limited growth in operating expenses came from VAT, Cost of living allowances and business growth partially offset by productivity initiatives driven by continued digitization.
NSCI for FY 2018 improved by 6% YoY due to increase in average earning assets and better margins from higher CAs growth.
4Q 2018 net income rose 15% YoY driven principally by 9% operating income growth and lower operating expenses by (-7%).
Summary Financial PerformanceSAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY %
change FY 2018 FY 2017 YoY % change
Total assets 426,865 434,567 413,376 +3% 426,865 413,376 +3%
Total operating income 4,280 4,176 3,937 +9% 16,693 16,118 +4%Net special commission income 3,457 3,310 3,126 +11% 13,103 12,386 +6%Fee income from banking services, net 615 610 582 +6% 2,375 2,306 +3%
Operating expenses (1,230) (1,369) (1,328) -7% (5,367) (5,218) +3%Impairment charge (351) (473) (275) +28% (1,067) (1,667) -36%Other income (expenses) (0) (14) 7 -104% (54) (39) +39%Net income for the period 2,698 2,321 2,341 +15% 10,204 9,193 +11%
% of total assets 94.1% 94.7% 92.9% +1% 94.1% 92.9% +1%Cost to income (%) 28.7% 32.8% 33.7% -15% 32.2% 32.4% -1%NCL (%) 0.6% 0.7% 0.4% +60% 0.4% 0.7% -42%ROA (%) 2.5% 2.2% 2.3% +9% 2.5% 2.3% +8%
NIM (%) 3.6% 3.5% 3.5% +5% 3.6% 3.5% +3%
NPL (%) 1.6% 1.6% 1.5% +9% 1.6% 1.5% +9%NPL Coverage Ratio (%) 157% 170% 164% -4% 157% 164% -4%
223 248 244
+9%
0
50
100
150
200
250
300
350
400
450
4Q 17 3Q 18 4Q 18
Financing and Advances, net (SARbn)
287 307 299
+4%
0
100
200
300
400
500
4Q 17 3Q 18 4Q 18
Customers' Deposits (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 51
Retail Banking
Higher FY 2018 net income from higher operating income and lower impairment charge
Management Commentary
FY 2018 net income increased by 18% YoY driven principally by 10% higher operating income and a 39% improvement in impairment charges.
NSCI for FY 2018 improved by 8% YoY due to a 7% increase in retail financing and better margins driven by higher current account growth.
Fee income increased by 16% in FY 2018 YoY, mainly from financing-related activities.
FY 2018 operating expenses increased 6% YoY and the cost to income ratio reached 45.0% from 46.4% a year earlier due to strong operating income growth.
4Q 2018 net income increased by 4% YoY driven by 7% higher operating income and lower operating expenses by (-3%).
Summary Financial PerformanceSAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY %
change FY 2018 FY 2017 YoY % change
Total assets 125,908 123,856 116,530 +8% 125,908 116,530 +8%
Total operating income 2,328 2,327 2,171 +7% 8,918 8,141 +10%Net special commission income 2,026 1,902 1,919 +6% 7,467 6,945 +8%Fee income from banking services, net 305 390 267 +14% 1,348 1,165 +16%
Operating expenses (944) (1,035) (970) -3% (4,015) (3,780) +6%Impairment charge (175) (26) (31) +463% (274) (447) -39%Other income (expenses) (0) (5) (2) -98% (18) (16) +18%Net income for the period 1,209 1,260 1,168 +4% 4,611 3,898 +18%
% of total assets 27.8% 27.0% 26.2% +6% 27.8% 26.2% +6%Cost to income (%) 40.5% 44.5% 44.7% -9% 45.0% 46.4% -3%CoR 0.7% 0.1% 0.1% +426% 0.3% 0.5% -43%ROA (%) 3.9% 4.2% 4.1% -5% 3.8% 3.5% +10%
93 99 99
+7%
0
20
40
60
80
100
120
140
160
4Q 17 3Q 18 4Q 18
Financing & Advances, net (SARbn)
237 247 243
+3%
0
50
100
150
200
250
300
350
400
450
4Q 17 3Q 18 4Q 18
Customers' Deposits (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 52
Corporate Banking
Higher FY 2018 net income by 13% from lower operating expense and lower impairment charge.
Management Commentary
FY 2018 net income increased 13% YoY due to lower impairments (-35%) and operating expenses (-8%).
NSCI for FY 2018 declined 2% YoY as a result of repayments in 4Q 2017 that reduced average balances during the period by 1% compared to 2017.
Fee income decreased by 12% YoY mainly on lower lending and trade fees.
The FY 2018 impairment charge declined 35% YoY due mainly to one-time IFRS9 adoption adjustment to retained earnings permissible by IFRS9.
4Q 2018 net income increased 33% YoY due to higher operating income 15% and lower operating expenses (-25%), partly offset by higher impairments by 12%.
Summary Financial PerformanceSAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY %
change FY 2018 FY 2017 YoY % change
Total assets 138,203 142,725 126,184 +10% 138,203 126,184 +10%
Total operating income 1,117 998 974 +15% 3,889 4,094 -5%Net special commission income 823 785 671 +22% 2,972 3,040 -2%
Fee income from banking services, net 295 201 291 +1% 918 1,044 -12%
Operating expenses (192) (225) (255) -25% (912) (992) -8%Impairment charge (160) (488) (143) +12% (724) (1,115) -35%Other income (expenses) (0) (4) (1) -81% (17) (15) +11%Net income for the period 765 282 574 +33% 2,237 1,972 +13%
% of total assets 30.5% 31.1% 28.4% +7% 30.5% 28.4% +7%Cost to income (%) 17.2% 22.5% 26.2% -34% 23.4% 24.2% -3%CoR 0.5% 1.4% 0.5% +3% 0.5% 0.9% -40%ROA (%) 2.2% 0.8% 1.7% +26% 1.7% 1.5% +12%
4252 48
+13%
0
10
20
30
40
50
60
70
80
90
100
4Q 17 3Q 18 4Q 18
Customers' Deposits (SARbn)
120 133 131
+9%
0
50
100
150
200
250
4Q 17 3Q 18 4Q 18
Financing & Advances, net (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 53
Treasury
Stable FY 2018 net income in treasury segment
Management Commentary
Stable FY 2018 net income YoY mainly from lower (-1%) operating income, partly offset by lower impairment charges.
FY 2018 operating income declined 1% YoY due to lower gains on non-trading investments from repositioning the investment portfolio.
4Q 2018 net income increased by 16% YoY driven by lower non recurring revenues, partly offset by reversal of credit losses, and lower operating expenses.
Summary Financial PerformanceSAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY %
change FY 2018 FY 2017 YoY % change
Total assets 154,763 159,829 162,510 -5% 154,763 162,510 -5%
Total operating income 822 851 806 +2% 3,873 3,896 -1%Net special commission income 609 623 535 +14% 2,663 2,402 +11%Fee income from banking services, net 15 20 24 -34% 109 97 +12%
Other operating income 197 209 248 -20% 1,101 1,397 -21%Operating expenses (94) (109) (103) -9% (440) (441) -0%Impairment charge (16) 41 (101) -84% (70) (105) -34%Other income (expenses) 0 (5) 11 -99% (19) (8) +133%Net income for the period 712 778 614 +16% 3,345 3,342 +0%
Cost to income (%) 34.1% 34.8% 36.5% -7% 34.1% 36.5% -7%% of total assets 11.4% 12.8% 12.8% -11% 11.3% 11.3% +0%ROA (%) 1.8% 2.0% 1.5% +17% 2.1% 2.1% +1%
115 117 118
+3%
0
50
100
150
200
4Q 17 3Q 18 4Q 18
Investments, net (SARbn)
535 623 609
271 228 213806 851 822
+2%
0
500
1,000
1,500
2,000
4Q 17 3Q 18 4Q 18
Total Operating Income (SARmn)
Net special commission incomeFee and other income
NCB Investor RelationsFY 2018 Investor Presentation 54
Capital Markets
Higher FY 2018 net income growth, driven by asset management
Management Commentary
FY 2018 operating income increased by 13% from higher AUM related and other fees, which combined with improving operating efficiency drove strong 23% net income growth YoY.
4Q 2018 net income decreased by 15% YoY due to lower operating income (-7%) due to lower fee income, offset by lower operating expenses (-9%).
Summary Financial PerformanceSAR (mn) 4Q 2018 3Q 2018 4Q 2017 YoY %
change FY 2018 FY 2017 YoY % change
Assets Under Management 144,096 136,659 123,329 +17% 144,096 123,329 +17%Brokerages Volume 57,580 30,052 48,990 +18% 182,949 197,910 -8%
Total operating income 162 155 174 -7% 720 636 +13%AUM Related Fee Income 115 118 127 -10% 512 443 +16%Brokerage Related Fee Income 37 22 39 -5% 135 150 -10%Other fee income 7 8 5 +23% 47 26 +80%
Fee income, net 158 148 172 -8% 695 619 +12%Operating expenses (81) (85) (90) -9% (344) (344) -0%Other income (expenses) (1) 0 8 -111% (1) 11 -108%Net income 79 70 92 -14% 376 303 +24%Non-controlling interests (3) (2) (3) +22% (13) (8) +56%Net income attributed to equity holders 76 68 90 -15% 363 295 +23%
Cost to income (%) 50.4% 55.0% 51.7% -3% 47.7% 54.1% -12%
123 137 144
+17%
0
50
100
150
200
250
4Q 17 3Q 18 4Q 18
Assets Under Management (SARbn)
49
30
58
+18%
(5)
15
35
55
75
95
115
4Q 17 3Q 18 4Q 18
Brokerages Volume (SARbn)
NCB Investor RelationsFY 2018 Investor Presentation 55
Türkiye Finans Katılım Bankası (TRY)FY 2018 net income increased by 20% YoY due mainly to higher operatingincome
Management Commentary
FY 2018 net income increased by 20% YoY driven by higher operating income (+22%), which was partially offset by higher operating expenses and impairment charges.
FY 2018 cost to income ratio reached to 50.0% from 55.5% in FY 2017.
4Q 2018 net income increased by 30% YoY due to (+47%) higher Operating income, and lower impairment charge by (-11%).
Summary Financial PerformanceTRY (mn) 4Q 2018 3Q 2018 4Q 2017 YoY %
change FY 2018 FY 2017 YoY % change
Total assets 46,486 49,901 38,636 +20% 46,486 38,636 +20%
Total operating income 475 522 323 +47% 1,839 1,508 +22%Net special commission income 408 456 255 +60% 1,573 1,235 +27%Fee income from banking services, net 67 66 68 -1% 266 273 -3%
Operating expenses (238) (226) (216) +10% (920) (837) +10%Impairment charge (75) (189) (84) -11% (454) (293) +55%Other income (expenses) (32) 5 77 -142% (19) (8) +138%Net income 130 112 100 +30% 445 370 +20%
Cost to income (%) 50.1% 43.3% 66.9% -25% 50.0% 55.5% -10%
CAR % 16.8% 19.4% 18.2% -8% 16.8% 18.2% -8%Tier 1 CAR % 12.0% 13.4% 14.3% -16% 12.0% 14.3% -16%LTD ratio % 110.0% 112.5% 118.8% -7% 112.0% 118.8% -7%
Note: Figures according to IFRS accounting standards
0.2
3.4
Growth at constant FX
TFKB FX translation
impact
4Q 17 Reported
4Q 18 Reported
4Q 18 Underlying
26.4 26.6
30.0
+1% +14%
Financing & Advances, net (TRYbn)
Customers’ Deposits (TRYbn)
0.5
4.1
4Q 18 Reported
22.2
4Q 17 Reported
Growth at constant FX
TFKB FX translation
impact
4Q 18 Underlying
22.7
26.8
+2% +20%
42% 39%
49% 59%
% in foreign currency xx%
NCB Investor RelationsFY 2018 Investor Presentation
National Commercial Bank Additional InformationFY 2018 Results
NCB Investor RelationsFY 2018 Investor Presentation 57
Disclaimer
The National Commercial Bank (NCB) prepared this presentation on a proprietary basis as general background information about the activities of NCB. The information contained herein is given in summary form and for discussion purposes only. Some of the information that is relied upon by NCB is obtained from sources believed to be reliable, but NCB (nor any of its directors, officers, employees, agents, affiliates or subsidiaries) does not guarantee the accuracy or completeness of such information, and disclaims all liability or responsibility for any loss or damage caused by any act taken as a result of the information. This presentation including the information covered therein is not intended either to be relied upon or construed as an advertisement for, or an offer, solicitation or invitation to sell or issue, or to subscribe, underwrite or otherwise acquire any securities in any jurisdiction. It should and must not be treated as giving tax, legal, investment or other specialist advice or a recommendation to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Neither shall any part of this information nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision or commitment relating thereto, nor does it constitute a recommendation regarding the subject of this presentation.
All statements included in this presentation other than statements of historical facts, including, without limitation, those regarding financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives) are forward-looking statements and may thus include words like "anticipate", "believe", "intend", "estimate", "expect", "will", "may", "project", "plan" and such other words of similar meaning. Such forward-looking statements are based on numerous assumptions regarding present and future business strategies and the relevant future business environment. Any forward-looking statements speak only as of the date of this presentation and NCB expressly disclaims to the fullest extent permitted by law any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. Due to rounding, numbers and percentages presented throughout this presentation may not add up precisely to the totals provided.
NCB is not under any obligation to update, complete, amend, revise or keep current the information contained herein, and any opinions expressed herein are subject to change materially without notice. Accordingly, no representation or warranty, express or implied, is or will be made by NCB, their respective advisors or any such persons’ directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, and any reliance you place on them will be at your sole risk. Investors must rely solely on their own examinations of the Offering and relevant documentation in making a determination as to whether to invest in the securities described. An investor should seek independent professional advice when deciding if an investment is appropriate. Securities that may be discussed herein may not be suitable for all investors. Investors are required to make their own independent investigation and appraisal of the business and financial condition of NCB and its subsidiaries, the nature of the securities and the merits or suitability of the securities or any transaction to any investor’s particular situation and objectives, including the possible risks and benefits of purchasing any securities. Any such determination should involve an assessment of the legal, tax, accounting, regulatory, financial, credit or other related aspects of the offering or the securities. Without prejudice to the foregoing, NCB, their advisors and any such persons’ directors, officers or employees expressly disclaim any liability whatsoever, in negligence or otherwise, for any loss howsoever arising, directly or indirectly, from use of, or reliance on, this presentation or its contents or otherwise arising in connection therewith.
NCB Investor RelationsFY 2018 Investor Presentation 58
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NCB Investor Relations
+966 12 646 3988
National Commercial Bank
P.O. Box 3555
21481 Jeddah
Kingdom of Saudi Arabia