NCB Investor Presentation 3Q 2017 FINAL · Investor Presentation 3Q 2017 Results. NCB Investor...
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NCB Investor Relations3Q 2017 Investor Presentation 1
National Commercial Bank
Investor Presentation
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 2
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 Relations3Q 2017 Investor Presentation 3
Investor Presentation
Contents
04
12
18
28
48
54
NCB – The leading KSA bank
Grow with KSA. Grow with NCB.
Strategy Overview
Financial Results Highlights
Segmental Overview
Additional Information
34 Financial Results Details
NCB Investor Relations3Q 2017 Investor Presentation 4
National Commercial Bank
The Leading KSA Bank
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 5
NCB is the leading banking group in Saudi Arabia
Established in 1953; IPO in 2014
NCB Snapshot
Jeddah HQ
>8m Clients12,310
Employees441bn
Assets316bn
Deposits>100bn
Market Cap
Wholesale branch in BahrainOffices: Singapore, Seoul, Shanghai
Subsidiary in Turkey:Türkiye Finans Katılım Bankası
Subsidiary in KSA:NCB Capital
NCB Investor Relations3Q 2017 Investor Presentation 6
NCB is the leading banking group in Saudi Arabia
NCB has a strong market and financial position (FY2016)
Financial Position KSA GCC
Assets #1 #4
Financing #1 #4
Deposits #1 #3 tied
Investments #1 #1
Total Operating Income #1 #3
Net Income #1 #3
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
441
340
231 218 203
0
100
200
300
400
500
NCB Rajhi Samba Riyad BSF
Assets (SRbn)
254 225
143 129 125
0
50
100
150
200
250
300
NCB Rajhi Riyad BSF Samba
Financing (SRbn)
316
273
172 158 157
0
50
100
150
200
250
300
350
NCB Rajhi Samba BSF Riyad
Deposits (SRbn)
NCB Investor Relations3Q 2017 Investor Presentation 7
NCB has a well-diversified business model
Total operating income contribution FY2016
Capital Markets
Largest Asset Manager in KSALargest Shariah-compliant Asset Manager worldwide
Top 3 Broker17 locations
286 Employees
SR 15.8bn85%
NCB
374 branches, 3,477 ATMs148 Remittance centers
8,035 Employees
7.5bn40%
4.6bn25%
3.7bn20%
RETAIL
CORPORATE
TREASURY
2.2bn12%
581mn3%
International
Türkiye Finans Katılım Bankası (TFKB)286 branches, 572 ATMs
3,989 employees
NCB Investor Relations3Q 2017 Investor Presentation 8
NCB has a strong financial position
Key KPIs
14.7% 15.1%
16.9%17.5% 17.1% 17.2% 17.2%
19.2%
16.5% 16.2%
13.5%
15.3%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
2012 2013 2014 2015 2016
Capital Ratios (%)
T1 ratio TC ratio CET1 ratio
39 43 47 56 60
+11%
0
20
40
60
80
100
2012 2013 2014 2015 2016
Total Equity (SRbn)
345 377 435 449 441
+6%
0
100
200
300
400
500
600
700
2012 2013 2014 2015 2016
Total Assets (SRbn)
CAGR CAGR
LCR is based on 4Q average numbersLCR was not reported before 2015
Capital ratios are based on Pillar I RWA
152.3%172.5%
59.8% 62.4% 66.3%78.1% 80.3%
0
0
0
1
1
1
1
1
2
2
2
2012 2013 2014 2015 2016
Liquidity Ratios (%)
Liquidity coverage ratio (LCR) Financing to customer deposit ratio
NCB Investor Relations3Q 2017 Investor Presentation 9
NCB has a strong performance track record
Key KPIs
9.0 10.1 11.4 12.6 13.6 4.5 4.8 4.8 4.9 5.1 13.5 14.9 16.2 17.5 18.6
+8%
0
5
10
15
20
25
30
2012 2013 2014 2015 2016
Total Operating Income (SRbn)
Net special commission incomeFee and other income
2.92% 2.95% 2.87% 3.00%3.31%
0
0
0
0
0
0
2012 2013 2014 2015 2016
Net Special Commission Margin (%)
38.7% 39.0% 39.0% 37.4% 37.7%
0
0
0
0
0
1
1
2012 2013 2014 2015 2016
Cost to Income Ratio (%)
CAGR CAGR
6.5 7.9 8.7 9.1 9.3
+10%
0
2
4
6
8
10
12
14
16
18
2012 2013 2014 2015 2016
Net Income attributable to equity holders (SRbn)
18.0%
20.0% 20.1%19.2%
17.8%
2.0% 2.2% 2.2% 2.1% 2.1%
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
2012 2013 2014 2015 2016
Returns (%)
ROE common shares (%) ROA (%)
NCB Investor Relations3Q 2017 Investor Presentation 10
NCB has outperformed the Saudi banking sector
Key KPIs compared to Saudi Arabian banking peers
SR (bn)
Financing and advances, net
Total operating income
Net income attributable to equity holders
Source: Company financials
CAGR
163 254
+12%
0
100
200
300
400
500
2012 2016
172 225
+7%
0
100
200
300
400
500
2012 2016
117 143
+5%
0
100
200
300
400
500
2012 2016
103 129
+6%
0
100
200
300
400
500
2012 2016
103 125
+5%
0
100
200
300
400
500
2012 2016
13.5 18.6
+8%
0
5
10
15
20
25
30
35
40
2012 2016
14.0 15.3
+2%
0
5
10
15
20
25
30
35
40
2012 2016
6.8 7.7
+3%
0
5
10
15
20
25
30
35
40
2012 2016
5.0 6.4
+6%
0
5
10
15
20
25
30
35
40
2012 2016
6.7 7.8
+4%
0
5
10
15
20
25
30
35
40
2012 2016
7.9 8.1
+1%
0
2
4
6
8
10
12
14
16
18
20
2012 2016
3.5 3.3
-1%
0
2
4
6
8
10
12
14
16
18
20
2012 2016
3.0 3.5
+4%
0
2
4
6
8
10
12
14
16
18
20
2012 2016
4.3 5.0
+4%
0
2
4
6
8
10
12
14
16
18
20
2012 2016
6.5 9.3
+10%
0
2
4
6
8
10
12
14
16
18
20
2012 2016
842 1,141
+8%
0
500
1,000
1,500
2,000
2,500
2012 2016
51 64
+6%
0
20
40
60
80
100
120
140
2012 2016
29 32
+3%
0
10
20
30
40
50
60
70
2012 2016
Industry Peers(ex NCB)
NCB Investor Relations3Q 2017 Investor Presentation 11
NCB Group listed on Tadawul in November 2014
Ranked third in Tadawul, S&P Pan Arab and MSCI Indices with significant weightings
MSCI GCC Index Float Adj. Mcap (USD) Weighting (%)
Al Rajhi Bank 21.42 8.80SABIC 20.56 8.44National Commercial Bank 10.97 4.50Etisalat 8.19 3.36Emaar Properties 8.11 3.33Qatar National Bank 7.74 3.18Saudi Telecom 7.55 3.10National Bank of Kuwait 7.31 3.00Samba Financial Group 7.04 2.89Almarai 6.85 2.81
Ratings LT ST Outlook
National Commercial Bank
Moody’s* A1 P-1 StableS&P BBB+ A-2 StableFitch A- F1 StableCapital Intelligence A+ A1 StableGovernment of Saudi Arabia
Moody’s A1 StableS&P A- StableFitch A+ StableCapital Intelligence A+ Stable
*Moody’s rating is unsolicited
[Source: MSCI, 6 July 2017]
Source: Bloomberg
Source: NCB, Bloomberg
0
10
20
30
40
50
60
70
80
Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17
Share Price Performance since IPO (SR)
Share parameters 30 Sept 2017
Closing Price 51.4252 week range (SR) 32-58Free Float 36%Shares issued (m) 2,000Tangible Book Value (SRm) 54,109Tangible BVPS 27.05P/TBV Ratio 1.9 xP/E Ratio 10.97xDiv Yield 3.11%3m Avg Daily Volume (Shares) 600,220
NCB Investor Relations3Q 2017 Investor Presentation
National Commercial Bank
Grow with KSA. Grow with NCB.
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 13
Saudi banking sector
The Saudi banking sector has been maneuvering challenges
Source: Thomson Reuters, SAMA, Banks’ Annual Reports, and NCB Economics Estimates
0.52% 0.49% 0.47% 0.48%
1.01%0.88%
0
0
0
0
0
0
0
2012 2013 2014 2015 2016 1H 2017
Cost of Funds (%)
Cost of Funds
960 1,076 1,205 1,323 1,351 1,365
16.4%
12.1% 11.9%9.8%
2.2%-1.7%
-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
2012 2013 2014 2015 2016 1H 2017
Lending Market (SRbn)
FinancingCredit Growth Rate (YoY%)
0.9%
1.8%
0.5%
1.3%
13.6%
2.4%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
(0)
0
0
0
0
0
0
0
2012 2013 2014 2015 2016 2017
Liquidity (%)
3M SAR SAIBOR 3M USD LIBOR M3 YoY Growth
Aug 2017
23 23
35 38 41 44 41
11.0%
7.2%
10.2%
5.4%
-5.4%
-1.5%
-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
2012 2013 2014 2015 2016 1H 2017
Profits (SRbn)
Profits (1H)Profits (FY)Annual Growth (%)
NCB Investor Relations3Q 2017 Investor Presentation 14
Economic headwinds
The oil market decline impacted the Kingdom financially
Source: Thomson Reuters, Ministry of Finance, SAMA, Tadawul, and NCB Economics Forecasts
0
20
40
60
80
100
120
140
0
2
4
6
8
10
12
2009 2010 2011 2012 2013 2014 2015 2016 2017USD/bblMMBD
Oil Market
Saudi Oil Production, LHSArabian Light Spot Price, RHS
13.6%6.4%
-2.3%
-14.8% -12.8%-5.8%
22.4%18.1%
9.7%
-8.7%-4.3%
2.3%
-25.0%
-15.0%
-5.0%
5.0%
15.0%
25.0%
2012 2013 2014 2015 2016P 1H 2017P
Twin Balances (%)
Budget Balance / GDPCurrent Account Balance / GDP
648 718 725 610 529 501
36 36 43
60 39 43
684 754 768
670 568 544
0
100
200
300
400
500
600
700
800
900
2012 2013 2014 2015 2016 1H 2017
Foreign Reserves (USDbn)
SAMABanks
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Stock Market
Tadawul Index
NCB Investor Relations3Q 2017 Investor Presentation 15
Vision 2030
The Kingdom of Saudi Arabia has responded with a bold vision to reduce oil dependency…
Economic reformMove from a government
driven economy to one that is market based
§ Increase the private sector’s contribution from 40% to 65% of GDP
§ Raise the share of non-oil exports in non-oil GDP from 16% to 50%
§ Increase FDI from 3.8% to the international level of 5.7% of GDP
§ Focus on strategic sectors: Mining and Minerals, Petrochemicals,
Manufacturing, Retail and Trade, Tourism, Finance and Healthcare
Fiscal sustainabilityCreating sustainable fiscal
management
§ Raise non-oil revenue to SAR 530bn by 2020
§ Reduce public wages to 40% of Budget
§ Create USD 2trn Public Investment Fund
ProductivityLeverage our young population,
50% being younger than 25
§ Lower the rate of unemployment from 11.6% to 7%
§ Increase SME contribution to GDP from 20% to 35%
§ Increase women’s participation in the workforce from 22% to 30%
§ Improve education with an uplift of 15% on Math and English attainment
Areas of Focus Selected Commitments / KPIs
NCB Investor Relations3Q 2017 Investor Presentation 16
Economic upturn
…leading to an expected economic rebound in 2018F
Source: Ministry of Finance, Fiscal Balance Program, and NCB Economics Forecasts
690 820 855 860 840
183 156 245 118
(15)
873 976
1,100 978
825 890 928 950 953
26.6%
19.0%
28.7%
13.7%
-1.8%0.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
(150)
50
250
450
650
850
1,050
1,250
2012 2013 2014 2015 2016P 2017F 2018F 2019F 2020F
Fiscal Discipline (SRbn)
BudgetActualBudget Overrun (%)
99 60 44 142
317 432
549 631 612
4% 2% 2%6%
13%17%
21%23% 21%
-10%
-5%
0%
5%
10%
15%
20%
25%
0
200
400
600
800
1,000
1,200
2012 2013 2014 2015 2016P 2017F 2018F 2019F 2020F
Utilizing Untapped Debt Markets (SRbn)
Domestic Public DebtDebt to GDP Ratio (%)
(
1,145 1,035 913 446 334 477 470 491 521
103 121 131
169 186
200 243 295 359
1,247 1,156 1,044
616 519 677 713 786 880
(100)
100
300
500
700
900
1,100
1,300
1,500
1,700
2012 2013 2014 2015 2016P 2017F 2018F 2019F 2020F
Revenue Diversification (SRbn)
Oil Revenues
Non-oil Revenues
5.3%
2.7% 3.6% 4.1%
1.8%
-1.2%
0.6% 1.2%1.9%
(0)
(0)
(0)
0
0
0
0
0
0
0
0
2012 2013 2014 2015 2016P 2017F 2018F 2019F 2020F
Economic Rebound (%)
OilNon-oil PublicNon-oil PrivateReal GDP
NCB Investor Relations3Q 2017 Investor Presentation 17
NCB is aligned with Government priorities
NCB has already made significant contributions to the economic welfare of Saudi Arabia
Government aims to mobilize capital and channel to target
sectors
NCB plans to target sectors where we have
competitiveness and scale
NCB supports +70,000 SME across Saudi Arabia with leading
market share
Only local and joint lead manager for KSA’s inaugural USD 17.5bn bond issuance
and numerous sukukissuances.
NCB is a large investorin Saudi Government Bonds with a portfolio SR 42bn.
NCB has provided home financing for more than 20,000 Saudi families with a portfolio of
SR 19bn
Achieving fiscalsustainability
Opening up the Saudi economy
Increase SME contribution to GDP
Increase homeownership
Reduce Saudi unemployment
Diversify economyNCB is the leading lender for
KSA companies with a portfolio of SR 137bn; 15% market share
NCB is the number one financial institution in
Saudization (95%) and has a 100% Saudi top management
team
NCB Investor Relations3Q 2017 Investor Presentation
National Commercial Bank
Strategic overview
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 19
NCB’s strategic plan is about execution
Domestic leadership position drives strategic priorities
Retail Banking Expand share of retail profits
Corporate Banking Grow selectively and increase risk-adjusted returns
TFKB Increase profit contribution
Treasury Diversify funding, sustain investment returns and cross-sell
NCBC Generate AUMs and cater to GRE’s growing needs
Lean Distribution
Digitization
Expand reach with lean branches
Anywhere, anytime, instant banking
NCB Investor Relations3Q 2017 Investor Presentation 20
Distribution expansion
We accelerated expansion of our distribution platform in Saudi Arabia…
299 322 342 352 374
+6%
0
100
200
300
400
500
600
700
2012 2013 2014 2015 2016
Number of branches
28 57
97
138 148
+52%
0
50
100
150
200
250
2012 2013 2014 2015 2016
Remittance Centers
1,960 2,252 2,643
3,107 3,477
+15%
0
1,000
2,000
3,000
4,000
5,000
6,000
2012 2013 2014 2015 2016
Number of ATMs
12,775 14,075
26,514 30,803
39,132
+32%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2012 2013 2014 2015 2016
Point of Sale
CAGR CAGR
CAGR CAGR
NCB Investor Relations3Q 2017 Investor Presentation
60%69%
+15%
0
0
0
1
1
1
1
2014 2016
Front / Back Office Ratio (%)
21
Lean distribution
…and are streamlining branch formats to enhance productivity gains
Strategic Imperatives
§ Continue expanding our distribution reach to acquire customers and grow market share
§ Expand with smaller branches that are headcount efficient§ Optimize costs of existing branch network§ Equip branches with self-service/assisted-service technologies§ Enhance the in-branch sales and service model to improve
customer experience
39.0% 37.7%
+3%
0
0
0
0
0
1
1
1
2014 2016
Cost / Income Ratio (%)
1.35
1.78
+32%
0
1
1
2
2
3
2014 2016
Operating Income / FTE (SRm)
12.1 11.0
-9%
0
2
4
6
8
10
12
14
16
18
20
2014 2016
FTE / Branch
8,021 8,035
+0%
(1,000)
1,000
3,000
5,000
7,000
9,000
11,000
13,000
15,000
2014 2016
Bank Headcount (NCB employees)
NCB Investor Relations3Q 2017 Investor Presentation 22
Digitization
Migrate customers to digital through superior user experiences
Strategic Focus Areas
§ Mobile first - anytime, anywhere§ Consistently lead KSA banks in functionality and user-experience § Expand end-to-end digital sales capability§ Expand subscription base and incentivize usage§ Leverage data and analytics to drive sales effectiveness
10%
29%
+70%
0
0
0
0
0
1
1
2014 2016
Digital Transactors(% of total base)
CAGR CAGR CAGR
13.0 17.5
2.8
17.9 15.8
35.4
+50%
0
10
20
30
40
50
60
2014 2016
Digital Transactions (mn)
OnlineMobile
8%
4%
-29%
0
0
0
0
0
0
0
2014 2016
Branch Financial Transactions (% of total)
NCB Investor Relations3Q 2017 Investor Presentation
5.7
7.5
+15%
0
2
4
6
8
10
12
14
2014 2016
Total Operating Income (SRbn)
Retail Banking
We are transforming retail distribution to increase share of profits
Strategic Focus Areas
§ Grow market share in consumer finance§ Grow in high deposit segments (Affluent/ HNW / GRE) § Expand and optimize branch network§ Drive digital migration§ Continue improving customer satisfaction
CAGR CAGR CAGR
1.6
3.2
+43%
0
1
2
3
4
5
6
2014 2016
Net Income (SRbn)
23
72 85
17.4% 19.7%
+8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
0
20
40
60
80
100
120
140
160
2014 2016
Consumer Financing & Advances, net (SRbn)
Consumer Financing & Advances, net (SRbn)Market Share (%)
NCB Investor Relations3Q 2017 Investor Presentation
3.7 4.6
+11%
0
1
2
3
4
5
6
7
8
2014 2016
Total Operating Income (SRbn)
108 130
+10%
0
50
100
150
200
250
2014 2016
Corporate Financing & Advances, net (SRbn)
24
Corporate Banking
Grow selectively and increase risk-adjusted returns
Strategic Focus Areas
§ Focus on portfolio quality and proactively manage risk§ Build a deal pipeline in V2030 target sectors § Cross sell treasury and cash management§ Drive migration to digital channels§ Expand collection capacity and increase recoveries
CAGR CAGR CAGR
3.2 2.7
-9%
0
1
1
2
2
3
3
4
4
5
5
2014 2016
Net Income (SRbn)
NCB Investor Relations3Q 2017 Investor Presentation
35%
25%
-15%
0
0
0
0
0
0
0
0
0
0
1
2014 2016
Investments as % of Total Assets
25
Treasury
Broaden and deepen liquidity access while sustaining investment returns and cross-sell
Strategic Focus Areas
§ Execute international hubs strategy § Expand wholesale funding program§ Maintain the high quality/liquidity and profitability of the
investment book§ Support the development of the sukuk capital markets § Underpin Islamic product innovation
100 104
152.3%172.5%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
200.0%
0
20
40
60
80
100
120
140
160
180
200
2015 2016
HQLA and Liquidity Coverage (SRbn/%)
High quality liquid assets (HQLA)Liquidity coverage ratio (LCR)
CAGR CAGR
HQLA is group-wide 4Q averageLCR shows 4Q average
99% 96%
-2%
0
0
0
1
1
1
1
1
2
2
2014 2016
Saudi Government and Investment Grade Investments as % of Total
London
Bahrain
Singapore
Jeddah
Established
Under consideration
FrankfurtNew York
Hong Kong
NCB Investor Relations3Q 2017 Investor Presentation 26
NCB Capital
KSA’s leading investment bank and asset manager; well positioned to capture future growth
Strategic Focus Areas
§ Grow recurring revenues by gathering more AUMs, launching new products, growing Corporate Savings business
§ Set the stage for future market upturn by growing brokerage market share and continuing to invest in NCBC capabilities
§ Build on market leadership, landmark IB mandates to support GREs as well as local and foreign institutional clients
§ Continue to focus on increasing efficiency, improving productivity to bolster resilience
57
115
+102%
0
50
100
150
200
250
2014 2016
NCBC Assets under Management (SRbn)
4,294
2,314
8,333 7,210
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2014 2016
Tadawul Traded Value (SRbn) & TASI Index
Traded Value TASI Index
490
283
11.4%12.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0
100
200
300
400
500
600
700
800
900
2014 2016
NCBC Traded Value (SRbn) & Market Share (%)
10.1%13.0%
+2.9ppt
0
0
0
0
0
0
2014 2016
NCBC Share of Sector Net Income (%)
NCB Investor Relations3Q 2017 Investor Presentation
4.1%
3.0%
-15%
0
0
0
0
0
0
0
0
0
2014 2016
TFKB Contribution to NCB Net Income (%)
1,446
2,066
+20%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2014 2016
Total Operating Income (TRYmn)
334 296
-6%
0
100
200
300
400
500
2014 2016
Net Income (TRYmn)
33.5 38.8
+8%
0
10
20
30
40
50
60
70
2014 2016
Total Assets (TRYbn)
27
Türkiye Finans Katılım Bankası
We are executing a transformation program to grow TFKB’s net income
Long-term strategic investment in TFKB
§ High-growth and profitable banking sector§ Strong position in participation banking and scalable platform§ Large, young and skilled workforceStrategic Focus Areas
§ Strengthen underwriting and improve collections§ Resume branch expansion and expand digital channels § Increase automation and drive capacity optimization § Instill NCB’s principles (Customer excellence, robust
governance, best-in-class technology)
CAGRCAGRCAGRCAGR
NCB Investor Relations3Q 2017 Investor Presentation
National Commercial Bank
Financial Results Highlights
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 29
Key messages
3Q 2017 Results
Profitability
BalanceSheet
Asset Quality, Capitalisationand Liquidity
§ 1% total assets and financing growth YTD reflective of subdued environment (domestic financing +2%; international -6%)
§ 5% YTD investments growth through Saudi Government debt issuance participation and portfolio re-balancing
§ 4% YTD decline in deposits as the funding mix was optimized by reducing time deposits, but CASA growth of 4%
§ 1% NSCI growth in 3Q YTD as NSCI margin improved by 13bps while average earning assets declined by 3% attributable to international
§ 7% decline in fee and other income in 3Q YTD due to lower fees primarily from financing, credit cards and trade finance
§ Expenses for 3Q YTD improved 8% due to ongoing digitization and productivity initiatives
§ 3% growth in 3Q YTD net income
§ Impairment charge for 3Q YTD improved 6% on lower retail & international credit charges
§ Group NPL ratio at 1.8% at 3Q 2017 vs. 1.5% at beginning of year and adequate NPL coverage at 142%
§ Capital position comfortably above regulatory minima with CET1 of 14.5% and T1 of 16.4% at 3Q 2017
§ Strong liquidity with LTD ratio of 85%, average 3Q LCR of 172% and Leverage Ratio of 12.7% at 3Q 2017
254 257
+1%
0
100
200
300
400
500
600
4Q 16 3Q 17
Financing (SRbn) Deposits (SRbn)
316 303
-4%
0
100
200
300
400
500
600
700
800
4Q 16 3Q 17
7.03 0.06
(0.27)
0.41 0.10
(0.08)
7.25
0
0
0
1
1
1
1
1
3Q 1
6YT
D
NSC
I
Non
-SC
I
Expe
nses
Impa
ir-m
ents
Othe
r
3Q 1
7YT
D
Net income movement (SRbn)
NPL & CoR (%) CET1 and LTD (%)
1.5%1.8%
0.7% 0.8%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
0
0
0
0
0
0
4Q 16 3Q 17
NPL CoR (YTD)
15.3% 14.5%80% 85%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
0
0
0
0
0
0
0
4Q 16 3Q 17
CET1 LTD
NCB Investor Relations3Q 2017 Investor Presentation 30
Profitability
Profitability Trends
SR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY % change 3Q 2017 YTD 3Q 2016 YTD YoY %
change
Net special commission income 3,449 3,473 3,442 +0% 10,283 10,226 +1%
Fee and other income 1,042 1,005 1,221 -15% 3,546 3,821 -7%
Total operating income 4,492 4,478 4,663 -4% 13,830 14,047 -2%
Operating expenses (1,602) (1,521) (1,702) -6% (4,811) (5,222) -8%
Total impairment charge (695) (475) (956) -27% (1,593) (1,698) -6%
Income from operations, net 2,195 2,483 2,005 +9% 7,426 7,127 +4%
Net income attributed to equity holders 2,126 2,417 1,962 +8% 7,246 7,030 +3%
YTD Net income growth from improved impairments and efficiency, partly offset by lower fee and other income
4.72 4.66 4.66 4.60 4.86 4.48 4.49
-4%
0
1
2
3
4
5
6
7
8
9
10
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Total Operating Income (SRbn)
14.0 13.8
-2%
0
5
10
15
20
25
3Q 16YTD
3Q 17YTD
2.63 2.44 1.96
2.29 2.70 2.42
2.13
+8%
0
1
2
3
4
5
6
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Net Income Attributed to Equity Holders (SRbn)
7.0 7.2
+3%
(1)
1
3
5
7
9
11
13
15
3Q 16YTD
3Q 17YTD
NCB Investor Relations3Q 2017 Investor Presentation 31
Balance Sheet
Balance Sheet Trends
SR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY % change FY 2016 YTD %
change
Investments, net 116,900 114,634 111,487 +5% 111,509 +5%
Financing and advances, net 256,852 256,901 259,915 -1% 253,592 +1%
Total assets 444,679 449,776 438,765 +1% 441,491 +1%
Customers' deposits 302,593 314,690 311,225 -3% 315,618 -4%
Debt securities issued 10,166 9,926 10,204 -0% 9,918 +3%
Total liabilities 381,944 388,623 379,696 +1% 381,566 +0%
Equity attributable to shareholders 54,433 52,876 51,954 +5% 53,038 +3%
Total equity 62,736 61,152 59,069 +6% 59,926 +5%
Growth constrained by economic environment
136 137 135 130 134 135 135
80 83 84 85 85 87 88 38 37 33 28 27 27 27
265 265 260 254 254 257 257
+1%
0
50
100
150
200
250
300
350
400
450
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Financing and Advances, net (SRbn)
CorporateConsumer and credit cardInternationalOthers
231 220 217 224 236 248 232
81 81 78 79 66 55 59
326 315 311 316 314 315 303
-4%
0
100
200
300
400
500
600
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Customers' Deposits (SRbn)
CASA
Time
Others
NCB Investor Relations3Q 2017 Investor Presentation
Retail44%
Corporate24%
Treasury20%
Capital Market3%
International9%
Total Operating Income by Segment (SRbn)
32
Segmental Information YTD Total operating income lower due to depreciation of Turkish Lira, partly offset by higher Retail and Corporate operating income
14.0 13.8
0
5,000
10,000
15,000
20,000
25,000
3Q 16YTD
3Q 17YTD
4,663
159
(111)
(62)40
(197)
4,492
0
100
200
300
400
500
600
700
800
3Q 16 Retail Corporate Treasury Capital Market International 3Q 17
QTR Total Operating Income Growth by Segment (SRbn)
14,047
161
185
(65)
41
13,830
(539)
0
200
400
600
800
1,000
1,200
3Q 16YTD
Retail Corporate Treasury Capital Market International 3Q 17YTD
YTD Total Operating Income Growth by Segment (SRbn)
104 109 107
143 143 143
152 156 154
41 39 39
441 450 445
+1%
0
100
200
300
400
500
600
700
4Q 16 2Q 17 3Q 17
Total Assets by Segment (SRbn)
RetailCorporateTreasuryCapital MarketInternational
85 87 88
130 135 135
28 27 27
254 257 257
+1%
0
50
100
150
200
250
300
350
400
450
4Q 16 2Q 17 3Q 17
Financing and Advances, net by Segment (SRbn)
RetailCorporateInternationalOther
NCB Investor Relations3Q 2017 Investor Presentation
Retail32%
Corporate23%
Treasury38%
Capital Market3%
International4%
Net Income by Segment (SRbn)
33
Segmental Information3Q YoY and YTD net income growth in most segments, except Corporate which was impacted by rising impairments
7.1 7.3
0
2
4
6
8
10
12
3Q 16YTD
3Q 17YTD
1,976
476
14
(404)
43 54 2,159
0
200
400
600
800
1,000
1,200
3Q 16 Retail Corporate Treasury Capital Market International 3Q 17
QTR Net Income Growth by Segment (SRmn)
7,089
363
(436)
180 40 7,344 108
0
200
400
600
800
1,000
1,200
3Q 16YTD
Retail Corporate Treasury Capital Market International 3Q 17YTD
YTD Net Income Growth by Segment (SRmn)
Management Commentary
§ YTD Total operating income declined 2% YoY due to depreciation of the Turkish Lira impacting International income (-31%), partly offset by growth in Retail (+3%) and Corporate (+6%).
§ YTD Net income improved 3% YoY respectively due to growth in Retail (+19%) and Treasury (+7%), partly offset by a decline in Corporate net income (-20%) as a result of higher impairments.
NCB Investor Relations3Q 2017 Investor Presentation
National Commercial Bank
Financial Results Details
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 35
Income Highlights
Management Commentary
§ 3Q 2017 total operating income declined 4% YoY despite stable net special commission income due to lower investment-related income and Turkish Lira depreciation.
§ 3Q 2017 YTD total operating income declined 2% YoY despite 1% growth in net special commission income due to lower fees from banking services and Turkish Lira depreciation.
§ Excluding the International business, 3Q 2017 total operating income grew 1% YoY (+3% 3Q 2017 YTD YoY).
Lower YTD and QTR total operating income largely attributable to lower fee and other income and Turkish Lira depreciation
3.44 3.47 3.45
1.22 1.00 1.04
4.66 4.48 4.49
-4%
0
1
2
3
4
5
6
7
8
3Q 16 2Q 17 3Q 17
Total Operating Income (SRbn)
Net special commission incomeFee and other income
10.2 10.3
3.8 3.5
14.0 13.8
-2%
0
5
10
15
20
25
3Q 16YTD
3Q 17YTD
14.05
0.47
(0.15)
14.37
(0.54)
13.83
0
1
1
2
2
3
3
3Q 16YTD
NSCI Non-NSCI Income
Excl. Intn'l International 3Q 17YTD
YTD Total Operating Income Movement (SRbn)
4.66 0.12
(0.09)
4.69
(0.20)
4.49
0
0
0
1
1
1
1
3Q 16 NSCI Non-NSCI Income
Excl. Intn'l International 3Q 17
QTR Total Operating Income Movement (SRbn)
NCB Investor Relations3Q 2017 Investor Presentation 36
Net special commission income trendsYTD and QTR commission income stable as domestic margin improvement offset by Turkish Lira depreciation
Management Commentary
§ The 3Q 2017 net special commission margin was stable at 3.43% as improved funding costs were offset by lower commission yields.
§ Special commission expense for 3Q 2017 was 11% lower YoY due to lower SAIBOR rates and a more optimal funding mix.
§ Excluding the International business, where NSCI was impacted by currency depreciation, domestic NSCI grew by 4% in 3Q 2017.
Net Special Commission Income
SR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY % change 3Q 2017 YTD 3Q 2016 YTD YoY %
change
Special commission income 4,282 4,268 4,377 -2% 12,771 13,103 -3%
Special commission expense (833) (794) (935) -11% (2,488) (2,877) -14%
Net special commission income 3,449 3,473 3,442 +0% 10,283 10,226 +1%
Net special commission margin (%) 3.43% 3.47% 3.40% +1% 3.46% 3.33% +4%
3.35% 3.24%3.40%
3.24%3.48% 3.47% 3.43%
0
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Net Special Commission Margin (%)
4.29% 4.19% 4.32% 4.31% 4.37% 4.27% 4.25%
1.00% 1.02% 0.96% 1.12% 0.95% 0.84% 0.85%
(0)
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Commission Yield and Funding Cost (%)
Commission yield (%) Funding cost (%)
1.80%
2.22% 2.36%2.04%
1.74% 1.78% 1.79%
0.63% 0.65%0.85%
1.00%
1.15%1.30% 1.33%
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
SAIBOR and LIBOR Rates (%)
3M SAR SAIBOR (%) 3M USD LIBOR ($)
NCB Investor Relations3Q 2017 Investor Presentation
754 790 793
288 285 280 335 78 101
1,221 1,005 1,042
-15%
(200)
300
800
1,300
1,800
2,300
2,800
3Q 16 2Q 17 3Q 17
Fee and Other Income (SRmn)
37
Fee and other income trends
Management Commentary
§ 3Q 2017 fee and other income declined 15% YoY as 5% growth in fees from banking services was more than offset by a 70% decline in investment-related income.
§ The higher fees from banking services in 3Q 2017 were mainly driven by higher fees from investment management services.
§ 3Q 2017 YTD fee and other income declined 7% YoY mainly resulting from an 8% reduction in fees from banking services.
§ The lower fees from banking services in 3Q 2017 YTD were mainly driven by lower financing, credit card and trade finance fees, partly offset by higher fees from investment management services.
Lower YTD and QTR fees and investment related income
754
48 15
(16) (7)
793
0
20
40
60
80
100
120
140
160
3Q 16 Invmnt. Mgmnt. Financing Credit Cards Others 3Q 17
QTR Key Drivers of Fee Income from Banking Services Movement (SRmn)
2,584 69
(129)(57)
(50) (32)
2,385
(50)
50
150
250
350
450
550
650
750
3Q 16YTD
Invmnt. Mgmnt.
Financing Credit Cards Trade Finance
Others 3Q 17YTD
YTD Key Drivers of Fee Income from Banking Services Movement (SRmn)
2,584 2,385
856 890 687 637
3,821 3,546
-7%
(400)
600
1,600
2,600
3,600
4,600
5,600
6,600
7,600
3Q 16YTD
3Q 17YTD
NCB Investor Relations3Q 2017 Investor Presentation 38
Expense highlights
Digitization and productivity enhancement delivered expense savings in 3Q 2017 YTD
Management Commentary
§ 3Q YTD operating expenses improved by 8% YoY.§ The YTD cost to income ratio improved by 2.4% YoY to 34.8%. § The cost base improvement was relatively broad-based, reflecting
the continued strides made in digitisation and productivity initiatives, and further benefited from the cessation of intangible assets amortisation as well as currency depreciation in the Turkish subsidiary.
5,222
(80) (10)
(147)
(175)
4,811
0
200
400
600
800
1,000
1,200
3Q 16YTD
Employee-related
Rent & premises Depreciation & amortisation
Other G&A 3Q 17YTD
Operating Expenses Movement Drivers (SRmn)
2,552 2,472
578 568 648 501
1,444 1,269
5,222 4,811
-8%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
3Q 16YTD
3Q 17YTD
36.0%37.5% 37.2% 37.7%
34.7% 34.4% 34.8%
33.2%
35.1% 34.9%36.2%
32.9% 32.4% 32.9%
0
0
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Cost to Income Ratio (YTD %)
Group (%) Excluding International (%)
786 835 797
194 188 197 219 154 153 502 345 455
1,702 1,521 1,602
-6%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
3Q 16 2Q 17 3Q 17
Operating Expenses (SRmn)
Employee-relatedRent & premisesDepreciation & amortisationOther G&A
NCB Investor Relations3Q 2017 Investor Presentation
Retail24%
Corporate32%
Treasury35%
Capital Market0%
International9%
Total Assets by Segment (SRbn)
39
Asset highlights and compositionBalance sheet growth reflective of a more subdued economic environment and Turkish Lira depreciation
254 257 257
112 115 117 63 60 52
441 450 445
+1%
0
100
200
300
400
500
600
700
800
4Q 16 2Q 17 3Q 17
Total Assets (SRbn)
Financing and advances, netInvestments, netCash and bank balancesOther assets
Financing and advances, net58%
Investments, net26%
Cash and bank balances12%
Other assets4%
Total Assets Mix (SRbn)
Management Commentary
§ Total assets grew by 1% during 3Q 2017 YTD due to limited growth in financing (+1%) and moderate growth in investments (+5%).
§ Overall balance sheet and financing growth was reflective of a more subdued economic environment domestically, and further muted by Turkish Lira depreciation and de-risking at TFKB.
441 445
0
100
200
300
400
500
600
4Q 16 3Q 17
441 445
0
100
200
300
400
500
600
4Q 16 3Q 17
NCB Investor Relations3Q 2017 Investor Presentation
Consumer financing and credit cards34%
Commerce16%Manufacturing
12%
Services8%
Utilities & health services8%
Building and construction8%
Others across 6 sectors14%
Financing and Advances, gross by Economic Sector ) (SRbn)
40
Financing and advances
Financing growth diluted by decline in Turkish subsidiary
Management Commentary
§ Domestically, financing grew for the Corporate (+3%) and Consumer (+4%) segments during 3Q 2017 YTD.
§ International financing declined 6% YTD due to both organic decline and weakened Turkish Lira.
257 260
0
50
100
150
200
250
300
350
400
4Q 16 3Q 17
130 135 135
85 87 88 28 27 27
254 257 257
+1%
0
100
200
300
400
500
600
4Q 16 2Q 17 3Q 17
Financing and Advances, net (SRbn)
CorporateConsumer and credit cardInternationalOthers
254 257
0
50
100
150
200
250
300
350
400
4Q 16 3Q 17
Corporate52%
Consumer and credit card34%
International11%
Others3%
Financing and Advances, net by Type (SRbn)
NCB Investor Relations3Q 2017 Investor Presentation 41
Financing and advances credit quality (1)
Rise in Corporate NPLs and impairment allowances partly offset by Retail and International
1.57 1.65 1.73 1.93 2.13 2.34 2.63 0.53 0.56 0.63 0.51 0.49 0.49 0.52 1.86 1.62 1.82 1.48 1.48 1.50 1.52 3.96 3.83 4.17 3.93 4.10 4.33 4.67
+12%
0
1
2
3
4
5
6
7
8
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
NPL (SRbn)
CorporateConsumer and credit cardInternationalOthers
0.08 0.15 0.19 0.19 0.26 0.25 0.47
0.11 0.02
0.41 0.08 0.17
0.15
0.15 0.21
0.24
0.21 0.08 0.05
0.08 0.35 0.38
0.84
0.36 0.42 0.47
0.69
-17%
0
0
0
1
1
1
1
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Impairment Charge (SRbn)
CorporateConsumer and credit cardInternationalOthers
2.88 2.93 3.13 3.41 3.68 3.92 3.99 1.38 1.27 1.45 1.22 1.16 1.24 1.29 1.49 1.32 1.50 1.26 1.27 1.29 1.33 5.79 5.56 6.12 5.93 6.15 6.50 6.65
+9%
0
2
4
6
8
10
12
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Impairment Allowances (SRbn)
CorporateConsumer and credit cardInternationalOthers
2.77 2.72 3.15 3.03 3.06 3.23 3.16
3.02 2.84 2.97 2.90 3.09 3.27 3.49
5.79 5.56 6.12 5.93 6.15 6.50 6.65
+9%
0
2
4
6
8
10
12
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Impairment Allowances (SRbn)
Portfolio (collective) allowancesSpecific allowances
NCB Investor Relations3Q 2017 Investor Presentation 42
Financing and advances credit quality (2)
Rise in NPL ratio but continued strong NPL coverage
Management Commentary
§ Rising NPL ratio driven by the Corporate segment.§ Consumer credit quality remains stable.§ International NPL ratio deteriorated over last year, but has been
stable since 3Q 2016.§ Provision coverage was comfortable at 142% as at 3Q 2017.
0.9% 1.0% 1.0% 1.1% 1.1% 1.2% 1.3%
4.7%4.3%
5.3% 5.0% 5.3% 5.4% 5.4%
1.5% 1.4% 1.6% 1.5% 1.6% 1.6% 1.8%
(0)
(0)
0
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
NPL Ratios (%)
Domestic International Total NPL ratio
205%192% 196% 191% 186% 184%
169%
80% 81% 83% 85% 86% 86% 87%
146% 145% 147% 151% 150% 150% 142%
(0)
0
1
1
2
2
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
NPL Coverage Ratios (%)
Domestic International Total NPL coverage ratio
0.3% 0.3%0.6% 0.5% 0.6% 0.6% 0.8%
1.5%1.9%
2.3%2.7%
1.2% 1.0% 1.0%0.5% 0.5%
0.8% 0.7%
0.6% 0.7%0.8%
(0)
(0)
(0)
(0)
0
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
CoR Ratios (YTD %)
Domestic International Total CoR ratio
NCB Investor Relations3Q 2017 Investor Presentation 43
Financing and advances credit quality (3)
Consumer NPLs declined while Corporate NPLs increased
1.1% 1.2% 1.3%1.4%
1.5%1.7%
1.9%
0.7% 0.7% 0.7%0.6% 0.6% 0.6% 0.6%
0
0
0
0
0
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
NPL Ratios (%)
Corporate Consumer and credit card
184% 177% 181% 177% 173% 168%152%
260%
229% 232% 237% 238%254% 246%
1
1
1
2
2
2
2
2
3
3
3
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
NPL Coverage Ratios (%)
Corporate Consumer and credit card
0.2% 0.3% 0.4% 0.5%
0.8% 0.7%0.9%
0.6%0.3%
0.8%0.6%
0.4%0.6% 0.6%
(0)
(0)
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
CoR Ratios (YTD %)
Corporate Consumer and credit card
Management Commentary
§ Rising Corporate NPL ratio but coverage remains strong at 152% as at 30 September 2017.
§ Consumer NPL ratio and coverage remain stable.
NCB Investor Relations3Q 2017 Investor Presentation
Saudi Arabia51%
GCC and Middle East19%
Europe1%
Turkey4%
Other countries25%
Investments by Geography (SRbn)
Investments trends and compositionInvestments rose through participation in Saudi Government debt issuance and ~90% of the investment portfolio remains Saudi Government or investment grade
112 117
0
20
40
60
80
100
120
140
160
4Q 16 3Q 17
Management Commentary
§ The investment portfolio is built on high quality securities with ~90% being investment grade.
§ Since the resumption of KSA government debt issuance , NCB has actively participated in issues of longer term debt securities.
§ The portfolio has been re-balancing towards floating rate securities during the year in light of the rising interest-rate environment.
Saudi Government Securities
36%
Other investment grade54%
Non-investment grade5%
Unrated5%
Investments by Credit Grade (SRbn)
44
71 65 66
35 44 44
112 115 117
+5%
0
50
100
150
200
250
4Q 16 2Q 17 3Q 17
Investments (SRbn)
Equity instruments, Mutual Funds, Hedge Funds and OthersFloating rate securitiesFixed rate securities
112 117
0
20
40
60
80
100
120
140
160
180
4Q 16 3Q 17
NCB Investor Relations3Q 2017 Investor Presentation
Due to banks and other financial institutions15%
Customers' deposits79%
Debt securities issued3%
Other liabilities3%
Total Liabilities Mix (SRbn)
45
Liabilities trends and composition
Stable total liability base and improving deposit mix towards CASA balances
Management Commentary
§ Customers’ deposits are the main source of funding and remained stable during 1H 2017 but declined by 4% during 3Q 2017 as the funding mix was optimized by reducing time deposits.
§ CASA balances grew by 4% YTD and account for 77% of customers’ deposits.
316 315 303
45 51 58
382 389 382
+0%
0
100
200
300
400
500
600
700
4Q 16 2Q 17 3Q 17
Total Liabilities (SRbn)
Customers' depositsDue to banks and other financial institutionsDebt securities issuedOther liabilities
382 382
0
100
200
300
400
500
600
4Q 16 3Q 17
218 225
6 7 79 59
316 303
-4%
0
100
200
300
400
500
600
4Q 16 3Q 17
Customers' Deposits (SRbn)
CASA - DomesticCASA - InternationalTimeOthers
NCB Investor Relations3Q 2017 Investor Presentation 46
Liquidity
NCB maintained a strong liquidity profile
Management Commentary
§ As at 3Q 2017, the financing to customer deposits ratio was 84.9% and comfortably below the regulatory guidelines.
§ HQLA balances declined compared to 2Q 2016, but average quarterly LCR improved to 172.5% from 159.8% in 3Q 2016.
§ Basel III leverage ratio improved to 12.7% from 12.1% in 3Q 2016.
LCR is quarterly average
94 101 97 104 102 96 91
145.3%156.1% 159.8%
172.5% 163.8% 166.1% 172.5%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
200.0%
0
50
100
150
200
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
HQLA and Liquidity Coverage (SRbn/%)
High quality liquid assets (HQLA)
Liquidity coverage ratio (LCR)
81.4%84.1% 83.5%
80.3% 81.0% 81.6%84.9%
1
1
1
1
1
1
1
1
1
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Financing to Customer Deposits Ratio (%)
11.5%11.6%
12.1% 12.2%12.4%
12.2%
12.7%
0
0
0
0
0
0
0
0
0
0
0
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Basel III Leverage Ratio (%)
NCB Investor Relations3Q 2017 Investor Presentation
Management Commentary
§ As at 3Q 2017, capitalization remained strong and comfortably above the regulatory minima.
§ Pillar I risk weighted assets increased by 8% YTD as revised regulatory requirements for the calculation of certain credit risk weighted assets came into effect during 1Q 2017.
§ During 2Q 2017, additional Tier 1 Sukuk of SR 1.3bn were issued, taking the total to SR 7bn as at 30 September 2017.
Common equity tier 1 capital (CET1)78%
Additional tier 1 capital (AT1)10%
Tier 2 capital (T2)12%
Total Capital Composition (SRbn)
47
Capital
Capital position comfortably above regulatory minima
67.7 70.4
0
10
20
30
40
50
60
70
80
90
100
4Q 16 3Q 17
Capital ratios are based on Pillar I RWA
54 54 55
6 7 7 8 8 8 68 69 70
+4%
0
20
40
60
80
100
120
4Q 16 2Q 17 3Q 17
Capitalisation (SRbn)
Tier 2 capital (T2)Additional tier 1 capital (AT1)Common equity tier 1 capital (CET1)
312 336
33 34 353 380
+8%
0
100
200
300
400
500
600
700
800
4Q 16 3Q 17
Pillar I Risk Weighted Assets (SRbn)
Credit riskOperational riskMarket risk
15.5%16.1%
16.7% 16.9%16.1% 16.0% 16.4%
17.5%18.2%
19.0% 19.2%18.2% 18.2% 18.5%
13.9%14.5%
15.1% 15.3%14.6%
14.1% 14.5%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17
Capital Ratios (%)
T1 ratioTC ratioCET1 ratio
NCB Investor Relations3Q 2017 Investor Presentation
National Commercial Bank
Segmental Review
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 49
Retail BankingStrong YTD and QTR net profit growth resulting from operating income growth, improved efficiency and lower impairments
Management Commentary
§ 3Q 2017 net income rose 116% YoY driven principally by 8% operating income growth, a 6% improvement in operating efficiency and 64% lower impairments.
§ NSCI for 3Q 2017 improved by 6% YoY due to a 4% increase in retail financing.§ Fee income increased by 7% in 3Q 2017 YoY, mainly resulting from financing-related
activity. § 3Q 2017 operating expenses improved by 6% and the cost to income ratio improved
13% YoY to 44.7%. This improvement was relatively broad-based across most expense categories, reflecting the continued strides made in digitisation and productivity initiatives.
§ 3Q 2017 impairments improved by 64% YoY due higher recoveries and improved risk management.
1,625 1,688 1,722
342 331 404 1,967 2,019 2,126
+8%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
3Q 16 2Q 17 3Q 17
Total Operating Income (SRmn)
Net special commission incomeFee and other income
409
768 885
+116%
0
200
400
600
800
1,000
1,200
1,400
3Q 16 2Q 17 3Q 17
Net Income (SRmn)
Summary Financial PerformanceSR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY %
change 3Q 2017 YTD 3Q 2016 YTD YoY % change
Total assets 106,939 109,354 109,687 -3% 106,939 109,687 -3%
Total operating income 2,126 2,019 1,967 +8% 6,083 5,923 +3%Net special commission income 1,722 1,688 1,625 +6% 4,979 4,684 +6%Fee income from banking services, net 307 311 288 +7% 897 1,039 -14%
Operating expenses (950) (911) (1,013) -6% (2,825) (3,041) -7%Impairment charge (148) (171) (408) -64% (397) (542) -27%Other income (expenses) (142) (168) (136) +5% (546) (387) +41%Net income 885 768 409 +116% 2,315 1,952 +19%
Cost to income (%) 44.7% 45.1% 51.5% -13% 46.4% 51.3% -10%% of total assets 24.0% 24.3% 25.0% -4% 24.0% 25.0% -4%ROA (%) 3.3% 2.9% 1.5% +120% 2.9% 2.5% +18%
NCB Investor Relations3Q 2017 Investor Presentation 50
Corporate Banking
YTD and QTR Net profit impacted by higher impairments
Management Commentary
§ 3Q 2017 net income dropped 57% YoY due to a 6% decline in total operating income and a 148% rise in impairments.
§ NSCI for 3Q 2017 declined 8% YoY despite stable corporate financing balances due to lower commission margins resulting from a drop in SAIBOR in 2Q and 3Q 2017 compared with 2016.
§ Fee income remained stable YoY and QoQ.§ 3Q 2017 operating expenses rose by 7% and the cost to income ratio increased 14%
YoY to 25.0%. § The 3Q 2017 impairment charge rose 148% YoY due to adequate provision coverage
for non-performing corporate financing formation.
825 820 761
280 280 281
1,104 1,100 1,042
-6%
0
500
1,000
1,500
2,000
2,500
3Q 16 2Q 17 3Q 17
Total Operating Income (SRmn)
Net special commission incomeFee and other income
715 659
311
-57%
0
200
400
600
800
1,000
1,200
3Q 16 2Q 17 3Q 17
Net Income (SRmn)
Summary Financial PerformanceSR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY %
change 3Q 2017 YTD 3Q 2016 YTD YoY % change
Total assets 143,378 143,320 141,459 +1% 143,378 141,459 +1%
Total operating income 1,042 1,100 1,104 -6% 3,385 3,200 +6%Net special commission income 761 820 825 -8% 2,510 2,348 +7%Fee income from banking services, net 243 243 245 -1% 752 753 -0%
Operating expenses (260) (209) (243) +7% (741) (724) +2%Impairment charge (465) (247) (188) +148% (972) (418) +133%Other income (expenses) (6) 16 41 -114% 46 97 -52%Net income 311 659 715 -57% 1,719 2,154 -20%
Cost to income (%) 25.0% 19.0% 22.0% +14% 21.9% 22.6% -3%% of total assets 32.2% 31.9% 32.2% +0% 32.2% 32.2% +0%ROA (%) 0.9% 1.8% 2.0% -57% 1.6% 2.0% -21%
NCB Investor Relations3Q 2017 Investor Presentation 51
Treasury
Higher NSCI and lower investment impairments partly offset by lower investment gains
Management Commentary
§ 3Q 2017 net income improved 2% YoY from a 16% improvement in NSCI and lower investment impairments, partly offset by lower investment gains.
§ Operating income in 3Q 2017 declined 13% YoY due to lower gains on non-trading investments from repositioning the investment portfolio.
§ Investment impairments were negligible during 3Q 2017, while the comparative quarter was impacted by SR 122mn relating to impairments of certain investments of a non-recurring nature.
521 615 607
353 205 156
874 820 763
-13%
0
500
1,000
1,500
2,000
2,500
3Q 16 2Q 17 3Q 17
Total Operating Income (SRmn)
Net special commission incomeFee and other income
778 872 792
+2%
0
500
1,000
1,500
2,000
3Q 16 2Q 17 3Q 17
Net Income (SRmn)
Summary Financial PerformanceSR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY %
change 3Q 2017 YTD 3Q 2016 YTD YoY % change
Total assets 153,802 156,203 139,529 +10% 153,802 139,529 +10%
Total operating income 763 820 874 -13% 2,709 2,774 -2%Net special commission income 607 615 521 +16% 1,768 1,758 +1%Fee income from banking services, net 26 22 22 +19% 73 80 -9%
Other operating income 130 183 331 -61% 867 936 -7%Operating expenses (97) (86) (61) +60% (338) (275) +23%Impairment charge (2) (2) (122) -98% (5) (139) -97%Other income (expenses) 128 140 88 +47% 457 283 +61%Net income 792 872 778 +2% 2,824 2,644 +7%
Cost to income (%) 12.7% 10.5% 7.0% +83% 12.5% 9.9% +26%% of total assets 34.6% 34.7% 31.8% +9% 34.6% 31.8% +9%ROA (%) 2.0% 2.2% 2.2% -6% 2.5% 2.4% +3%
NCB Investor Relations3Q 2017 Investor Presentation 52
Capital Markets
Growth driven by asset management
Management Commentary
§ 3Q 2017 net income increased by 130% (SR 43mn) YoY due to higher operating income and improved operating efficiency.
§ Operating income in 3Q 2017 rose 35% (SR 40mn) YoY due to higher fee and other income, mainly resulting from asset management.
33 54
76
+130%
0
20
40
60
80
100
120
140
160
3Q 16 2Q 17 3Q 17
Net Income (SRmn)
Summary Financial PerformanceSR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY %
change 3Q 2017 YTD 3Q 2016 YTD YoY % change
Total assets 1,562 1,465 1,568 -0% 1,562 1,568 -0%
Total operating income 154 144 114 +35% 462 421 +10%Net special commission income 1 1 0 +125% 2 1 +240%Fee income, net 148 140 108 +37% 447 412 +9%
Operating expenses (79) (91) (81) -2% (254) (253) +0%Impairment charge 0 0 0 0 0 Other income (expenses) 1 1 (0) -1115% 2 3 -15%Net income 76 54 33 +130% 210 171 +23%
Cost to income (%) 51.4% 63.2% 70.9% -28% 54.9% 60.1% -9%% of total assets 0.4% 0.3% 0.4% -2% 0.4% 0.4% -2%ROA (%) 20.2% 15.2% 8.6% +136% 19.5% 13.3% +47%
114 143 153
114 144 154
+35%
0
50
100
150
200
250
300
3Q 16 2Q 17 3Q 17
Total Operating Income (SRmn)
Fee and other incomeNet special commission income
NCB Investor Relations3Q 2017 Investor Presentation 53
InternationalOperating income impacted by depreciating Turkish currency but strong net income growth from declining expenses and lower impairment charges
Management Commentary
§ 3Q 2017 net income improved 135% YoY as a significant reduction in the cost base and improving credit quality more than offset declining operating income.
§ 3Q 2017 operating expenses fell 29%. This improvement resulted from the ongoing progress made in cost-optimisation initiatives as well as the cessation of intangible assets amortisation from the start of 2017.
§ The impairment charge for 3Q 2017 declined 66% due to limited new NPL formation in the Turkish subsidiary over the period, further aided by the Turkish Lira depreciation.
Summary Financial PerformanceSR (mn) 3Q 2017 2Q 2017 3Q 2016 YoY %
change 3Q 2017 YTD 3Q 2016 YTD YoY % change
Total assets 38,998 39,433 46,522 -16% 38,998 46,522 -16%
Total operating income 406 396 603 -33% 1,190 1,729 -31%Net special commission income 358 350 471 -24% 1,024 1,435 -29%Fee income from banking services, net 70 73 92 -24% 214 299 -28%
Operating expenses (214) (223) (304) -29% (653) (929) -30%Impairment charge (80) (54) (238) -66% (219) (599) -64%Other income (expenses) (17) (20) (21) -17% (42) (33) +27%Net Income 94 98 40 +135% 276 168 +65%
Cost to income (%) 52.8% 56.4% 50.4% +5% 54.9% 53.7% +2%% of total assets 8.8% 8.8% 10.6% -17% 8.8% 10.6% -17%ROA (%) 1.0% 1.0% 0.3% +195% 0.9% 0.5% +98%
471 350 358
132 46 48
603
396 406
-33%
0
200
400
600
800
1,000
1,200
3Q 16 2Q 17 3Q 17
Total Operating Income (SRmn)
Net special commission incomeFee and other income
40
98 94
+135%
0
20
40
60
80
100
120
140
160
180
200
3Q 16 2Q 17 3Q 17
Net Income (SRmn)
NCB Investor Relations3Q 2017 Investor Presentation
National Commercial Bank
Additional Information
3Q 2017 Results
NCB Investor Relations3Q 2017 Investor Presentation 55
Additional Information
Please don’t hesitate to contact NCB Group Investor Relations
More information
Download copies of National Commercial Bank’s:
§ Financial statements
§ Earnings release
§ Investor presentation
§ Financial data pack (Excel)
Visit: http://www.alahli.com/en-us/Investor_Relation
Mr. Abdulbadie Alyafi
Head, Investor Relations
P: +966 12 646 3988
National Commercial Bank
P.O. Box 3555
21481 Jeddah, Kingdom of Saudi Arabia