1
INVESTOR
PRESENTATION Full Year 2013 |
Financial Performance
2
Operating Environment
Performance | Risk Profile
2 | Burgan Bank FY 2013 Investor Presentation
2014 in Prospect
3
Operating Environment
3 | Burgan Bank FY 2013 Investor Presentation
4
No major changes… lower growth ahead
Global GDP | Average growth (%) Advanced Economies | Output Gap (%)
Key takeaways
0
2
4
6
8
10
12
142003-2010
2011-2018
Commodities indices (2005 = 100)
% MENA
4 | Burgan Bank FY 2013 Investor Presentation
Source: IMF 2013 Data base, World Bank & Burgan Bank Economic Research.
G3: below-potential but rising growth. High debt and
unemployment to constrain prospects.
Subdued growth will hinder demand for commodities
especially in developing countries.
Overall, global disinflation is expected to continue in the
forecasted period.
MENAT growth as expected is slower, despite an urgent
need to create jobs.
GCC: Low demand and high supply are likely to keep oil
prices low throughout the year hindering economic
performance, but public spending will support demand.
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5-5
-4
-3
-2
-1
0
1
2
3
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Output gap (%) Unemployment rate (%, rhs)
0
50
100
150
200
250
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Energy Food and beverage
Subdued growth levels still persist, with weak fundamentals, lower policy rates and challenging
operating environments going forward…
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
5
Algeria Foreign Exchange Regulations
5 | Burgan Bank FY 2013 Investor Presentation
\
Growth at 1.8% below potential due to delays investment
spending & political uncertainty.
Growth expected to reach 2.0% below potential due to continued
delays in investment spending & lower oil prices.
Growth at 3.0% line with expectations but below potential due
to fiscal austerity & negative impact of Syrian civil war.
Growth at 3.0% line with expectations but below potential due
to lack of investments.
Growth at 4.5% lower than expected and below potential due
to lower oil production and capital expenditure.
Growth at 2.8% in line with expectations but below potential
due to fiscal austerity, low growth in EU and political tensions.
Growth at 3.3% higher than expected (due to contraction
related activities) but below potential.
OUTLOOK 2014 E
CO
NO
MIC
P
OL
ITIC
AL
RECAP 2013
Tunisia:
• Elections likely in 2Q14
• Tensions between Islamists and
seculars
Turkey:
• March: municipal elections, August: presidential elections
• Ongoing political tensions within AKP
Jordan:
• Syria Refugee
problem
Iraq:
• Domestic violence
Syria:
• Civil war
• Fragmented opposition between
moderates and Muslim extremism
Saudi Arabia:
• Succession issues for the ailing king
• Rising unease in the Shi’a dominated
Eastern provinces
Egypt:
• Elections likely in 2Q14
• High tensions betw Muslim Brotherhood and military
• Economy on life support by GCC aids
Algeria:
• Presidential elections in
April.
• President Bouteflika has not
announced his candidacy yet
• Unclear if he can outlive
another election cycle and/or
who would replace him
Kuwait: • Parliamentary in-fighting delaying
economic reforms.
• Instability in southern Iraq could
impact Kuwait
Growth expected to reach 3.5%; financing of the budget deficit.
Energy dependency reflecting negatively on the budget.
Growth expected to reach 3.2%; Declining natural gas prices,
high unemployment.
Declining economic growth potential due to slowing FDI.
GDP growth slowing down due to lack of reforms with high
current account deficit, inflation expected to slow but food
inflation may remain high.
Growth expected to reach 2.4%; Capital outflows trigger
further TRY depreciation. Rising NPLs due to higher interest
rates.
MENAT growth as expected is slow, as geopolitical tension still persist…
Source: Burgan Bank Economic Research. Note: Darker the color, higher the political risks in 2014
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
6
Results Overview
6 | Burgan Bank FY 2013 Investor Presentation
7
9 Months 2013: Key Highlights
7 | Burgan Bank FY 2013 Investor Presentation
REVENUE GREW BY 33.4% (FY13 VS. FY12) REACHING KD 253.6M
NIM’S ADVANCED TO REACH 2.71% IN FY13 VS. 2.45% IN FY12
OPERATING PROFIT REACHING KD 140.7M GROWING BY 18.3% (FY13 VS. FY12)
NET INCOME REACHING KD 20.1M AFTER ACCUMULATION OF ADDITIONAL PRECAUTIONARY
RESERVE OF KD52.6M
ENHANCED ASSET QUALITY; WITH IMPROVED NPA RATIO AND BETTER COVERAGE RATIO
NPA RATIO DECLINED FROM 5.6% IN FY12 TO 3.4% IN FY13 BUILD UP ADDITIONAL PRECAUTIONARY RESERVE OF KD 52.6M COVERAGE RATIO
(2) IMPROVED FROM 73% IN FY12 TO 123% IN FY13 & COVERAGE
NET OF COLLATERAL AT 256% FOR FY13
MAINTAINED GROWTH YOY & QOQ IN BALANCE SHEET; SUPPORTED BY INTERNATIONAL
OPERATIONS PERFORMANCE
LOANS GROWING BY 17.2% YOY & 11.3% QOQ
DEPOSITS GROWING BY 19.1% YOY & 7.8% QOQ
OPTIMIZING BALANCE SHEET WITH SOUND LIQUIDITY LEVELS AT 32.0% AND STABLE
CAPITAL BUFFER WITH CAR AT 15.4%
Solid Operating
Performance enabled us to accelerate
reserves build up
Healthy Balance
Sheet generating resilient
underlying earnings
Asset Quality in comfortable levels with
effective risk management
(1) NIM’s excluding BBT contribution is 2.70% for FY13. (2) Total Provisions(General + Specific) to NPA’s.
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
8
Performance Trends
8 | Burgan Bank FY 2013 Investor Presentation
9
Strong Financial and Operating Performance…
9 | Burgan Bank FY 2013 Investor Presentation
9.2
2.5
10.8
5.1
20.0
7.7
Q4'12 Q4'13
Net Profit | KD million(1)
Cost of Credit | KD million(1) Revenue | KD million(1)
Key Indicators(1)
190.1
229.7
14.2
23.9
190.1
253.6
FY 12 FY 13
Additional precautionary reserves.
∆ 33.4%
45.1
62.0 6.1
4.3
51.2
66.3
Q4'12 Q4'13
∆ 25.2%
1 offs Revenues items.
18.8 37.3
17.3
52.6
36.1
89.9
FY 12 FY 13
3,498 4,090
2.9
20.6 10.8
5.1 13.7
25.7
Q4'12 Q4'13
Gross Loans in KD million. Additional precautionary reserves
55.6
20.1
17.3
52.6
72.9 72.7
FY 12 FY 13
(1)Figures are reported after consolidation adjustments.(2) Excl. BBT contribution in FY13.(3) Liquid assets comprises of Cash & Cash eq., Treasury bills & bonds and Due from Banks & OFIs.
Burgan Bank Group FY 2012 FY 2013
Revenue Growth (YoY) 16.4% 33.4% | 16.8%(2)
Operating Profit Growth (YoY) 16.6% 18.3% | 19.4%(2)
Cost to Income Ratio 37.4% 44.5% | 36.1%(2)
Jaws Ratio (YoY) 0.5% (25.1%) | 2.8%(2)
Loans to Cust. Deposits 86.6% 85.2% | 77.9%(2)
Liquidity Ratio(3) 31.5% 32.0% | 35.5%(2)
NPA Ratio 5.6% 3.4%
NPA net of Collateral Ratio 1.8% 1.6%
ROE | ROE ex. Additional Provisions 12.4% | 16.3% 4.1 | 14.8%
ROTE | ROTE ex. Additional Provisions 20.2% | 26.5% 6.4 | 23.3%
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
Note: Other Expense grew by KD4.7m Q4’13 vs. Q3’13, due to; asset revaluation loss of Debt to Asset swap in Kuwait, deprecation cost of branches in Algeria, Licenses renewal in Jordan & prior year expenses of Bank of Baghdad Beirut branch losses in Iraq.
10
Strong Financial and Operating Performance…
10 | Burgan Bank FY 2013 Investor Presentation
(1)Figures are reported after consolidation adjustments.(2) Excl. BBT contribution in FY13.(3) Liquid assets comprises of Cash & Cash eq., Treasury bills & bonds and Due from Banks & OFIs.
Cost of Credit | KD million(1) Revenue | KD million(1)
150 160 176
230 15 4
14
24
165 163
190
254
FY 2010 FY 2011 FY 2012 FY 2013
72
13 19 37 16 17
53
72
29 36
90
FY 2010 FY 2011 FY 2012 FY 2013
3.2% 2.2%
Cost of Credit | % Additional Provisions
1.0% 1.2%
1 offs.
Operating Profit & Net Profit | KD million(1)
100 102
119
141
51 56 20
16 17 53
5
67 73 73
Additional Provisions
FY 2010 FY 2011 FY 2012 FY 2013
Operating Profit Net Profit
Key Indicators(1)
Burgan Bank Group FY 2012 FY 2013
Revenue Growth (YoY) 16.4% 33.4% | 16.8%(2)
Operating Profit Growth (YoY) 16.6% 18.3% | 19.4%(2)
Cost to Income Ratio 37.4% 44.5% | 36.1%(2)
Jaws Ratio (YoY) 0.5% (25.1%) | 2.8%(2)
Loans to Cust. Deposits 86.6% 85.2% | 77.9%(2)
Liquidity Ratio(3) 31.5% 32.0% | 35.5%(2)
NPA Ratio 5.6% 3.4%
NPA net of Collateral Ratio 1.8% 1.6%
ROE | ROE ex. Additional Provisions 12.4% | 16.3% 4.1 | 14.8%
ROTE | ROTE ex. Additional Provisions 20.2% | 26.5% 6.4 | 23.3%
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
11
…with improved underlying Net Interest
Income
11 | Burgan Bank FY 2013 Investor Presentation
25.6 28.0 35.0
28.7 29.9
43.0
26.8 30.8
42.2 23.5
30.2
45.2
104.6
118.9
165.4
FY 2011 FY 2012 FY 2013
Net Interest
Margins(1)
Ne
t In
tere
st
Inc
om
e | K
Dm
n
(1)FY Net Interest Margin’s figures calculated based on the Average 12 months Interest Earning Assets.
2.64% 2.45%
2.71%
Q2
Q1
Q3
Q4
No
n-I
nte
res
t In
co
me
| K
Dm
n
38.1 38.1 44.6
7.8
17.6
18.6
1.6
2.2
2.9
6.2
2.0
11.7
5.1
11.3
10.5
58.8
71.2
88.3
FY 2011 FY 2012 FY 2013Fees & Commissions FX Income DividendSecurity Gains Other Income Non-Interest Income
36.0% 37.4% 34.8%
Non-Interest
Income to
Revenues
11.2 14.9 4.8 3.1 9.0 -1.3
1 off’s items in KD million.
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
12
Strengthen / Diversified Balance Sheet
12 | Burgan Bank FY 2013 Investor Presentation
Cu
sto
me
r L
oa
ns
| K
Dm
n
Cu
sto
me
r D
ep
os
its
| K
Dm
n
34.9%
41.1%
International
Contribution
Loans to
Deposits
Kuwait International Customer Loans Kuwait International Customer Deposits
Customer loans and Customers deposits figures after consolidation adjustments.
1,819
2,218
2,733
977
1,677
1,907
2,796
3,895
4,640
FY 2011 FY 2012 FY 2013
1,576
2,054
2,414
676
1,321
1,541
2,252
3,374
3,955
FY 2011 FY 2012 FY 2013
30.0%
39.1% 39.0%
80.6%
86.6% 85.2%
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
13
…and effectively managed risk position
13 | Burgan Bank FY 2013 Investor Presentation
Non Performing Assets and Coverage Ratio | KD million
282
165 104
80
102
85
362
267
189
49% 73%
123%
FY 2011 FY 2012 FY 2013
NPA Kuwait NPA International NPA Coverage Ratio
∆ -47.8%
362
267
189
176 194 232
146
86 91
121%
226% 256%
FY 2011 FY 2012 FY 2013
NPA Total Provisions NPA net of collateral Coverage Ratio net of collateral
5.6% 5.6%
4.2%
4.7%
3.4%
Q4'12 Q1'13 Q2'13 Q3'13 Q4'13
NPA’s to Gross Facilities NPA’s net of collateral to Gross Facilities
1.8% 1.8%
1.9% 1.8%
1.6%
Q4'12 Q1'13 Q2'13 Q3'13 Q4'13
NPL KPIs
Indicators Q4’12 Q3’13 Q4’13
Gross Loans 3,498 3,673 4,090
NPL’s 247 219 174
NPL Ratio 7.1% 6.0% 4.2%
NPL, net of
collateral 1.9% 2.1% 1.9%
NPL Coverage, net
of collateral 171% 157% 178%
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
14
… with stable shareholder returns
14 | Burgan Bank FY 2013 Investor Presentation
Operating Profit & Net Profit(1) | KD million
12.0% 12.4%
4.1%
21.1% 20.2%
6.4%
FY 2011 FY 2012 FY 2013ROE ROTE Additional Provisions
6.7%
16.9% 3.8% 3.9%
15.8% 16.3%
14.8%
23.3%
26.5% 27.8%
6.3%
10.7%
ROE & ROTE | %
102
119
141
51 56
20
16 17
53
67 73 73
Additional Provisions
FY 2011 FY 2012 FY 2013
Operating Profit Net Profit
375 1,089
201
Jan'04 Jan'14
Adjusted Share Price (KD Fils) Cumulative Dividend (KD Fils)
TSR (Share Price Return and Dividend Yield) Growth
10 years (Jan’04 – Jan’14) 1,290
Note: Adjusted for right issue and stock dividend
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
15
Performance Trend – By Country
15 | Burgan Bank FY 2013 Investor Presentation
16
Healthy balance sheet growth driving
Franchisees performance……
16 | Burgan Bank FY 2013 Investor Presentation
98.1
117.6
FY 12 FY 13
43.4
46.3
FY 12 FY 13
34.7
37.9
FY 12 FY 13
12.4
17.6
FY 12 FY 13
5.2 6.2
FY 12 FY 13
Kuwait
Jordan
Algeria
Iraq
Tunisia
31.5
FY 12 FY 13Turkey
2,054
2,414
FY 12 FY 13
559 526
FY 12 FY 13
230
289
FY 12 FY 13
34
53
FY 12 FY 13
5
8
FY 12 FY 13
513
675
FY 12 FY 13
3,103
3,899
FY 12 FY 13
683
733
FY 12 FY 13
272
377
FY 12 FY 13
229
352
FY 12 FY 13
110
120
FY 12 FY 13
535
621
FY 12 FY 13
Revenue(1) Loans Total Deposits(2)
(1)Figures are reported before consolidation adjustments; Sub debt cost allocated to subsidiaries. (2)Total deposits includes; Due to Banks and Customers Deposits.
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
17
Performance vs. Peers
17 | Burgan Bank FY 2013 Investor Presentation
18
…Outperforming Peers – Both Local (9M 2013 vs. 9M 2012)
18 | Burgan Bank FY 2013 Investor Presentation
Burgan Bank Additional precautionary reserves impact.
(1)Burgan Bank ROTE exclude additional precautionary reserves of KD 52.6m for FY13. (2)ROTE based on Open Equity. (3)Non Performing Loans to Gross Loans based on latest reported financials, Burgan Bank Non Performing Loans net of collateral for FY 2013.
17.2%
8.5%
1.2%
8.9%
10.2%
BB
NBK
GBK
CBK
ABK
19.1%
10.2%
2.4%
16.5%
5.9%
33.4%
-3.6%
-7.1%
8.8%
-0.7%
6.4%
14.0%
7.2%
4.3%
6.9%
16.9% 23.3%
Customer Deposits
Growth %
(FY13 vs.FY12)
Customer Loans
Growth %
(FY13 vs.FY12)
ROTE(1)(2) %
(FY13)
Revenue
Growth %
(FY13 vs.FY12)
Sustained high performance vs. peers locally…
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
19
…and Regional (9M 2013 vs. 9M 2012)
19 | Burgan Bank FY 2013 Investor Presentation
AUB adjusted for 1 off gain of US$ 212.9mn in Q1’13 from Sale of its stake in Ahli Bank of Qatar.
Burgan Bank Additional precautionary reserves impact (1)Burgan Bank ROTE exclude additional precautionary reserves of KD 52.6m for FY13. (2)ROTE based on Open Equity. (3)Non Performing Loans to Gross Loans based on latest reported financials, Burgan Bank Non Performing Loans net of collateral for FY 2013. Note: 9M 2013 numbers for AUB, BSF and CBQ
…and regional
18.5%
6.4%
14.1%
16.9%
11.8%
16.6%
32.6%
12.4%
12.7%
14.0%
10.6%
20.2%
23.3%
Customer Deposits
Growth %
(FY13 vs.FY12)
Customer Loans
Growth %
(FY13 vs.FY12)
ROTE(1)(2) %
(FY13)
Revenue
Growth %
(FY13 vs.FY12)
17.2%
26.9%
18.8%
8.5%
10.1%
41.0%
5.9%
5.4%
33.3%
19.1%
24.2%
12.0%
10.2%
6.9%
16.0%
19.5%
4.4%
38.4%
33.4%
27.6%
18.7%
-3.6%
1.5%
-1.8%
9.5%
-1.5%
8.1%
36.8% 46.3%
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
20
2014 in Prospect
20 | Burgan Bank FY 2013 Investor Presentation
21
Healthy balance sheet growth driving
Franchisees performance……
21 | Burgan Bank FY 2013 Investor Presentation
Expecting defensive year with high focus on risk.
Enhancing branches network.
On alert for tactical inorganic opportunities.
Maintaining focus on growth in corporate banking and developing retail while absorbing forex loss
and LC confirmation fees cap due to new regulations.
Continue branch network development.
Organic growth with good risk balance focus.
Redefining SME and Retail business models.
Continuity of the integration to Burgan Group
Corporate Banking: Credit growth expected higher than market despite increasing competition
Private Banking: Sticking to core competencies of expanding business complemented by several new
initiatives.
Retail Banking: Increasing scale supported by launching of new products.
Treasury: Optimizing intragroup funding.
Regulatory Changes: Expected introduction of Basel III, capital optimization plan to be evaluated and
actions to be taken
New CEO in place with revamped business proposition to be introduced.
JORDAN
IRAQ
ALGERIA
TURKEY
KUWAIT
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
22
Summary
22 | Burgan Bank FY 2013 Investor Presentation
23
… In Summary
23 | Burgan Bank FY 2013 Investor Presentation
OPERATING ENVIRONMENT PERFORMANCE | RISK PROFILE 2014 IN PROSPECT SUMMARY
2014
Conditions to persist with marginal improvement in the region
Our Business proposition proven successful, even with less favorable macro-
economic conditions, we plan to continue growing with a balanced approach
towards returns and risks
2013
Good year in business fundamentals despite less favorable economic and
operating environment
Enhanced Risk Position; both asset quality and coverage ratio showing
considerable improvement
Healthy leading indicators to sustain solid operating performance
24
Thank You
24 | Burgan Bank FY 2013 Investor Presentation
25 25 | Burgan Bank FY 2013 Investor Presentation
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contains time-sensitive information which is based on currently available information to Burgan Bank as of the date stated or, if no date is stated, as of the date of this
preparation and accordingly does not guarantee specific future results, performances or achievements. The information and the opinions contained herein are subject to
change without notice. None of Burgan Bank or any of its subsidiaries or affiliates assume any obligation to update or otherwise revise any such information to reflect
information that subsequently becomes available or circumstances existing or changes occurring after the date hereof.
FORWARD-LOOKING STATEMENTS
All statements included or incorporated by reference in this presentation, other than statements or characterizations of historical fact, are forward-looking statements.
Such forward-looking statements are based on Burgan Bank’s current expectations, predictions and estimates and are not guarantees of future performance,
achievements or results. Forward-looking statements are subject to and involve risks and uncertainties and actual results, performance or achievements of Burgan
Bank may differ materially or adversely from those expressed or implied in the forward-looking statements as a result of various factors. In addition, even if Burgan
Bank’s results of operations, financial condition and the development of the industry in which it operates are consistent with forward-looking statements contained
herein, those results or developments may not be indicative of results or developments in subsequent periods. Burgan Bank does not undertake to update any forward-
looking statements made herein. Past results are not indicative of future performance.
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