samba financial group · 2020-06-28 · samba financial group investor presentation q1 2020 results...

Public

1

Samba Financial Group

Investor Presentation

Q1 2020 ResultsJune, 2020

The information contained in this document and any other information presented or discussed inconnection therewith (together, the “Information”) is being provided on basis concerning SambaFinancial Group (Company). Please refer to slide no 29 for important disclaimers and relatedinformation.

Public

2

Table of Contents

Samba Financial Group Profile

Key Financial Highlights Q1 2020

Strategy and Transformation update

Environment and Forward looking guidance

Appendix: Balance Sheet & Income Statement

Covid 19 Response

Public

3

Table of Contents






Covid 19 Response

Public

4

Profile

Shareholding includes Al-Raidah with PPA and Hassana with GOSI

Samba Financial Group (“Samba” or the “Bank”) is a leading bank established in 1980 as the Saudi American Bank, later renamed Samba Financial Group in 2003

A well diversified and shariah compliant franchise which operates through following four segments and led by an experienced and cohesive management team:

(i) Consumer Banking, (ii) Corporate Banking, (iii) Treasury and (iv) Investment Banking

Forerunner in corporate, consumer, private & priority banking, ATMs, Debit & Islamic Credit Cards, Derivatives etc. in KSA

Has major market share both in assets and deposits in Saudi Banking Industry

A sound corporate governance structure is in place in line with global standards, which oversees the operations of the bank

A1 A+ BBB+ A-

1.942.20

2.43

Q1 2018 Q1 2019 Q1 2020

+11%

1.311.22

1.45

Q1 2018 Q1 2019 Q1 2020

+19%

Net Income (before Zakat / Tax), SAR bnTotal Operating Income, SAR bnShareholding

SAR

148 BLoans

SAR

267 BAssets

SAR

178 BDeposits

SAR

91 BInvestments

3,629Employees

SAR

45 BEquity

73Branches

538ATMs

General Public PPA

PIF GOSI

10.09%

14.74%

22.91%52.26%

Public

5

Overview

Total Assets, SAR bn Total Performing Loans and Advances, SAR bn

Total Net Investments, SAR bn Total Funding, SAR bn

116.0 115.0147.8

61.0 75.9

91.443.8 32.0

Q1 2018

8.1

Q1 2020

17.08.2

Q1 2019

10.9228.9 231.1

267.1+16%

17.5

Q1 2019

19.3

18.3

Q1 2018

99.2 98.7129.5

Q1 2020

117.5 116.2

148.8

+28%

19.7

61.3

13.2

Q1 2019

47.8

14.7

Q1 2018

71.7

Q1 2020

61.0

76.0

91.4+20%

172.3 170.2 177.7

43.6 42.7 44.9

26.49.2 11.7

3.9

Q1 2018 Q1 2019

6.5

Q1 2020

228.9 231.1267.1

7.810.3

+16%

Consumer loans and Credit cards

Commercial loans and advances

Other Assets

Cash and balances with Central Banks and FIs

Investments, net

Loans and Advances, net

International

Domestic

Other Liabilities

Customer deposits

Equity

Due to banks andother Financial Institutions

Term loan and debt securities

Public

6

Table of Contents






Covid 19 Response

Public

Covid-19; People safety, customers and community support, and operations continuity

People and Workplace

Safety

Customers Support

Community Support

Donated SAR 16.5Mn to the healthcare endowment fund

Donated SAR 10.3Mn to the social charity fund

Awareness campaign on social media

All corporate, MSME, Private and Priority clients were called to check on their needs and inform them that Samba is available for them

Availed support provided from SAMA and provided liquidity to clients

Digital solutions and products offering were availed to support clients; 94% of transactions performed digitally

Most employees worked from home during peak of curfew enabled by remote working environment

Branch network operated at reduced capacity (i.e. only 40 branches were open across all three regions), now coming back to normal

Ensured the supply of necessary masks and sterilization tools in all workplaces

Availability of nurses across all locations, Thermal camera’s installed

Supported staff who were stuck overseas as well as their families

7

Public

8

Covid-19; Regulatory compliance, Portfolio risk management and post covid strategy

Portfolio risk management

Evaluated impact on impairments by sector/customer

Proactively restructured loans of customers severely impacted by Covid-19

Refined the business plan in the wake of COVID-19; interest rate cuts, oil prices impact

Maintaining strong liquidity profile and highly liquid asset portfolio

Regulatory Compliance

Full compliance with all SAMA guidelines (e.g. 3 month instalment waiver provided to Health Care sector workers, 6 month extension of loan instalments to MSME sector, fee waivers)

Compliance with CMA guidelines and circulars (e.g. suspension of freezing investment accounts, extending submission deadlines for certain reports)

Strategic implications of

Covid-19

Determined impact on 2020 budget and rebase our 3 years strategy e.g.,

• Optimize non-personnel expenditure

• Manage and strengthen funding capacity

• Accelerate delivery of digital initiatives

Public

9

Table of Contents






Covid 19 Response

Public

10

Income statement: Key Metrics

SAR Millions

1. Includes net income from investment held in FVIS + net trading income + net gain in FVOCI debt + net other operating income

QoQ GrowthX

Q1 2019 Q4 2019 Q1 2020

Q1’20 vs Q1’19

growth

Other Income, net1 166 89 460

Provision for Credit Impairment, net 321 231 183

Zakat and Income Tax 157 223 180

Special Commission Income, net 1,646 1,559 1,562 -5% 0%

Fees, Commission and Exchange Income, net 383 391 409 7% 5%

Total Operating Income 2,195 2,039 2,431 11% 19%

Total Operating Expenses 652 820 795 22% -3%

Pre-provision Income 1,543 1,219 1,636 6% 34%

Net Income, before Zakat and Taxation 1,222 988 1,453 19% 47%

Net Income, after Zakat and Taxation 1,065 765 1,273 20% 67%

Q1’20 vs Q4’19

growth

Income

Statement

figures

Public

11

Balance sheet: Key Metrics

SAR Billions

Retail Loans and Advances

Investments, net 76 85 91 20% 7%

Loans and Advances, net 115 142 148 29% 5%

Commercial Loans and Advances 98 124 129 32% 4%

1.38 1.43 1.30 Credit Cards -5% -8%

Consumer Loans 16 17 18 12% 5%

Deposits 170 180 178 4% -1%

Demand Deposits 93 94 98 6% 5%

Saving & Time Deposits 71 81 74 3% -9%

Others Deposits 6 5 6 10%2%

Q1 2019 Q4 2019 Q1 2020

Q1’20 vs Q1’19

growth

Q1’20 vs Q4’19

growth

Quarter

End

Balances

QoQ GrowthX

Public

12

Income Statement Analysis

Management Analysis Net Income before Zakat and Tax, SAR mn

Net Interest Margin, % Net Fees, Commissions and Exchange income, SAR mn

Samba is performing strongly despite COVID-19, oil prices and low interest rate challenges

Net Income increased due to higher revenues as a result of increased cross sell and lower provisions compared to same period last year

Compression in NIM, driven by reduction in interest rates

Well diversified income generation sources

1,2221,453

Q1 2019 Q1 2020

+19%

988

1,453

Q4 2019 Q1 2020

+47%

2.5%

Q1 2019 Q1 2020

3.2%

-70bps

2.9%

Q4 2019 Q1 2020

2.5% -40bps383 409

Q1 2019 Q1 2020

+7%

391 409

Q4 2019 Q1 2020

+5%

Public

13

Income Statement Analysis: Key Ratios

Management Analysis Return on Average Assets1, %

Return on Average Equity1, % Cost to Income Ratio, %

Uptake in returns, driven by increase in cross sell, lower provisions and reduction in cost base

Cost to income ratio is one of the best in the industry

In 2020, the bank will maintain focus on cost control

1. Calculated on continuous quarterly accumulated basis, Annualized

Q1 2019 Q1 2020

1.95%1.85% +10bps

Q1 2020Q4 2019

1.64%1.95%

+31bps

11.31%

Q1 2019 Q1 2020

10.04% +127bps

Q1 2020Q4 2019

9.09%

11.31%

+222bps

Q1 2019

29.7%

Q1 2020

32.7%+300bps

32.7%

Q4 2019

33.45

Q1 2020

-75bps

Public

14

Balance Sheet Analysis

Management Analysis Balance Sheet, SAR bn

Loans to Deposit Ratio1, % Loans and Deposits, SAR bn

Balance sheet grew more than 15% on the back of strong growth in loans and investments

High asset quality as majority of growth driven by government bonds and collateralized lending

Solid liquidity position, one of the best in industry

Q1 2019

180

Q1 2020

115

170148

178

Q4 2019

142

1. Net Loans / (Customer Deposits + Term Loans + Debt Securities in Issue)

Net Loans Customer Deposits

Assets

15.6%231,111

Q1 2019

267,083

Q1 2020

Equity

5.0%42,735

Q1 2019

44,870

Q1 2020

Q1 2020Q1 2019

67.6%79.7% 76.1%

Q4 2019 Q1 2020

79.7%

Public

15

Balance Sheet – Funding Analysis

Management Analysis Funding Breakdown, SAR bn

Net Loans & Advances vs Core Funding1, SAR bn

Samba has ample liquidity to support its customers’ loan growth requirements

About 58.5% of the customer deposits are non-interest bearing and granular in nature, allowing a favorable deposits mix.

Under USD 5bn EMTN program, Samba raised an additional USD 500mn in Jan 2020

Q4 2019

148

Q1 2019

142

231

Q1 2020

213

115

230

1. Core Funding = Customer Deposits + Term Loans + Debt Securities in Issue + Equity

Net Loans Core Funding

Q1 2018 Q1 2019 Q1 2020

Loans & Adv Net / Core Funding1 53.8% 54.1% 64.2%

IB Borrowing / Total Liabilities 2.1% 3.4% 11.9%

Customer Deposits EquityInter-bank Deposits Other LiabilitiesTerm loans and debt securities

Q1 2020

Q1 2019

45

8

26

178

10

170

6

12

43

Total: 267

Total: 231

Public

16

Balance Sheet – Liquidity Analysis

Management Analysis Liquidity Analysis, %

Assets Maturity Profile

Samba has a high proportion of total liquid assets accounting for 22% of total balance sheet assets

Strong Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) profile, well above the SAMA thresholds of 100% for LCR and NSFR

22%

13%

21%

34%

10%

Q4 2019

Over 5 years

3-12 months

within 3 months

1-5 years

No maturity

233%242%

260%271%

259%

229%

131% 137%129% 130% 130% 129%

Q2’19Q4’17 Q3’19Q4’18 Q1’19 Q4’19

100

LCR NSFR

SAMA Threshold

Public

17

Balance Sheet – Risk Management

NPLs/Gross Loans (Portfolio Infection ratio), %

NPL Coverage Ratio, %

Management Analysis

Asset quality remains strong, underpinned by a low infection ratio and high coverage ratio

Proactive risk classification & management – One of the lowest infection ratio of 1.4% in the industry

Samba has robust credit evaluation system which is corroborated by historical performances

The strong capital position has helped the bank maintain a stable dividend policy

Slight reduction in Equity in Q1 20 is primarily due to transfer of 2019 final dividend to a liability account and reduction in value of other valuation reserves

Q2,’18 Q3,’19Q3,’18

1.4%

Q1,’18 Q4,’18 Q1,’19

1.3%

Q4,’19Q2,’19 Q1,’20

1.1% 1.2%1.5% 1.5% 1.5%

1.3% 1.4%

1. Calculated on continuous quarterly accumulated basis

Credit Impairment/Average Loans1, %

0

300

100

200 175% 150%212%

167%201%180% 168%

Q1,’19

161% 150%

Q1,’18 Q2,’18 Q3,’18 Q4,’18 Q2,’19 Q3,’19 Q4,’19 Q1,’20

0

2

1

1.37%

Q2’18

1.12%

0.04%

Q1’18

0.15%0.11%

Q3’18

0.13%

Q4’18 Q4’19Q1’19 Q2’19 Q1’20

0.97%

Q3’19

0.86% 0.50%

Tier 1 + Tier 2 Capital Ratio, %

23.3% 22.7% 22.7% 22.4% 22.8% 21.8% 21.1% 19.0%

0

10

20

30

Q3,’19 Q4,’19Q4,’18Q3,’18 Q1,’19Q2,’18 Q2,’ 19 Q1,’20

Public

18

Table of Contents






Covid 19 Response

Public

19

Summary of Samba’s Strategy and Transformation Themes

&Transform the core… …digitize

Operations simplification

(e.g., lean product and credit processes)

Value propositions

(e.g., revamping SME and Private Banking)

Organization & performance management

(e.g., business org re-structuring, KPI setting, new

coverage teams, target cascade process)

Sales productivity

(e.g., account planning, branch transformation)

Enhanced productivity

(e.g., digital RM workbench, automated lead generation)

Customer journey re-imagination

(e.g., digital customer journeys, automated approvals)

Ramp-up new digital propositions

(e.g., tech enabled and personalized propositions)

Digital performance management

(e.g., automated unit-level and individual target setting)

Health

(leadership, transparent communication, accountability)

Public

20

Transform the core

Management Analysis Key achievements

Corporate Banking; Cross-sell, pricing improvement, risk management

Consumer Banking; Mortgages, Sales infrastructure, Digital operating model

Treasury: Strong presence in primary and secondary markets, maintain solid liquidity and funding profile

Samba Capital: Innovative wealth management product solutions, leverage large customer base of bank

Corporate Banking; 30% increase in assets, significant improvement in cross-sell

Consumer Banking; 5.7x increase in mortgages sold per month vs. same time last year

Treasury: 20% increase in total investments, USD 500Mn raised in January 2020 as part of EMTN program

Samba Capital: 18% increase in operating income driven by uptake in Investment Banking activities

Corporate Banking Total

Assets, SAR bn

Consumer Banking Monthly

mortgages sold, #

Treasury Total Investments,

SAR bn

Samba Capital Operating

Income, SAR mn

70

400

Q1 2019 Q1 2020

5.7x

98

127

Q1 2019 Q1 2020

+30%

7691

Q1 2019 Q1 2020

+20%

147173

Q1 2019 Q1 2020

+18%

Public

21

Digitize the core

Strategic priorities

Reinvent customer experience; Increase emotional connection between Samba’s brand and customers

Digital monetization; Create new revenue streams by providing onboarding and acquisition digitally

Venture into new businesses; Build new digital value propositions for emerging segments

Build a culture of innovation; Tap into new technologies & improve digital literacy across organization

Branch Transactions, # Digital Transactions, # Digital Accounts Deposits, SAR mn

Digital Migration

Efficient Expansion

Digital Enablement

Mobile Branch

203,602

158,272

Feb 2020 Mar 2020

-22%

2,023,6112,338,766

Mar 2020Feb 2020

+16%

109

173

Feb 2020 Mar 2020

+60%

Public

22

Table of Contents






Covid 19 Response

Public

23

Saudi Arabia economic impact during past events

Historical Economic data, SAR Billion

Real GDPNominal GDP Fiscal surplus/deficit

Global financial crisis: Nominal GDP declined by 17.4%

(2008 -2009) but recovered to pre-crisis level in 1-2 years

Oil prices slump: Nominal GDP declined by 13.5% (2014-

2015) but recovered to pre-crisis level in 4-5 years

190

618

(87)

71282 331

162

(96)

(388) (416)(240)

(136)

1,949

1,609

2,836

2,454

1,000

2,500

-500

2,000

0

500

1,500

3,000

2006 07 08 09 10 1611 12 13 1514 17 2018

Public

24

KSA Banking sector was also impacted differently

-400bps

-36%

-17.4%

-1% (vs 20%+ pre crisis)

11% (vs 20%+ pre crisis)

-39%

3bn

0bps

-50%

-13.5%

9% (vs 12% pre crisis)

2% (vs 10%+ pre crisis)

-4%

3bn

Financial crisis, ’08/’09 Oil price crisis, ’14/’15

Interest rate change, bps

Oil price change, %

Nominal GDP change, %

Deposit growth, %

Revenue growth,%

Loan growth, %

Provisions growth, SAR

Public

25

KSA is facing a unique situation

1

2

3

Factors affecting the KSA market currently

Deep interest rate cut driven by US Fed

Depressed consumer and global demand due to COVID-19

Oil price drop due to both demand & supply shocks

The future outlook is uncertain as all three economic levers are severely impacted

however, Saudi banking sector is well positioned to absorb Covid 19 impact

Public

26

COVID-19 implications on Samba’s strategic direction

Optimize non-personnel

expenditure

Support retail and

corporate customers

Maintain/Strengthen

funding capacity of bank

Enhance focus on risk

management

Maintain leadership

position in capital ratios

Accelerate delivery of

digital initiatives

Public

27

Forward looking guidance

27

Q1 2020 Actual Full year 2020 guidance

285-290 Bn

8-10% growth

2.2-2.5%

78-83%

32-34%

55-65bps

1.85-1.95%

Total Assets

Net Loans

NIM

Cost to income ratio

Risk cost

LDR

ROA

11.5-12%ROE

267 Bn

148 Bn

2.5%

79.7%

32.7%

50bps

1.95%

11.31%

19% 17.5-19%CAR

Public

28

Conclusion

1

2

3 The bank readjusted its strategy with a clear focus on optimizing non-personnel

expenses, strengthening liquidity and risk management

The bank provided unparallel support to its employees, customers and communities to

soften the impact of Covid 19

Samba Financial Group delivered strong results in Q1 2020 despite of Covid-19, oil

prices and low interest rates challenges

4 For full year 2020, the bank aims to deliver strong results to create shareholder

value and for that purpose a forward looking guidance has been shared

Public

The Samba Financial Group (SAMBA) prepared this presentation on a proprietary basis as general background information about the activities of SAMBA. The information

contained herein is given in summary form and for discussion purposes only. Some of the information that is relied upon by SAMBA is obtained from sources believed to be

reliable, but SAMBA (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 data, 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 SAMBA 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.

SAMBA 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 SAMBA, 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 SAMBA 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, SAMBA, 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.

29

Disclaimer

Public

30

Q&A

Public

31

Table of Contents






Covid 19 Response

Public

32

Balance Sheet – Assets

Gross Loans and Advances

Held for fair value through income statement (FVIS)

Held at fair value through other comprehensive income

Other at Amortized Cost1

Investments, net

Derivatives

Property and Equipment, net

Other Assets

Total Assets

Net Loans & Advances, net

117,917 144,695 150,879

5,519 6,100 6,301

59,649 65,292 71,444

10,758 13,621 13,642

75,926 85,013 91,387

3,721 3,092 5,357

3,141 3,067 3,106

1,261 1,070 2,393

231,111 255,604 267,083

115,054 141,595 147,822

(2,863) (3,100) (3,057) Credit Impairment Provision

Amounts in SAR millions Q1 2019 Q4 2019 Q1 2020

Cash and balances with Central Banks 21,007 18,138 12,496

Due from Banks and other Financial Institutions 11,001 3,628 4,523

1. Adjusted to credit impairment provision

Public

Balance Sheet – Liabilities & Equity

93,107 93,715 98,246

7,881 7,563 7,865

63,505 73,669 65,821

5,674 5,219 5,777

170,167 180,166 177,710

6,449 15,647 26,441

- 3,746 5,652

9,523 7,236 8,702

188,376 210,155 222,213

20,000 20,000 20,000

17,193 18,348 18,348

1,678 2,882 2,364

4,764 3,697 5,034

93 90 89

42,735 45,449 44,870

231,111 255,604 267,083


Customer Deposits

Demand

Other

Total Due to Banks and other Financial Institutions

Debt securities in issue

Other Liabilities

Total Liabilities

Share capital

Statutory reserves

General and other reserves

Time

Savings

Proposed Dividend

Retained earnings

Non Controlling Interest

Total Equity

Total Liabilities and Equity

33

- 2,168 2,167Term Loan

2,237 1,192 1,540Derivatives

42,642 45,359 44,781 Equity attributed to Equity holders of Bank

(993) (962) (964)Treasury Stocks

- 1,394 -

Public

34

Income Statement


2,132 2,105 2,156 Special Commission Income

486 546 593 Special Commission Expense

1,646 1,559 1,562 Net Special Commission Income, net

316 313 326 Fee and Commission Income, net

67 78 83Exchange Income, net

72 16 361 Income from Investments, net1

19 16 27 Other Operating Income

549 479 869 Non Interest Income

2,195 2,039 2,431 Total Operating Income

(332) (435) (415) Salary and Employee related Expenses

(75) (103) (79) Rent and Premises related Expenses

(47) (64) (59) Depreciation

(198) (217) (241) Other General and Administrative Expenses

(652) (820) (795) Total Operating Expenses before credit Impairment Provision

(321) (231) (183) Provision for Credit Losses

(157) (223) (180) Zakat and Taxation

1,065 765 1,273Net Income

75 56 71Trading Income, net

(973) (1,051) (977) Total Operating expenses

1. Income from Investment held at FVIS, net + Gain on FVOCI debt, net

1,222 988 1,453Net Income before Zakat and Taxation

Public

35

Thank You

samba financial group · 2020-06-28 · samba financial group investor presentation q1 2020 results...

Documents