the national commercial bank earnings presentation · 1 day ago · the national commercial bank...

Earnings Presentation

The National Commercial Bank

2Q 2020 Results

NCB Investor Relations | 2Q 2020 Earnings Presentation

Disclaimer

2

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.


T1 Ratio (%) COR Ratio & NSCI Margin (%)

17.6%

17.2%

18.0%

16.0%

18.0%

0

0

0

0

0

0

1H 19 9M 19 FY 19 1Q 20 1H 20

0.3% 0.5% 0.5% 0.6% 0.8%

3.8% 3.8% 3.8% 3.6% 3.5%

(0)

(0)

0

0

0

0

0

0

0

1H 19 9M 19 FY 19 1Q 20 1H 20CoR NSCI Margin

Key Messages

3

Covid-19 disruptions impact 1H 20 performance

1. NCB has adjusted to the new normal

2. 1H20 performance materially impacted by Covid-19

3. Revision to 2020 financing growth guidance

4. 2020 strategy progressing well; operational strength in digital & mortgage

Net income (SARbn) Financing (SARbn)

Mortgage (SARbn) Digital Sales Penetration

282 316

+12%

0

100

200

300

400

500

600

700

800

4Q 19 2Q 20

3752

+42%

(10)

10

30

50

70

90

110

130

150

4Q 19 2Q 20

5.46 4.92

-10%

(1)

1

3

5

7

9

11

13

15

17

1H 19 1H 20

28%

51%66%

0

0

0

0

1

1

1

1

1

1

2018 2019 1H 20


> SAR 224bn

Key Government Support

NCB Response Compliant with SAMA Measures

Government Response Key Government Measures

Operating Environment Banking sector impacted by Covid-19 measures, oil market, interest rates and contraction in GDP

4

Sources: IMF, Opec, Ministry of Finance, SAMA and Social Development Bank (IMF projections based on June 2020 WEO)

1.89%

0.99%1.78%

0.30%

(0)

(0)

0

0

0

0

0

0

0

0

Interbank Rates (%)

3M SAR SAIBOR 3M USD LIBOR

1.7%

-0.7%

2.4%

0.3%

-6.8%

3.4% 3.9% 3.6% 2.9%

-4.9%

1.7%2.5%

2.2%1.7%

-8.0%-9.0%

-7.0%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

0

0

0

0

0

0

0

0

0

2016 2017 2018 2019 2020F

Real GDP Growth

KSA World Advanced Economies

Healthcare

Containment & Treatment

Government Debt to GDP Ceiling

Up to 50%

Expenditure Rationalization

Opex & Capex

VAT increases to

15%

POS & e-commerce Fees

SAR0.8 bn

Loan Guarantee Program

SAR6 bn

Funding for Lending Program

SAR13.2 bn

Deferred Payment Program

SAR50.3 bn

SAMA - PSFP SAR 70.3bn

Deferrals and Exemptions

SAR43 bn

SDB: SMEs & Families

SAR12 bn

Healthcare sector support

SAR47 bn

Private Sector Support

SAR70 bn

9.210.5 10.0 10.3 9.8

40.952.4

70.1 64.5

40.00.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

0

5

10

15

20

25

2016 2017 2018 2019 2020F

Oil Production

Oil Production (Mb/d) Average Oil Price (USD)

Serving our Customers

Cash availability acrossATMs, branches & remittance centers

100%

Digital channel availability

99.7%

Digital account opening

87%

BranchesOperational

100%


2020 Strategy Progress Accelerated focus on Retail & Digital

5

Stra

tegi

cEn

able

rs

Digital Productivity

Accelerate digital transformation Increase Operational Efficiency

Digital sales Advanced analytics

Lean distribution Robotics & AI

1H 2020 Update

Digital Transactors (% of total base): 72.8% Digital Account Opening: 87.2%

NCB 1H20 C/I 31% (NCB Group 32%) 130 bots (+75 YTD) 333 self-service kiosks (+22 YTD)

Funding

Current Accounts Wholesale Funding

Grow Current Accounts

Expand Funding Options

Digital & physical distribution

Cash management Customer coverage

models

Programs across maturity and seniority spectrums

Mix and cost optimization

1H 2020 Update CASA +17% YTD Affluent Banking

proposition enhancements

SAR 5bn long-term diversified funding YTD

SAR 4.2bn T1 Sukuk issued & SAR 1bn Sukuk redemption

Asset Deployment

Retail Corporate Treasury Subsidiaries

Grow Mortgages Improve Returns Sustain Investment Returns

Grow Value Contribution

Sales channels Digitization

Mega financing SME Transaction banking

Recurring revenues Portfolio liquidity &

quality

Key business lines Efficiency &

productivity

1H 2020 Update +42% Mortgage

growth SAR 52bn Mortgage

balance

1Q 2020 Update +9% Financing

growth Cash Mgmt Coverage

up. POS M.S. +1.6ppts

1Q 2020 Update +16% 2Q 2020 NSCI Stable 172% LCR,

>85% IG portfolio

1Q 2020 Update TFKB 1H NI +97%

(TRY), C/I 40.5% YTD NCBC 1H NI +31% YoY,

CI 33% YTD


1H 2020 Financial Highlights

6

1H 20 performance impacted by Covid-19

ROE

15.2% -282 bpsYoY

ROA

1.9% -49 bpsYoY

Net Income (SAR mn)

4,922 -10%YoY

Total Assets (SAR bn)

557.3 +10%YTD

Operating Income (SAR mn)

10,071+1%

NSCI

7,895 +3%YoY

NSCI Margin

Fee & Other Income

2,176-7%YoY

Cost to Income Ratio

-83 bps

Cost of Risk

0.8% +48 bpsYoY

NPL Coverage Ratio

140.9% +279 bpsYTD

Financing(SAR bn)

+12%

Investments(SAR bn)

146.3+9%YTD

EPS (SAR)

-10%YoY

1.76 1.58

1H 19 1H 20

282 316

4Q 19 2Q 20

3.77%3.46%

1H 19 1H 20

32.8% 32.0%

1H 19 1H 20

Customers’ Deposits (SAR bn)

+8%

353 380

4Q 19 2Q 20

Mortgage(SAR bn)

+42%37 52

4Q 19 2Q 20

DPS (SAR)

1.10 -

1H 19 1H 20 *

* 1H 2020 Dividend deferred; retaining capital in an uncertain environment and preserving capacity to support lending activities.


Asset Deployment Healthy balance sheet growth from financing and investments

7

282 305 316

134 133 14662 54 53

29 43 42507 535 557

0

0

0

0

0

1

1

1

1

4Q 19 1Q 20 2Q 20

Total Assets Composition (SARbn)

Financing Investments Cash, Bank & SAMA Other

535 477 557

0

100

200

300

400

500

600

700

800

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Total Assets Trend (SARbn)

507.3

34.012.2

(9.4)

13.2 557.3

+10%

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

4Q 19 Financing Invest-ments

Cash,Bank &SAMA

Other 2Q 20

Movement in Total Assets (SARbn)


282.3

15.4

(0.4)

11.34.1

3.8 316.3

+12%

0

10

20

30

40

50

60

70

80

90

100

4Q 19 Mortgages Other Corporate FI Inter-national

2Q 20

Movement in Financing (SARbn)

Financing Financing growth of 12% from strong Retail mortgages, Corporate, FI and International

8

Retail+SAR 15.0bn (+12%)

Guidance+12%-14%

131 111 139

0

20

40

60

80

100

120

140

160

180

200

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Retail (SARbn)

138 133 139

0

50

100

150

200

250Corporate (SARbn)

20 20 23

0

5

10

15

20

25

30

35

40

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

International (SARbn)


Investments Investment portfolio increased 9% from continued participation in SGBs and high-quality securities

Saudi Government

securities50%

Other investment grade35%

Non-investment grade8%

Equity & others7%

Investments by Credit Grade (SARbn)

Fixed rate securities

54%

Floating rate securities

37%Equity instruments & others9%

Investments by Type (SARbn)

134 146

0

20

40

60

80

100

120

140

160

4Q 19 2Q 20

134.14.6

4.03.7

(0.1)

146.3

+9%

0

20

40

60

80

100

120

4Q 19 SaudiGovernmentsecurities

Otherinvestment

grade

Non-investment

grade

Equity &others

2Q 20

Movement in Investments (SARbn)

134 146

0

20

40

60

80

100

120

140

160

180

4Q 19 2Q 20

9


507.3

39.3

(16.1)

11.91.1 3.7

(1.5)

0.5(0.3)

557.3

+10%

7.3 4.1

0

50

100

150

200

250

4Q 19 CASA Time Other CASA Time Other Inter-bank

Debt OtherLiabil-ities

TotalEquity

2Q 20

Movement in Funding (SARbn)

CASA77%Time

19%

Others4%

Customers' Deposits Mix (SARbn)

Interbank15%

Customers' deposits79%

Debt0%

Other6%

Total Liabilities Mix (SARbn)

Funding Balance sheet growth funded by growth in CASA and interbank balances

10

Domestic Deposits+SAR 24.2bn (+7%)

437 483

0

100

200

300

400

500

600

4Q 19 2Q 20

353 380

0

100

200

300

400

500

600

4Q 19 2Q 20

International Deposits

+SAR 2.8bn (+11%)


* Impairments include impairment charges for financing and investments

Net Income Decline in net income due to Covid-19 impact, lower fee income and higher credit cost

11

2.4% 1.9%-49 bps

0

0

0

0

0

0

0

0

0

1H 19 1H 20

ROA (%)

1.76 1.58

-10%

0

1

1

2

2

3

3

4

4

1H 19 1H 20

EPS (SAR)

18.0% 15.2%

-282 bps

0

0

0

0

0

0

0

0

0

0

1H 19 1H 20

ROE (%)

5,461

233

(164)

61

(754) (16)

133

(32)

4,922

-10%

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

1H 19 NSCI Fee &Other

Income

Expenses Impair-ments*

OtherNon-

Operating

Zakat &Income

Tax

Minorities 1H 20

Net Income after Zakat and Income Tax attributed to Equity Holders (SARmn)


7,662 104

(38)

452

(524)

144 104

(11)

7,895

+3%

3.77% +4 bps -40 bps +3 bps -12 bps +11 bps +2 bps -0 bps +1 bps 3.46%

2

-

1,000

2,000

3,000

4,000

5,000

6,000

1H 19 Retail Corporate Other Investments Depositmix &cost

Wholesalefunding

Other International 1H 20

Movement in Net Special Commission Income (SARmn) & NSCI Margin (%)

NSCI and Margin Net special commission income grew 3% YOY; Margin impacted by lower rate environment

Guidance3.40%-3.60%

1.2%0.7%

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Funding cost (%)

4.9%

4.0%

0

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Commission yield (%)

12

3.8% 3.3%

2.8%1.12%

0

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

NSCI margin & Avg Interbank Rate (%)

NSCI margin 3M SAR SAIBOR

Financing Mix & Yield+SAR 31mn

Quarterly Figures


81

254

2,340

(46) (26)

106

(16)

26101

(273) (35)

2,176

1,9222,259

-7%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1H 19 Finance&

lending

Tradefinance

Inv. mgt.&

brokerage

Creditcards

Others ExchangeIncome

Investment-relatedincome

Otheroperatingexpenses

1H 20

Fee and Other Income Movement (SARmn)

Fee & Other Income Fee and other income declined due to lower investment related income, fee waivers and higher other operating expenses; partly offset from FX and investment management fees

624 615

628

0

200

400

600

800

1,000

1,200

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Fee from banking services (SARmn)

314 290 316

0

100

200

300

400

500

600

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Exchange Income (SARmn)

*

490

332

20 0

100

200

300

400

500

600

700

800

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Investment-related Income (SARmn)

* Includes adjustments for adoption IFRS9/15 relating to fees amortization

Domestic

International

Fees from Banking Services+SAR 44mn (+4%)

13


Operating Expenses Lower operating expenses from decreased employee related expenses and other G&A

14

Domestic

International

32.8%32.5%

30.7%

31.9% 32.0%

31.2% 31.0%

29.3%

30.9%31.0%

0

0

0

0

0

0

0

0

0

1H 19 9M 19 FY 19 1Q 20 1H 20

Cost to Income Ratio (YTD %)

Group (%) Excluding International (%)

Guidance< 33%

3,282

(32) (19)

11

(21)

3,221

2,837

384

2,915

367

-2%

0

500

1,000

1,500

2,000

2,500

3,000

1H 19 Employee-related

Rent &premises

Deprecia-tion &amorti-zation

OtherG&A

1H 20

1H 20 Operating Expenses Movement (SARmn)


Cost of Risk for Financing Increase in impairments from Covid-19 related adjustments and impacts

0.3%0.6%

0.8%

0

0

0

0

0

0

0

0

1H 19 9M 19 FY 19 1Q 20 1H 20

Group

0.5%0.3% 0.3%

0

0

0

0

0

0

1H 19 9M 19 FY 19 1Q 20 1H 20

Retail

0.1%0.4%

1.1%

(0)

0

0

0

0

0

0

0

0

0

1H 19 9M 19 FY 19 1Q 20 1H 20

Corporate

1.4%2.7% 2.3%

0

0

0

0

0

0

0

0

1H 19 9M 19 FY 19 1Q 20 1H 20

International

CoR (%)

472

(102)

42

768 107

13

(41)

1,258

+166%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1H 19 Impairments Recoveries& Other

Impairments Recoveries& Other

Other International 1H 20

Movement in Impairments (SARmn)

Corporate+ SAR 727 mn

Retail-SAR 60 mn

15


5,329 133

633

(183)

5,912

+11%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

4Q 19 Retail Corporate International 2Q 20

Movement in NPLs (SARmn)

Credit Quality Credit quality weakened from Covid-19 impact

Domestic+SAR 766mn (+21%)

16

145%138%

141%1.8% 2.1% 1.8%

120%

130%

140%

150%

160%

170%

180%

190%

200%

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Group

278% 277%

221%

0.5% 0.6% 0.5%

200%

250%

300%

350%

400%

0

0

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Retail

141%

152% 150%2.4% 2.5% 2.6%

134%

136%

138%

140%

142%

144%

146%

148%

150%

152%

154%

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Corporate

81% 62% 75%

5.5%9.7%

6.1%20%

40%

60%

80%

100%

120%

0

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

International

NPL Ratio NPL Coverage


T1 Guidance16% - 18%

Capital Capital position comfortably above regulatory minima

0.79

(2.84)

0.88

3.7(3.6)

(5)

(4)

(3)

(2)

(1)

1

2

3

4

5

4Q 19 1Q 20 2Q 20

Other Reserves (SARbn)

390.3 34.8 0.2

(4.6)

420.8

+8%

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

4Q 19 Credit risk Operationalrisk

Market risk 2Q 20

Movement in RWA (SARbn)

15.8% 15.4%16.2%

14.4%

15.6%

17.6%17.2%

18.0%

16.0%

18.0%

18.4%18.0%

18.7%

16.9%

19.0%

0

0

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Capital Ratios (%)

CET1 ratio T1 ratio TC ratio

73.2 4.9 3.2

(3.6)

79.9 2.2

+9%

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

4Q 19 Net Income Net SukukIssuance

2019 FinalDividend

Other 2Q 20

Movement in Total Capital (SARbn)

17


* Headline ratio, which does not equate to SAMA regulatory LDR ratio

Liquidity Strong and stable liquidity profile maintained

18

92 92 99

113 112

50 53 59 64 68

185.5%173.2% 168.9%

176.1%165.0%

(5)

15

35

55

75

95

115

135

1

1

1

1

1

2

2

2

2

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

LCR Ratio (%)

HQLA (SARbn)Net cash outflows (SARbn)LCR

13.0% 12.6% 12.8% 11.4% 12.4%

0

0

0

0

0

0

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

Basel III Leverage Ratio (%)

330 334 343 362 384

263 271 275 309 319

125.5% 123.2% 124.4%117.1% 120.0%

(18)

82

182

282

382

482

582

1

1

1

1

1

1

1

1

1

1

2

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

NSFR Ratio (%)

Available stable funding (SARbn)Required stable funding (SARbn)NSFR

83.9% 82.4% 79.9% 81.3% 83.1%

0

0

0

1

1

1

1

1

2Q 19 3Q 19 4Q 19 1Q 20 2Q 20

LDR Ratio* (%)


2020 Guidance

19

Financing guidance revised upwards;

Possibility of varied outcomes persists

Macro-Economic Outlook

2020 Original Outlook 2020 Expected Outlook

Oil Price USD 60 / bbl USD 40 / bbl

US Fed Rates Stable Stable rest of 2020

GDP Growth Real GDP 2.3% Real GDP -6.8%

Fiscal Balance Deficit 6.4% of GDP Deficit 11.4% of GDP

Inflation 2.0% 0.9%

NCB Financial Guidance

FY 2019 Reported

2Q 2020 Reported

FY 2020 Guidance

FY 2020 Outlook

Financing Growth +6.5% +12% +8% - 10% Revised+12%-14%

NSCI Margin 3.77% 3.46% 3.40% - 3.60% Within Guidance

Cost to Income 30.7% 32.0% Below 33% Within Guidance

Cost of Risk 0.51% 0.82% 0.8% - 1.0% Within Guidance

Tier 1 CAR 18.0% 18.0% 16% - 18% Within Guidance

Macroeconomic Indicator Sources: IMF, Opec (June 2020)

Q&A SESSION

2Q 2020 Results

20

ADDITIONAL INFORMATION

2Q 2020 Results

21


Contact UsThe National Commercial Bank

P.O. Box 3555

21481 Jeddah, Kingdom of Saudi Arabia

Mr. Abdulbadie Alyafi

Head Of Investor Relations

[email protected]

More InformationVisit: http://www.alahli.com/en-us/Investor_Relation

to access NCB’s current and previous Investor Publications including:

Financial statements

Earnings releases

Investor presentations

Financial data packs (in Excel)

NCB Contacts NCB welcomes your feedback and inquiries

22

http://www.alahli.com/en-us/Investor_Relation

the national commercial bank earnings presentation · 1 day ago · the national commercial bank...

Documents