B URGAN B ANK G ROUP I NVESTOR P RESENTATION 1 ST Q UARTER 2017 - - PowerPoint PPT Presentation

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B URGAN B ANK G ROUP I NVESTOR P RESENTATION 1 ST Q UARTER 2017 - - PowerPoint PPT Presentation

B URGAN B ANK G ROUP I NVESTOR P RESENTATION 1 ST Q UARTER 2017 Burgan Bank a journey of success from local bank to a regional powerhouse with more than 180 branches in 7 countries across the MENAT region. Inception Lunch of new identify


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BURGAN BANK GROUP

INVESTOR PRESENTATION

1ST QUARTER 2017

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Burgan Bank – a journey of success from local bank to a regional powerhouse with more than 180 branches in 7 countries across the MENAT region.

Inception Kuwait Projects Company (KIPCO) becomes the largest shareholder Lunch of new identify and announcing expansion plan Entering the Algerian Market through AGB Entering the Iraqi Market through BOB Entering the Lebanese Market through BOB branch Entering the Tunisian Market through TIB Entering the Turkish Market through BBT Entering the UAE Market through Corporate Office in DIFC

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RESILIENT BUSINESS MODEL + FOCUSED EXECUTION…

(1) Excluding one-offs; (2) Adjusting for FX depreciation; (3) After AT1 cost and excluding precautionary provisions;

HIGH QUALITY EARNINGS

Maintained with operating efficiencies focus

LEADING INDICATORS

ARE POSITIVE And selective growth continues

MANAGED BY RETURNS

Lower valuation promising upside potential

1 2 3

KEY PERFORMANCE INDICATORS Q1’17

1.0X

PBV

11.2X

PE

14%

ROTE underlying(1)(3)

6%

Jaws Ratio(1)

0.6%

Cost of Credit

5%

Core revenue growth(1)(2)

23%

True earnings growth(1)(3)

66%

Time Deposits Contribution

1.1%

NPA Ratio net of collateral

8%

Customer Loans Growth(2)

16.5%

Capital Adequacy Ratio

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AMID LOW GLOBAL AND REGIONAL GROWTH AND CURRENCY

DEPRECIATION…

TRY, TND strongly depreciated (year-on-year) against the USD, KWD mildly

2.9 3.7 2.0 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 USDTRY 10 - year average (23%) TRY depreciation

Turkish Lira – past 12 months

3.31 3.28 3.50 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 KWDUSD 10 - year average (1%) KD depreciation

Kuwaiti Dinar– past 12 months

Source: Economic Indicators Burgan Bank Economic Research, as of Dec 2016.; Banking Sector latest Figures based from Countries Central Banks, IMF Article IV Consolation Reports and Bloomberg. Currency figures as of 9 April 2017. Note: 1. In 2017, a) CET1 requirements (9.5% Kuwait vs. 5.8% internationally); b) Tier 1 requirements (11% Kuwait vs.7.3% internationally) and c) total capital ratio (13% Kuwait vs. 9.3%). 2.0 2.3 1.6 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 USDTND 10 - year average (14%) TND depreciation

Tunisian Dinar – past 12 months

Trump reforms delayed; oil prices not lifted by Opec agreement

Past 3 months Next 3 months

  • New US president Trump reforms are being
  • delayed. US Dollar Index (DXY) is down 3.0% year-

to-date.

  • The Opec oil agreement to cut oil production

came into force: high compliance within the Opec, but oil prices below year-end levels, due to high inventories and increasing US production.

  • Tax reform and infrastructure spending plans in

the US are likely to be passed. Uncertainty about tightening of the monetary policy.

  • The Opec is likely to announce an extension of the

agreement: impact on oil prices will depend on compliance outside Opec group and US shale oil production.

Challenging

  • perating

environment: low global and regional growth

Global and regional

Past 3 months

  • Global: Low global growth is hampered by persistent

structural problems, such as low productivity growth.

  • GCC: Lower-for-longer oil prices are impacting public

finances, despite subsidy cuts; regional instability persists.

  • Turkey: further political uncertainty ahead of the

constitutional referendum. Next 3 months

  • Global: tensions over the possibility of disruption of

trade agreements and security situation in East Asia.

  • Turkey: Domestic and regional tensions, involvement in

Syria and Iraq conflict, and extension of the emergency rule will continue to impact investor's sentiment.

  • Iraq: Domestic security is expected to improve.
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DELIVERING SOLID BUSINESS PERFORMANCE

Revenue(1) USD million

Q1’17: YoY Growth

5% 4%

Q1’17: YoY Growth as reported

After perpetual cost

23% 7%

(1) Adjusted for non recurring items; (2) Returns computed on reported net profit after AT1 Cost. (3) Q1’17 lost income from foreign exchange devaluation in subsidiaries after rebasing Q1’17 with Q1’16 rates; Note 1: Local peers Includes NBK, GBK and ABK.

Cost of Credit USD million

17 1 13 10 17 10 46 21 Q1'16 Q1'17

Kuwait International Additional Precautionary

0.6% 1.8%

1.3% 0.6% 328% 378%

Net Profit(2) USD million

54 67 54 67 Q1'16 Q1'17

Underlying

23%

Cost of Credit Coverage net of Collateral

Q1’17: Cost of Credit

BBG Local Peers Avg.

Net Interest Income(1) USD million

3% 2%

134 129 9 134 138 2.4% 2.3% Q1'16 Q1'17

Foreign Exchange Impact NIM's

3% 188 186 11 188 197 15% 18% Q1'16 Q1'17

Foreign Exchange Impact F&C Income to Revenues

5%

  • (0.8)

1 Offs

1 (3)

1 Offs

(3) (3) (3)

1 (8)

1 Offs

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AIMING TO DELIVER DOUBLE DIGIT RETURNS…

Returns(1) %

13.0% 2.0% (1.8%)

15.0%

Q1'17

As reported adjusted

  • for. 1 offs

13.9% 2.2% (2.0%)

16.1%

Q1'17 ROE ROTE RRWA

AT1 Cost

13.2% 1.5% 0.2% (0.2%)

1.7%

Q1'17

Additional Precautionary Provisions

(1) ROE & ROTE computed on Opening Equity.

Earnings Evolution | USDm

14.1% 1.5% 38 47 35 31

57

17 17 17 29

10

54 64 52 60

67

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Net Income excl. 1 offs after AT1 cost 1 Off’s

Additional Precautionary Provisions

Q1’16 Q1’17

1.1 (7.6) 0.5 12.8 24.2

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Customer Loans USDm

9,401 9,686 9,579 9,425 9,552 4,435 4,623 4,539 4,547 4,500 13,836 14,310 14,118 13,972 14,052 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Kuwait International

Asset Quality USDm

682 677 802 666 767 130% 125% 109% 124% 110% 328% 443% 385% 407% 378% Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Total NPAs Coverage Ratio Coverage Net of Collateral

2.2% 2.1% 2.5% 2.0% 2.4% 1.4% 1.4% 1.6% 1.4% 1.5%

3.6% 3.5% 4.1% 3.4% 3.9% Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Kuwait International

0.8% 0.5% 0.5% 0.5% 0.6% 0.6% 0.5% 0.6% 0.6% 0.6%

1.4% 1.0% 1.2% 1.0% 1.1% Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Kuwait International

NPA to Gross Facilities NPA’s net of collateral to Gross Facilities Customers Deposits Breakdown

Deman d 26% Saving 5%

Time 66%

Other 3%

USD 12.9b

Q1’16 Q1’17 Deman d 27% Saving 5%

Time 66%

Other 2%

USD 12.9b

YoY growth adjusted for FX Devaluation

WITH PRUDENT BALANCE SHEET PROGRESSION…

YoY growth as reported

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(1) Excludes 1 offs items in Kuwait; (2) Net Profit Margin for Kuwait excl. precautionary provisions; (3) Based on CBK reporting and Kuwait CAR is for the Group. Note: Subsidiaries figures before consolidation adjustments. Q1’17 Figures Q1’16 Figures Q1’17 Contribution

Kuwait | KDm Turkey | TRYm Algeria | DZDm Iraq | IQDm Tunisia | USDm

CUSTOMER LOANS

2,911 2,838 12,146 9,342 21 13 110,524 98,158 172,948 247,209

68% 24% 7% 1% 0.1%

REVENUES(1)

35 33 115 144 3 4 2,721 2,384 25,452 14,165

54% 20% 13% 11% 2%

CAR(3)

16.5% 16.4% 13.9% 17.9% 19.7% 23.8% 56.5% 53.8% 21.2% 19.2%

NUMBER OF BRANCHES

49 60 42 + 1 3 + 1 29

COST OF CREDIT

1.4% 0.4% 1.1% 1.0% 1.1% 0.7% 6.4% 0.0% 2.0% 9.4%

NET PROFIT MARGIN(2)

50% 60% 7% 14% 20% 26%

  • 65%

5% 28% 41%

CAPTURING DIVERSIFICATION BENEFITS…

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MENAT Banks Comparative PB Ratios MENAT Banks Growth Matrix(8)

Kuwait

1.4x

Bahrain

1.2x

Saudi Arabia

1.1x

Egypt

1.6x

UAE

1.2x

Jordan

1.1x

Qatar

1.6x

Lebanon

0.7x

Oman

0.9x

Turkey

1.0x

Bahrain Egypt Jordan Kuwait Lebanon Oman Qatar Saudi Arabia Turkey UAE Burgan Bank

  • 10%
  • 5%

0% 5% 10% 15% 20% 25%

  • 30%
  • 20%
  • 10%

0% 10% 20% 30% Net Income YoY Growth Loans YoY Growth

BURGAN BANK HAS COMPETITIVE METRICS AMONGST PEERS

AND BANKING UNIVERSE…

Q1’17

Customer Loans Growth % Revenues Growth % EPS(6) Growth % COC % ROTE % JAW’s %

8%(1) 5%(1)(3) 30% 0.6% 14%(3)(4) 6%(4)

Rankings

#1 #2 #1 #1 #2 #2

3% 7%(5) | 8% (3%) 1.0% 15% 4% (6%) 0.1% 7% 2.4% 7% 8%

  • (2%)

5% 10% 1.9% 6% 3%

PE(x)(2) PB(x)(2)

11.2x 1.0x

Undervalued Undervalued

11.9x 1.4x 20.0x 1.3x

  • 14.5x

0.9x

Upside Potential

(1) Adjusted for foreign exchange devaluation (2) Closing Prices of 31/3/2017; (3) Burgan Bank figures excludes 1 off items; (4) Burgan Bank ROTE Exclude Additional Precautionary Provisions and after AT1 Cost; (5) Revenue growth excluding Boubyan Bank (Islamic Bank); (6) EPS as reported and after AT1 cost; (8) MENAT banks figures based on latest filling by Bloomberg and PB ratios are country banks average. Source: Companies Financials. Note: Additional precautionary provisions for local banks are not disclosed. Note: CBK figures not reported as of 5/8/2017..

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(1) Adjusted for one-offs and Lost income from foreign exchange devaluation; (2) Excluding one-offs, gross precautionary provisions and after AT1 cost.

REVENUE GROWTH

5%(1)

NET PROFIT GROWTH

23%(2)

Strength of franchise focused on high quality earnings

► True growth inertia maintained ► Continue carefully to capture diversification benefits despite operating in

highly volatile environments

STRONG FRANCHISE IN CHALLENGING OPERATING ENVIRONMENT KEY METRICS Q1’17

POSITIVE JAWS

6.4%

NPA RATIO NET

1.1%

CAR

16.5%

ROTE

14.1%(2)

Good operating efficiencies and credit risk management

► Positive jaws achieved ► Optimized spending and rationalized investments ► Asset quality in comfortable levels with healthy coverage ratios ► Aligning risk appetite to strategy and use of capital

What's coming ahead

► Continue to strategically innovate ► Smart and selective growth/optimization of capital ► And aiming to deliver double digit returns

IN SUMMARY

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THANK YOU

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IMPORTANT NOTICE This presentation has been prepared by Burgan Bank and is subject to the applicable laws and regulations in the State of Kuwait. It is for information purposes only and it shall not be reproduced or redistributed to any other person without obtaining Burgan Bank’s prior written consent. It does not and shall not constitute either an

  • ffer to purchase or buy or a solicitation to purchase or buy or an offer to sell or exchange or a solicitation to sell or exchange any securities of Burgan Bank. Neither

this presentation nor anything contained herein shall form the basis of any contract, commitment or advice whatsoever. This Presentation must be read in conjunction with all other publicly available information. To the maximum extent permitted by law, Burgan Bank and its directors, employees, agents ,consultants, affiliates and subsidiaries expressly exclude all liability and responsibility for any loss or damage arising from the use of, or reliance on, the information contained in this presentation or the website whether or not caused by any negligent act or omission. Neither Burgan Bank nor any of its directors, employees, agents, consultants, affiliates, or subsidiaries warrant or represent the correctness, accurateness or completeness of the information provided herein. This document is not to be relied upon in any manner as legal, tax or investment advice. Each recipient hereof shall be responsible for conducting its own investigation and analysis of the information contained herein and shall familiarize and acquaint itself with, and adhere to, the applicable local legislations. Except where otherwise expressly indicated herein, this presentation 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. INVESTOR RELATIONS Contact details below for any enquiries related to Burgan Bank and Subsidiaries; Email: IR@burgan.com Phone: +965 2298 8852 Foreign Exchange Rates

KWD:US$ End Period: (Q1’17) 3.281, (Q4’16) 3.267, (Q3’16) 3.318, (Q2’16) 3.314, (Q1’16) 3.313, (Q1’15) 3.331. KWD:US$ Average: (Q1’17) 3.278, (Q4’16) 3.273, (Q3’16) 3.316, (Q2’16) 3.304, (Q1’16) 3.304, (Q1’15) 3.372.

DISCLAIMERS