B URGAN B ANK G ROUP I NVESTOR P RESENTATION F ISCAL Y EAR 2017 T - - PowerPoint PPT Presentation

BURGAN BANK GROUP

INVESTOR PRESENTATION

FISCAL YEAR 2017

TABLE OF CONTENTS

Contents Page Macro Environment Reading 3 Group Financial Performance 5 Summary 11

3

MACRO ENVIRONMENT READING

4

Source: Burgan Bank, EIU, 2018.

OUR READING FOR 2018: SLIGHTLY IMPROVED LANDSCAPE, BUT PRUDENCE TO CONTINUE WITH DISCIPLINED GROWTH…

Risks

UPSIDE DOWNSIDE

Region Probability(%) Market Impact

Likely reaction

US: tax cuts significantly increase profit repatriation and investment; infrastructure spending plans implemented in full; continued Fed normalization

1 US 20 BULL (GLOBAL)

1) Economy: higher growth, employment and inflation supported by a) increased investment; b) rising infrastructure spending. 2) Banking: higher lending and deregulation. EU: increased fiscal spending, led by Germany

2 EU 20 BULL (EU)

1) Economy: France and Germany support increased government spending in S. Europe in exchange for reforms and first few steps towards issuing Eurobonds 2) Banking: higher lending

3 2 1 4 5 6

Algeria: success of diversification efforts and regulatory changes on business environment, labor market, and foreign investment

3

MENAT/ GCC

20 BULL (ALGERIA)

1) Economy: growth, increase in private and foreign investment, reduced dependence on natural resources, appreciation of DZD 2) Banking: higher lending GCC: most countries successfully implement VAT and other revenue-raising taxes, and succeed in reducing subsidies.

4

MENAT/ GCC

20 BULL (GCC)

1) Economy: growth, lower budget deficit/higher budget surplus, reduced dependence on natural resources, higher government investment. 2) Banking: higher lending. GCC: successful resolution of the Qatar crisis. GCC regains strength as an institution.

MENAT/ GCC 20 BULL (GCC)

1) Economy: intraregional trade flows and joint investment programs resume. Adoption of common taxation regulation. 2) Banking: resume lending to Qatar institutions, reduce allocation to safety assets.

5

Regional: escalation of tensions between US, and N.Korea, EU and Russia, S.Arabia and Iran

GLOBAL 20 BEAR (GLOBAL)

1) Economy: disruption of confidence and trade; lower global growth. 2) Banking: defensive portfolio allocation; reduced lending. Global: loss of credibility of central banks

GLOBAL 25 BEAR (GLOBAL)

1) Economy: disruption of confidence and transmission of monetary policy resulting in credit contraction; fiscal expansion to limit market volatility. 2) Banking: switch to liquid assets and safer sectors/companies. MENAT/ GCC

20 BEAR (TURKEY)

1) Economy: lower growth, risk to foreign capital inflows, depreciation of TRY. 2) Banking: likely to cut lending rates after the regulator’s proposal. GCC: Qatar crisis tensions increase. Qatar leaves GCC, intensifies links with Iran, Turkey MENAT/ GCC

15 BEAR (GCC)

1) Economy: declining investment; volatility of oil prices. 2) Banking: hedge local currencies out of the money forward; focus on cash-flow. Turkey: political tensions spill over to the economy Global: Trump policies increase protectionism and trigger global trade wars.

GLOBAL

1) Economy: disruption of confidence and trade; lower growth; higher oil prices. 2) Banking: defensive portfolio allocation; reduced lending.

15 BEAR (GLOBAL)

MENAT: Opec deal broken, oil below 40 USD/bbl Global: faster-than-expected Fed rate hikes

GLOBAL 15 BEAR (GLOBAL)

1) Economy: lower growth and investment in EMs; periphery-to-core capital flows. 2) Banking: defensive portfolio allocation; reduced lending.

10

MENAT/ GCC 1) Economy: lower growth; declining investment; higher budget deficit and debt. 2) Banking: defensive portfolio allocation.

BEAR (MENAT) 7

5

GROUP FINANCIAL PERFORMANCE

6

2017 FINANCIAL TARGETS…

(1) Excluding one-offs; (2) Net Income attributed to equity holders after AT1 cost and excluding precautionary provisions; (3) Central Bank of Kuwait Monthly Statistic Data for December 2017 in USD growth.

2017 TARGETS SCORECARD

4%

KUWAITI BANKS(3)

LOANS GROWTH

In line with the Kuwaiti Market

YIELD AND EFFICIENCY

Improvement

6%

BURGAN BANK

FY16 FY17

NIMS

2.4%

2017(1) JAWS

11.7%

NIMs

2.2%

2016(1) JAWs

(1.2%)

ASSET QUALITY

At comfortable levels

NPL RATIO

2.7%

2017

COVERAGE

155%

NPL Ratio

4.1%

2016

Coverage

120%

OPTIMIZE CAPITAL

Without the need for a dilutive capital hike

CET1 RATIO

10.9%

2017

ROTE(1)(2)

13.8%

CET1 Ratio

11.2%

2016

ROTE(1)(2)

12.0%

7

2017 PERFORMANCE OUTPACES LAST YEAR…

(1) Excluding one-offs and precautionary provisions; (2) Net Income attributed to equity holders; (3) ROTE after AT1 cost.

514.5 260.6 775.1 Net Interest Income Non Interest Income Operating Income

FY16 As Reported - US$’mn

563.9 225.9 789.8

FY17 +10%

(13%)

+2%

Growth

(57.9) (79.1) Provision for Loans CBK Precautionary Provisions (64.5) (72.7) +11% (8%) (375.7) Operating Expense (360.2) (4%) 399.4 Operating Profit 429.5

+8% KPI’s

(10.6) Provision for Investment Securities (28.9) +174% 225.3 Net Income(2) before AT1 cost 214.9

(5%)

2.3% NIM’s 2.4% +14 bps (4.0%) JAW’s 6.0% +1000 bps 1.0% Cost of Credit 0.9% (10 bps) 9.7% ROTE(3) 9.0% (70 bps) 4.1% NPL Ratio 2.7% (140 bps) 16.7% CAR 16.2% (20 bps) 511.2 212.4 723.6 Net Interest Income Non Interest Income Operating Income

FY16 Underlying(1) - US$’mn

562.5 212.0 774.5

FY17 +10%

• +7%

Growth

(57.9)

• Provision for Loans

CBK Precautionary Provisions (64.5)

• +11%
• (365.7)

Operating Expense (348.6) (5%) 357.8 Operating Profit 425.9

+19% KPI’s

(4.4) Provision for Investment Securities (0.9) (80%) 270.5 Net Income(2) before AT1 cost 311.0

+15%

2.2% NIM’s 2.4% +20 bps (1.2%) JAW’s 11.7% +1290 bps 0.4% Cost of Credit 0.4%

• 12.0%

ROTE(3) 13.8% +180 bps 4.1% NPL Ratio 2.7% (140 bps) 16.7% CAR 16.2% (20 bps) 189.7 Net Income(2) after AT1 cost 178.6 (6%) 235.0 Net Income(2) after AT1 cost 274.7 +17% 12,211 Customers Deposits 13,768 +13%

Balance Sheet

13,802 Customers Loans 14,607

+6%

2,292 Total Equity 2,398 +5% 12,211 Customers Deposits 13,768 +13% 13,802 Customers Loans 14,607

+6%

2,292 Total Equity 2,398 +5%

Balance Sheet Income Statement Income Statement

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Revenues and Margins | USD mn,%(1)

724 774 2.2% 2.4% FY 16 FY 17

Asset Quality Capitalisation (Basel 3)

11.7% 11.2% 10.9% 15.6% 16.7% 16.2% FY 15 FY 16 FY 17 CET1 CAR 3.9% 4.1% 2.7% 134% 120% 155% FY 15 FY 16 FY 17 NPL Ratio Coverage Ratio

Revenues improved, driven by healthy net interest income growth… Asset quality in comfortable levels with lower cost of credit Continue to optimize capital

Earnings Underlying | USD mn,%(2)

61 71 13.0% 15.2% Q4'16 Q4'17 Net Income ROTE

YTD earnings and returns are on the right track after the full implementation of Basel 3 post 2014…

0.9% 1.0% 1.4% Cost of Credit

(1) Excluding one-offs; (2) Earnings underlying excluding one-offs, precautionary provisions and after AT1 cost.

9.7% 9.7% 10.5% Leverage Ratio 180 200 2.2% 2.6% Q4'16 Q4'17 Revenues NIMs 235 275 12.0% 13.8% FY 16 FY 17 2.3% 3.4% 3.8% NPA Ratio COC excl. Precautionary 0.4%

DRIVEN BY A FOCUS ON CORE EARNINGS, YIELDS

IMPROVEMENT AND EFFICIENCIES…

0.7% 0.4%

9

Asset Mix

13% 12% 13% 7% 7% 7% 8% 11% 9% 59% 58% 59% 13% 12% 13% FY 15 FY 16 FY 17 Other Assets Loans Due from Banks

• T. Bills & Bonds

Cash

Funding Mix

57% 51% 56% 25% 28% 25% 2% 2% 2% 6% 9% 7% 10% 10% 10% FY 15 FY 16 FY 17 Total Equity Other Liabilities

• Perp. Tier 1

Due to Banks Customers Deposits 24.6 23.8 22.5 24.6 23.8 22.5

Driven by loans… Still focusing on LT stable funding…

US$ bn US$ bn

Customers Loans | USD bn,%(1)

Loans grew 6% year on year supported by international operations

13.2 13.8 14.6 FY 15 FY 16 FY 17 33% 32% 18.0 15.9 37% CAGR Growth International Contribution RWA excl. Real Estate Collateral Phase-out impact in US$ Bn Oil/gas 2% Trade 12% Real Estate 22% Person al 27% Manufa cturing 12% Constru ction 8% Others 17%

Customers Loans by Sector | FY 17 Customers Deposits | USD bn,%(2)

… with deposits growing at 13% year on year

12.8 12.2 13.8 FY 15 FY 16 FY 17 113% 104% Loans to Deposits Ratio 106% CAGR Growth Deman d 29% Saving 5% Time 62% Other 5%

Customers Deposits by Type | FY 17

WITH STABLE BALANCE SHEET GROWTH TRENDS, WHILE

MAINTAINING RWAS LEVELS…

17.8 18.9 RWA in US$ Bn

10

(1) Excludes 1 offs items in Kuwait; (2) Based on CBK reporting and Kuwait CAR is for the Group. Note: Subsidiaries figures before consolidation adjustments. FY17 Figures FY16 Figures FY17 Contribution

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

CUSTOMER LOANS

2,786 2,884 14,862 11,750 15 25 150,737 116,224 167,006 174,900

63% 27% 9% 1% 0.2%

REVENUES(1)

128 142 496 573 16 19 13,567 10,403 62,823 65,366

58% 19% 15% 6% 2%

CAR(2)

16.2% 16.7% 13.8% 14.7% 15.9% 19.4% 60.1% 59.1% 21.5% 20.7%

COST OF CREDIT

1.1% 1.0% 0.8% 0.7% 0.5% 1.3% 2.9%

• 0.7%
• 0.2%

0.3%

NET PROFIT MARGIN

44% 42% 13% 17% 22% 23% 3% 12% 39% 43%

COST TO INCOME(1)

31% 30% 65% 59% 59% 48% 77% 69% 47% 43%

THE 5 SUBSIDIARIES GROWING PRUDENTLY AND

IMPROVING EFFICIENCIES

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SUMMARY

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RESILIENT BUSINESS MODEL + FOCUSED EXECUTION…

(1) Excluding one-offs; (2) After AT1 cost and excluding precautionary provisions; (3) Based on 31/12/2017 closing price.

HIGH QUALITY EARNINGS

Maintained with operating efficiencies focus

LEADING INDICATORS

ARE POSITIVE And selective growth continues

MANAGED BY RETURNS

Through optimizing capital usage

1 2 3

KEY PERFORMANCE INDICATORS

1.0X

PBV(3)

12.2X

PE(3)

13.8%

ROTE underlying(1)(2)

7% 2.7%

NPL RATIO

155%

NPL Coverage Ratio

6%

Customer Loans Growth

10.9%

CET1

16.2%

CAR

11%

Core Revenues Growth(1)

12% 18%

Jaws Ratio(1)

0.9% 1.3%

Cost of Credit

16.9% 18.1%

True Earnings Growth(1)(2)

FY VS. FY Q4 VS. Q4

13

THANK YOU

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DISCLAIMERS

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: (Q4’17) 3.314, (Q3’17) 3.310, (Q2’17) 3.300, (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: (Q4’17) 3.314, (Q3’17) 3.310, (Q2’17) 3.300, (Q1’17) 3.278, (Q4’16) 3.273, (Q3’16) 3.316, (Q2’16) 3.304, (Q1’16) 3.304, (Q1’15) 3.372.