Samba Financial Group Investor Presentation H1 2020 Results Aug, - - PowerPoint PPT Presentation

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Samba Financial Group

Investor Presentation H1 2020 Results

Aug, 2020

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Table of Contents

Samba Financial Group Profile Key Financial Highlights H1 2020 Strategy and Transformation update Forward looking guidance Appendix: Balance Sheet & Income Statement Appendix: Samba’s response on Coronavirus

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Table of Contents

Samba Financial Group Profile Key Financial Highlights H1 2020 Strategy and Transformation update Forward looking guidance Appendix: Balance Sheet & Income Statement Appendix: Samba’s response on Coronavirus

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Overview

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 Awarded the “Best Investment Bank in KSA” by Euromoney and Global Finance Led the Historic Aramco IPO which was massively over-subscribed A sound corporate governance structure is in place in line with global standards, which oversees the operations of the bank

A1 A+ BBB+ A-

H2 2019 H1 2019 H1 2020 4.23 4.79 4.37 +13% Net Income (before Zakat / Tax), SAR bn Total Operating Income, SAR bn Shareholding

SAR

148 B

Loans SAR

279 B

Assets SAR

187 B

Deposits SAR

93 B

Investments

3,611

Employees SAR

46 B

Equity

73

Branches

526

ATMs

7.09% 11.54% 22.91% 58.46% H1 2020 2.36 H1 2019 H2 2019 2.26 2.61 +11%

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Overview

Total Assets, SAR bn Total Performing Loans and Advances, SAR bn Total Net Investments, SAR bn Total Funding, SAR bn

H2 2019 8.4 H1 2019 32.8 79.2 85.0 115.1 21.8 7.2 141.6 279.3 12.5 25.5 93.2 148.1 255.6 H1 2020 235.6 +9% 17.6 98.7 129.4 H2 2019 18.5 H1 2019 124.2 19.9 H1 2020 116.3 142.8 149.4 +5% 20.9 18.1 21.4 61.1 H1 2019 64.1 71.8 H2 2019 H1 2020 79.2 85.0 93.2 +10% 45.4 H1 2020 14.2 279.3 44.6 168.3 15.6 H1 2019 5.9 180.2 H2 2019 7.7 255.6 28.6 46.4 187.3 235.6 +9%

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 Equity Other Liabilities Term loan and debt securities Customer deposits Due to banks and

• ther Financial

Institutions

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Table of Contents

Samba Financial Group Profile Key Financial Highlights H1 2020 Strategy and Transformation update Forward looking guidance Appendix: Balance Sheet & Income Statement Appendix: Samba’s response on Coronavirus

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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)

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We collaborated as “one bank” to deliver progress on our transformation

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initiatives

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initiatives

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initiatives

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initiatives

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initiatives Cross-functional effort with all functions contributing meaningfully We have also assessed further opportunities in H1:

• Financial Institutions
• Asset and Wealth

Management

• Cost optimization

Corporate Banking LCB (SME)1 Consumer Banking Digital Culture

• 1. LCB stands for Local Corporate Banking

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Transformation strategy…How? Samba Bank offers full suite

• f market leading products

to institutional and individual customers through experienced and capable relationship teams

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Cultural paradigm shift Rapid, high-agility execution Rigorous KPI monitoring and tracking at all levels Data & analytics to drive portfolio growth “One Bank” mentality through collaboration

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Wholesale Banking update

Key achievements

• Corporate Banking: Completed multiple initiatives to drive

asset growth, increase cross-sell & mange credit risk e.g.,

• Account planning, KPI cascading and monitoring, New client acquisition,

credit process digitization etc.

• LCB (SME): Launched Government backed Kafala program

through consumer branches to drive asset growth in SME sector

• Treasury: Strong presence in primary and secondary

markets, maintain solid liquidity and funding profile Commercial Loans and advances, SAR bn Corporate Banking Operating Income, SAR Mn Treasury Total Investments, SAR bn Treasury Operating Income, SAR Mn H1 2019 99 H1 2020 129 +31% 93 79 H1 2019 H1 2020 +18% 897 1,639 H1 2019 H1 2020 +83% 1,561 1,664 H1 2019 H1 2020 +7%

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Consumer Banking update

• Portfolio growth: Demonstrated record high mortgage sales in June and

significant uptake in liabilities

• Customer centricity: Improved convenience for our customers despite

COVID curfews

• Client service: Adapted our distribution channels to ensure continuous

momentum

• Evolving the core: Upgraded our digital infrastructure to enable growth

Credit cards sales campaign Mortgage refinancing campaign

Key achievements Liabilities, SARbn Assets, SARbn Mortgages sold through alternative channels, %

91.2 102.0 H1 2019 H1 2020 +12% 32.9 37.4 H1 2020 H1 2019 +14% Q1 2020 Q2 2020 36% 40%

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We have adopted a two-phased digital strategy that aims to establish the necessary infrastructure and then innovate to leap frog within key segments Objectives

Reinvent client experience to catch up with the competition Introduce new propositions to attract and acquire new segments Boost efficiency and speed by digitizing core back-end functions Tap into new technologies such as AI to build viable business models or enhance existing ones

Digitize the core Leap frog by Innovation

We successfully launched a number of initiatives this year, aimed at digitizing

• ur core operations to remain resilient in the phase of ongoing disruption…

2020

Credit Card Acquisition Installed ITMS in Branches Pilot of the New Instant Card Printing New SambaOnline Facelift National ID and Address Update E-promissory Note and Digital Signature New Debit and Credit Card Services (7 New Services)

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Table of Contents

Samba Financial Group Profile Key Financial Highlights H1 2020 Strategy and Transformation update Forward looking guidance Appendix: Balance Sheet & Income Statement Appendix: Samba’s response on Coronavirus

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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

HoH Growth X H1 2019 H2 2019 H1 2020 H1’20 vs H1’19 growth Other Income, net1 370 279 1,005 Provision for Credit Impairment, net 782 321 646 Zakat and Income Tax 264 365 383 Special Commission Income, net 3,253 3,123 2,953

• 9%
• 5%

Fees, Commission and Exchange Income, net 743 832 832 12% 0% Total Operating Income 4,367 4,234 4,790 10% 13% Total Operating Expenses 1,320 1,557 1,532 16%

• 2%

Pre-provision Income 3,047 2,676 3,258 7% 22% Net Income, before Zakat and Taxation 2,264 2,355 2,612 15% 11% Net Income, after Zakat and Taxation 2,000 1,990 2,229 11% 12% H1’20 vs H2’19 growth Income Statement figures

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Balance sheet: Key Metrics

SAR Millions Retail Loans and Advances Investments, net 79,250 85,013 93,193 18% 10% Loans and Advances, net 115,062 141,595 148,088 29% 5% Commercial Loans and Advances 98,746 124,224 129,411 31% 4% 1,386 1,429 1,212 Credit Cards

• 13%
• 15%

Consumer Loans 16,174 17,118 18,727 16% 9% Deposits 168,306 180,166 187,259 11% 4% NIBs 101,875 96,510 104,234 2% 8% Saving & Time Deposits 66,431 83,656 83,026 25%

• 1%

H1 2019 H2 2019 H1 2020 H1’20 vs H1’19 growth H1’20 vs H2’19 growth Period End Balances HoH Growth X

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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 investment gains compared to same period last year

• Compression in NIM, driven by reduction in interest rates

2,264 2,612 H1 2020 H1 2019 +15% 2,355 2,612 H2 2019 H1 2020 +11% H1 2019 H1 2020 3.11% 2.40%

• 71bps

2.40% H2 2019 H1 2020 2.79%

• 39bps

743 832 H1 2020 H1 2019 +12% 832 832 H2 2019 H1 2020

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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 and

investment income

• 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

H1 2020 H1 2019 1.72% 1.67%

• 5bps

1.64% H1 2020 H2 2019 1.67% +3bps H1 2020 9.73% H1 2019 9.23% +50bps 9.73% H2 2019 H1 2020 9.09% +64bps 30.2% 32.0% H1 2019 H1 2020 +175bps 36.8% 32.0% H2 2019 H1 2020

• 480bps

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Balance Sheet Analysis

Management Analysis Balance Sheet, SAR bn Loans to Deposit Ratio1, % Loans and Deposits, SAR bn

• Balance sheet grew 19% on the back of strong growth in

loans and investments

• High asset quality as majority of growth driven by government

bonds and collateralized and structured lending

• Solid liquidity position, one of the best in industry

H1 2019 H1 2020 H2 2019 115 168 142 180 148 187

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

Customer Deposits Net Loans

Assets

19%

235.5

H1 2019

279.3

H1 2020

Equity

4%

44.6

H1 2019

46.4

H1 2020

68.4% 75.9% H1 2019 H1 2020 76.1% 75.9% H2 2019 H1 2020

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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 56% 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 115 232 H1 2019 H2 2019 H1 2020 213 142 148 241

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

Net Loans Core Funding H1 2019 H2 2019 H1 2020 Loans & Adv Net / Core Funding1 54% 61% 61% Inter-bank Borrowing / Total liabilities 7% 7% 12%

8 46 29 9 187

H1 2020 H1 2019

8 45 168 14

Total: 279 Total: 235

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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

within 3 months 3-12 months 1-5 years No maturity Over 5 years

186% 233% 263% 242% 218% 229% 242% 132% 131% 125% 140% 133% 127% 121%

H1 2018 H1 2020 H1 2017 H2 2017

100

H2 2018 H1 2019 H2 2019

NSFR LCR

SAMA Threshold

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Balance Sheet – Risk Management

NPLs/Gross Loans (Portfolio Infection ratio), % NPL Coverage Ratio, % Management Analysis

• 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

H2,’19 H2,’17 H1,’17 H1,’18 H2,’18 H1,’19 0.88% H1,’20 0.94% 1.20% 1.28% 1.54% 1.33% 1.45%

• 1. Calculated on continuous quarterly accumulated basis

Credit Impairment/Average Loans1, %

H2,’17 H1,’17 201% 182% 175% H1,’18 175% H2,’18 168% H1,’19 161% H2,’19 158% H1,’20 H1,’17 0.27% 0.15% H2,’19 H2,’17 0.20% H1,’18 0.11% H2,’18 1.37% H1,’19 0.50% 0.89% H1,’20

Tier 1 + Tier 2 Capital Ratio, %

19.7% 21.1%

H1,’17

23.3%

H2,’17 H1,’18

22.7%

H2,’18

22.8%

H1,’19

21.1%

H2,’19

19.1%

H1,’20

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Table of Contents

Samba Financial Group Profile Key Financial Highlights H1 2020 Strategy and Transformation update Forward looking guidance Appendix: Balance Sheet & Income Statement Appendix: Samba’s response on Coronavirus

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Forward looking guidance

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H1 2020 Actual Revised guidance 290-300 Bn Same as before 2.0-2.2% Same as before Same as before 65-75bps 1.5-1.7% Total Assets Net Loans NIM Cost to income ratio Risk cost LDR ROA 9-10.5% ROE 279 Bn 148 Bn 2.40% 75.9% 32% 89bps 1.67% 9.73% 19.1% Same as before CAR Previous full year guidance 285-290 Bn 8-10% growth 2.2-2.5% 78-83% 32-34% 55-65bps 1.85-1.95% 11.5-12% 17.5-19%

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Disclaimer

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

• therwise 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

• n 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.

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Q&A

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Table of Contents

Samba Financial Group Profile Key Financial Highlights H1 2020 Strategy and Transformation update Forward looking guidance Appendix: Balance Sheet & Income Statement Appendix: Samba’s response on Coronavirus

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Balance Sheet – Assets

• 1. Adjusted to credit impairment provision
• Gross Loans and Advances
• Held at FVIS
• Held at FVOCI
• Held at Amortized Cost1

Investments, net Derivatives Property and Equipment, net Other Assets Total Assets Net Loans & Advances, net 118,131 144,695 151,547 79,250 85,013 93,193 4,013 3,092 6,238 3,118 3,067 3,136 1,282 1,070 3,103 235,552 255,604 279,261 115,062 141,595 148,088 (3,069) (3,100) (3,459)

• Credit Impairment Provision

Amounts in SAR millions H1 2019 H2 2019 H1 2020 Cash and balances with Central Banks 20,865 18,138 24,163 Due from Banks and other Financial Institutions 11,961 3,628 1,339 5,840 6,100 4,503 61,186 65,292 75,109 12,223 13,621 13,580

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Balance Sheet – Liabilities & Equity

101,875 96,510 104,234 66,431 83,656 83,026 168,306 180,166 187,259 14,250 15,647 28,634

• 3,746

5,585 6,467 7,236 7,084 190,980 210,155 232,887 20,000 20,000 20,000 17,193 18,348 18,348 2,572 2,882 2,878 5,695 3,696 5,999 85 90 89 44,572 45,449 46,374 235,552 255,604 279,261 Amounts in SAR millions H1 2019 H2 2019 H1 2020 Customer Deposits

• NIBs

Total Due to Banks and other Financial Institutions Debt securities in issue Other Liabilities Total Liabilities

• Share capital
• Statutory reserves
• General and other reserves
• IBs
• Proposed Dividend
• Retained earnings

Non Controlling Interest Total Equity Total Liabilities and Equity

• 2,168

2,164 Term Loan 1,958 1,192 2,160 Derivatives 44,485 45,358 46,283 Equity attributed to Equity holders of Bank 976 962 942

• Treasury Stocks
• 1,393

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Income Statement

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

Amounts in SAR millions H1 2019 H2 2019 H1 2020 4,220 4,207 3,972

• Special Commission Income

966 1,084 1,018

• Special Commission Expense

3,253 3,123 2,953 Net Special Commission Income, net 612 656 657

• Fee and Commission Income, net

131 176 175

• Exchange Income, net

210 72 757

• Income from Investments, net1

102 95 110

• Other Operating Income

1,113 1,111 1,837 Non Interest Income 4,367 4,234 4,790 Total Operating Income 814 790

• Salary and Employee related Expenses

181 168

• Rent and Premises related Expenses

110 110

• Depreciation

452 462

• Other General and Administrative Expenses

(1,320) (1,557) (1,532) Total Operating Expenses before credit Impairment Provision (782) (321) (646) Provision for Credit Losses (264) (365) (383) Zakat and Taxation 2,000 1,990 2,229 Net Income 58 112 138

• Trading Income, net

(2,102) (1,879) (2,178) Total Operating expenses 2,264 2,355 2,612 Net Income before Zakat and Taxation 673 153 94 399

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Table of Contents

Samba Financial Group Profile Key Financial Highlights H1 2020 Strategy and Transformation update Forward looking guidance Appendix: Balance Sheet & Income Statement Appendix: Samba’s response on Coronavirus

Samba’s CSR response for Coronavirus (1/2)

Emergency response

• Sanitization by specialized company (Main building, offices and branches).

Dedicated team continued sanitation activities.

• Daily deep cleaning
• Provided hand sanitizers, face masks and gloves. Ensured the supply of

necessary masks and sterilization tools in all workplaces

• A specialized nurse to check employees and visitors temperature (Main building

and branches)

• Safe distancing marks in the branches and main building for clients and staff to

keep enough space between clients Stand as one nation

• Supported the Health Endowment Fund with SAR 16.5 million.
• Supported the community fund with more than SAR 10 million.
• Supported the community with more than SAR 16 million to pay the financial
• bligations of the detainees who are covered by the initiative.
• Samba has implemented the continuity protocols as directed by the Saudi

Arabian Monetary Authority.

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Samba’s CSR response for Coronavirus (2/2)

Structural & Sustained response Communication

• Awareness campaign on social media
• Educated employees by constantly sending awareness messages and safety

guidelines through emails and communication from the CEO

• Educated customers by constantly sending awareness messages
• Honored front-line heroes and stand as one nation with the nation in our fight

against the Covid-19

• Promoted digital services to clients
• Ensured people readiness and address morale issues over the new remote-work

environment

• Implemented optimal balance of work-from-home and in- office work (including

back up locations) along with direct interaction in selective branches that are open

• Addressed morale issues by continuing engagement with various employees

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Thank You