samba financial group...investor presentation h1 2020 results aug, 2020 the information contained in...

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Samba Financial Group

Investor Presentation

H1 2020 ResultsAug, 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 26 for important disclaimers and relatedinformation.

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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 2019H1 2019 H1 2020

4.234.79

4.37

+13%

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

SAR

148 BLoans

SAR

279 BAssets

SAR

187 BDeposits

SAR

93 BInvestments

3,611Employees

SAR

46 BEquity

73Branches

526ATMs

General Public GOSIPIF PPA

7.09%

11.54%

22.91%

58.46%

H1 2020

2.36

H1 2019 H2 2019

2.262.61

+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

79.285.0

115.1

21.87.2

141.6

279.312.5

25.5

93.2

148.1

255.6

H1 2020

235.6

+9%

17.6

98.7129.4

H2 2019

18.5

H1 2019

124.2

19.9

H1 2020

116.3

142.8 149.4+5%

20.918.1

21.4

61.1

H1 2019

64.1 71.8

H2 2019 H1 2020

79.285.0

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

7.7255.628.6

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 debtsecurities

Customer deposits

Due to banks and other Financial Institutions

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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

5initiatives

5initiatives

7initiatives

20initiatives

6initiatives

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 of 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%

9379

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, SARbnMortgages sold through alternative

channels, %

91.2102.0

H1 2019 H1 2020

+12%

32.937.4

H1 2020H1 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

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

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 GrowthX

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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

2,2642,612

H1 2020H1 2019

+15%

2,3552,612

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 2020H1 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 2020H1 2019

1.72% 1.67%-5bps

1.64%

H1 2020H2 2019

1.67%+3bps

H1 2020

9.73%

H1 2019

9.23% +50bps9.73%

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 2020H2 2019

115

168142

180

148

187

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

Customer DepositsNet 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%

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46

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9

187

Other LiabilitiesCustomer Deposits Inter-bank Deposits Term loans and debt securities Equity

H1 2020

H1 2019

80

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

NSFRLCR

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,’19H2,’17H1,’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,’17H1,’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,’19H2,’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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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 beforeCAR

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 informationcontained 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 bereliable, 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 coveredtherein 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 orotherwise 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 toinvestors 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 thisinformation 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 itconstitute 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, plansand objectives of management for future operations (including development plans and objectives) are forward-looking statements and data, and may thus include wordslike "anticipate", "believe", "intend", "estimate", "expect", "will", "may", "project", "plan" and such other words of similar meaning. Such forward-looking statements are basedon numerous assumptions regarding present and future business strategies and the relevant future business environment. Any forward-looking statements speak only as ofthe 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 toany forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on whichany 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 torounding, 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 tochange materially without notice. Accordingly, no representation or warranty, express or implied, is or will be made by SAMBA, their respective advisors or any suchpersons’ directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, andany 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 adetermination 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 thebusiness 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’sparticular 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 suchpersons’ directors, officers or employees expressly disclaim any liability whatsoever, in negligence or otherwise, for any loss howsoever arising, directly or indirectly, fromuse 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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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


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 46,283Equity 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


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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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 obligations 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

samba financial group...investor presentation h1 2020 results aug, 2020 the information contained in...

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