Saudi Hollandi Bank
Investor Presentation
Financial Update – Year 2014
Q2 – Year 2014
800-124-2525
Important notice
Disclaimer:
The information in this presentation is prepared by Saudi Hollandi Bank. The information is solely intended to provide financial and general
information about Saudi Hollandi Bank’s activities at the date of the presentation. The information in the Presentation is strictly proprietary and
being supplied to you solely for your information. This information may not be reproduced, distributed or passed to a third party or used for any
other purposes then stated above.
The information in this presentation is given in a summary form and does not purport to be complete. The information contained herein has been
obtained from the sources believed to be reliable but does not guarantee its accuracy, reasonableness or completeness. Whilst all reasonable care
has been taken to ensure that the facts stated herein are accurate and that the opinions and expectations contained herein are fair and reasonable,
no reliance may be placed for any purposes whatsoever on the information, opinion, forecast and assumptions contained in the Presentation or on
its completeness, accuracy or fairness. No representation or warranty, express or implied, is given/made by the company or its affiliates as to the
accuracy, fairness and completeness of the information contained herein and no liability is accepted for any loss , arising, directly or indirectly, from
any use of such information.
Forward looking Statements:
The information in this presentation could or may contain forward-looking statements with respect to financial conditions and results of operations.
These forward-looking statements are not historical facts and represent only SHB’s beliefs regarding future events and, many of which by their
nature are inherently uncertain and beyond the bank’s control which could cause actual results, performance or events to differ materially from
those expressed or implied in such statement.
There are several factors that could cause actual results to differ materially from those anticipated by forward-looking statements contained in this
presentation include, but not limited to: changes in economic, business, competitive, global, market, regulatory, interest rates, tax rates etc.
2
1 Group Overview
2 Strategy
3 Financial and Operating Performance
4 Segment Performance
5 Awards
3
Group Overview - at a glance
>
Founded in 1926 as the Netherlands Trading Society – the first bank to be established in the Kingdom.
>
Consistently profitable with clearly defined business model.
>
Well positioned to grow and deliver great values to its customers, shareholders, and employees.
>
Fully fledged and diversified financial services offering.
>
Moderate risk profile with clean balance sheet, low exposure to peripherals and sound capital and liquidity
management.
>
Domestic network of 55 branches and a network of 382 ATMs.
>
Over 1,600 staff with Saudization ratio greater than 85%.
>
State of the art Multi Channel capabilities to its growing customer base in commercial, corporate and
investment sectors.
>
Strong focus on improving service to customer, lowering cost base and achieving integration synergies.
>
Subsidiaries and Associates :
• Saudi Hollandi Captal: Manage the Group’s Investment services , Asset management
and Brokerage activities.
• Saudi Hollandi Real Estate Company: Registration of real estate title deeds in support
of the bank’s home financing products.
• Saudi Hollandi Insurance Company :The company act as agent for Wataniya Insurance
Company, an associate, selling insurance products.
• Wataniya Insurance : The bank has 20% shares in Wataniya.
27.79%
10.41%
ABN AMRO
40%
Olayan SIC
GOSI
Public
21.80%
Shareholder structure
4
Saudi Hollandi Bank – Group Overview
Key Highlights - Market data (Share price and Volumes)
Yearly return = 19.63%
Financial Sector avg = 13.7%
(Market data as of Feb 05,2015 live feed)
[mrq : most recent quarter , mry : most recent year]
Market data as of Feb 05,2015 opening price at 45.5
Credit ratings
Rating agency
Long term
MOODY'S A1
Fitch Ratings A-
Short term
Outlook
P-1
Stable
F2
Stable
5
Bank’s Operating Segments
Personal
Banking Group
The Personal Banking operates through a network of branches and ATMs as well as state of the art ebanking services. It provides clients with full range of Shariah compliant products catering for their
deposit, financing, mortgage and payment needs. It also provides Brokerage and Wealth
Management services through Saudi Hollandi Bank’s subsidiary, Saudi Hollandi Capital. Insurance
services are also provided through Saudi Hollandi Insurance Agency. Personal Banking tailored
“affluent Banking” services for its qualified customers through relationship managers in dedicated
centers. Ladies Banking services are also provided through a network of ladies branches. SME
banking is offered through well trained relationship managers in dedicated Business Banking centers.
Institutional &
Corporate
Banking Groups
The Institutional & Corporate Banking Groups provide their clients with a wide range of products and
services including Term Loans, Trade Finance, Guarantees and Corporate Finance and Advisory. It
offers both conventional and Sharia-compliant financial solutions across the full spectrum of
corporate banking. The products and services offered include: Working Capital and Trade Financing,
Asset Financing, Structured Financing Solutions, Clean Overdraft Line, Short Term Financing for LC
retirement, Letters of Guarantee issued on behalf of our clients for a third party , Acquisition
financing, equity bridge financing and SIDF bridge financing.
Treasury
Saudi Hollandi Bank’s Treasury provides hedging and investment solutions to the Bank's clients.
Already a leading provider of foreign exchange cash products, the Treasury department has been
growing its (structured) derivatives businesses in foreign exchange and special commission rates.
Treasury is an active interbank market maker in Saudi Riyal-denominated foreign exchange and
interest rate products. Treasury offer Foreign exchange spot,Forwards,Options, Deposits and Loans,
Special commission rate swaps, Forward rate agreements, Structured commission rate derivative
solution and Structured Foreign Exchange solutions in conventional and Sharia-complaint variants.
Investment
Banking
Saudi Hollandi Capital was established as an independent Investment subsidiary of Saudi Hollandi
Bank with a vision to become a leading provider of innovative Investment banking and Wealth
management solution for private and institutional clients.
Saudi Hollandi Capital’s Investment team provides a broad range of Investment banking products to
corporate and financial intuitions. Services that SHC offer include Public offering and Convertibles,
Sukuk and Bonds issuance, Mergers and Acquisitions Advisory Private placements and Privatization.
6
1 Group Overview
2 Strategy
3 Financial and Operating Performance
4 Segment Performance
5 Awards
7
Strategy - Highlights
1
Strengthen SHB as a fully integrated, client-centric bank, by emphasizing customer intimacy as
the bank’s main value discipline and positioning SHB Treasury and SH Capital as product units in
support of the Personal Banking Group, the SME Business, the Corporate Banking Group and
the Institutional Banking Group.
2
Increase profitability of the Personal Banking business by having well-trained staff providing the
best service to two chosen segments, i.e. professionals and mass affluent customers, making
optimal use of a differentiated value proposition across the different channels.
3
Establish the Small and Medium-Size client segment (turnover below 100 million Riyal) by
having a dedicated relationship management team and dedicated business centers.
4
Grow the Corporate Banking client segment (turnover between 100 and 500 million Riyal) in
terms of assets, whilst building and maintaining an average yield of 3.5%.
5
Increase the profitability of the Institutional Banking segment (turnover above 500 million
Riyal) by increasing cross-sell of all the bank’s products, adherence to RARORC hurdle rates,
and aggressive asset turnover in case RARORC hurdle rates are not met.
8
Strategy – Highlights contd…
6
Continue to aggressively grow fee income across the bank in Trade Finance, Cash Management
and Treasury.
7
Further develop the service & sales culture across the branch network, shifting the focus from
operational processes to relationship management.
8
Nourish the cultural change in awareness and responsibility for risk management throughout
the businesses – from `order takers’ focused only on returns to active portfolio managers
considering risk-adjusted returns on capital.
9
Use technology as a business enabler to achieve strategic objectives.
10
Create a high-performance culture in which managers lead by example, performance is
monitored, measured and acted upon, accountability is key, and where there is zero tolerance
to any Compliance or Controls breaches.
9
1 Group Overview
2 Strategy
3 Financial and Operating Performance
4 Segment Performance
5 Awards
10
Financial highlights
Key messages
• Past 30 months have seen SHB record strong income
generation on the back of pick-up in corporate and consumer
lending.
• Ahead of the pack in addressing asset quality and
concentration issues allowing it to re-focus on balance sheet
growth.
• Established profile, strong sponsors, and historical links with
Saudi have enabled SHB to establish itself as a top tier lender.
• Net Profit of SAR1.8bln during Year 2014 is the highest in the
bank’s history.
• Net profit increased by 21% yoy during Year-2014.
• Improvement driven by both solid increase in total income and
cost controls.
• Operating profit increased 26% yoy.
• Total Asset up 20% to SAR96.7bln (Year-2013 : SAR80.5bln).
• Underlying cost/income ratio improved to 31.8% from 34.2%
compared to year 2013.
• All business segments showed good performance despite
challenging market conditions.
• Successful performance resulted in all key performance
indicators being in line with or ahead of budget and prior year.
• Maintained stable credit rating.
• Invested in people & technology to strengthen the platform.
Key figures
in SAR mln
Net Interest Income
Non Interest Income
Operating Income
Operating cost
Operating Profit
Impairment & Provisions
Other Income/Expense
Net Profit
FY-2014
1,966
1,216
3,182
1,011
2,171
(346)
(4)
1,821
FY-2013
1,624
992
2,616
895
1,721
(218)
(1)
1,502
Growth
YOY
21%
23%
22%
13%
26%
na
na
21%
in SAR mln
FY-2014
FY-2013
Growth
YOY
Total Assets
Loans & Advances (net)
Investments, net
Customers' deposits
Equity
RWA Basel III
96,619
65,148
18,784
76,814
10,742
89,999
80,468
53,211
16,849
61,875
9,401
75,790
20%
22%
11%
24%
14%
19%
Tier I ratio
Tier I & II ratio
11.22%
15.85%
11.76%
18.32%
na
na
EPS - SAR
Return on average Assets
Return on average Equity
Loan to deposit ratio
Cost to Income
FTEs ( #)
3.82
2.06%
18.08%
80.9%
31.8%
1,637
3.15
2.02%
16.96%
80.3%
34.2%
1,534
na
na
na
na
na
na
11
Increase balance sheet primarily due to loan growth
Strong Asset Base
• Asset base has increased by 20% yoy.
120
• Assets growth driven by 22% increase in total loans yoy.
• Lending book has grown by 86% over 2010-2014.
asset base.
• SHB growth in assets of 20% during Year 2014 is one of the
best in industry.
• Maintain a moderate risk profile.
• Investment activities part of liquidity management.
80
80
SAR.bln
• Loans and investments represents more c.85% of the total
97
100
69
60
54
57
2010
2011
40
20
2012
2013
2014
Asset mix
• Active management of funding surplus.
3%
• Significant success in mortgage finance growth.
10%
8%
19%
3%
21%
Loans (net)
Due from Banks
Investments(net)
2%
1%
Cash
66%
2013
67%
Others
2014
12
Loan Portfolio - growing at a steady rate…
Key Highlights…
Loan Portfolio Breakdown
Mining,Quarrying,Agri
culture & Fishing 2%
Services 8%
• The main contributors to this increase in loans are from the
Transportation &
Communication 1%
Consumer loans &
credit cards 18%
robust consumer and public spending growth being
Elec.,Water, Gas &
Health 3%
Government & Quasi
Govt 2%
experienced in the kingdom, SHB is actively participating and
supporting this growth phase.
Miscellaneous 6%
• Significant growth in mortgage from 1.3bln in Year 2012 to
6.4bln in Year 2014 , approx 392% increase .
Building &
Construction 13%
• Strong focus on credit quality - NPLs % have reduced to 1.27%
in Year 2014 vs. 1.35% in Year 2013.
Commerce 27%
Finance 4%
• Improved coverage ratio .
• Client diversification reflection of client focus.
Manufacturing 16%
Increase in Loan Portfolio
Highly Conservative Coverage
70
53.2
45.3
35.0
145%
1,200
SR' mln
SAR.bln
180%
1,000
161%
1,400
50
40
1,600
65.1
60
37.4
30
Non Performing Loans and NPL %
1,000
153%
161%
140%
800
1,158
1,070
1,104
1,193
1,352
400
20
200
10
2011
2012
2013
2014
735
722
2.5%
739
2.0%
600
100%
500
80%
400
60%
300
40%
200
1.91%
1.5%
1.56%
1.35%
1.27%
2011
Impairment allowances
2012
2013
2014
Provisions Coverage ratio
1.0%
0.5%
0% -
2010
2010
2.57%
20%100
-
0
842
700
120%
124%
800
600
3.0%
931
160%
900
0.0%
2010
2011
Non Performing Loans
2012
2013
2014
NPL% of Total Loans
13
Revenue breakup
Operating Income
Operating Income breakup
120%
3,500
3,182
100%
3,000
2,616
SR'mln
2,500
2,000
80%
5%
4.7%
5.9%
4%
4%
5.2%
5.2%
26%
27%
28.0%
27.2%
64%
62%
62.1%
61.8%
2011
2012
2013
2014
6%
2,219
1,954
2,005
60%
40%
1,500
1,000
20%
500
0%
0
2010
2011
2012
2013
Net Special Commission Income
2014
Fee & Commission Income
Trading Income
Others
Evolution of Net Interest Margin
3.00%
2.50
• Operating Income increase by 26% yoy during Year
2014.
• Non funded Income increased by 23% compare to
Year-2013.
• Contribution of Non-funded Income towards the total
revenue at 38.2% represent improved cross-sell and
customer centricity.
2.52%
2.36%
2.34%
2.39%
2.50%
2.00%
SAR. bln
• Net special Commission Income increased by 21%
compared to Year-2013.
2.46%
2.00
1.50
1.50%
1.00
1.97
1.29
1.29
1.37
1.00%
1.62
0.50
0.50%
0.00%
-
2010
2011
Net interest income
2012
2013
2014
Net Interest Margin
14
Financial Summary Trends
Operating Income breakup
Operating expenses / Cost to Income ratio
3,500
1,200
3,182
3,000
2,005
667
716
1,500
SAR. mln
SAR. mln
1,954
992
847
1,000
500
1,290
1,287
1,372
45%
38.1%
34.2%
40%
31.8%
35%
1,216
2,219
2,000
40.0%
1,000
2,616
2,500
39.5%
30%
437
600
346
362
373
386
25%
20%
400
1,966
1,624
800
15%
427
200
440
474
574
509
10%
5%
2010
2011
Net interest income
2012
2013
-
2014
0%
2010
Non interest income
2011
Staff cost
Operating Profit
2012
Other cost
2013
2014
Cost to income ratio
Net Profit
2.50
2.00
1.80
2.00
1.60
SAR. bln
SAR bln
1.40
1.50
2.17
1.00
1.18
1.20
1.00
1.82
0.80
1.72
0.50
1.20
1.25
0.60
1.37
0.40
1.50
1.03
0.79
0.20
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
15
Capital, funding & liquidity
Regulatory capital (Basel III)
• Core Tier 1 capital increase as a result of increase in
Share capital.
in SAR mln
Paid up share Capital
1,662
3,666
4
1,709
3,211
22
10,095
8,911
Subordinated loan capital
Provisions
Other Tier 2 ( staff share plan)
3,620
523
28
4,485
463
22
Total Tier 2
4,171
4,970
Total Capital
14,266
13,881
RWA Basel III
Credit risk (RWA)
Operational risk (RWA)
Market risk (RWA)
89,999
85,399
4,041
558
75,790
71,696
3,654
441
[1]
Common Equity Tier 1 Total
• The credit risk is around 95% of total RWA, while
operational and market risk are low at 4.5% & and 0.6%
respectively.
[2]
• Increase in credit RWA caused by business growth.
• Actively managed liquidity.
Loan to deposit and liquidity
90%
[1] Reta i ned ea rni ng i ncl ude Res erve for bonus s ha res
80
80%
[2] Subordi na ted debts a re net of a morti za ti on per Ba s el gui del i nes
70
70%
60
60%
50
50%
81.3%
81.4%
79.9%
20
Regulatory Capital
16
40
30
80.9%
80.3%
28.8%
41.6
35.0
44.7
27.0%
53.9
37.4
45.3
61.9 25.8%
53.2
65.1
24.0%
30%
20%
10
10%
35%
11.12
10
8.81
8.20
8
1.85
6
0%
2010
Deposits
2011
Loans & advances
2012
Loan/deposit
2013
Liquidity ratio
2014
14.27
13.88
15.85%
18.32%
30%
4.17
4.97
25%
3.28
20%
1.79
15%
13.22%
12.66%
4
12.41%
7.84
7.02
6.35
0
17.60%
16.60%
16.35%
12
40%
76.8
26.2%
14
SAR bln
SAR. bln
FY-2013
3,969
Retained earning
Eligible reserves
Other additions /reserves
• Core Tier 1 capital include 16.5% of reported net profit as
retained earnings.
90
FY-2014
4,763
11.76%
11.22%
10.09
8.91
10%
5%
2
-
0%
2010
2011
Tier 1
2012
Tier 2
Total
Tier 1 Ratio
2013
2014
Total Ratio
16
1 Group Overview
2 Strategy
3 Financial and Operating Performance
4 Segment Performance
5 Awards
17
Underlying results by segment
Underlying results by segment
• Personal banking (PBG) achieved breakthrough
results for 2014 with year-on-year growth of 18%
in personal loans, 67% in home finance and 20% in
NIBs.
• The bank is upgrading its Trade & Cash portal and
Trade back office to provide state of the art
electronic platform for its institutional, corporate &
SME customer base.
• State of the art banking platform with Multi
Channel capabilities for its growing retail base and
to service commercial banking needs as well as
customer investment needs through advanced
brokerage capabilities.
FY-2014
FY-2013
1,966
1,624
1,216
Growth
YOY
CBG
PBG
TRY
1,113
693
454
4
(299)
992
in SAR mln
Special commission
21%
income, net
23% Non Interest Income
903
225
74
79
(64)
3,182
2,616
22% Operating Income
2,017
918
528
83
(363)
1,011
895
340
539
87
45
-
1,676
378
441
38
(363)
536
6,370
28
24,907
13% Operating cost
26% Operating Profit
[1]
2,171
1,721
96,619
80,468
20% Total Assets
52,094 13,330 24,290
85,877
71,067
21% Total Liabilities
36,546 21,341
3,055
INV SUPPORT
[Small differences in total can be due to the roundings]
[1] Operating profit is exclusive of Impairment & Provisions
Relative contribution per segment
CBG
PBG
TRY
INV
SUPPORT
Special commission
income, net
Non interest income
• SUPPORT function consists of units which support
the business segments. Cost of SUPPORT units are
allocated to the relevant business segments.
Operating Income
Operating cost
Operating Profit
Total Asset
Total Liabilities
-20%
0%
20%
40%
60%
80%
100%
18
Personal Banking , putting clients first
Sustained revenue growth and improvement in profitability
• Focus on Product enhancement.
• Introduced new acquisition channels.
• Moved away from plain vanilla products
• Stable business with resilient income generation, sticky
deposit flow providing stable funding base for the bank.
19
Corporate Banking , a leading franchise
Maintained a strong presence in the market
• Focus on growth in mid-corporate segments
• Successful cross selling Trade and Treasury products.
• Tailored service model to the size of the client with
dedicated client teams.
20
1 Group Overview
2 Strategy
3 Financial and Operating Performance
4 Segment Performance
5 Awards
21
Awards
2014
Ex ce lle nce in Corpora te
Ba nking in the Middle
Ea st
The Be st Home Fina nce
2014
Be st Inte rne t Ba nk in
Sa udi Ara bia
2014
Be st Inte rne t Ba nk in
Sa udi Ara bia
2014
Be st Susta ina ble Ba nk
in Sa udi Ara bia
2014
2014
Be st SME Ba nk Sa udi
Ara bia
2013
Be st Pe rsona l Fina nce
Progra m in Sa udi
Ara bia
Ex ce lle nce in Corpora te
Ba nking Middle Ea st
2013
Be st Ba nking Group in
Sa udi Ara bia
2014
Be st Ba nking Group in
Sa udi Ara bia
2013
Ba nke r Middle Ea st
ma ga zine a w a rds
Be st SME Ba nk in Sa udi
Ara bia
2014
2013
Ba nke r Middle Ea st
Ma ga zine Aw a rds
2014
Be st Home Fina nce
2013
22