Banque Saudi Fransi · TADAWUL:1050
Banque Saudi Fransi — Q2 2023 Earnings Presentation
52 slides from Banque Saudi Fransi's earnings presentation, 2023
Slide 1: Banque Saudi Fransi Investor Presentation 2Q 2023
3 Column Slides Banque Saudi Fransi Investor Presentation 2Q 2023
Slide 2: Contents
INVESTOR PRESENTATION 2Q 2023 Contents BSF Profile 3 Operating Environment 7 Strategy 11 ESG Update 18 Financial Performance 23 Outlook & Guidance 40 Segmental Performance 42 Performance Track Record 48 Appendix 51
Slide 3: BSF Profile
INVESTOR PRESENTATION 2Q 2023 BSF Profile
Slide 4: Leading banking group in Saudi Arabia with strong focus on domestic operations
PROFILE | PRESENCE We are a leading banking group in Saudi Arabia with a strong focus on domestic operations Retail Clients Branches Employees (Million) 1.2 82 3,082 +1.3% year-on-year +0 year-on-year +3.6% year-on-year 1H 23 Operating Income Diversity (SAR Mn) 4,665 Headquartered in Riyadh: S
Slide 5: Solid market parameters and credit ratings
PROFILE | SHARE PROFILE AND CREDIT RATINGS Solid market parameters and credit ratings Share Parameters 30 Jun 2023 Total Shareholder Return (TSR) 160 Closing price (SAR) 41.70 140 52 weeks range (SAR) 32.5 - 53.4 120 Shares issued (million) 1,205 100 80 60 Market capitalization (SARbn) 50.26 40 Mark
Slide 6: Experienced and dynamic executive management team
PROFILE | MANAGEMENT Experienced and dynamic executive management team Bader Alsalloom Ramzy Darwish Sander Aardoom Chief Executive Officer Chief Financial Officer Deputy Chief Financial Officer BSF: appointed Apr-21 BSF: appointed CFO Dec-22 Business Lease Group B.V.: CFO & Board Saudi Inve
Slide 7: Operating Environment
INVESTOR PRESENTATION 2Q 2023 Operating Environment
Slide 8: Macro-economic environment: rising rates, supportive domestic activity, moderating oil and stock prices
OPERATING ENVIRONMENT | ECONOMIC CONDITIONS The macro-economic environment is characterized by rising rates, supportive domestic activity and moderating oil and stock prices Brent Oil Price / Barrel (USD) Tadawul Index Oil prices rose to USD 120/bl in 2Q 2022, following Ukraine-Russia disruption,
Slide 9: Saudi Arabia's real GDP growth is forecast at 1.9% in 2023
OPERATING ENVIRONMENT | ECONOMIC OUTLOOK Saudi Arabia’s real GDP growth is forecast at 1.9% in 2023 Real GDP growth (%) Brent Oil Price / Barrel (USD) Real GDP for Saudi Arabia is expected grow by 1.9% in 2023 following 8.7% expected growth in 2022. Interest rates arises are expected to tail off
Slide 10: Saudi banking sector well positioned for resiliency and growth
OPERATING ENVIRONMENT | KSA BANKING SECTOR The Saudi banking sector is well positioned for both resiliency and growth Bank Credit (SAR Bn) Capitalization: T1|CAR (%) NPL Ratio (%) 2,471 18.4%|20.0% 1.7% +13% 19.4% 20.3% 19.9% 19.9% 20.0% 2,349 2,471 2.2% 2,059 1.9% 1.9% 1.8% 1,783 1.7% 1,443 1,552 1
Slide 11: Strategy
INVESTOR PRESENTATION 2Q 2023 Strategy
Slide 12: Refocusing and simplifying our existing strategy
STRATEGY | CONTEXT We are refocusing and simplifying our existing strategy for an evolving external environment and an optimized internal structure Rising rate environment Historic increase in levels of inflation Sudden rate declines Geopolitical tensions Covid-19 Recessionary fears In
Slide 13: Refocused strategy targets vital initiatives, including technology upgrades and rebranding
STRATEGY | SUMMARY Refocused strategy targets 10 vital initiatives, including planned completion of technology infrastructure upgrades and rebranding in 1H 2024 Wholesale Banking Private Banking Technology Expand FIG Expand Infrastructure & MNC product Upgrade Coverage suite 1H 2024 Priority Saudi F
Slide 14: Strategy driven by ambitious aspirations for position, profitability and customer experience
STRATEGY | STRATEGIC FRAMEWORK Our strategy is driven by ambitious aspirations for market position, profitability and customer experience Strategic Goals Position: Profitability: Customer Experience: Be among the top players in our target segments Focus on profitability and return on capital Continu
Slide 15: Strategic initiatives built on core business strengths and opportunities
STRATEGY | STRATEGIC PILLARS Strategic initiatives are built on our core business strengths and opportunities Wholesale Banking Personal Banking Private Banking Saudi Fransi Leasing Saudi Fransi Capital Strategic Goals Strong corporate relationships Solid positioning & strong Leading market po
Slide 16: Strategy execution commenced across business pillars with positive momentum
STRATEGY | STRATEGIC PILLARS Strategy execution commenced across the various business pillars with positive momentum in progress Wholesale Banking Personal Banking Private Banking Saudi Fransi Leasing Saudi Fransi Capital Seize existing Leverage segmentation Reinforce market Expand in new Strategic
Slide 17: Good progress in four key strategic programs
STRATEGY | STRATEGIC ENABLERS Good progress in the implementation of the four key strategic programs across the technology and rebranding priorities Technology Infrastructure Upgrade Rebranding Integrated Corporate Portal Omnichannel Core Banking System New corporate platform supporting New high per
Slide 18: ESG Update
INVESTOR PRESENTATION 2Q 2023 ESG Update
Slide 19: BSF materiality matrix
ESG | MATERIALITY MATRIX The BSF materiality matrix defines the most significant ESG topics to the organization and its stakeholders Most Important 1 1 Governance, Accountability, Transparency and Ethics 2 Financial and Economic Performance 2 3 Risk Management 4 Responsible Customer Relations and Sa
Slide 20: ESG Framework: 5 pillars and 15 material issues
ESG | ESG FRAMEWORK The ESG Framework consists of 5 pillars and 15 material issues, and was approved by the Board in November 2022 Exemplifying the Highest Ethical and Governance Accelerating Sustainable Economic Growth Standards Financial and Economic Performance 2 1 Governance, Accountability, Tra
Slide 21: ESG governance and policy framework with Board oversight
ESG | ESG GOVERNANCE A comprehensive ESG governance and policy framework was implemented in November 2022, with Board oversight Nomination & BSF Board of Board Strategy Board Risk Executive Committee Audit Committee Remuneration Directors Committee Committee Committee Abdullatif Alothman Rayan Fayez
Slide 22: Good progress along ESG roadmap
ESG | ESG PROGRESS & ROADMAP BSF is making good progress along its ESG roadmap ESG Progress ESG Ratings ESG Governance & Framework MSCI Sustainalytics 1 ESG Board & Management Committees appointed in November 2022 ESG Rating ESG Rating Materiality matrix and framework approved in November 2022 ESG P
Slide 23: Financial Performance
INVESTOR PRESENTATION 2Q 2023 Financial Performance
Slide 24: Improved profitability in 1H 2023 from NIM expansion and balanced asset growth
FINANCIAL PERFORMANCE | HIGHLIGHTS Improved profitability in 1H 2023 from NIM expansion and balanced asset growth BALANCE SHEET Loans & Advances Investments Customers' Deposits High quality loan growth of 6% YoY driven by 7% commercial and 5% consumer lending growth. 169.7 +6% year-on-year 49.2
Slide 25: Balance sheet growth driven by lending and investments
FINANCIAL PERFORMANCE | BALANCE SHEET HIGHLIGHTS Balance sheet growth driven by lending and investments, funded by IBD growth Growth in total assets of 6% YTD, mainly driven by healthy 7% loan growth and 10% Total Assets Movement (SAR Bn) investments growth. Liabilities grew by 7% during 1H 2023
Slide 26: Net income grew 26% YoY from strong NII growth
FINANCIAL PERFORMANCE | INCOME STATEMENT HIGHLIGHTS Net income grew 26% YoY from strong NII growth, partly offset by increased operating expenses and impairments Net Income Movement (SAR Mn) Net income for 1H 2023 grew 26% YoY to SAR 2,150mn from 26% growth in operating income, partly offset by 15
Slide 27: Healthy and balanced 7% loan growth during 1H 2023
FINANCIAL PERFORMANCE | LOANS AND ADVANCES Healthy and balanced 7% loan growth during 1H 2023 Total Loans & Advances (SAR Bn) Commercial Loans Movement YTD (SAR Bn) Loans & Advances Composition (SAR Mn) 139.3 169,695 169.7 +8% +7% Consumer 17.9% 0.8 0.7 1.6 139.3 Commercial 164.8 169.7 3.0 3.0 1.1 1
Slide 28: Solid 10% increase in investment portfolio
FINANCIAL PERFORMANCE | INVESTMENTS Solid 10% increase in the investment portfolio in 1H 2023 Investments Movement by Type (SAR Bn) Investments Composition by Type Investments increased 10% YTD reflecting (SAR Mn) increased investment in longer-term fixed- rate Government securities. 49.2 49,178
Slide 29: 2% growth in deposits YTD from increased IBDs
FINANCIAL PERFORMANCE | CUSTOMERS’ DEPOSITS 2% growth in deposits YTD from increased IBDs Customers' Deposits (SAR Bn) Customers' Deposits Movement (SAR Bn) Deposits grew 2% during 1H 2023 from increased IBDs. IBD increased 7% YTD from 32% growth in Corporate, partly offset by a 32% decline in R
Slide 30: NII growth of 33% from margin expansion and earning assets growth
FINANCIAL PERFORMANCE | NET INTEREST INCOME NII growth of 33% from margin expansion and earning assets growth Net Interest Income Movement (SAR Mn) NII for 1H 2023 grew 33% YoY to SAR 3,899mn from margin expansion and 6% growth in (simple) average earning assets. 3,899 Interest income rose 83% Y
Slide 31: Improved loan yields drive margin expansion
FINANCIAL PERFORMANCE | NET INTEREST MARGIN Improved loan yields from higher rate environment drive margin expansion YTD Net Interest Margin Trend (%) Net Interest Margin Movement (%) The NIM increased 72bps YoY due to improved loan yields, partly offset by the higher funding costs and the hedging
Slide 32: BSF positively positioned for a rising rate environment
FINANCIAL PERFORMANCE | RATE SENSITIVITY BSF is positively positioned for a rising rate environment Exposure to Interest Rate Risk as at 31 December 2022 (SAR Bn) • At 31 December 2022, BSF estimated a 1-year NIM sensitivity of a 100bps rates rise at 10bps; this would translate into SAR 219mn higher
Slide 33: Non-interest income increased 1% YoY
FINANCIAL PERFORMANCE | NON-INTEREST INCOME Non-interest income increased 1% YoY as higher FX income was mostly offset by lower trading income Non-interest income for 1H 2023 increased 1% YoY to SAR 766mn as higher FX income was Non-Interest Income Movement (SAR Mn) mostly offset by lower trading
Slide 34: Operating expenses growth of 15% from higher employee-related expenses
FINANCIAL PERFORMANCE | OPERATING EXPENSES Operating expenses growth of 15% from higher employee-related expenses Operating Expenses Movement (SAR Mn) Operating expenses increased 15% YoY to SAR 1,436mn in 1H 2023 due to increased employee-related costs and excess accrual reversals in 1Q 2022. T
Slide 35: Cost of risk increased by 39bps YoY to 1.07%
FINANCIAL PERFORMANCE | IMPAIRMENT CHARGE Cost of risk increased by 39bps YoY to 1.07% for 1H 2023 from improving Commercial coverage Impairment Charge (SAR Mn) Impairment Charge (SAR Mn) Cost of Credit Risk (%) Commercial COR 431 1.07% 431 1.37% +52 bps year-on-year +46% 1.16% +46% 1.07% 431 0.85
Slide 36: NPL ratio trend moderating during 1H 2023
FINANCIAL PERFORMANCE | CREDIT QUALITY NPL ratio trend moderating during 1H 2023 following previous migration of isolated exposures in the Commercial book Non Performing Loans & Advances Non Performing Loans & Advances (SAR NPL Ratio (%) Commercial NPL Ratio (%) (SAR Bn) Bn) 4.2 4.2 2.42% 2.8% -9
Slide 37: NPL coverage improved 13.4ppts YTD to 133.3%
FINANCIAL PERFORMANCE | CREDIT QUALITY NPL coverage improved 13.4ppts YTD to 133.3% Allowance For Impairment (SAR Bn) Allowance For Impairment (SAR Bn) NPL Coverage Ratio (%) Commercial NPL Coverage (%) 5.7 5.7 133.3% 132% +9 ppts year-on-year +13% +13% 133.3% 131.3% 5.4 5.7 5.2 5.4 5.7 126.5% 5.0
Slide 38: Capital ratios improved YTD
FINANCIAL PERFORMANCE | CAPITALIZATION Capital ratios improved YTD from net income generation and lower operational risk RWAs Total Capital (SAR Bn) RWA (SAR Bn) Total capital (Tier 1 + Tier 2 regulatory capital) increased 2% to SAR 43.4bn during 1H 2023 from net income generation, partly offset b
Slide 39: Liquidity remains strong and within regulatory limits
FINANCIAL PERFORMANCE | LIQUIDITY Liquidity remains strong and comfortably within regulatory limits LCR & NSFR (%) HQLA (SAR Bn) LCR declined by 17ppts during 1H 2023 to 180%. NSFR moderated 6ppts to 116% as of 30 June 2023. The SAMA regulatory LTD ratio was within required levels 180% 38.1 at
Slide 40: Outlook and Guidance
INVESTOR PRESENTATION 2Q 2023 Outlook and Guidance
Slide 41: Improving profitability expected in 2023
OUTLOOK & GUIDANCE | GUIDANCE Improving profitability expected in 2023 from solid loan growth, continued NIM expansion, positive jaws and lower cost of risk Metric 1H 2023 Outcome 2023 Guidance Revision Drivers Financing Growth Financing Growth Balanced growth of consumer and commercial LOANS & ADVA
Slide 42: Segmental Performance
INVESTOR PRESENTATION 2Q 2023 Segmental Performance
Slide 43: Profitability driven by growth in Retail and Corporate
SEGMENTAL PERFORMANCE | SUMMARY Profitability driven by growth in Retail and Corporate, partly offset by lower Treasury and Investment Banking and Brokerage Operating Income Movement (SAR Mn) Net Income Before Zakat Movement (SAR Mn) 4,665 2,393 +26% +26% 557 687 93 707 4,665 2,393 3,691 1,903 (263)
Slide 44: Retail: higher profits YoY from higher net interest income
SEGMENTAL PERFORMANCE | RETAIL Higher profits YoY from higher net interest income Net Income Before Zakat Movement (SAR Mn) Total Operating Income (SAR Mn) Net Interest Income 963 883 851 +88.9% year-on-year +249% +71% SAR Million 738 883 120 963 804 32 515 64 Fee & other income (31) (140) 65 +10%
Slide 45: Corporate: increased profitability from net interest income growth
SEGMENTAL PERFORMANCE | CORPORATE Increased Corporate profitability from net interest income growth partly offset by increased impairments Net Income Before Zakat Movement (SAR Mn) Total Operating Income (SAR Mn) Net Interest Income 777 1,024 892 +26.2% year-on-year +14% +30% SAR Million 473 84 1,
Slide 46: Treasury: net income declined 51% YoY
SEGMENTAL PERFORMANCE | TREASURY Net income declined 51% YoY from lower net interest income Net Income Before Zakat Movement (SAR Mn) Total Operating Income (SAR Mn) Net Interest Income 543 332 197 -39.5% year-on-year -33% -26% SAR Million 817 452 370 332 6 543 127 Fee & other income 140 135 (249)
Slide 47: Investment Banking and Brokerage: profitability decline
SEGMENTAL PERFORMANCE | INVESTMENT BANKING AND BROKERAGE Profitability decline due to lower brokerage fees Net Income Before Zakat Movement (SAR Mn) Total Operating Income (SAR Mn) Net Interest Income 110 108 35 +4.7% year-on-year -13% -5% SAR Million 127 6 113 108 11 110 96 Fee & other income 79
Slide 48: Performance Track Record
INVESTOR PRESENTATION 2Q 2023 Performance Track Record
Slide 49: Balance Sheet Metrics
PERFORMANCE TRACK RECORD Balance Sheet Metrics Loans & Advances (SAR Bn) Total Assets (SAR Bn) Customers' Deposits (SAR Bn) CAR (%) 159.0 232.1 157.6 19.92% +7% +5% 21.57% 21.09% +2% 19.77% 19.92% 19.20% 147.8 159.0 215.8 232.1 148.4 157.6 20.56% 19.94% 130.6 190.3 194.1 132.8 142.0 18.32% 18.90% 12
Slide 50: Income Statement Metrics
PERFORMANCE TRACK RECORD Income Statement Metrics Operating Income (SAR Mn) Net Interest Margin (%) Cost To Income Ratio (%) Cost Of Risk (%) 8,017 3.06% 33.1% 0.85% +4% 2.07% 3.04% 3.02% 3.06% 33.7% 33.3% 33.6% 34.3% 33.1% 2.85% 2.97% 8,017 6,799 6,873 7,045 7,128 0.79% 0.85% 0.72% 0.67% +12% YoY 2
Slide 51: Appendix
INVESTOR PRESENTATION 2Q 2023 Appendix
Slide 52: Disclaimer
INVESTOR PRESENTATION 2Q 2023 Disclaimer This presentation is being provided to you for general information purposes. The information contained in the presentation has been obtained from sources believed by Banque Saudi Fransi (“BSF") to be up to date, correct and reliable, but BSF does not make any