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GCC listed banks’ resultsEmbracing digitalYear-ended 31 December 2018

Appendix report

June 2019

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2

Contents

AppendicesAppendix I: Country analysisAppendix II: Data tablesAppendix III: Sources

AppendicesAppendix I: Country analysis

33

5

Bahrain Population (million)1 1.5

Nominal GDP (US$ billion)1 38.7

GDP per head (US$ at PPP)1 47,580.0

Inflation (%)2 2.0

Economic data as of 31 December 2018

Source(s):1Economic Intelligence Unit estimates, Bahrain — data by country, 29 March 2019; 2Bahrain Inflation Rate, Trading economics website, accessed on 29 March 2019.

6

Summary

Sector overview

Under the Central Bank of Bahrain’s (CBB’s) regulatory regime, 382 financial institutions were licensed and regulated as of 31 December 2018. They include 25 conventional retail banks (including branches of foreign banks) and 51 conventional wholesale banks. The Islamic segment includes six retail banks and 15 wholesale banks. Of these financial institutions, three conventional retail banks and five Islamic retail banks are listed on the Bahrain Bourse, and have been covered as part of this report.

Regulatory update

CBB has been continuously enhancing the regulatory framework in Bahrain to support innovation and maintain stability of the financial sector. This includes introduction of liquidity ratios such as liquidity coverage ratio (LCR), and net stable funding ratio (NSFR) to be followed by banks, and promoting the fintech environment for new businesses in Bahrain.

Financial position

Retail banks’ total assets increased from US$95.1 billion in 2017 to US$96.0 billion in 2018 representing 1.0 percent growth. The retail banking assets have been witnessing year-on-year growth since 2009 and the trend is expected to continue.

Financial performance

In 2018, all listed retail banks reported profits with six banks reporting increase in profits compared to the prior year. One bank reported stagnant growth and two banks reported negative growth in profit. ROE was in the range of 0.6–17.1 percent excluding one retail bank which was negative primarily due to the reorganization carried out in 2016. LDR was mixed with half of the participants reporting a decrease while the remaining demonstrating an increase compared to 2017.

Total assets and net profit (US$ billon)as of, and for the year ended, 31 December 2018

Share price movement (US$)

35.5

23.8

4.5 3.4 9.5

8.5

2.3

8.5

0.7

0.1 0.0 0.00.2

(0.0) 0.00.2

-1.0

0.0

1.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Net

pro

fit

To

tal a

sset

s

AUB Al Baraka Al Salam BISB BBK Ithmaar Khaleeji NBB

0.0

0.5

1.0

1.5

2.0

12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018


7

Insights

The year gone by (2018)

Robust asset growth

— 2018 was another challenging year and the Bahrain banking sector simulated strong sentiments of asset growth with an increase in the loan portfolio of retail banks.

— Total outstanding retail loans as of November 2018 stood at $US24.9 billion representing a 9.2 percent year–on–year growth.

Mixed performance

— During the year, the majority of retail banks posted year-on-year growth of 2.2–14.7 percent, excluding two banks that reported a decrease and one bank that reported stagnant performance.

— While ROE showed marginal to significant increase for individual banks, ROA remained muted, which needs to be monitored given the challenging environment as well as the asset growth.

Declining trend in CAR

— Regulatory CAR remained within 13.4–33.8 percent compared to the minimum requirement of 12.5 percent. Though the CAR of individual banks was above the minimum required levels, the movement showed a decreasing trend of 0.9 percent.

— The CAR levels may undergo further stress in 2019, when the phase in requirements for treatment of certain exposures will be ineligible from 1 January 2019.

Tightening costs

— Profitability was higher for majority of the banks compared with 2017 as some of the banks have been able to keep costs under check due to increased control measures.

— This resulted in the CIR declining for the majority of the banks with the year–on–year change ranging between (2.2)–(1.0) percent. Remaining banks witnessed an increase in costs ranging within 4.0–10.4 percent.

Concern over asset quality

— All banks adopted IFRS 9 with an effective date of 1 January 2018 while two banks early adopted in previous years. As a result, the NPL ratios of 2017 and 2018 were not directly comparable. However, data indicates that asset quality is under stress, as evidenced by the average of 8.7 – 12.0 percent of total loans under stage 2 and stage 3.

— The NPL portfolio also remained skewed due to the application of transition provisions allowed after adoption of IFRS 9.

8

Outlook

The year ahead (2019)

Global economy slowdown

A combination of various factors such as fluctuating oil prices, geopolitical crisis and decline in global equity performance have seriously impacted the global economy. Active steps are taken by regulators across the globe to ensure stimuli are in place to improve the prospects of a growing economy. In 2018, Bahrain’s non-oil economy increased by 2.5 percent while the oil sector posted 5.0 percent year-on-year decrease. With the recovery of oil prices to pre-decline levels of 2015 remains bleak and volatility is expected to continue, Bahrain’s real GDP growth is forecast to be 2.4 percent in 2020 — implementation of various projects led by GCC Development Program (additional capacity at Alba, airport modernization program, light rail network, King Hamad Causeway) remain the key drivers to ensure economic continuity in the medium term.

Regulatory regime

CBB has already issued consultation papers on topics including digital finance advice, credit risk management, and operational risk management in 2019. A suite of amendments to various modules of the rule book are expected to be issued in 2019 to enhance the risk management practices followed by the banking sector. This would eventually necessitate the banks to revisit the strategy, product offering, and margins. Furthermore, CBB is taking various initiatives to promote fintech, digital solutions, crypto-asset platform operators, open banking, and digital finance advice (Robo-advisor) to support the growth of economy.

Digital, fintech – technology focus

Bahrain has been active in hosting various events, conferences, workshops on fintech throughout 2018. This has put Bahrain at a significant position in the digital technology world as an attractive destination for investment. The evolving technology has paved the way for digital payment solutions, being launched in Bahrain (bwallet, VIVA Cash, MaxWallet, BenefitPay), which has changed the complete dynamics of traditional banking system. Innovations are expected to continue with the support of the CBB in the finance sector, which would open opportunities.

License downgrade

In 2017 and 2018, Bahrain witnessed two banks downgrade their licensing categories to ‘Investment Firm’ and shareholders of one Islamic bank approved this downgrade. This could be viewed as a result of challenging regulatory and economic conditions. This trend is expected to continue in the future, given the number of regulated institutions domiciled in Bahrain.

Data protection and privacy

The Personal Data Protection Law, which was issued by the Kingdom of Bahrain in July 2017, comes to effect on 1 August 2019. It’s important to watch how this will impact the Finance sector in terms of managing the private data of customers that is collected, stored, processed and destroyed. This may result in additional costs to ensure compliance with the regulations, which might affect the margins already under stress for certain banks.

8

9

Key performance indicators

LDR (%)

CAR (%)

ROE/ROA (%)

Note: 1For calculating CAR and NPL for Ithmaar Holding, financial numbers for Ithmaar Bank have been considered as proxy data.For source data refer to the data table (page 58–59) in Appendix II.

17.0% 17.3%

21.4%19.4% 20.0%

13.9%17.0%

36.3%

16.9% 17.4%20.6%

17.1%19.6%

13.4%16.2%

33.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%


Minimum (average) regulatory CAR as of 31/12/2018: 12.5%

2017 2018

1

15.9%8.6%

5.8%8.5%

12.9%

(21.6)%

1.7%

14.1%17.1%

7.9% 6.1%9.5%

14.6%

(10.2)%

0.6%

15.2%

1.9% 0.5% 1.1% 0.9% 1.6%

(1.0)%

0.3% 2.0%2.0%

0.5% 1.1% 0.9% 1.8%

(0.3)%

0.1%2.2%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%


2017:ROE 2018:ROE

2017:ROA 2018:ROA

2017 2018

88.6% 83.9%76.6% 80.0%

66.3%

93.3%85.7%

56.7%

82.4% 80.2% 79.2%82.7%

74.6%

101.9%

77.4%

54.3%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%


10


Stage-wise coverage ratios as at 31 December 2018 vs NPL coverage ratio as at 31 December 2017 on loans (%)

Total loans subject to ECL (by stage) as at 31 December 2018 vs NPL ratio as at 31 December 2017 (%)

Note: 1For calculating CAR and NPL for Ithmaar Holding, financial numbers for Ithmaar Bank have been considered as proxy data. For Ithmaar Holding, stage-wise breakup of financial assets is considered due to non availability of data for financing assets in the financial statement.For source data refer to the data table (page 58–59) in Appendix II.

0.7% 0.3% 0.7% 0.4% 0.8% 2.1% 1.5% 0.6%

13.2%

5.2% 6.9% 7.4% 8.3%

0.5%

6.7%12.0%

85.5%

55.1%

33.1%37.2%

57.8%

68.1%

16.9%

36.0%

85.1%

58.8%

26.7%31.7%

61.6%59.1%

11.2%

34.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%


Stage 1 Stage 2 Stage 3 NPL coverage ratio at 2017

1

84.5

76.882.2

79.275.9

79.6

68.1

87.6

13.7 18.2

8.8

9.1 16.114.0

12.1

4.3

1.9 1.9 5.0 4.2 9.0 18.4 11.7 7.1 8.0 5.8 6.4 9.4 19.8 12.9 8.2 6.9

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%


Stage 1 Stage 2 Stage 3 NPL ratio at 2017

AUB Al Baraka Al Salam BISB BBK Ithmaar1 Khaleeji NBB


Net provision charge on loans (US$ million)

CIR (%)

Credit rating

Credit rating S&P Moody’s Fitchagency

Long-term Long-term Long-term Bank issuer rating Outlook issuer rating Outlook issuer rating Outlook

AUB BBB Stable NA NA BBB- Stable

Al Baraka BB Negative NA NA NA NA

Al Salam NA NA NA NA NA NA

BISB NA NA B2 Stable NA NA

BBK NA NA B2 Stable BB- Stable

Ithmaar NA NA NA NA NA NA

Khaleeji NA NA B2 Negative NA NA

NBB NA NA B1 Stable BB- Stable

Overall country rating B+ Stable B2 Stable BB- Stable

Note: NA = rating not available on ThompsonOne database, checked on 29 March 2019.1For Ithmaar Holding, the graph represents total impairment charge for 2018 as stage-wise breakup of provision charge was not available in the financial statement.For source data refer to the data table (page 58–59) in Appendix II.

11

60.7 128.9 39.1 6.7 76.7 24.1 13.1 27.5

(21.2)6.1

(7.4)

(4.0) 4.7 (1.1)

(4.2)

18.046.2

5.6

(5.4)

71.1

(3.0)

13.5

79.2

56.8

29.622.6

(25.0)(9.1)

15.5

15.1

-100.0%-80.0%-60.0%-40.0%-20.0%

0.0%20.0%40.0%60.0%80.0%

100.0%


2017

Stage 1 Stage 2 Stage 3

AUB Al Baraka Al Salam BISB BBK Ithmaar1 Khaleeji NBB

28.8%

56.9%

38.5%

61.9%

37.8%

90.4%

59.4%

31.6%27.1%

54.7%48.9%

55.5%

36.8%

83.3%

64.3%

35.6%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


2017 2018

12

Fintech bay

Bahrain FinTech Bay (BFB) is a fintech ecosystem launched in February 2018 by the Bahrain Economic Development Board (EDB) and Singapore-based FinTech Consortium (FTC). BFB is dedicated to further develop and accelerate fintech firms and drive innovation in Bahrain by bringing together industry leaders and new entrants to

— drive innovation,

— create opportunities for growth and,

— foster interaction between players in the financial sector, investors, entrepreneurs, and government bodies.

BFB provides co-working spaces and other shared infrastructure to attract fintech start-ups to base themselves within the Kingdom.

Electronic fund transfer system (EFTS)

Since the introduction of EFTS in 2015, the number of participants in EFTS has reached 26, growing significantly and gaining popularity over the years. For example, the average daily volume of Fawri nearly doubled to 15,484 from 2016 to the first half of 2018 with daily average value of US$79.6 million compared to US$66.3 million in the first half of 2016. Daily volume of Fawri+ increased significantly by 734.0 percent in the first half of 2018 compared to the same period in the prior year. The average daily value of Fawri+ increased by 500.0 percent (US$1.1 million) in the first half of 2018 compared to the first half of 2016. The various types of EFTS (Fawri, Fawri+, Fawateer) have been operating seamlessly with virtually no errors.

E-wallets

Bahrain witnessed the launch of four digital wallets in the last two years including two in 2018. These are bwallet, BenfitPay, VIVA Cash and MaxWallet. This is a significant step by Bahrain to realize its vision as a technology pioneer.

Case studies

14

Kuwait Population (million)1 4.7



Inflation (%)2 0.7


Source(s):1 Economic Intelligence Unit estimates, Kuwait — data by country, 7 March 2019;2 Kuwait, International Monetary Fund, accessed on 25 March 2019.

15

Summary

Sector overview

The banking landscape in Kuwait consists of 11 locally incorporated banks (of which five operate under the principles of Sharia) and 12 branches (of which one operates under the principles of Sharia) of foreign banks. Shares of all locally incorporated banks except one (which has been excluded for the purpose of this report) are listed on Boursa Kuwait. No new banking licenses were granted by the CBK in 2018.

Regulatory update

In March 2018, the CBK raised the discount rate from 2.75 percent to 3.0 percent on the back of the US Federal Reserve hike. The subsequent rate hikes by the US Federal Reserve were not matched by corresponding increases in the CBK discount rate.

In 2018, the CBK issued instructions for (i) regulating electronic payments (ii) a regulatory sandbox framework and (iii) revised rules and regulations for granting consumer and installment loans/ finance.

Financial position

Total listed banking sector assets at the end of 2018 stood at US$264.5 billion which was 5.0 percent higher than that at the end of 2017. The market continues to be dominated by NBK and KFH who, together, have a 56.4 percent share of the total assets. Total assets of Islamic banks stood at US$100.3 billion at the end of 2018 which was 6.3 percent higher than that at the end of 2017.


Profits for Kuwaiti banks increased an impressive 19.3 percent compared to 2017. This growth was mainly due to higher net interest income which increased by 11.0 percent in local currency terms. This growth was offset by the provisions booked by Kuwaiti banks in 2018.



0

0.5

1

1.5

2

2.5

3

12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

AUBK ABK Boubyan Burgan GBKKFH KIB NBK CBK Warba

12.9 15.0 14.3

24.119.9

58.6

7.2

90.5

14.77.2

0.2 0.1 0.20.3

0.2

0.8

0.1

1.2

0.2 0.0 0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0.0

20.0

40.0

60.0

80.0

100.0

AUBK ABK Boubyan Burgan GBK KFH KIB NBK CBK Warba

Net

pro

fit

To

tal a

sset

s

1616

Insights


Another year of solid growth

— The growth story for Kuwaiti banks continued in 2018 with a 19.3 percent overall increase in net profits compared to 2017.

— All banks showed double-digit growth in net profit compared to 2017. The impressive growth was notwithstanding the significant increase in provision for impairment by 21.1 percent over 2017.

Modified approach to IFRS 9

— In 2018, the CBK issued guidelines regarding the adoption of IFRS 9 by Kuwaiti banks. These guidelines require the ECL on credit facilities to be measured at the higher of the amounts computed under IFRS 9 in accordance with the CBK guidelines or the provisions as required by the CBK instructions.

— All banks, except one Islamic bank, reported ECL calculated as per IFRS 9 according to the CBK guidelines to be lower than the provisions required by the CBK instructions.

Focus on efficiency

— CIR at Kuwaiti banks continue to show a declining trend as banks focus on efficiency and use of technology to bring down costs.

— Average CIR in 2018 stood at 37.9 percent with eight out of 10 banks showing a decline in CIR compared to 2017.

Decline in non performing loans

— At the end of 2018, the average NPL ratio for Kuwaiti banks stood at less than 2.0 percent, which is one of the lowest amongst GCC banks.

Continued access to debt and capital markets

— 2018 saw Kuwaiti banks continue to access international debt and capital markets.

— Three banks accessed the debt and capital markets raising approximately US$1.0 billion.

17 17

Outlook


Growth story to continue

— In our view, Kuwaiti banks are expected to continue to grow and report higher earnings in 2019. This growth will be driven by more lending as the government continues with project spending and consumer confidence improves.

— Earnings may get a boost based on the increase in limit for consumer loans by the CBK in late 2018.

Consolidation

— In 2018, one of the largest Islamic banking groups, Kuwait Finance House (KFH) announced its intention to acquire Bahrain-based Ahli United Bank (AUB).

— The acquisition, which completed in February 2019, will be the first cross-border banking transaction in the GCC and will create the largest banking group in Kuwait and the sixth largest banking group in the GCC.

Digital agenda

— Kuwaiti banks will continue to invest in digital banking channels, infrastructure and solutions in 2019. This will involve investments in new age technologies such as intelligent automation, blockchain and AI.

— In our view, Kuwaiti banks will see increased acquisition of customers through digital channels across most of the product offerings.

Fintech regulatory push

— With the changing fintech landscape globally as well as regionally, we expect the regulatory authorities to issue regulatory guidelines/ framework.

— Any fintech regulations will need to be benchmarked against the framework/ guidelines that are issued by other regulators within the GCC to ensure a level playing field for Kuwaiti banks.

18


LDR (%)

CAR (%)

ROE/ROA (%)

Note: For source data refer to the data table (page 60–61) in Appendix II.

18.0% 17.2%19.4%

16.2%17.8% 17.8%

19.1%17.8% 18.7%

22.5%

16.6%

19.2%18.2% 17.4% 17.5% 17.5% 16.6% 17.2%

18.8%

24.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%



2017 2018

11.2%

6.3%

13.2%

9.9% 8.2%10.0%

6.9%

10.9%8.8%

7.0%

12.2%

7.3%

14.3%

11.6%9.2%

12.1%

7.8%

12.0%

9.2% 8.6%

1.2% 0.8% 1.3% 0.9% 0.9% 1.1% 0.9% 1.3% 1.3% 0.5%1.4% 0.9%

1.3%1.1% 1.0% 1.3% 1.0% 1.4% 1.4% 0.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%


2017:ROE 2018:ROE

2017:ROA 2018:ROA

2017 2018

110.2% 104.6%

84.6%

106.1% 112.8%

79.5%

108.4%105.2% 101.5%

125.2%115.5%

97.2%87.7%

113.1%109.6%

79.7%

121.8%107.7%

98.3%

152.5%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%


19


NPL (%)


CIR (%)

Credit rating

Note: NA = rating not available on ThompsonOne database, checked on 22 March 20191For calculating NPL ratio for Warba bank, past due or impaired has been taken as proxy data.Islamic Banks have been presented in italics.2On 1 June 2017, Moody's withdrew all ratings of Burgan Bank A.S.For source data refer to the data table (page 60–61) in Appendix II.



AUBK NA NA A2 Stable A+ Stable

ABK NR Stable A2 Stable A+ Stable

Boubyan NA NA A3 Stable A+ Stable

Burgan2 BBB+ Stable NA NA A+ Stable

GBK A- Stable A3 Positive A+ Stable

KFH A- Negative A1 Stable A+ Stable

KIB NA NA NA NA A+ Stable

NBK A+ Stable Aa3 Stable AA- Stable

CBK NR Stable A3 Stable A+ Stable

Warba NA NA Baa2 Stable A+ Stable

Overall country rating AA Stable Aa2 Stable AA Stable

32.0% 37.7% 42.1%45.6% 35.4% 42.8% 51.0%

32.3%30.9%

47.4%30.6% 38.6% 40.6%42.1% 34.5% 39.2%

53.9%

31.3% 29.7% 38.3%

0.0%

50.0%

100.0%

AUBK ABK Boubyan Burgan GBK KFH KIB NBK CBK Warba2017 2018

87.7190.2

29.0 136.7227.4 224.3

30.8

574.5

-71.6 39.772.2 180.9 45.2 205.4

340.4 197.2

30.4

549.1

122.0 40.8

-200.0

0.0

200.0

400.0

600.0

800.0


2017 2018

1.4%1.0% 0.8%

2.7%

1.7%

2.5% 2.4%

1.4%

0.5%

1.5%1.3%1.7%

0.8%

2.4%

1.0%

2.0%

0.7%1.4%

0.0%

1.3%

0.0%

1.0%

2.0%

3.0%


2017 2018

1

20

Case studies

Regulatory sandbox framework issued by the CBK

— The framework targets both companies and individuals striving to provide innovative fintech products or services that are based on, or relevant to the electronic payment of funds either by using a new technology or an existing technology in an innovative way.

— The main objective of the framework is to promote innovation by temporarily exempting participants of certain requirements pertaining to either the implementation of the regulatory instructions or the required licenses.

Appointment of Chief Data Officer and Chief Digital Officer

— A large banking group in Kuwait has appointed a Chief Data Officer and a Chief Digital Officer to drive the bank’s digitization program.

— In addition, the banking group has developed a digital roadmap which that includes defined KPIs, which are directly linked to profitability and which will allow for accurate tracking of progress.

Biometric card

— A large banking group in Kuwait is the first in the GCC to introduce a biometric credit card with an embedded fingerprint sensor through Mastercard.

— The biometric card requires the cardholder to place their finger on the embedded sensor while making a point of sale transaction. The fingerprint is verified against the template stored on the card and, if the biometrics match, the transaction can be approved with the card never leaving the cardholder.

22

Oman Population (million)1 4.7



Inflation (%)2 0.9


Source(s):1 Economic Intelligence Unit estimates, Oman — Country Report, 04 March 2019; 2 Oman, International Monetary Fund, accessed on 25 March 2019.

23

Summary

Sector overview

20 banks are currently regulated by the Central Bank of Oman (CBO):— Seven local commercial banks (six of which are listed on

the Muscat Securities Market (MSM))— Nine foreign banks— Two development finance institutions— Two Islamic banks (both listed on MSM).Six out of the seven local commercial banks also have separate Islamic windows. No new banking licenses were granted by the CBO in 2018.

Regulatory update

The CBO regulations ensure that Oman complies with the international legislation and global best practices. A new National Payments Systems Law was promulgated, substantial modifications in the regulations were introduced by the CBO in an effort to boost economic growth, and a Master Circular on ‘Fraud Risk Management’ was issued during the year 2018. A sizable package of regulatory reforms for commercial banks operating in the Sultanate was announced in March 2018 effective from April 2018, which included reduction of the minimum CAR under Basel III to 11.0 percent from 12.0 percent of risk-weighted assets (RWAs) to increase the banks’ lending capacity and reflect favorably on overall credit growth.

Financial positionTotal assets of the eight listed banks analyzed for this report increased by 7.3 percent from US$71.0 billion in 2017 to US$76.2 billion in 2018. The increase was noted in all the listed banks except Bank Dhofar. Bank Muscat represented 42.0 percent of total listed banking assets at the end of 2018. The listed Islamic banks had a combined market share of 5.3 percent at the end of 2018.


In 2018, profitability for listed banks increased by 11.5 percent from the previous year. This was mainly due to increase in average interest rates and growth in loans and advances. Banks' total credit grew by 6.3 percent in 2018 although there was pressure on margins as a result of the increasing cost of funds due to a combination of higher US interest rates and competition for deposits. On average, ROA increased by 0.2 percent and ROE increased from 6.6 percent in 2017 to 8.4 percent in 2018 due to improving market conditions. Islamic banks reported higher returns on both assets and equity as compared to the prior year with increase in ROE by 9.0 percent.



0

0.2

0.4

0.6

0.8

1

1.2

31/12/2017 31/03/2018 30/06/2018 30/09/2018 31/12/2018Ahli Alizz Dhofar Muscat Nizwa Sohar HSBC NBO

5.9 1.810.9

31.9

2.3 7.96.1 9.3

0.1 0.0 0.1

0.5

0.0 0.10.1 0.1

0.0

0.2

0.4

0.6

0.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Ahli Alizz Dhofar Muscat Nizwa Sohar HSBC NBO

Net

pro

fit

To

tal a

sset

s

24 24

Insights


Higher impairment charges

— Net impairment charges against loans and advances increased by 16.0 percent as compared to the prior year. This was due to the effect of higher ECL.

Improved cost-to-income ratios

— Most Omani banks improved their CIRs, primarily due to an increase in income which outstripped an increase in costs. This was mainly on account of rigorous steps taken by the banks to optimize their operating costs. Five listed banks contributed to the overall improvement in the CIR.

Share prices decline

— Share prices of several listed banks declined while those of other banks remained the same as in the prior year, reflecting overall market sentiments.

Margin pressure continues

— Interest rates on bank lending and deposits in Oman slightly increased, following the rate increases by the US Federal Reserve in 2018. The average deposit rates increased from 1.7 percent to 1.9 percent and average lending rates increased from 5.2 percent to 5.3 percent.

Tighter liquidity

— Oman's banks, on average, have LDR in excess of 100.0 percent (five listed banks), illustrating tighter liquidity levels and a cause for concern. The LDR showed an improving trend in 2018, declining from 105.3 percent to 103.6 percent for the eight listed banks.

Regulatory capital

— Five out of the eight listed banks’ CAR dipped, reflecting an increase in RWAs while regulatory CAR continues to increase as Basel III regulations are gradually implemented.

Outlook


Sources of growth— The small and medium-sized enterprises (SMEs) sector

will continue to be an important focus area for banks as the government strives to reduce the economy’s dependency on the oil and gas sector.

— A steep jump in the global competitive index is a testimony to the improving business environment in the country. Furthermore, the government is committed to containing the twin deficits for bolstering macroeconomic stability. Some of the important policy measures under active consideration in the near future include implementation of excise duty and VAT and promulgation of foreign investment law. Against the above mentioned backdrop, the outlook for the Omani economy appears fairly positive over short to medium term. The biggest downward risk, however, is a steep fall in oil prices. Oman’s real growth in GDP has been projected to move from 2.1 percent in 2018 to 1.1 percent during 2019 and improve to 6.2 percent in 2020 (IMF, WEO, April 2019).

Potential mergers

— Oman has 20 banks for 4.6 million people when compared to Saudi Arabia where only 27 banks serve a population close to 33 million. Oman Arab Bank (OAB) and Alizz Islamic Bank have signed a memorandum of understanding (MoU) to continue the dialogue concerning the intended merger between the two parties.

— Mergers are expected to cut operating and funding costs, boost profitability, robustness and efficiency, and improve economies of scale. As profitability levels come under pressure and regulatory demands increase, there is growing potential for more mergers and acquisitions over the medium term.

Performance

— As the CBO follows the lead of the US Federal Reserve in setting interest rates, rising funding costs over 2018 and 2019 are likely to maintain downward pressure on profits by increasing the cost of banks’ local currency deposits.

— In October 2018, Moody’s forecast that the net interest margins of Omani banks would decrease throughout 2019 and during early 2020 to reach around 2.2 percent, down from 2.3 percent in the second quarter of 2018, and 2.4 percent in 2016.

IFRS 16 impact

— Banks in Oman have many leasing arrangements that will now be in the ambit of the new IFRS 16 standard effective from 1 January 2019. Branches, ATMs, IT infrastructure and outsourcing arrangements to name a few will have to be assessed to evaluate the impact on the financial statements, operations and capital requirements.

Liquidity pressures

— Oman’s liquidity levels are primarily linked to oil prices and interest rates. Oil prices improved in 2018, helping to ease liquidity. However, future interest rate hikes and oil price fluctuations may put further stress on liquidity. Meanwhile, government initiatives to diversify revenue, privatize assets and attract FDI should improve liquidity.

25

26


LDR (%)

CAR (%)

ROE/ROA (%)


16.7% 16.7%15.4%

18.6%17.2% 16.2% 16.9% 17.3%17.5%

15.3%17.3%

19.2%

16.2% 15.0%

19.4%

16.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%



2017 2018

1.4%

(0.6)%

1.2% 1.6%0.6% 0.9% 0.8% 1.3%

1.3%

0.2%1.2% 1.5% 1.0% 1.0% 1.3% 1.4%

10.7%

(3.8)%

8.9%

10.9%

2.9%

8.9%

6.0%

8.2%

11.3%

2.6%

8.4%10.3%

5.6%

10.1%9.5% 9.3%

-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%


2017:ROE 2018:ROE

2017:ROA 2018:ROA

2017 2018

112.7%

97.0%105.9%

112.3%106.5%

127.8%

72.2%

107.8%112.6%

94.4%

108.0%105.6%

97.9%

123.8%

72.1%

114.6%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%


27



0.4% 0.5% 0.5% 0.2% 0.6% 0.7% 0.4% 0.6%

6.1% 3.3% 3.7% 4.5% 3.8%7.7% 3.4% 4.8%

53.7%46.6%

34.1%

72.0% 69.1%

42.9%

70.7%64.0%

53.5% 56.1%

15.2%

129.5%

36.4%

48.3%

33.0%

89.2%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%




89.6 93.5

76.1 71.2

89.578.0

71.8 77.0

8.7 5.320.2

25.7

10.5

18.7 26.318.2

1.7 1.2 1.2 0.2 3.7 3.1 3.1 2.9 0.0 0.2 3.3 2.3 1.9 3.8 4.8 4.1

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%




28



CIR (%)

Credit rating



Ahli NA NA NA NA BB Stable

Alizz NA NA NA NA NA NA

Dhofar NA NA Ba2 Negative BB Stable

Muscat BB Stable Ba2 Negative BB+ Stable

Nizwa NA NA Ba2 Negative NA NA

Sohar NA NA Ba2 Negative BB Stable

HSBC NA NA Ba2 Negative BB+ Negative

NBO NA NA Ba2 Negative BB Stable

Overall country rating BB Stable Ba1 Negative BB+ Stable

Note: NA = Rating not available on ThompsonOne database, checked on 29 March 2019.Islamic banks have been presented in italics.For source data refer to the data table (page 62–63) in Appendix II.

9.3 5.4 30.0 57.1 5.0 18.2 14.4 72.4

(19.8) (2.2)

1.3

(80.7)

1.8 6.8

5.2

(5.6)12.5 0.7

(3.0)

134.5

3.5

21.5 6.2

(20.4)

24.7 3.6 14.6

55.7

0.1

17.1

(6.9)

74.5

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


2017



38.2%

113.1%

46.5% 42.0%

73.3%

45.5%64.2%

48.8%40.8%

83.1%

50.5%42.6%

61.5%

42.2%57.5%

47.9%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Ahli Al Khaliji Doha MAR QIIB QIB QNB CB

2017 2018

29

Case studies

Blockchain technology

— Blockchain, or distributed ledger technology, is expected to give rise to a new era of the internet. The Sultanate of Oman accepts that efficient infrastructure needs to be in place across diverse sectors to cope with this transition.

— The Sultanate of Oman has demonstrated a clear interest in using blockchain technology in its digitalization efforts. To promote the adoption and implementation of blockchain, Oman’s first Blockchain symposium was organized by a high-profile group of government bodies.

— Bank Dhofar, local listed bank in Oman is among the first set of blockchain movers in the Middle East.

Enhancing financial inclusion

Last year, CBO launched the mobile payment clearing system (MpClear) with an intent to offer interoperability and a unified switching and clearing services between various mobile banking systems, thereby promoting enhanced efficiency and security of payments effected through mobile medium. Moreover, CBO has undertaken the initiative to implement a re-designed ACH system for retail payments, based on a web technology, and empowered by powerful security standards. Furthermore, this year, enhancements were incorporated in the Wages Protection System to roll-out a consolidated version of the wage files of workers’ pay transfers. It provides pre-requisite data for the Ministry of Manpower to create databases that document the details of wage payments in the public sector to ensure timeliness of payments. These developments in the banking sector have contributed significantly in promoting financial inclusion in the Sultanate.

Developing the customer experience

Oman’s leading banks have continued to invest significantly in the customer experience, using the power of digital to transform the sector. To leverage social media to engage with a younger generation of customers, banks across the Sultanate are developing apps such as mobile wallet and other innovative digital products. Some of the offerings, such as an augmented reality app, have not been seen before in the GCC, suggesting that Oman’s banks may be setting the agenda in terms of customer experience.

31

Qatar Population (million)1 2.7


GDP per head (US$ at PPP)1 129,620

Inflation (%)2 (0.3)


Source(s):1Economist Intelligence Unit, Qatar — data by country, 05 March 2019;2QCB website, Main Economic Indicators, accessed on 05 March 2019.

32

Summary

Sector overview

Currently 18 banks operate under the Qatar Central Bank (QCB) regulatory regime, of which 11 are national banks (four of which are Islamic) and seven foreign branches. Nine national banks are listed on the Qatar Exchange (QE) (four being Islamic), including one Islamic investment bank which has been excluded for the purposes of this report, which covers only commercial banks. No new banking licenses were granted by the QCB in 2018.

Regulatory update

The QCB takes a proactive approach to regulating banks in Qatar. It has issued Basel III regulations for all banks, which have been applied in a phased manner, and has implemented numerous regulatory requirements that have been applied in more developed financial markets, covering areas such as stress testing, capital planning, liquidity management, and recovery and resolution planning.

Financial position

Total listed banking sector assets increased by 3.2 percent, from US$395.8 billion in 2017 to US$408.4 billion in 2018, driven by a growth in corporate lending and cash and equivalents which were partially offset by decrease in investment securities. The market is dominated by QNB, which had a market share of 58.0 percent of total listed banking assets at the end of 2018, up from 2017, while Islamic banks had a combined market share of 20.2 percent.


In 2018, profitability for listed banks increased by 9.5 percent on average compared to the previous year. This was mainly a result of higher net interest income, which increased by 4.7 percent compared to the prior year, and a reduction in costs, despite a higher impairment charge on loans.



0.0

10.0

20.0

30.0

40.0

50.0

60.0

31/12/2017 31/03/2018 30/06/2018 30/09/2018 31/12/2018


11.1 14.3 26.4 26.7 13.8 42.1 236.9 37.1 0.2 0.2 0.2

0.60.2

0.8

3.8

0.5

0.0

1.0

2.0

3.0

4.0

0.0

40.0

80.0

120.0

160.0

200.0

240.0

280.0


Net

pro

fit

To

tal a

sset

s

33 33


Profitability on the rise

— Overall profitability for listed Qatari commercial banks has increased year-on-year by 9.5 percent. All banks, except for one, reported an increase in net profit compared to 2017, with conventional banks performing in line with their Islamic counterparts.

— This increase can predominantly be attributed to higher net interest income and a decrease in costswhich banks continue to focus on.

Robust asset growth

— Listed commercial banks posted a 3.2 percent growth in total assets compared to the prior year.This growth can be predominantly attributed to the increase in cash and cash equivalents (88.0 percent) and higher financing asset balances (26.0 percent) which was partially offset by lowerinvestment securities (27.0 percent).

— The significant increase in cash and cash equivalents and financing asset balances was primarily driven by QNB, which contributed 125.0percent of the total growth. The significant decrease in investment securities was also primarily driven by QNB, which contributed 23.5 percent of decline.

Challenging credit environment

— 2018 has witnessed an overall increase in provision charges against financing assets by 10.1 percent, driven by the corporate sector, reflecting potential challenges in the credit environment.

— Although non-performing loan ratios remain relatively low when compared to international norms, 2018 saw higher ratios as compared to the prior year.

Insights

Cost consciousness remains

— At 28.2 percent, Qatar’s listed banks have the lowest CIR on average across the GCC, reflecting cost consciousness across the sector and country as a whole.

— All, except two banks, reported a decline in their CIR which helped the overall average dip below 30.0 percent for the second consecutive time in a number of years. Banks have continued to invest in short and long-term cost-saving initiatives.

Expected credit losses

— Listed banks reported an ECL charge of US$3.0 billion on the adoption of IFRS 9 on 1 January 2018, predominantly as a result of the ECL on financing assets. This is an increase of approximately 50.0 percent in provisions from the 31 December 2017 reported numbers.

— Islamic banks contributed 15.6 percent of this total ECL while conventional banks accounted for the balance.

Stronger CARs

— The average CAR increased by 0.5 percent as compared to prior year, with four banks showing an increase and the remaining showing a decrease, reflecting the conservative approach to business during the year coupled with the specific capital raising activities undertaken to address the concerns identified in previous years.

— In addition, the regulatory capital adequacy requirements have been, and continue to, increase with the gradual phasing of Basel III regulations.

34

Outlook


Fintech gathers momentum

— With increasing regulatory support for the fintech sector through Qatar Development Bank (QDB) and Qatar Financial Centre (QFC) lead initiatives, we expect new players to enter the market and new alliances to be formed in 2019.

— The continued focus on innovation and efficiency will remain as banks look to differentiate themselves in a competitive market given the income pressures being faced and increasing regulatory requirements with efforts from the regulators for ensuring greater financial inclusion and fostering financial innovation in line with the Second Strategic Plan for the Financial Sector 2017–22.

A measured approach to continue

— As the 2022 FIFA World Cup approaches and in line with the Qatar National Vision 2030, Qatari banks will keep primary focus on the local market, as opposed to looking overseas for growth.

— Banks will also most likely continue with a measured and cautious approach to lending, particularly to the SME, real estate and contracting sectors, given the credit challenges experienced in 2018.

Regulatory requirements on the rise

— In line with the Second Strategic Plan for the Financial Sector 2017–22, and in advance of the upcoming Financial Action Task Force (FATF) review of Qatar, a greater emphasis is expected on enhancing AML/ CFT effectiveness for improving the integrity of and confidence in the financial system.

— In line with the new corporate governance code issued in late 2017 by the Qatar Financial Market Authority (QFMA), for all listed companies including banks, there will be a greater focus on internal controls over financial reporting and compliance with corporate governance requirements in line with international best practices.

Increased capital and fundraising

— In our view, banks will continue to look to access the capital markets for funding (through EMTN and sukuk issuances) and local capital issuances given that the State of Qatar outlook had been upgraded to stable in late 2018 by rating agencies. Liquidity is expected to improve with further issuances in the capital markets and support from the State to continue.

— The regulator will continue to implement the Basel III capital requirements, with additional domestic systemically important banks (DSIB) and counter cyclical buffer (CCB) requirements to be gradually phased in, resulting in higher capital adequacy requirements for banks to meet.

Consolidation drive

— In early 2019, the merger of two unlisted banks was completed which is expected to trigger further consolidation initiatives across the banking sector in our view.

— The merger of banks is expected to consolidate market share, improved pricing and cost synergies, which may make them more competitive in the context of shrinking margins currently being faced by banks in Qatar.

34

35


LDR (%)

CAR (%)

ROE/ROA (%)

Note: 1Minimum (average) regulatory CAR (14.2%) = Minimum total capital plus capital conservation buffer (12.5%) + DSIB buffer (average) (0.6%) + ICAAP capital charge (average) (1.1%). For source data refer to the data table (page 64–65) in Appendix II.

15.5%16.7% 17.5%

19.3%17.9% 17.3% 16.5% 16.1%

18.2% 16.9%16.6%

19.2%

16.4%

18.8% 19.0%

15.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%



2017 2018

12.6%

8.0% 8.8%

15.7%13.5%

14.9%

19.8%

2.3%

12.3%9.3%

6.2%

16.1%15.1%

16.6%19.6%

8.6%

1.6% 0.9% 1.2% 2.1% 1.9% 1.7%1.7%

0.4%1.7% 1.1%

0.9%2.1% 1.8% 1.8% 1.6% 1.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%


2017:ROE 2018:ROE

2017:ROA 2018:ROA

2017 2018

122.8%

107.4%100.6%

115.3%

100.1% 100.8% 99.8%

114.8%126.4%

109.5% 107.8%

117.2%

88.2%

101.6% 99.3%

117.4%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%


36





0.5% 0.6% 0.5% 0.1% 0.9% 0.2% 0.3% 0.1%9.6%

15.4%6.4% 2.3%

0.9%4.9% 8.3% 4.1%

69.8%

106.6%97.5%

50.5%

68.5%

100.0%104.1%

58.1%

142.5%138.1%

119.8%

48.7%

63.0%

106.8%111.9%

81.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%



92.1

83.9

63.1

85.791.6

84.6

94.7

67.8

6.2 14.2

31.1 13.46.3

14.2

3.4

26.6

1.7 1.0 1.9 1.9 5.8 3.6 0.8 0.5 2.0 1.3 1.2 1.1 1.9 1.8 5.6 5.6

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%




37



CIR (%)

Credit rating



Ahli NA NA A2 Stable A Stable

Al Khaliji NA NA A3 Stable A Stable

Doha BBB+ Stable A3 Stable A Stable

MAR NA NA A1 Stable NA NA

QIIB NA NA A2 Stable A Stable

QIB A- Stable A1 Stable A Stable

QNB A Stable Aa3 Stable A+ Stable

CB BBB+ Negative A3 Stable A Stable

Overall country rating AA- Stable Aa3 Stable AA- Stable

Note: NA = Rating not available on Thompson One, checked on 05 March 2019. 1Stage 3 charge as mentioned in note 4 in the FS – interest in suspense for the year; 2Stage 3 charge as mentioned in note 4 in the FS – interest in suspense for the year – foreign currency translation; 3Stage 3 charge as mentioned in note 4 in the FS – profit in suspense for the year; 4stage 3 charge as mentioned in note 4 in the FS – interest in suspense for the year (which is assumed to be differential between total profit and loss charge and total charge as per note 4); 5Stage 3 charge as mentioned in note 4 in the FS – interest in suspense for the year;Islamic banks have been presented in italics.For source data refer to the data table (page 64–65) in Appendix II.

18.3 82.6 162.8 29.6 7.7 130.4 553.4 466.2

0.7 (0.1)(33.3)

(5.8)1.7 4.5 93.5 25.1

12.012.7 13.9

(21.8)

(0.7)

53.0 93.6

(80.2)

22.044.3

280.8

23.6

18.5

81.3648.2

309.8

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


2017


2 3 4 51

30.6%27.6%

37.4%

21.1%

27.3% 26.6% 29.7%

36.0%

28.1% 28.8%

35.5%

24.0% 24.9%25.7% 26.6%

31.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%


2017 2018

38

Case studies

Conventional international bank to open the first digital branch in Qatar

Set to open in 2019, the expected opening of this new digital branch is the first of its kind in Qatar. The branch will be implementing a series of digital services to make customers’ banking journey smoother and more convenient. The new downtown district will be a showcase of the future of financial services and this digital branch is expected to be a focal point for the delivery of innovative digital banking services. The branch aims to bring in services and experiences that are smart, sustainable, innovative and fit for the future of Qatar with a unique digital banking solution that will support the overall vision of the State.

Islamic bank creates a Chief Digital Officer role

One of the leading Islamic banks in Qatar has created a Chief Digital Officer role, as part of the management team, to focus on digital services to enhance efficiency and customer satisfaction for clients. This is the first of its kind in Qatar, as the Bank looks to drive efficiency and innovation in terms of customer service and product innovation. The Bank started with the new mobile banking app, launched earlier this year, to be followed by other innovative solutions. The Bank has stated that it is very important for them to reach the customer, and ensure that they are empowered to transact, and meet their day-to-day banking requirements conveniently.

Innovation hub to drive Qatar’s vibrant fintech ambitions

An innovation hub has been launched in Qatar to act as a catalyst in developing Qatar as a fintech hub. A local financial institution, in conjunction with a third-party service provider, is planning to invest more into the venture capital fund initiatives and provide funding for Qatari SMEs. Innovative banking services that offer increased efficiency and lower costs have helped propel the rise of fintech as a global industry, and this is something that is likely to be a focus area in Qatar. The local development bank is taking tremendous efforts to offer a much needed push to Qatar’s financial landscape, backed by technology. The emergence of fintech is only the latest wave of innovation to have hit the banking industry. While banks have undergone various technology-enabled innovation phases before, fintech has the potential to lower barriers of entry to the financial services market and elevate the role of data as a key commodity and drive the emergence of new business models.

40

Saudi Arabia

Population (million)1 33.3



Inflation (%)2 2.2


Source(s):1Economist Intelligence Unit, Saudi Arabia — data by country, 9 March 2019; Main Economic Indicators;2Inflation Rate, SAMA website, accessed on 2 April 2019.

41

Summary

Sector overview

Of the 26 commercial banks operating in Saudi Arabia under the Saudi Arabian Monetary Authority (SAMA) regulatory regime, 12 are national banks and 14 are branches of foreign banks. The 12 national banks are listed on the Saudi Stock Exchange (Tadawul), and have been analyzed in this report. Majority of these banks offer both Shariah compliant and conventional banking products, while four banks are wholly Shariah compliant.

Regulatory update

SAMA issued new bank licensing guidelines in December 2018 that apply to both branches of foreign banks and new domestic banks. These guidelines are designed to encourage new entrants following a period when new licenses were more tightly controlled, as evidenced by new licences issued/ announced for First Abu Dhabi Bank, Standard Chartered Bank and Credit Suisse Group. Enforcement of responsible financing guidelines and approach for digital offerings have been other key areas of regulatory focus

Financial position

The total listed banking sector assets remained relatively stable year-on-year, showing only 2.1 percent growth. Home financing was a key driver in 2018, driven by government initiatives taken to develop affordable housing units and to facilitate the necessary legal and financing environment to encourage greater home ownership. Asset growth was higher amongst the Islamic banks, underscoring demand for Shariah compliant facilities.


Profitability for the listed banks increased by 11.3 percent in 2018 as compared with the previous year. This was primarily driven by higher the Saudi Arabian Interbank Offered Rates (SAIBOR) during 2018, thereby improving margins, conflated with a slight reduction in operating expenses owing to banks taking active cost management initiatives such as branch rationalisation (following ramping up of digitization efforts) and restructuring of non-risk taking functions.



0.0

5.0

10.0

15.0

20.0

25.0

12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

Al Rajhi Alinma ANB BAB BAJ BSFRiyad SAMBA AAAL NCB SABB SAIB

97.4

32.4 47.6

19.6 19.5

50.761.3 61.3

21.9

121.0

46.6

25.6

2.7

0.7 0.9

0.3 0.3

0.9

1.3

1.5

0.3

2.8

1.3

0.40.0

0.5

1.0

1.5

2.0

2.5

3.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Al Rajhi Alinma ANB BAB BAJ BSF Riyad SAMBA AAAL NCB SABB SAIB

Net

pro

fit

To

tal a

sset

s

42

Insights


Modest asset growth

— In 2018, total assets for the Saudi Arabian banks increased by US$12.5 billion (2.1 percent). Islamic banking assets also increased, primarily within retail financing. In particular, home financing and personal financing were buoyed by a growing population (both generally and for ‘bankable’ segments), government initiatives and product development.

— In contrast, some of the commercial banks such as The Saudi British Bank, Banque Saudi Fransi and Alawwal bank reported a decline in their asset portfolios driven by corporate deleveraging and muted trade flows.

— The increase in the total banking sector assets was broadly consistent with GDP growth in Saudi Arabia for 2018, which amounted to 2.2 percent.

Strong financial performance

— The average net profit increased by 11.3 percent in 2018 for the listed Banks in Saudi Arabia, capping a year of significant returns underpinned by higher average SAIBOR rates, modest growth in assets and a slight decrease in costs.

— During 2018, the increase in SAIBOR rates was in line with rate-setting trends by the US Federal Reserve, and had a positive impact on bank margins, given that funding costs remained stable.

— The average CIR across the banking industry slightly improved by 0.3 percent, compared with the previous year, notwithstanding generally higher costs of doing business in Saudi Arabia during 2018 due to the implementation of VAT, increases in employment-related expenses and increase in regulatory compliance costs.

Increased impairment charge

— The net impairment charge on loans and advances increased by 14.8 percent in 2018 compared with 2017, driven by changes in ECL in accordance with IFRS 9 from 1 January 2018.

— For Saudi Arabian banks, 88.3 percent of their financing exposures were classified under stage 1, whereas 9.6 percent and 2.1 percent were classified under stage 2 and stage 3 respectively. The majority of the ECL charges during 2018 were in respect to corporate exposures classified under stage 3.

Stronger capital adequacy ratio and increase in loans to deposit ratio

— Regulatory CAR remained between 17.3 percent and 27.5 percent for Saudi Arabian banks in 2018, with an overall average increase by 0.3 percent, compared with the previous year. The minimum benchmark regulatory capital ratio is 8.0 percent, although the SAMA sets specific minimum capital requirements for each bank.

— This increase was despite the implementation of IFRS 9, which resulted in significant ECL being recognized in opening retained earnings as at 1 January 2018 (with regulatory capital impact transitioned over five years), and the zakat agreement that all the listed banks reached with the General Authority of Zakat and Tax (GAZT) to settle their legacy liabilities and legal cases through a series of payments.

— The banks continued to invest in relatively low-risk assets in 2018, with securities such as sovereign sukuks prominent within their investment portfolios, offering advantages for both liquidity and capital. The strengthening of CAR was particularly apparent among those five banks (Alinma, Bank Aljazira, SAMBA Financial Group, The National Commercial Bank and The Saudi British Bank), who became ‘primary dealers’ in 2018 for the Debt Management Office (DMO) to facilitate secondary market-making activities for the Saudi Government-issued bonds and sukuks, and thus were required to mandatorily purchase agreed volumes of these securities every month.

— While the LDR increased to 84.5 percent on average in 2018, there is further headroom for financing growth within the SAMA-prescribed LDR limit of 90.0 percent.

43

Outlook


Increased opportunities for asset growth

— The year ahead promises to be an exciting one for the market, and there are many direct and indirect benefits that the banking industry is primed to reap due to the following:

– Many of the mega/giga development projects announced in the previous year, such as NEOM and Al Qiddiya, are expected to launch during 2019. These projects are both ambitious in their vision and massive in their scale, expected to create opportunities for finance providers.

– Foreign investment is expected to increase in 2019 in line with government initiatives. The Financial Services Development Program (FSDP) is one such initiative that aims to develop an advanced capital market capable of encouraging investment, promoting transparency, enhancing market participants’ sophistication, and facilitating the raising of capital for entities both in the public and private sectors. Similarly, indirect foreign investment is expected to pick up in 2019 with the inclusion of Saudi Arabian-listed equities in the FTSE Russell and MSCI emerging markets’ indices, with knock-on liquidity benefits from these increased capital flows.

– Saudi Arabia is widely seen as an ‘under-banked’ nation, with an estimated 6.4 million unbanked adults (with higher incidence among female adults and in the rural areas) and a further 1.8 million unbanked adolescents in the 15–18 years age bracket. Opportunities exist for diversified product offerings (e.g. profit-yielding saving products, microfinancing and SME solutions) and increased competition. The FSDP initiatives call for progress on financial inclusion, and are in step with the broader Vision 2030 themes.

– In a country where the population is rapidly growing and the middle class is expanding, and where 60 percent of the population is under the age of 30 and ‘tech savvy’, there is strong demand for a digital product suite. Expanded digital offerings can also have knock-on benefits over time for cost optimization and financial inclusion. We expect to see banks with an enhanced, omni-channel customer experience delivering a higher growth trajectory.

Macroeconomic and geopolitical risks:

— The ongoing geopolitical risks in the Middle East may result in major corporates, both domestic and foreign, exercising caution in investment decisions, growth ambitions and cash deployment – all of which could result in a drag on the economy in 2019.

Increased competition:

— Further new banking licenses are expected to be issued in the near future for both domestic and foreign entrants. These are expected to include ‘challenger’ banks, with a strong focus on the digital offering.

— Increased competition and disruption are also expected from fintech start-ups entering the market. The economic reforms (in line with Vision 2030), and resultant investment, have provided a platform for recent entrants, including PayTabs and BayanPay, which have been developing digital business models to challenge the traditional banks in the payment sector.

Consolidation in the banking sector:

— Subject to regulatory and other approvals, we expect two significant banking mergers to be completed in Saudi Arabia during 2019–20. The consolidation in the market is expected to bring synergies, efficiencies and expanded product offerings; however, it will take some time for integration projects to complete.

Accounting and regulatory changes:

— In March 2019, the Ministry of Finance (MoF) issued revised zakat calculation guidelines for banks, effective from 1 January 2019. The revised guidance provides much clarity on the calculation method, and is significantly different from the historic basis used in the previous years. Banks will need to determine their zakat liabilities as per the new regulations and assess the capital impacts going forward.

— In addition, the accounting framework adopted by banks in Saudi Arabia for zakat and income tax are expected to be revised at some stage, with the current exemption for reporting under IAS 12 Income Taxes, facing fresh scrutiny from the Saudi Organization for Certified Public Accountants (SOCPA). Reported earnings are likely to be impacted by any change.

43

44


LDR (%)

CAR (%)

ROE/ROA (%)

16.9%

10.1%

12.7% 12.8%

10.1%11.5%

10.3%11.5%

10.2%

18.0%

12.2%

10.4%

19.7%

12.1%13.0%

14.4%

10.0%10.6%

12.5% 12.7%

8.2%

18.8%

15.0%

11.6%

2.7% 1.8% 1.8% 1.6% 1.3%1.8%

1.8% 2.2%1.3%

2.2% 2.1%1.5%

2.9% 2.1% 1.9% 1.6% 1.4%1.7%

2.1% 2.4%1.2%

2.4% 2.7% 1.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%


02 17:ROE 2018:ROE

2017:ROA 2018:ROA


23.3%20.8%

17.6% 18.5%20.9%

19.4% 19.6%21.1%

20.3% 20.0%21.0% 20.4%

20.2%

21.1%

18.1%

17.3%

27.5%

19.8%

18.1%

22.7% 20.6% 20.6%21.3%

19.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%



2017 2018

2017 2018

85.5%88.8%

84.2%

90.9%

79.1%80.8%

89.9%

70.1%81.3% 80.7% 83.4%

89.0%

79.6%

92.9%85.9% 88.5%

78.9%81.3%

88.9%

66.8%

89.5% 83.3% 84.5%93.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%


45



1.2% 1.1% 0.4% 0.8% 0.4% 0.6% 0.2% 0.6% 0.5% 1.0% 0.4% 0.6%18.5% 6.8% 5.3% 6.9% 4.4% 7.6% 7.7% 10.1% 10.9% 9.2% 10.1% 2.2%

88.8%75.0% 70.6%

101.8%

50.3%66.0%

45.8%

75.6%

120.9%

71.7% 68.2%49.1%

313.8%

184.7%

160.9%

234.7%

139.7%

100.1%

147.6%

175.2%

139.6% 142.6%

187.8%

139.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

350.0%




0.9 0.7 1.5 1.0 1.3 1.2 1.5 1.2 2.9 1.2 2.9 2.7 2.0 1.0 1.6 0.9 3.3 3.0 1.9 1.9 3.5 1.6 4.4 1.3100.0%7.5 4.1 4.4

13.2 17.0 5.790.0% 15.1 10.6 10.7 24.7 14.0 10.2

80.0%

70.0%

60.0%

50.0%94.291.5 92.3 93.7

85.3 86.5 86.40% 81. 83.3 85.440. 7 82.4

71.930.0%

20.0%

10.0%

0.0%Al RaAl jhi AliAlinmanma ANABNB BABABB BAJBAJ BSFBSF RiyadRiyad SAMSAMBA BA AAALAAAL NCBNCB SABBSABB SAIBSAIB

Rajhi



46



CIR (%)

Credit rating

Note: NA = Rating not available on ThompsonOne, checked on 22 March 2019.1For Riyad Bank, provision charge for the year may include write-offs as bifurcation is not available in the financial statementsIslamic banks have been presented in italics.For source data refer to the data table (page 66–67) in Appendix II.



Al Rajhi BBB+ Stable A1 Stable A- Stable

Alinma NA NA NA NA BBB+ Stable

ANB BBB+ Stable A1 Stable BBB+ Negative

BAB NA NA A2 Stable NA NA

BAJ NA NA A3 Stable BBB+ Stable

BSF BBB+ Stable A1 Stable A- Stable

Riyad BBB+ Stable A2 Stable BBB+ Negative

SAMBA BBB+ Stable A1 Stable A- Stable

AAAL NA NA A3 Stable BBB+ Stable

NCB BBB+ Stable A1 Stable A- Stable

SABB BBB+ Stable A1 Stable A- Stable

SAIB BBB/A-2 Stable A3 Stable BBB+ Stable

Overall country rating A- Stable A1 Stable A+ Stable

412.4 148.8 306.2 100.9 71.2 132.7 327.1 76.5 298.6 496.7 267.0 56.8

36.9

70.1

11.0

79.7

(30.2)

82.4

(33.9)

177.3

(6.7)(48.0)

(106.6)

11.9 96.4

31.2

(5.4)

14.1

15.8

(150.5)

8.9

117.0

158.4 46.6 31.7

3.0

658.7 273.2

36.0

69.2 311.0 286.9

65.0

258.8

360.9 115.4

44.0

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


2017


Al Rajhi

Alinma ANB BAB BAJ BSF Riyad1 SAMBA AAAL NCB SABB SAIB

3.5

32.9%

39.9%34.6%

55.6% 56.6%

36.3%36.5% 32.7% 34.0%

35.2%30.4%

37.9%31.7%

38.3%34.2%

53.1%59.6%

34.2%

37.4%

30.3%

35.7%34.1%

30.3%

39.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%


2017 2018

47

Case studies

Best Bank for Customer Experience

In 2018, the Banker Middle East announced a Saudi Arabian bank as the winner of the ‘Best Bank for Customer Experience’ award. The current product offering among the listed banks in Saudi Arabia is broadly homogenous. Banks that acknowledge the tech savviness of a young target population that demands a high-quality, tailored customer experience – and build their organization strategy and execution around user experience – will achieve a competitive edge in a crowded market, and drive returns.

Launch of the regulatory Sandbox

The SAMA launched a regulatory Sandbox environment in early 2019 in a bid to promote innovative technologies in the financial services sector. The ‘sandbox ’ allows market participants wishing to develop new digital solutions to do so in a ‘test’ environment before actual full-scale roll-out. Currently, 11 local and international banks, along with seven specialist companies in the digital payment space, are authorized to work in the sandbox environment. Some of the innovative digital solutions currently being tested are e-Wallet services and money transfers through standardized QR codes.

49

United Arab Emirates

Population (million)1 9.5


GDP per head (US$ at PPP)1 76,280

Inflation (%)2 0.3


Source(s):1Economist Intelligence Unit, UAE — data by country,12 March 2019; Main Economic Indicators;2Trading Economics website, accessed on 9 March 2019.

50

12.0

15.0

18.0

21.0

24.0

0

3

6

9

12

12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

ADCB ADIB CBD DIB ENBD

RAKBANK UNB FAB SIB Mashreq

Summary

Sector overviewThere are 49 banks under the auspices of the Central Bank of the United Arab Emirates' (CBUAE), of which 27 are foreign banks, 22 are national banks and seven are local banks that follow Shari'a principles. This report analyzes the top 10 listed local banks.

Regulatory update

Globally, the regulatory environment is becoming more stringent for financial institutions, and the UAE ino exception. The CBUAE issued a number of regulations in the second half of 2018. These are all inline with the regulator’s aim to enhance the governance, risks and controls environment across thbanking sector, and to encourage financial institutions to adopt international leading practices. In 2018, CBUAE published regulations as well as a ‘Standards’ release which stipulates what banks should be doing to achieve best practice. It points out the main areas for banks to focus on: governance, identification and assessment, control and mitigation, business continuity management, information technology and systems, and reporting.


There is an increasing expectation of a number of circulars/ regulations to be issued by CBUAE in upcoming years.

Financial positionFor the top 10 listed local banks, gross assets increased by 7.9 percent year-on-year to US$623.8 billion in 2018. CAR reduced from 18.7 percent to 17.3 percent mainly due to the adoption of Basel III and IFRS 9. The LDR decreased slightly; however the overall liquidity position of the market seems steady. NPL ratio decreased to 3.1 percent from 4.3 percent in 2017 due to several banks writing off bad book loans in a clean up exercise.


Results are mixed for the 10 banks analyzed in this report, with most enjoying a stable year. The results of nine banks improved compared to the previous year, mainly due to overall growth in business and a decrease in net impairment charges for the year. Average ROE for the 10 banks showed improvement, and CIR increased to 37.5 percent.

76.2

34.1

20.260.9

136.2

38.114.3 29.1

202.6

12.2

1.3

0.7

0.3

1.3

2.7

0.60.2 0.3

3.3

0.1

0

1

2

3

4

0.0

50.0

100.0

150.0

200.0

250.0

ADCB ADIB CBD DIB ENBD Mashreq RAKBANK UNB FAB SIB

Net

pro

fit

To

tal a

sset

s

s

e


0.0

3.0

18.0

24.0

21.0

51 51


Economic growth

— The banking sector in UAE ended 2018 with stable results with a focus on tight underwriting standards for credit initiation to manage provisions and to improve efficiencies within an operating model to reduce cost.

— As per latest World Economic Outlook, the IMF predicted that the UAE's real GDP grew 1.7 percent in 2018 but the growth will pick up to 2.8 percent in 2019 and 3.3 percent in 2020. This prediction is lower than its October 2018 forecast when IMF had projected 2.9 percent growth for 2018 and 3.7 percent for 2019.

Consolidation and merger

— Currently, the UAE is overbanked for the current population as both retail and commercial banking customers in the UAE have a wealth of choice, ranging from international and local lenders, specialist and commercial banks, and private banks. Hence consolidation in the UAE's overbanked industry has accelerated, compelled largely by a tougher operating environment, owing to oil price volatility and growing competition from fintech firms, not just in the UAE, but in many countries globally. The recent merger between FGB and NBAD was one of the largest banking mergers in the GCC.

Insights

Governance

— It has been witnessed that CBUAE started focusing on overall governance side of the banks as the regulator’s aim to enhance the governance, risks and controls environment across the banking sector, and to encourage financial institutions to adopt international leading practices. The regulations and standards pertaining to internal controls, compliance, and internal audit issued by CBUAE came into effect in October 2018. Their objective is to strengthen the internal control environment of banks in order to meet the changing market conditions and ensure the soundness and stability of the banking sector. Although most large banks in the UAE have defined internal control processes, they would be well advised to reassess their frameworks by conducting a diagnostic review of their existing target operating model, policies and procedures across the three lines of defense.

KPIs

— ROE marginally increased year-on-year. Profitability increased by 11.1 percent. Reduction in impairment charge of 10.7 percent, and efforts to management operating cost are the key contributions in increasing the overall banking sector profitability.

52

Outlook


Innovation and technology

— Today, digital banking appears to be more of a ‘renovation’ of the service delivery channel than true ‘innovation’, a process that has long since occurred in other industries such as e-commerce. Banking services that were accessible at physical branches or websites are now being offered through smart phone apps. In essence, many banks have emulated and replicated what was happening elsewhere, albeit with a time lag, than having truly innovated. In an era where traditional banking methods are gradually being usurped by fintech and digital banking, the industry must remain alert and responsive to technological developments.

Headwinds as banks prepare for LIBOR transition

— LIBOR is currently the reference interest rate for millions of contracts globally, ranging from syndicated loans and retail mortgages to complex derivative products. However, LIBOR’s central role in the financial system appears to be coming to an end. In 2017 the UK’s Financial Conduct Authority (FCA) announced that after 2021 it would no longer persuade or compel panel banks to submit the rates required to calculate LIBOR. In its stead, there is now a clear global direction of travel toward alternative risk-free rate benchmarks (RFRs) based on actual transactional data.

— The transition from LIBOR to RFRs could introduce considerable costs and risks for financial institutions if not managed properly. The proposed alternative rates are calculated differently and payments under contracts referencing the new rates will likely differ from those referencing LIBOR.

— Given the degree of uncertainty and complexity, LIBOR transition is likely to be a significant transformation program for banks. In practice, transition planning will require mobilizing a cross business unit and geography transition program clarifying the individual accountabilities for the steering committees

Rightsizing the sector

— More consolidation in the financial services sector, mainly among banks, is likely during the 2019–23 forecast period given the moderate economic growth. This will be driven by the higher cost of doing business in the UAE and the threat of new entrants disrupting the market. Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank (all of which are based in Abu Dhabi) successfully merged in April 2019.

Automated know your customer (KYC) in a blockchain environment

— KYC is currently a pressing concern for banks and financial institutions throughout the world. Procedures often tend to be performed using traditional and outdated checklists with low quality data – albeit using centralized systems which are in fact fast and effective platforms. To resolve these concerns, banks are considering using blockchain technology to perform KYCs and address onboarding inefficiencies. Blockchain is an ideal platform for an automated, secure, and trustworthy KYC solution that improves the client experience, streamlines operations and enhances compliance.

Incorporating the right governance and corporate culture

— A strong corporate governance culture is regarded as one of the main pillars of maintaining and growing a sustainable economy.

— Carrying out annual assessments of the internal control framework, compliance function, and internal audit function by the board is another area that banks should think about addressing in the short term. As per the new regulations, the board of directors/ board committees are now also required to obtain an independent external evaluation of the compliance and internal audit functions every five years.

52

53


LDR (%)

140.0%118.5%

120.0% 114.9%100.2%100.1% 97.7% 93.0% 94.3% 96.3% 93.4%100.0% 94.2% 95.8%90.6% 93.1% 83.2% 90.4% 83.5%78.4% 82.5%

80.0% 76.5% 75.9%

60.0%

40.0%

20.0%

0.0%ADCB ADIB CBD DIB ENBD Mashreq RAKBANK UNB FAB SIB

2017 2018

CAR (%)25.0%

21.9%20.9% 21.1%20.1%

19.1% 19.5% 18.9%20.0% 18.3%17.3% 17.2% 17.5%17. 17.8% 17.7%

16.7% 0% 16.5% 17.2% 15.7%15.0%14.6%15.0%

10.0%

5.0%


2017 2018 Minimum (average) regulatory CAR as of 31/12/2018: 12.5%

ROE/ROA (%)

30.0%

25.0% 21.5%20.8%

19.2%20.0% 18.2%16.3% 18.1%

16.5%15.0%12.7 12.7%15.0% %

10.2% 12.2% 11.9% 9.4%11.3% 10.4%10.5% 9.4% 9.2%10.0%6.5%

2.3%5.0% 1.8% 2.1% 1.8%2.0% 1.6% 1.6% 1.6% 1.7% 1.3%

2.3% 1.8%1.6% 1.9% 1.8%1.5% 1.7% 1.1% 1.7% 1.2%0.0%

ADCB ADIB CBD DIB ENBD Mashreq RAKBANK UNB FAB SIB2017:ROE 2018:ROE

2017:ROA 2018:ROA


54


Stage-wise coverage ratios as at 31 December 20181 vs NPL coverage ratio as at 31 December 2017 on loans2 (%)

100.0%91.8%

90.0% 85.2% 85.9%80.6% 78.3%

80.0% 73.7%

66.9% 68.0%70.0% 66.2%

61.1%.6% 59.5% 60.5%58

60.0% 56.2% 54.4% 52.1%

50.0% 46.3% 45.5%39.3% 37.6%

40.0%28.4%

30.0%18.2% 18.9%

20.0% 15.8%13.8%12.4% 12.4%

7.4% 7.6% 8.4%10.0%

0.4% 0.5% 1.5% 0.8% 1.6% 0.7% 1.9% 1.0% 0.2% 0.6%0.0%

ADCB ADIB CBD DIB ENBD Mashreq RAKBANK UNB FAB SIB


1.6100.0%2.3 2.1

2.93.3 3.13.4 3.8 3.6 4.0 4.3 4.3 3.14.8 4.55.0 5.15.995.0% 6.26.5

7.2 7.1 9.010.0 5.0

8.8 3.6 7.38.4 10.4

90.0%

85.0% 95.3

90.5 90.5 90.588.887.9 86.786.080.0% 85.2 84.5

75.0%ADADCBCB ADAIBDIB CBCBDD DIBDIB ENENBBD D MMasharsehqreq RAKRAKBANKBANK UNBUNB FABFAB SIB SIB


Total loans subject to ECL (by stage)3 as at 31 December 2018 vs NPL ratio as at 31 December 2017 (%)

Note: 1All numbers are presented for loans and advances (financing assets for Islamic banks) except for ADCB, FAB and RAK Bank, where numbers have been reported for all financial instruments at amortized cost.2Where interest suspense has not been disclosed in the financial statements, we have assumed the amount of interest suspense to have been already netted with outstanding of exposure loan and hence amount of interest suspense has not been taken into the formula to calculate coverage ratio.3The ECL numbers presented in this document are on loans and advances (including financing assets for Islamic banks) for all top 10 listed banks except for ADCB, FAB and RAK Bank where ECL numbers are presented on all financial assets measured.For source data refer to the data table (page 68–69) in Appendix II.

55


Islamic banks have been presented in italics.

Net provision charge on loans (US$ million)1

100.0%

80.0%

60.0% 342.1455.6 208.5 187.0 227.4 260.7 591.3 596.6 393.7 422.7 219.3 216.3 567.8 42.0414.8

40.0% 231.4 18.6563.9 246.5 540.3

20.0% 179.112.9 84.7 2.4 0.2 69.7 2.90.0% 34.6(82.0) (32.3) (51.4)(59.3) (47.2) (54.0)ADCB ADIB CBD DIB (94.9) ENBD Mashreq (207.2)RAKBANK(28.3) UNB FAB SIB (9.0)-20.0% (131.8) (59.5)

-40.0% ADCB ADIB CBD DIB ENBD Mashreq RAKBANK UNB FAB SIB

2017


60.0%52.9%

50.0% 47.2% 48.6% 47.0%44.1%

39.2% 38.0% 38.9% 37.5%40.0% 33.1% 33.5% 34.1%31.5% 30.4% 31.2% 32.0% 31.3% 30.1%

30.0% 28.3% 27.4%

20.0%

10.0%


2017 2018

CIR (%)

Credit rating



ADCB A Stable Aa2 Stable A+ Stable

ADIB NA NA A2 Stable A+ Stable

CBD NA NA Baa1 Stable A- Stable

DIB NR Negative A3 Stable A Stable

ENBD NA NA A3 Stable A+ Stable

Mashreq A- Stable Baa1 Stable A Stable

RAK A/A-1 Stable Baa1 Stable BBB+ Stable

UNB NA NA A1 Stable A+ Stable

FAB2 AA- Stable Aa3 Stable AA- Stable

SIB BBB+ Stable A3 Stable BBB+ Stable

Overall country rating AA Stable Aa2 Stable AA Stable

Note: NA = Rating not available on ThompsonOne, checked on 22 March 2019. 1All numbers are presented for loans and advances (financing assets for Islamic banks) except for Abu Dhabi Commercial Bank and RAK Bank, where numbers have been reported for all financial instruments at amortized cost. Furthermore, total amount of net provision charge is netted with total recoveries for the year. The recoveries reported in stage 3 movement may not represent total recovery as there were some cases where banks recorded recovery directly in the statement of profit and loss, therefore we have adjusted stage 3 movement with recovery amount (recorded directly) to compare net provision charge in stage 3 movement with net provision charge reported in the statement of profit and loss.2For FAB, pro-forma financial statements are used for FY17 and FY18.

For source data refer to the data table (page 68–69) in Appendix II.

56

Case studies

Robotics in banks

One of the leading banking groups in the region is introducing 'Pepper', an artificial intelligence robot that is purported to add a ‘fun’ element to customer engagement. Pepper will interact with customers to understand visitation needs and present products and services alternatives in an engaging way, assisted by the bank's staff. Pepper will not however be involved in core banking functions. As the world of artificial intelligence and robotics evolves, the bank, a front-runner in digital and mobile banking, has announced that it will continue to engage with these technologies to make banking simpler and more convenient.

Digital transformation and reduction in physical branches across all services

One of the leading banks in the UAE is poised to continue its digital transformation journey by extending the use of internet, mobile solutions, social media, artificial intelligence and robotics in a much wider range of banking functions. Extensive use of new generation machines such as automated teller machines (ATMs), cheque deposit machines (CDMs), and mobile apps was successful in revolutionizing service delivery through digital and automated channels. With the introduction of these machines, banks were able to increase the share of automated transactions and initiate the process of closing 50.0 percent of their physical branches. Some branch-based customer services — such as updating KYC input details like email IDs, phone numbers, addresses, and trade licenses - are also progressively moving to digital and automated channels. This is expected to have a positive impact on bottom line results and customer satisfaction, while creating opportunities to launch innovative products.

58

Appendix II: Data tables — Bahrain

Total assets (US$ million) Net profit (US$ million)

Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

AUB 33,241.9 35,507.6 6.8% 618.7 697.5 12.7%

Al Baraka 25,453.2 23,831.2 (6.4)% 129.0 129.1 0.0%

Al Salam 4,215.5 4,536.6 7.6% 48.0 49.1 2.2%

BISB 3,259.0 3,393.6 4.1% 26.9 30.2 12.2%

BBK 9,981.6 9,500.5 (4.8)% 155.7 178.0 14.4%

Ithmaar 8,611.4 8,488.7 (1.4)% (84.7) (24.0) (71.7)%

Khaleeji 2,082.8 2,257.1 8.4% 5.2 1.7 (66.5)%

NBB 8,226.8 8,476.1 3.0% 161.8 185.7 14.7%

Total 95,072.2 95,991.3 1.0% 1,060.7 1,247.3 17.6%

Capital adequacy ratio Return on assets Return on equity

2017 2018 Δ y-o-y 2017 2018 Δ y-o-y 2017 2018 Δ y-o-yBank

AUB 17.0% 16.9% (0.1)% 1.9% 2.0% 0.1% 15.9% 17.1% 1.2%

Al Baraka 17.3% 17.4% 0.1% 0.5% 0.5% 0.0% 8.6% 7.9% (0.8)%

Al Salam 21.4% 20.6% (0.8)% 1.1% 1.1% 0.0% 5.8% 6.1% 0.3%

BISB 19.4% 17.1% (2.3)% 0.9% 0.9% 0.0% 8.5% 9.5% 1.0%

BBK 20.0% 19.6% (0.4)% 1.6% 1.8% 0.3% 12.9% 14.6% 1.7%

Ithmaar1 13.9% 13.4% (0.5)% (1.0)% (0.3)% 0.7% (21.6)% (10.2)% 11.5%

Khaleeji 17.0% 16.2% (0.8)% 0.3% 0.1% (0.2)% 1.7% 0.6% (1.1)%

NBB 36.3% 33.8% (2.5)% 2.0% 2.2% 0.2% 14.1% 15.2% 1.0%

Average 20.3% 19.4% (0.9)% 0.9% 1.1% 0.1% 5.8% 7.6% 1.8%

Share price (US$)

Bank 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

AUB 0.7 0.7 0.6 0.7 0.7

Al Baraka 0.4 0.4 0.3 0.3 0.3

Al Salam 0.3 0.3 0.3 0.3 0.3

BISB 0.4 0.3 0.3 0.3 0.3

BBK 1.1 1.2 1.2 1.2 1.2

Ithmaar 0.1 0.1 0.1 0.1 0.1

Khaleeji 0.3 0.2 0.2 0.2 0.2

NBB 1.7 1.6 1.6 1.6 1.6

Average 0.6 0.6 0.6 0.6 0.6

Note: 1For calculating CAR, regulatory capital and NPL for Ithmaar Holding, numbers for Ithmaar Bank have been considered as proxy data.For detailed sources, refer to Appendix III: Sources.

59

Loan-to-deposit ratio Cost-to-income ratio

Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

AUB 88.6% 82.4% (6.2)% 28.8% 27.1% (1.7)%

Al Baraka 83.9% 80.2% (3.7)% 56.9% 54.7% (2.2)%

Al Salam 76.6% 79.2% 2.6% 38.5% 48.9% 10.4%

BISB 80.0% 82.7% 2.6% 61.9% 55.5% (6.5)%

BBK 66.3% 74.6% 8.3% 37.8% 36.8% (1.0)%

Ithmaar 93.3% 101.9% 8.7% 90.4% 83.3% (7.1)%

Khaleeji 85.7% 77.4% (8.3)% 59.4% 64.3% 4.9%

NBB 56.7% 54.3% (2.3)% 31.6% 35.6% 4.0%

Average 78.9% 79.1% 0.2% 50.7% 50.8% 0.1%

Coverage ratios on loans as at 31 December 2018

Bank Stage 1 (US$ million) Stage 2 (US$ million) Stage 3 (US$ million)

Coverage ratio Exposures Exposures Exposures on NPL as at 31 subject to Coverage subject to Coverage subject to Coverage December 2017 ECL ECL ratio ECL ECL ratio ECL ECL ratio

AUB 85.1% 125.1 17,162.3 0.7% 365.3 2,777.1 13.2% 324.8 379.8 85.5%

Al Baraka 58.8% 36.7 11,826.0 0.3% 147.1 2,807.9 5.2% 421.2 764.7 55.1%

Al Salam 26.7% 13.2 1,904.9 0.7% 14.1 204.5 6.9% 68.9 207.9 33.1%

BISB 31.7% 6.8 1,699.1 0.4% 14.5 195.3 7.4% 93.8 252.1 37.2%

BBK 61.6% 30.1 3,819.7 0.8% 67.6 811.0 8.3% 231.4 400.0 57.8%

Ithmaar1 59.1% 135.1 6,309.6 2.1% 5.2 1,109.4 0.5% 347.2 509.8 68.1%

Khaleeji 11.2% 12.9 853.3 1.5% 10.2 151.2 6.7% 41.8 248.2 16.9%

NBB 34.4% 17.5 2,879.3 0.6% 16.7 139.8 12.0% 96.8 268.7 36.0%

Average 46.1% 47.2 5,806.8 0.9% 80.1 1,024.5 7.5% 203.2 378.9 48.7%

Note: 1For calculating CAR, Regulatory Capital and NPL for Ithmaar Holding, financial numbers for Ithmaar Bank have been considered as proxy data. Total impairment charge for 2018 is taken as stage-wise breakup of provision charge was not available in the financial statementFor detailed sources, refer to Appendix III: Sources.

NPL ratio Total loans subject to ECL - by as at 31 stage as at 31 December 2018 Net provision charge on loans (US$ million)

December Bank 2017 Stage 1 Stage 2 Stage 3 2017 Stage 1 Stage 2 Stage 3 Total Δ y-o-y

AUB 1.9% 84.5% 13.7% 1.9% 60.7 (21.2) 18.0 79.2 75.9 25.1%

Al Baraka 4.2% 76.8% 18.2% 5.0% 128.9 6.1 46.2 56.8 109.2 (15.3)%

Al Salam 18.4% 82.2% 8.8% 9.0% 39.1 (7.4) 5.6 29.6 27.8 (28.8)%

BISB 7.1% 79.2% 9.1% 11.7% 6.7 (4.0) (5.4) 22.6 13.2 96.0%

BBK 5.8% 75.9% 16.1% 8.0% 76.7 4.7 71.1 (25.0) 50.8 (33.8)%

Ithmaar1 9.4% 79.6% 14.0% 6.4% 24.1 Stage-wise break up not available (9.1) (137.8)%

Khaleeji 12.9% 68.1% 12.1% 19.8% 13.1 (1.1) (3.0) 15.5 11.3 (13.4)%

NBB 6.9% 87.6% 4.3% 8.2% 27.5 (4.2) 13.5 15.1 24.4 (11.2)%

Average/ total 8.3% 80.5% 14.2% 5.3% 376.8 (27.2) 146.0 193.8 303.5 (19.4)%

60

Appendix II: Data tables — Kuwait


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

AUBK 12,059.8 12,913.1 7.1% 146.3 169.1 15.6%

ABK 14,350.1 15,007.6 4.6% 117.3 139.0 18.4%

Boubyan 13,062.6 14,335.6 9.7% 156.6 185.1 18.2%

Burgan 24,396.0 24,126.3 (1.1)% 214.6 272.5 27.0%

GBK 18,698.4 19,851.0 6.2% 158.0 187.2 18.5%

KFH 57,107.8 58,633.2 2.7% 605.9 750.3 23.8%

KIB 6,303.8 7,155.3 13.5% 58.2 68.9 18.4%

NBK 85,653.8 90,498.7 5.7% 1,060.6 1,223.2 15.3%

CBK 14,458.2 14,740.7 2.0% 182.4 210.3 15.3%

Warba 5,833.3 7,236.0 24.0% 22.3 42.0 88.8%

Total 251,923.7 264,497.4 5.0% 2,722.1 3,247.7 19.3%

Net provision charge on loans (US$ million) Loan-to-deposit ratio (%)

Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

AUBK 87.7 72.2 -17.6% 110.2% 115.5% 5.3%

ABK 190.2 180.9 -4.9% 104.6% 97.2% (7.5)%

Boubyan 29.0 45.2 55.6% 84.6% 87.7% 3.0%

Burgan 136.7 205.4 50.3% 106.1% 113.1% 7.1%

GBK 227.4 340.4 49.7% 112.8% 109.6% (3.2)%

KFH 224.3 197.2 -12.1% 79.5% 79.7% 0.2%

KIB 30.8 30.4 -1.5% 108.4% 121.8% 13.4%

NBK 574.5 549.1 -4.4% 105.2% 107.7% 2.5%

CBK (71.6) 122.0 -270.3% 101.5% 98.3% (3.2)%

Warba 39.7 40.8 2.6% 125.2% 152.5% 27.3%

Total/average 1,468.8 1,783.6 7.4% 103.8% 108.3% 4.5%

Share price (US$)

Bank 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

AUBK 1.1 1.1 0.9 1.0 1.0

ABK 1.0 1.1 1.1 1.0 1.0

Boubyan 1.4 1.6 1.6 1.9 1.8

Burgan 1.0 0.9 0.9 0.8 0.9

GBK 0.8 0.8 0.8 0.8 0.8

KFH 1.9 2.0 1.8 2.0 2.0

KIB 0.8 0.8 0.7 0.8 0.9

NBK 2.4 2.5 2.5 2.7 2.8

CBK 1.3 1.5 1.6 1.7 1.6

Warba 0.8 0.8 0.7 0.8 0.7

Average 1.2 1.3 1.3 1.3 1.4

Note: For detailed sources, refer to Appendix III: Sources.

61

Capital adequacy ratio (%) Return on equity (%) Return on assets (%)

2017 2018 Δ y-o-y 2017 2018Bank Δ y-o-y 2017 2018 Δ y-o-y

AUBK 18.0% 16.6% (1.4)% 11.2% 12.2% 1.0% 1.2% 1.4% 0.1%

ABK 17.2% 19.2% 1.9% 6.3% 7.3% 1.0% 0.8% 0.9% 0.1%

Boubyan 19.4% 18.2% (1.2)% 13.2% 14.3% 1.1% 1.3% 1.3% 0.1%

Burgan 16.2% 17.4% 1.2% 9.9% 11.6% 1.7% 0.9% 1.1% 0.2%

GBK 17.8% 17.5% (0.3)% 8.2% 9.2% 1.1% 0.9% 1.0% 0.1%

KFH 17.8% 17.5% (0.3)% 10.0% 12.1% 2.1% 1.1% 1.3% 0.2%

KIB 19.1% 16.6% (2.4)% 6.9% 7.8% 0.9% 0.9% 1.0% 0.1%

NBK 17.8% 17.2% (0.6)% 10.9% 12.0% 1.1% 1.3% 1.4% 0.1%

CBK1 18.7% 18.8% 0.1% 8.8% 9.2% 0.4% 1.3% 1.4% 0.1%

Warba 22.5% 24.3% 1.8% 7.0% 8.6% 1.6% 0.5% 0.6% 0.2%

Average 18.4% 18.3% (0.1)% 9.2% 10.4% 1.2% 1.0% 1.2% 0.1%

Non-performing loan ratio (%) Cost-to-income ratio (%)

2017 2018Bank Δ y-o-y 2017 2018 Δ y-o-y

AUBK 1.4% 1.3% (8.1)% 32.0% 30.6% (1.4)%

ABK 1.0% 1.7% 70.7% 37.7% 38.6% 0.9%

Boubyan 0.8% 0.8% 6.0% 42.1% 40.6% (1.5)%

Burgan 2.7% 2.4% (13.6)% 45.6% 42.1% (3.5)%

GBK 1.7% 1.0% (41.2)% 35.4% 34.5% (1.0)%

KFH 2.5% 2.0% (21.8)% 42.8% 39.2% (3.6)%

KIB 2.4% 0.7% (70.4)% 51.0% 53.9% 2.8%

NBK 1.4% 1.4% (2.2)% 32.3% 31.3% (1.0)%

CBK 0.5% 0.0% (100.0)% 30.9% 29.7% (1.1)%

Warba2 1.5% 1.3% (11.8)% 47.4% 38.3% (9.1)%

Average 1.6% 1.3% (19.2)% 39.7% 37.9% (1.8)%

Note: 1Capital adequacy for CBK as on 30 September 2018 has been used as proxy data for regulatory capital numbers as on 31 December 2018 due to non-availability of disclosure document on report release date. 2For calculating NPL ratio for Warba bank, past due or impaired has been taken as proxy data

62

Appendix II: Data tables — Oman


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

Ahli 5,232.7 5,949.1 13.7% 69.3 74.8 7.9%

Alizz 1,477.8 1,773.5 20.0% (7.8) 5.2 (167.0)%

Dhofar 11,030.4 10,944.1 (0.8)% 123.7 130.6 5.6%

Muscat 28,959.0 31,917.0 10.2% 459.3 466.6 1.6%

Nizwa 1,809.4 2,265.4 25.2% 9.8 19.5 98.4%

Sohar 7,383.9 7,912.7 7.2% 65.8 76.3 15.9%

HSBC 6,061.8 6,131.5 1.1% 49.7 81.5 64.1%

NBO 9,013.9 9,280.3 3.0% 114.4 131.4 15.0%

Total 70,969.0 76,173.6 7.3% 884.1 985.9 11.5%



Ahli 16.7% 17.5% 0.8% 1.4% 1.3% 0.0% 10.7% 11.3% 0.6%

Alizz 16.7% 15.3% (1.4)% (0.6)% 0.2% 0.9% (3.8)% 2.6% 6.3%

Dhofar 15.4% 17.3% 1.9% 1.2% 1.2% 0.0% 8.9% 8.4% (0.6)%

Muscat 18.6% 19.2% 0.7% 1.6% 1.5% (0.1)% 10.9% 10.3% (0.6)%

Nizwa 17.2% 16.2% (1.0)% 0.6% 1.0% 0.3% 2.9% 5.6% 2.7%

Sohar 16.2% 15.0% (1.2)% 0.9% 1.0% 0.1% 8.9% 10.1% 1.2%

HSBC 16.9% 19.4% 2.5% 0.8% 1.3% 0.5% 6.0% 9.5% 3.4%

NBO 17.3% 16.3% (1.1)% 1.3% 1.4% 0.2% 8.2% 9.3% 1.1%

Average 16.9% 17.0% 0.1% 0.9% 1.1% 0.2% 6.6% 8.4% 1.8%

Share price (US$)

Bank 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

Ahli 0.4 0.4 0.4 0.4 0.4

Alizz 0.2 0.2 0.2 0.2 0.2

Dhofar 0.6 0.5 0.4 0.4 0.4

Muscat 1.0 1.0 1.0 1.1 1.1

Nizwa 0.2 0.2 0.2 0.2 0.2

Sohar 0.4 0.4 0.4 0.3 0.3

HSBC 0.3 0.3 0.3 0.3 0.3

NBO 0.5 0.5 0.5 0.5 0.5

Average 0.5 0.4 0.4 0.4 0.4


63


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

Ahli 112.7% 112.6% (0.1)% 38.2% 40.8% 2.5%

Alizz 97.0% 94.4% (2.6)% 113.1% 83.1% (30.0)%

Dhofar 105.9% 108.0% 2.1% 46.5% 50.5% 4.0%

Muscat 112.3% 105.6% (6.6)% 42.0% 42.6% 0.6%

Nizwa 106.5% 97.9% (8.6)% 73.3% 61.5% (11.9)%

Sohar 127.8% 123.8% (3.9)% 45.5% 42.2% (3.3)%

HSBC 72.2% 72.1% (0.1)% 64.2% 57.5% (6.7)%

NBO 107.8% 114.6% 6.7% 48.8% 47.9% (1.0)%

Average 105.3% 103.6% (1.6)% 59.0% 53.3% (5.7)%




Ahli 53.5% 17.4 4,431.5 0.4% 26.2 431.6 6.1% 45.8 85.2 53.7%

Alizz 56.1% 6.7 1,360.2 0.5% 2.5 76.8 3.3% 8.2 17.5 46.6%

Dhofar 15.2% 34.7 6,510.1 0.5% 63.8 1,730.6 3.7% 107.5 315.1 34.1%

Muscat 129.5% 38.8 17,130.9 0.2% 279.7 6,197.0 4.5% 536.3 744.9 72.0%

Nizwa 36.4% 12.3 2,065.8 0.6% 9.1 242.6 3.8% 0.5 0.7 69.1%

Sohar 48.3% 33.0 4,742.2 0.7% 87.3 1,137.5 7.7% 85.8 200.0 42.9%

HSBC 33.0% 10.2 2,657.9 0.4% 32.6 973.7 3.4% 49.3 69.8 70.7%

NBO 89.2% 37.8 5,881.4 0.6% 67.2 1,390.2 4.8% 233.7 365.0 64.0%

Average 57.7% 23.9 5,597.5 0.5% 71.1 1,522.5 4.6% 133.4 224.8 56.6%




Ahli 1.2% 89.6% 8.7% 1.7% 9.3 (19.8) 12.5 24.7 17.4 87.6%

Alizz 0.2% 93.5% 5.3% 1.2% 5.4 (2.2) 0.7 3.6 2.1 (60.7)%

Dhofar 3.1% 76.1% 20.2% 3.7% 30.0 1.3 (3.0) 14.6 12.9 (57.0)%

Muscat 2.9% 71.2% 25.7% 3.1% 57.1 (80.7) 134.5 55.7 109.5 91.9%

Nizwa 0.2% 89.5% 10.5% 0.0% 5.0 1.8 3.5 0.1 5.4 7.8%

Sohar 2.3% 78.0% 18.7% 3.3% 18.2 6.8 21.5 17.1 45.3 148.8%

HSBC 3.8% 71.8% 26.3% 1.9% 14.4 5.2 6.2 (6.9) 4.5 (69.0)%

NBO 4.1% 77.0% 18.2% 4.8% 72.4 (5.6) (20.4) 74.5 48.4 (33.1)%

Average/ total 2.2% 76.2% 20.7% 3.1% 211.7 (93.2) 155.4 183.4 245.6 16.0%

64

Appendix II: Data tables — Qatar


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

Ahli 10,957.0 11,099.7 1.3% 175.7 182.8 4.0%

Al Khaliji 15,902.4 14,313.9 (10.0)% 151.2 167.1 10.5%

Doha 25,685.5 26,410.0 2.8% 305.0 228.1 (25.2)%

MAR 28,282.7 26,729.2 (5.5)% 557.2 585.3 5.0%

QIIB 12,807.4 13,807.7 7.8% 228.6 242.3 6.0%

QIB 41,311.8 42,096.8 1.9% 660.8 757.0 14.5%

QNB 222,823.6 236,867.5 6.3% 3,606.6 3,787.9 5.0%

CB 38,035.5 37,107.3 (2.4)% 165.8 456.9 175.5%

Total 395,805.9 408,432.0 3.2% 5,851.1 6,407.5 9.5%



Ahli 15.5% 18.2% 2.8% 1.6% 1.7% 0.0% 12.6% 12.3% (0.3)%

Al Khaliji 16.7% 16.9% 0.2% 0.9% 1.1% 0.2% 8.0% 9.3% 1.3%

Doha 17.5% 16.6% (0.9)% 1.2% 0.9% (0.3)% 8.8% 6.2% (2.6)%

MAR 19.3% 19.2% (0.1)% 2.1% 2.1% 0.0% 15.7% 16.1% 0.4%

QIIB 17.9% 16.4% (1.5)% 1.9% 1.8% 0.0% 13.5% 15.1% 1.6%

QIB 17.3% 18.8% 1.4% 1.7% 1.8% 0.2% 14.9% 16.6% 1.7%

QNB 16.5% 19.0% 2.5% 1.7% 1.6% (0.1)% 19.8% 19.6% (0.2)%

CB 16.1% 15.5% (0.6)% 0.4% 1.2% 0.8% 2.3% 8.6% 6.4%

Average 17.1% 17.6% 0.5% 1.4% 1.5% 0.1% 12.0% 13.0% 1.0%

Share price (US$)

Bank 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

Ahli 10.7 8.7 8.5 8.4 7.7

Al Khaliji 3.9 3.0 2.9 3.0 3.2

Doha 7.8 7.4 7.3 5.7 6.1

MAR 10.4 9.7 9.6 10.2 11.5

QIIB 15.0 13.7 14.6 15.6 18.2

QIB 26.6 26.8 31.9 38.8 41.8

QNB 34.6 35.7 41.8 48.6 53.6

CB 7.9 8.2 10.5 11.0 10.8

Average 14.6 14.2 15.9 17.7 19.1


65


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

Ahli 122.8% 126.4% 3.7% 30.6% 28.1% (2.5)%

Al Khaliji 107.4% 109.5% 2.1% 27.6% 28.8% 1.3%

Doha 100.6% 107.8% 7.3% 37.4% 35.5% (1.9)%

MAR 115.3% 117.2% 1.9% 21.1% 24.0% 2.9%

QIIB 100.1% 88.2% (11.8)% 27.3% 24.9% (2.3)%

QIB 100.8% 101.6% 0.8% 26.6% 25.7% (0.9)%

QNB 99.8% 99.3% (0.5)% 29.7% 26.6% (3.1)%

CB 114.8% 117.4% 2.6% 36.0% 31.9% (4.1)%

Average 107.7% 108.4% 0.7% 29.5% 28.2% (1.3)%




Ahli 142.5% 36.6 7,067.3 0.5% 45.7 476.2 9.6% 90.3 129.3 69.8%

Al Khaliji 138.1% 47.7 7,576.3 0.6% 197.1 1,281.2 15.4% 180.2 169.0 106.6%

Doha 119.8% 61.5 11,272.1 0.5% 357.7 5,549.2 6.4% 1,018.6 1,044.5 97.5%

MAR 48.7% 16.1 17,134.4 0.1% 61.9 2,686.7 2.3% 83.8 165.9 50.5%

QIIB 63.0% 56.0 6,557.5 0.9% 4.1 454.4 0.9% 98.7 144.0 68.5%

QIB 106.8% 57.4 24,270.2 0.2% 198.6 4,065.5 4.9% 346.3 346.3 100.0%

QNB 111.9% 458.3 164,708.4 0.3% 490.4 5,918.1 8.3% 3,486.1 3,348.2 104.1%

CB 81.0% 13.8 16,312.3 0.1% 261.6 6,395.7 4.1% 781.3 1,343.7 58.1%

Average 101.5% 93.4 31,862.3 0.4% 202.1 3,353.4 6.5% 760.7 836.4 81.9%



Ahli 1.0% 92.1% 6.2% 1.7% 18.3 0.7 12.0 22.0 34.7 89.3%

Al Khaliji 1.9% 83.9% 14.2% 1.9% 82.6 (0.1) 12.7 44.3 56.9 (31.1)%

Doha 3.6% 63.1% 31.1% 5.8% 162.8 (33.3) 13.9 280.8 261.4 60.6%

MAR 0.5% 85.7% 13.4% 0.8% 29.6 (5.8) (21.8) 23.6 (4.0) (113.5)%

QIIB 1.3% 91.6% 6.3% 2.0% 7.7 1.7 (0.7) 18.5 19.5 154.1%

QIB 1.1% 84.6% 14.2% 1.2% 130.4 4.5 53.0 81.3 138.8 6.4%

QNB 1.8% 94.7% 3.4% 1.9% 553.4 93.5 93.6 648.2 835.3 50.9%

CB 5.6% 67.8% 26.6% 5.6% 466.2 25.1 (80.2) 309.8 254.7 (45.4)%

Average/ total 2.1% 83.0% 14.4% 2.6% 1,451.0 86.2 82.6 1,428.6 1,597.4 10.1%


66

Appendix II: Data tables — KSA


2017 2018 Δ y-o-y 2017 2018Bank Δ y-o-y

Al Rajhi 91,440.6 97,388.4 6.5% 2,430.7 2,747.2 13.0%

Alinma 30,648.9 32,373.5 5.6% 536.0 671.7 25.3%

ANB 45,758.5 47,570.5 4.0% 806.7 883.2 9.5%

BAB 16,844.8 19,647.2 16.6% 251.1 296.3 18.0%

BAJ 18,198.6 19,478.3 7.0% 228.5 266.9 16.8%

BSF 51,415.5 50,748.3 (1.3)% 941.2 882.3 (6.3)%

Riyad 57,639.2 61,340.6 6.4% 1,051.6 1,258.3 19.7%

SAMBA 60,658.4 61,350.9 1.1% 1,338.1 1,472.8 10.1%

AAAL 26,615.3 21,886.3 (17.8)% 355.9 301.6 (15.3)%

NCB 118,290.3 120,971.0 2.3% 2,612.2 2,846.0 9.0%

SABB 49,999.5 46,576.3 (6.9)% 1,053.9 1,315.1 24.8%

SAIB 24,996.7 25,632.9 2.5% 376.0 389.2 3.5%

Total 592,506.2 604,931.0 2.1% 11,982.0 13,330.4 11.3%


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

Al Rajhi 23.3% 20.2% (3.1)% 2.7% 2.9% 0.2% 16.9% 19.7% 2.8%

Alinma 20.8% 21.1% 0.3% 1.8% 2.1% 0.3% 10.1% 12.1% 2.0%

ANB 17.6% 18.1% 0.5% 1.8% 1.9% 0.1% 12.7% 13.0% 0.3%

BAB 18.5% 17.3% (1.2)% 1.6% 1.6% 0.0% 12.8% 14.4% 1.6%

BAJ 20.9% 27.5% 6.5% 1.3% 1.4% 0.1% 10.1% 10.0% (0.2)%

BSF 19.4% 19.8% 0.4% 1.8% 1.7% (0.1)% 11.5% 10.6% (0.9)%

Riyad 19.6% 18.1% (1.5)% 1.8% 2.1% 0.3% 10.3% 12.5% 2.2%

SAMBA 21.1% 22.7% 1.5% 2.2% 2.4% 0.2% 11.5% 12.7% 1.2%

AAAL 20.3% 20.6% 0.3% 1.3% 1.2% (0.1)% 10.2% 8.2% (1.9)%

NCB 20.0% 20.6% 0.7% 2.2% 2.4% 0.2% 18.0% 18.8% 0.8%

SABB 21.0% 21.3% 0.3% 2.1% 2.7% 0.6% 12.2% 15.0% 2.8%

SAIB 20.4% 19.4% (1.0)% 1.5% 1.5% 0.0% 10.4% 11.6% 1.2%

Average 20.2% 20.5% 0.3% 1.8% 2.0% 0.2% 12.2% 13.2% 1.0%

Share price (US$)

Bank 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

Al Rajhi 17.2 20.1 23.0 23.5 23.3 Alinma 5.1 5.5 5.7 5.7 6.1 ANB 6.6 7.8 8.5 8.8 8.5 BAB 5.5 6.1 6.2 6.6 7.3 BAJ 3.1 3.0 3.9 3.9 3.8 BSF 7.6 7.8 9.0 8.9 8.4 Riyad 3.3 3.7 4.3 4.4 5.3 SAMBA 6.3 7.1 8.7 8.5 8.4 AAAL 3.2 3.3 3.8 3.8 4.0 NCB 9.8 11.6 13.0 12.0 12.8 SABB 7.2 8.4 8.4 8.5 8.7 SAIB 4.0 4.1 4.8 4.9 4.6

Average 6.6 7.4 8.3 8.3 8.4


67


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

Al Rajhi 85.5% 79.6% (5.9)% 32.9% 31.7% (1.2)%Alinma 88.8% 92.9% 4.1% 39.9% 38.3% (1.6)%ANB 84.2% 85.9% 1.7% 34.6% 34.2% (0.4)%BAB 90.9% 88.5% (2.4)% 55.6% 53.1% (2.4)%BAJ 79.1% 78.9% (0.2)% 56.6% 59.6% 3.0%BSF 80.8% 81.3% 0.5% 36.3% 34.2% (2.1)%Riyad 89.9% 88.9% (1.0)% 36.5% 37.4% 0.9%SAMBA 70.1% 66.8% (3.2)% 32.7% 30.3% (2.4)%AAAL 81.3% 89.5% 8.2% 34.0% 35.7% 1.7%NCB 80.7% 83.3% 2.6% 35.2% 34.1% (1.1)%SABB 83.4% 84.5% 1.1% 30.4% 30.3% (0.1)%SAIB 89.0% 93.3% 4.3% 37.9% 39.9% 2.0%

Average 83.6% 84.5% 0.8% 38.6% 38.2% (0.3)%




Al Rajhi 313.8% 706.9 59,071.7 1.2% 896.7 4,858.4 18.5% 542.5 611.1 88.8%

Alinma 184.7% 207.3 19,622.4 1.1% 205.7 3,033.8 6.8% 255.3 340.6 75.0%

ANB 160.9% 115.0 26,958.5 0.4% 299.6 5,626.2 5.3% 299.7 424.4 70.6%

BAB 234.7% 95.9 11,632.7 0.8% 146.6 2,112.6 6.9% 215.3 211.4 101.8%

BAJ 139.7% 36.9 9,658.5 0.4% 51.5 1,182.9 4.4% 160.6 319.6 50.3%

BSF 100.1% 175.4 28,740.1 0.6% 269.4 3,562.3 7.6% 638.5 967.2 66.0%

Riyad 147.6% 80.4 37,788.3 0.2% 178.1 2,326.6 7.7% 370.7 810.0 45.8%

SAMBA 175.2% 182.7 29,242.4 0.6% 129.1 1,284.2 10.1% 384.6 508.9 75.6%

AAAL 139.6% 53.1 11,749.2 0.5% 438.8 4,041.4 10.9% 661.6 547.2 120.9%

NCB 142.6% 684.7 68,191.0 1.0% 292.9 3,180.8 9.2% 1,003.8 1,400.0 71.7%

SABB 187.8% 97.8 25,299.8 0.4% 433.5 4,307.1 10.1% 736.1 1,080.2 68.2%

SAIB 139.0% 90.6 13,940.9 0.6% 36.1 1,672.4 2.2% 352.3 717.9 49.1%

Total 172.1% 210.6 28,491.3 0.7% 281.5 3,099.1 8.3% 468.4 661.6 73.6%



Al Rajhi 0.7% 91.5% 7.5% 0.9% 412.4 36.9 96.4 658.7 792.0 92.0%

Alinma 1.0% 85.3% 13.2% 1.5% 148.8 70.1 31.2 3.5 104.8 (29.6)%

ANB 1.2% 81.7% 17.0% 1.3% 306.2 11.0 (5.4) 273.2 278.8 (8.9%

BAB 1.2% 83.3% 15.1% 1.5% 100.9 79.7 14.1 36.0 129.7 28.6%

BAJ 1.2% 86.5% 10.6% 2.9% 71.2 (30.2) 15.8 69.2 54.8 (23.0)%

BSF 2.7% 86.4% 10.7% 2.9% 132.7 82.4 (150.5) 311.0 242.9 83.1%

Riyad1 1.0% 92.3% 5.7% 2.0% 327.1 (33.9) 8.9 (286.9) (307.5) (194.0)%

SAMBA 0.9% 94.2% 4.1% 1.6% 76.5 177.3 117.0 65.0 (12.4) (116.2)%

AAAL 3.0% 71.9% 24.7% 3.3% 298.6 (6.7) 158.4 258.8 410.5 37.5%

NCB 1.9% 93.7% 4.4% 1.9% 496.7 (48.0) 46.6 360.9 359.4 (27.6)%

SABB 1.6% 82.4% 14.0% 3.5% 267.0 (106.6) 31.7 115.4 40.4 (84.9)%

SAIB 1.3% 85.4% 10.2% 4.4% 56.8 11.9 3.0 44.0 58.8 3.6%

Total 1.5% 88.3% 9.6% 2.1% 2,694.8 243.9 367.1 2,482.6 3,093.5 14.8%

Note: 1For Riyad Bank, provision charge for the year may include write-offs as bifurcation is not available in the financial statementsFor detailed sources, refer to Appendix III: Sources.

68

Appendix II: Data tables — UAE


2017 2018 Δ y-o-y 2017 2018 Δ y-o-y 2017 2018Bank Δ y-o-y

ADCB 19.1% 17.3% (1.8)% 1.6% 1.8% 0.1% 15.0% 16.3% 1.3%

ADIB 16.7% 17.2% 0.5% 1.9% 2.0% 0.1% 19.2% 18.2% (1.0)%

CBD 15.0% 14.6% (0.5)% 1.5% 1.6% 0.1% 11.3% 12.7% 1.4%

DIB 17.0% 17.5% 0.5% 2.3% 2.3% 0.0% 21.5% 20.8% (0.7)%

ENBD 21.9% 20.9% (0.9)% 1.8% 2.1% 0.3% 16.5% 18.1% 1.6%

Mashreq 18.3% 16.5% (1.9)% 1.7% 1.6% (0.1)% 10.5% 10.2% (0.3)%

RAK 19.5% 17.2% (2.3)% 1.8% 1.8% 0.0% 10.4% 12.2% 1.8%

UNB 20.1% 18.9% (1.3)% 1.6% 1.1% (0.4)% 9.4% 6.5% (2.9)%

FAB 17.8% 15.7% (2.1)% 1.7% 1.7% 0.0% 11.9% 12.7% 0.8%

SIB 21.1% 17.7% (3.4)% 1.3% 1.2% (0.1)% 9.2% 9.4% 0.2%

Average 18.7% 17.3% (1.3)% 1.7% 1.7% 0.0% 13.5% 13.7% 0.4%


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

ADCB 72,133.9 76,174.7 5.6% 1,164.4 1,317.5 13.2%

ADIB 33,556.2 34,080.0 1.6% 625.7 680.6 8.8%

CBD 19,166.7 20,171.7 5.2% 272.7 316.3 16.0%

DIB 56,437.1 60,890.2 7.9% 1,176.5 1,338.3 13.8%

ENBD 128,035.3 136,202.0 6.4% 2,271.5 2,733.2 20.3%

Mashreq 34,076.2 38,091.8 11.8% 558.6 560.8 0.4%

RAK 13,211.8 14,341.5 8.6% 217.9 248.4 14.0%

UNB 29,266.4 29,124.3 (0.5)% 447.7 324.1 (27.6)%

FAB 182,093.2 202,563.8 11.2% 2,971.1 3,269.6 10.0%

SIB 10,422.1 12,180.5 16.9% 130.0 138.9 6.9%

Total 578,399.0 623,820.4 7.9% 9,836.2 10,927.8 11.1%

Share price (US$)

Bank 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018

ADCB 1.9 1.8 1.9 2.2 2.2

ADIB 1.0 1.0 1.0 1.0 1.1

CBD 1.1 1.1 1.1 1.1 1.1

DIB 1.5 1.3 1.3 1.5 1.4

ENBD 2.2 2.9 2.7 2.6 2.4

Mashreq 19.1 19.1 20.3 18.5 21.2

RAK 1.3 1.2 1.2 1.1 1.1

UNB 1.0 1.0 1.0 1.3 1.3

FAB 2.8 3.2 3.3 3.9 3.8

SIB 0.4 0.3 0.3 0.3 0.3

Average 3.2 3.3 3.4 3.4 3.6


69


Bank 2017 2018 Δ y-o-y 2017 2018 Δ y-o-y

ADCB 100.1% 94.2% (5.9)% 33.1% 33.5% 0.4%

ADIB 76.5% 78.4% 1.8% 47.2% 48.6% 1.4%

CBD 97.7% 95.8% (1.8)% 34.1% 31.5% (2.6)%

DIB 90.6% 93.0% 2.4% 30.4% 28.3% (2.1)%

ENBD 93.1% 94.3% 1.1% 31.2% 32.0% 0.8%

Mashreq 82.5% 83.2% 0.8% 39.2% 44.1% 4.8%

RAK 100.2% 96.3% (3.9)% 38.0% 38.9% 0.9%

UNB 90.4% 93.4% 3.0% 31.3% 37.5% 6.2%

FAB 83.5% 75.9% (7.6)% 30.1% 27.4% (2.7)%

SIB 114.9% 118.5% 3.7% 47.0% 52.9% 5.9%

Average 92.9% 92.3% (0.6)% 36.2% 37.5% 1.3%




ADCB 80.6% 231.9 55,741.6 0.4% 813.3 4,457.3 18.2% 799.2 1,422.9 56.2%

ADIB 37.6% 86.3 18,907.5 0.5% 275.1 2,218.6 12.4% 423.2 1,075.6 39.3%

CBD 58.6% 186.6 12,438.6 1.5% 91.3 1,229.9 7.4% 569.5 1,047.0 54.4%

DIB 85.2% 276.1 36,000.3 0.8% 274.1 3,589.8 7.6% 1,009.0 1,369.4 73.7%

ENBD 85.9% 1,375.0 87,380.3 1.6% 651.1 3,446.0 18.9% 5,242.8 5,710.9 91.8%

Mashreq 61.1% 121.1 17,629.1 0.7% 413.1 1,455.0 28.4% 451.1 757.6 59.5%

RAK 66.9% 224.7 11,742.5 1.9% 119.1 1,421.1 8.4% 224.9 486.2 46.3%

UNB 52.1% 187.3 17,961.0 1.0% 259.1 1,875.0 13.8% 587.3 887.5 66.2%

FAB 60.5% 500.4 233,456.9 0.2% 1,219.8 7,705.8 15.8% 1,755.8 3,861.8 45.5%

SIB 68.0% 46.3 7,597.1 0.6% 52.1 419.3 12.4% 298.7 381.4 78.3%

Average 65.6% 323.6 49,885.5 0.9% 416.8 2,781.8 14.3% 1,136.2 1,700.0 61.1%

Total loans subject to ECL - By NPL ratio as at stages as at 31 December 2018 Net provision charge on loans (US$ million)31 December

Bank 2017 Stage 1 Stage 2 Stage 3 2017 Stage 1 Stage 2 Stage 3 Total Δ y-o-y

ADCB 2.1% 90.5% 7.2% 2.3% 455.6 (82.0) (131.8) 563.9 350.0 (23.2)%

ADIB 5.0% 85.2% 10.0% 4.8% 208.5 (32.3) (59.5) 246.5 154.7 (25.8)%

CBD 6.5% 84.5% 8.4% 7.1% 187.0 (59.3) 12.9 231.4 185.0 (1.1)%

DIB 3.4% 87.9% 8.8% 3.3% 227.4 (94.9) 84.7 260.7 250.4 10.1%

ENBD 6.2% 90.5% 3.6% 5.9% 591.3 34.6 (47.2) 596.6 584.0 (1.2)%

Mashreq 2.9% 88.8% 7.3% 3.8% 393.7 2.4 (207.2) 540.3 335.5 (14.8)%

RAK 4.0% 86.0% 10.4% 3.6% 422.7 0.2 (28.3) 414.8 386.7 (8.5)%

UNB 4.3% 86.7% 9.0% 4.3% 219.3 (54.0) 69.7 216.3 232.1 5.8%

FAB 3.1% 95.3% 3.1% 1.6% 567.8 (51.4) 179.1 342.1 469.8 (17.3)%

SIB 5.1% 90.5% 5.0% 4.5% 42.0 2.9 (9.0) 18.6 12.5 (70.2)%

Average/ total 4.3% 91.8% 5.1% 3.1% 3,315.2 (333.8) (136.6) 3,431.1 3,038.5 (10.7)%


70

Appendix III: Sources

Bahrain1. AUB: Financial Statement FY18, Financial Statement

FY17; AUB Website

2. Al Baraka: Financial Statement 18, Annual Report 2017,Financial Statement FY17; Al Baraka website

3. Al Salam: Financial Statement FY18, FinancialStatement FY17; Al Salam Website

4. BISB: Financial Statement FY18, Bahrain StockExchange; Financial Statement FY17; BISB Website

5. BBK: Financial Statement FY18, Bahrain StockExchange; Financial Statement FY17; Bahrain StockExchange

6. Ithmaar: Ithmaar Holdings - Financial Statement FY18,Financial Statement FY17, Bahrain Stock Exchange;Ithmaar Bank – Annual Report 2018, Annual Report2017, FY17 PD2 and PD 3 Disclosures, Ithmaar Bankwebsite

7. Khaleeji: Financial Statement FY18, Khaleeji website;Financial Statement FY17; Bahrain Stock Exchange

8. NBB: Financial Statement FY18, Financial StatementFY17; Bahrain Stock Exchange

Kuwait1. AUBK: Financial Statement FY18, AUBK website,

Financial Statement FY17, Kuwait Stock Exchange

2. ABK: Financial Statement FY18, Financial StatementFY17; Kuwait Stock Exchange

3. Boubyan: Financial Statement FY18, FinancialStatement FY17; Kuwait Stock Exchange

4. Burgan: Financial Statement FY18, Burgan website,Financial Statement FY17, Kuwait Stock Exchange

5. GBK: Financial Statement FY18, Financial StatementFY17; Kuwait Stock Exchange

6. KFH: Financial Statement FY18, Financial StatementFY17; Kuwait Stock Exchange

7. KIB: Financial Statement FY18, Financial StatementFY17; Kuwait Stock Exchange

8. NBK: Financial Statement FY18, Financial StatementFY17, Kuwait Stock Exchange

9. CBK: Financial Statement FY18, Financial StatementFY17, Kuwait Stock Exchange; Consolidated PublicDisclosures on Capital Adequacy Standard Q3, CBKWebsite

10. Warba: Financial Statement FY18, Financial StatementFY17; Kuwait Stock Exchange

Oman1. Ahli: Financial Statement FY18, Financial Statement

FY17; Muscat Stock Exchange

2. Alizz: Financial Statement FY17, Financial StatementFY18; Muscat Stock Exchange

3. Dhofar: Financial Statement FY18, Bank Dhofarwebsite; Financial Statement FY17, Muscat StockExchange

4. Muscat: Financial Statement FY18, Bank Muscatwebsite; Financial Statement FY17, Muscat StockExchange

5. Nizwa: Financial Statement FY18, Financial StatementFY17; Muscat Stock Exchange

6. Sohar: Financial Statement FY18, Financial StatementFY17; Muscat Stock Exchange

7. HSBC: Financial Statement FY18, Financial StatementFY17; Muscat Stock Exchange

8. NBO: Financial Statement FY18, Financial StatementFY17; Muscat Stock Exchange

Qatar1. Ahli: Financial Statement FY18, Financial Statement

FY17; Qatar Exchange

2. Al Khaliji: Financial Statement FY18, Al Khaliji website,Financial Statement FY17; Qatar Exchange

3. Doha: Financial Statement FY18, Financial StatementFY17; Qatar Exchange

4. MAR: Financial Statement FY18, Financial StatementFY17; Qatar Exchange

5. QIIB: Financial Statement FY18, Financial StatementFY17; Qatar Exchange

6. QIB: Financial Statement FY18, QIB website, FinancialStatement FY17; Qatar Exchange

7. QNB: Financial Statement FY18, QNB website,Financial Statement FY17; Qatar Exchange

8. CBQ: Financial Statement FY18, CBQ website,Financial Statement FY17, Qatar Exchange

https://www.ahliunited.com/bh/wp-content/uploads/2019/02/AUB-Financials-Dec-2018_English.pdf

http://www.ahliunited.com/pdfs/qr/AUBFS_31December2017English.pdf

https://www.albaraka.com/media/pdf/cc/consolidatedfs31122018eng.pdf

http://www.albaraka.com/media/pdf/cc/AlBarakaAR2017English.pdf

http://www.albaraka.com/media/pdf/InterimReports/consolidatedfs_31122017_eng.pdf

https://www.alsalambahrain.com/en/INVESTOR-RELATIONS/Financial-Results/Documents/2018/ASBB_2018%20Year%20End%20Financial%20Results_English.pdf

http://www.alsalambahrain.com/en/INVESTOR-RELATIONS/Financial-Results/Documents/2017/FinancialStatement2017YearEnd.pdf

http://www.bahrainbourse.com/sysimages/companyannouncement/documents/BiSB%20FS%20YE%202018%20-%20Signed%20-%20English.pdf_37776.pdf?636867708760053075&tick=1551163275243

https://bisb.com/media/document/FS_DEC_2017_ENGLISH_SIGNED.pdf

http://bahrainbourse.com/sysimages/companyannouncement/documents/BBK%20FS%202018%20-%20English%20Signed.pdf_37572.pdf?636867707616157573&tick=1551163160427

http://www.bahrainbourse.com/sysimages/companyannouncement/documents/BBK%20FS%202017%20(signed)%20Eng.pdf_32920.pdf?636559180127530472&tick=1520310411934

http://www.bahrainbourse.com/sysimages/companyannouncement/documents/02132019_Financials_Ithmaar%20Holding_31%20December%202018_full%20set%20signed_Eng....pdf_37392.pdf?636904889185338545&tick=1554881314712

http://www.bahrainbourse.com/sysimages/companyannouncement/documents/02282018_Financials_Ithmaar%20Holding_31%20December%202017_full%20set%20signed_Eng....pdf_33228.pdf?636559182150666318&tick=1520310614106

https://www.ithmaarbank.com/sites/default/files/Ithmaar_Bank_AR2018_English2.pdf

https://www.ithmaarbank.com/sites/default/files/Ithmaar-BANK-ENG.PDF

https://www.ithmaarbank.com/sites/default/files/02282018_PD2_PD4_Diclosures_31_December_2017.pdf

http://www.khcbonline.com/en/InvestorRelations/Financial%20Reports/2018/KHCB%20FS%202018_Final%20english%20(signed).pdf

http://bahrainbourse.com/sysimages/companyannouncement/documents/KHCB%20FS%202016%20English.pdf_27924.pdf

http://www.bahrainbourse.com/sysimages/companyannouncement/documents/NBB%20Financial%20Statements%202018.pdf_37050.pdf?636843526777817988&tick=1548745074467

https://www.nbbonline.com/images/documents/financial/NBB-Financial-Statements-and-Notes-2017-Final---English.pdf

https://www.ahliunited.com.kw/en/about/investors/reports/financial-statements/2018/q4/AUB_Q4_2018_Eng.pdf

https://cis.boursakuwait.com.kw/Portal/FData/1322018114555896105_FS_Ann_Eng_13.2.2018.pdf

https://cis.boursakuwait.com.kw/Portal/FData/104_BL_2018_9_E_522019124853539.pdf

https://cis.boursakuwait.com.kw/Portal/FData/622018125652881%D8%A7%D9%84%D8%A8%D9%8A%D8%A7%D9%86%D8%A7%D8%AA%20%D8%A7%D9%84%D9%85%D8%A7%D9%84%D9%8A%D8%A9%202017%20%D8%A7%D9%86%D8%AC%D9%84%D8%B4.pdf

https://cis.boursakuwait.com.kw/Portal/FData/109_BL_2018_9_E_231201984341865.PDF

https://cis.boursakuwait.com.kw/Portal/FData/301201812635790109_FS_2017_31.12.2017.pdf

http://www.burgan.com/uploads/BBFY2018.pdf

http://www.burgan.com/uploads/BB-FY2017Final.pdf


https://cis.boursakuwait.com.kw/Portal/FData/82201813352523Financials%20-%20English.pdf


https://cis.boursakuwait.com.kw/Portal/FData/12201894648398Kuwait%20Finance%20House-%2031%20Dec%202017%20English.pdf


https://cis.boursakuwait.com.kw/Portal/FData/311201814591960FSYE17English.pdf


https://nbk.com/dam/jcr:27b939df-1212-4a9e-935a-278e5efa840f/NBK%20FS%2031%20Dec%202017%20-%20English.pdf


https://cis.boursakuwait.com.kw/Portal/FData/152201872016182103_FS_Dec%202017_Eng.pdf

https://www.cbk.com/media/6e251917-7ea9-466f-910c-834329b1a264/Gq4iGg/CBK_Public%20Disclosures_Website_Sept%202018_Eng_Website.pdf

https://cis.boursakuwait.com.kw/Portal/FData/821_BL_2018_9_E_31120191572426.PDF

https://cis.boursakuwait.com.kw/Portal/FData/42201892930765Warba%20Bank-Eng-31%20Dec%202017-final.pdf

https://www.msm.gov.om/MSMDOCS/FinancialReports/ABOB_2018_Yearly_e.zip

http://msm.gov.om/msmdocs/financialreports/ABOB_2017_Yearly%20(Un-Audited)_e.zip

http://msm.gov.om/msmdocs/financialreports/BKIZ_2017_Yearly%20(Un-Audited)_e.zip

https://www.msm.gov.om/MSMDOCS/FinancialReports/BKIZ_2018_Yearly_e.zip

http://www.dohabank.qa/wp-content/uploads/sites/12/Doha-Bank-Financials-31-Dec-2018-En-V2.pdf

http://msm.gov.om/msmdocs/financialreports/BKDB_2017_Yearly%20(Un-Audited)_e.zip

https://www.bankmuscat.com/en/investorrelations/AnnualReports/Bank%20Muscat%20EFS%202018.pdf

http://msm.gov.om/msmdocs/financialreports/BKDB_2017_Yearly%20(Un-Audited)_e.zip

https://www.msm.gov.om/MSMDOCS/FinancialReports/BKNZ_2018_Yearly_e.zip

http://msm.gov.om/msmdocs/financialreports/BKNZ_2017_Yearly_e.zip

https://www.msm.gov.om/MSMDOCS/FinancialReports/BKSB_2019_Yearly_e.zip

http://msm.gov.om/msmdocs/financialreports/BKSB_2017_Yearly%20(Un-Audited)_e.zip

https://www.msm.gov.om/MSMDOCS/FinancialReports/HBMO_2018_Yearly_e.zip

http://msm.gov.om/msmdocs/financialreports/HBMO_2017_Yearly%20(Un-Audited)_e.zip

https://www.msm.gov.om/MSMDOCS/FinancialReports/NBOB_2018_Yearly%20(Un-Audited)_e.zip

http://msm.gov.om/msmdocs/financialreports/NBOB_2017_Yearly%20(Un-Audited)_e.zip

https://www.qe.com.qa/documents/20181/6f2bd38f-3645-3cb7-2f0f-3c663517c96b

https://www.qe.com.qa/documents/20181/b575ffb1-4746-83bc-bc5e-f57fa92a0a74

https://www.alkhaliji.com/web/assets/site/pdf/7.2%20AKCB%20Final%20QCB%20Approved%20Financials%202018-%20English.pdf

https://www.qe.com.qa/documents/20181/d555bf12-2ed1-3f73-f10c-adfb8886df50

https://www.qe.com.qa/documents/20181/135bc8ba-5bab-8668-7b10-ca604218d417

https://www.qe.com.qa/documents/20181/c2ad74fe-e242-2a70-2adb-862c7d6a6f64

https://www.qe.com.qa/documents/20181/b3ea9ea6-de8a-f77b-868b-652cab21917c

https://www.qe.com.qa/documents/20181/3d2f1e00-1bc3-4986-19b6-6fa86f4cbf4a

http://www.qiib.com.qa/Documents/Download/111

https://www.qe.com.qa/documents/20181/ccdeb868-2c9a-507c-9e65-75f1139c4a3f

https://www.qib.com.qa/en/images/QIB-FS%20-31%20Dec%202018-Eng.pdf

https://www.qe.com.qa/documents/20181/2edbb1fd-cb7e-46ac-9ca1-547ae7b2ca3c

https://www.qnb.com/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1355613080569&ssbinary=true

https://www.qe.com.qa/documents/20181/5d57ed1d-d945-aebc-fad4-3308915a0493

http://www.cbq.qa/EN/AboutUs/For-Investors/Financial-highlights/Documents/fs_q4_2018_en.pdf

https://www.qe.com.qa/documents/20181/c311de28-24e3-98c4-6581-af6ccf7e92c3

71

Saudi Arabia1. Al Rajhi: Financial Statement FY18, Financial Statement

FY17; Saudi Stock Exchange

2. Alinma: Financial Statement FY18, Financial StatementFY17; Alinma Bank website

3. ANB: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

4. BAB: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

5. BAJ: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

6. BSF: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

7. Riyad: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

8. SAMBA: Financial Statement FY18, Financial StatementFY17; SAMBA Bank website

9. AAAL: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

10. NCB: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

11. SABB: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

12. SAIB: Financial Statement FY18, Financial StatementFY17; Saudi Stock Exchange

United Arab Emirates1. ADCB: Financial Statement FY18, Financial Statement

FY17; Abu Dhabi Commercial Bank website

2. ADIB: Financial Statement FY18, Financial StatementFY17; Abu Dhabi Islamic Bank website

3. CBD: Financial Statement FY18, Financial StatementFY17; Commercial Bank of Dubai website

4. DIB: Financial Statement FY18, Financial StatementFY17; Dubai Islamic Bank website

5. ENBD: Financial Statement FY18, Financial StatementFY17; Emirates NBD website

6. Mashreq: Annual Report FY18, Annual Report FY17;Mashreq Bank website

7. RAK: Financial Statement FY18, Financial StatementFY17; RAK Website

8. UNB: Financial Statement FY18, Financial StatementFY17; UNB Website

9. FAB: Pro Forma Financial Statement FY18, Pro FormaFinancial Statement FY17; NBAD website (merged withFGB to form FAB)

10. SIB: Financial Statement FY18, Financial StatementFY17; Sharjah Islamic Bank website

Other sources1. Quarterly Statistical Bulletin: December 2016, 22

February 2017, Central Bank of Oman website

2. Composition of Capital Disclosure Requirements,Central Bank of Bahrain website

3. Quantifying the Impact of Basel III Capital Standards onKuwaiti Banks, May 2016, Central bank of Kuwaitwebsite

4. Guidelines on Regulatory Capital under Basel3, CentralBank of Oman

5. Qatar – Minimum (average) regulatory CAR (14.2%) =Minimum total capital plus capital conservation buffer(12.5%) + DSIB buffer (average) (0.6%) + ICAAP capitalcharge (average) (1.1%)

6. Saudi banks’ capital adequacy ratio jumps to 18% inQ1, May 2016, Argaam Website

7. Most UAE banks are prepared to meet new CentralBank regulations: Analysts, March 2017, ThompsonReuters Zawya

8. Share prices as available on the respective stockexchange websites (Bahrain Bourse website, KuwaitStock exchange, Muscat Securities market, QatarExchange, Saudi Stock Exchanges (Tadawul), AbuDhabi Stock Exchange and Dubai Financial MarketPJSC). Additionally, ThomsonOne has been used formissing data points.

9. Overall country credit ratings checked from TradingEconomics Website, 6 April 2019; Oman CreditRatings, March 2019; Oman Fitch Ratings, March 2019;Oman Moody’s Rating, March 2019;

10. The below currency conversion rates from Oanda.comhave been used:

a. Bahraini dinar (BD)/US$ [2018: 2.6525,2017: 2.6525]

b. Kuwaiti dinar (KD)/US$ [2018: 3.2900,2017: 3.300]

c. Omani rial1 (RO)/US$ [2018: 2.5974,2017: 2.5974]

d. Qatari rial (QAR)/US$ [2018: 0.2747, 2017: 0.2747]

e. Saudi riyal (SAR)/US$ [2018: 0.2668,2017: 0.2665]

f. UAE dirham (AED)/US$ [2018: 0.2722,2017: 0.2722]

Note: 1Omani Rial is converted using pegged rate of 1US$ = RO0.385 for 2017 and 2018

https://www.tadawul.com.sa/Resources/fsPdf/353_2018-02-25_12-53-49_Eng.pdf


https://www.alinma.com/wps/wcm/connect/alinma/f24d23a0-9b53-4555-9d6f-529151d6a473/FS+English+2018+(Final)+with+Audit+Report.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE.Z18_MA161940L0OG50AQAK1OKV30K7-f24d23a0-9b53-4555-9d6f-529151d6a473-mzmh5lQ

https://www.alinma.com/wps/wcm/connect/alinma/fbfecd36-1240-4ec7-b8c3-4828868bb276/FS-English+2017-Final.pdf?MOD=AJPERES&CACHEID=fbfecd36-1240-4ec7-b8c3-4828868bb276




http://www.bankalbilad.com/sites/en/Documents/English%20FS%20of%20Dec%202017.pdf

















https://www.adcb.com/Images/4Q18_Financial_statement_English.pdf

https://www.adcb.com/Images/4Q17_Financial_statement_English.pdf

https://www.adib.ae/en/SiteAssets/2019-PDFs/Abu%20Dhabi%20Islamic%20Bank%20Signed%20English%20FS%202018.pdf

http://www.adib.ae/en/SiteAssets/2017%20PDFs/ADIB_MDA_Q4_2017.pdf

https://www.cbd.ae/docs/librariesprovider2/financial-results/cbd-financial-statements-31-december-2018---english.pdfhttps:/www.cbd.ae/docs/librariesprovider2/financial-results/cbd-financial-statements-31-december-2016-english-2.pdf?sfvrsn=2

https://www.cbd.ae/docs/librariesprovider2/default-document-library/cbd-financial-statements-31-december-2017-eng.pdf?status=Temp&sfvrsn=0.852081560823148

https://www.dib.ae/docs/default-source/financial-reports/dib-fs-ye-2018-english-final.pdf?sfvrsn=2a6100f9_4

http://www.dib.ae/docs/investor-relation/dib-financial-statement-2017-english.pdf

https://www.emiratesnbd.com/plugins/FinanceManagement/QuaterlyReports/FinancialEng/Emirates_NBD_Financial_Statements_FY_2018_English.pdf

https://www.emiratesnbd.com/plugins/FinanceManagement/QuaterlyReports/FinancialEng/Emirates_NBD_Financial_Statements_FY_2017_English.pdf

https://www.mashreqbank.com/uae/en/images/MB-Annual-Report-2018-English.pdf

https://www.mashreqbank.com/uae/en/images/Consolidated-Financials-2017-English.pdf

https://rakbank.ae/wps/wcm/connect/c2c371a1-b195-4a67-bfab-467a11973494/English+FS.pdf?MOD=AJPERES&CVID=mA5sXLq

https://rakbank.ae/wps/wcm/connect/5fa05b25-ffe3-4b27-b8c0-3343499ded77/English+FS+31.12.2017.pdf?MOD=AJPERES

https://www.unb.com/en/media/ENFS%20December%202018%20final_tcm7-15073.pdf

https://www.unb.com/en/media/UNB%20FS%2031%20Dec%202017%20English_tcm7-11524.pdf

https://www.bankfab.com/-/media/fabgroup/home/about-fab/investor-relations/pdfs/investor-relations/2018/q4/fab-q4-2018-fs-en.pdf?view=1

https://www.nbad.com/content/dam/NBAD/documents/investor-relations/nbad-and-fgb/pro-forma-financials/2017-q4-proforma-en.pdf

https://www.sib.ae/uploads/media/default/0001/05/b443395c490c359961e69c051e017f71e6a88a8b.pdf

http://www.sib.ae/uploads/media/default/0001/05/866bd1450c7b37caf5ea258f3b3e61907e19882a.pdf

http://www.cbo-oman.org/

http://cbb.complinet.com/net_file_store/new_rulebooks/v/o/Vol_2_AppendicesPD1-4Updated_23_May_April_2016.pdf

http://www.kibs.edu.kw/upload/Basel_Impact_June_1__2016_1891_971.pdf

http://www.cbo-oman.org/circulars/2013/CP1Basel3.pdf

http://www.argaam.com/en/article/articledetail/id/427154

https://www.zawya.com/mena/en/story/Most_UAE_banks_are_prepared_to_meet_new_Central_Bank_regulations-GN_07032017_080338/

https://tradingeconomics.com/country-list/rating

https://tradingeconomics.com/oman/rating

https://www.spglobal.com/marketintelligence/en/news-insights/trending/B96hqW0jaGNO8FzjdQkCLQ2

https://muscatdaily.com/Archive/Business/Moody-s-takes-rating-actions-on-Omani-banks-5de8

72

Notes

73

Notes

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