Market Making ProposalBank ABC AGM, 25th March 2018

Low Liquidity in Bahrain Market

Bahrain Market has the lowest average yearly Turnover-to-Market cap compared to its peers a clear sign of low liquidity and further potential to improve compared to its peer markets.

3%

10%13% 14%

21%

29%

49%

38%

59%

Bahrain Abu Dhabi Oman Qatar Kuwait Dubai Saudi S&P FTSE

Average yearly Turnover/ Market Cap

Bahrain Abu Dhabi Oman Qatar Kuwait Dubai Saudi S&P FTSE

Source:- Bloomberg; Period FY 2017, SICO

Strong Correlation of Valuation & Value Traded

Liquid stocks tend to trade at higher valuation as transactions can be swiftly executed with minimal spreads (bid-ask) and preference of large institutional investors to invest in these names

Source:- Bloomberg; Jan 30, 2017, SICO

ABC has Lower Free Float than Bahrain Peers

Major Bahraini companies have a free float of 45%, which is much higher than the c.10% free float of Bank ABC. However, companies such as ALBA also have low float and better liquidity aided by a market making arrangement.

Source: Bahrain Bourse except for BCFC, SICO

2.0%

3.4%3.8%

0.4%

2.2%1.6% 1.6%

2.7%

5.0%4.2%

0.7%1.7%

3.1%

7.0%

1.2%

AUB

ALBH

GFH

NBB BB

K

BATE

LCO

INVC

OR

P

SALA

M

ITH

MR

BAR

KA

BISB

KHC

B

BHO

TEL

BCFC

DU

TYF

ABC

Yearly Traded Value/ Market Cap. 20% *

53

10

93

4524 23 19

79

46

19 2035 45 53

72

10

AUB

ALBH

GFH

NBB BB

K

BATE

LCO

INVC

OR

P

SALA

M

ITH

MR

BAR

KA

BISB

KHC

B

BHO

TEL

BCFC

DU

TYF

ABC

Free Float %

* KHCB had a Yearly Traded Value to Market Cap of 20% for 2017, however removing a block trade of BHD 9.6mn in Sep 2017 would give 12.4%.

Bank ABC Shares – Low Current Valuation

Stock underperformance driven by market factors including lack of liquidity and trading volume.

StockUnder-Performance…

…despite healthy Fundamental Performance

Steady improvement in profitability

Due to low liquidity of stock

Low LiquidityOverall low trading volume on

Bahrain Bourse

Lack of sufficient free float

Relatively cheaper multiple than peers

Least expensive Bank in the GCC on PB

Source: SICO, ABC

Detail Proposed Path Matrix

Revenue*

Active market making to infuse

liquidity

Initiate active IR and PR team

Clarifying dividend policy

6 Months

Investor awareness with Flash Note &

Road shows

SICO

Act

ion

Bank

ABC

Act

ion

Action plan requires a combination of SICO and ABC activities, with degree of success being judged over the next 12 months

Research

Market Making

Source: SICO, ABC