B URGAN B ANK G ROUP I NVESTOR P RESENTATION F ISCAL Y EAR 2017 T - PowerPoint PPT Presentation

B URGAN B ANK G ROUP I NVESTOR P RESENTATION F ISCAL Y EAR 2017

T ABLE OF C ONTENTS Contents Page Macro Environment Reading 3 Group Financial Performance 5 Summary 11

M ACRO E NVIRONMENT R EADING 3

O UR R EADING FOR 2018: S LIGHTLY IMPROVED LANDSCAPE , B UT PRUDENCE TO CONTINUE WITH D ISCIPLINED G ROWTH … Market Risks Likely reaction Region Probability(%) Impact US : tax cuts significantly increase profit 1) Economy : higher growth, employment and inflation supported by a) increased B ULL repatriation and investment; infrastructure US 20 investment; b) rising infrastructure spending. 1 spending plans implemented in full; continued ( GLOBAL ) 2) Banking : higher lending and deregulation. Fed normalization 1) Economy : France and Germany support increased government spending in S. B ULL EU 20 2 EU : increased fiscal spending, led by Germany Europe in exchange for reforms and first few steps towards issuing Eurobonds UPSIDE (EU) 2) Banking : higher lending Algeria : success of diversification efforts and 1) Economy : growth, increase in private and foreign investment, reduced B ULL MENAT/ 3 regulatory changes on business environment, 20 dependence on natural resources, appreciation of DZD GCC (A LGERIA ) labor market, and foreign investment 2) Banking : higher lending GCC : most countries successfully implement 1) Economy : growth, lower budget deficit/higher budget surplus, reduced MENAT/ B ULL VAT and other revenue-raising taxes, and 20 4 dependence on natural resources, higher government investment. GCC (GCC) succeed in reducing subsidies. 2) Banking : higher lending. 1) Economy : intraregional trade flows and joint investment programs resume. MENAT/ B ULL GCC : successful resolution of the Qatar crisis. 5 Adoption of common taxation regulation. 20 GCC GCC regains strength as an institution. (GCC) 2) Banking : resume lending to Qatar institutions, reduce allocation to safety assets. 1) Economy : disruption of confidence and transmission of monetary policy resulting B EAR in credit contraction; fiscal expansion to limit market volatility. 1 Global : loss of credibility of central banks G LOBAL 25 ( GLOBAL ) 2) Banking : switch to liquid assets and safer sectors/companies. Global : Trump policies increase protectionism B EAR 1) Economy: disruption of confidence and trade; lower global growth. G LOBAL 2 20 ( GLOBAL ) and trigger global trade wars. 2) Banking: defensive portfolio allocation; reduced lending. DOWNSIDE B EAR 1) Economy : lower growth and investment in EMs; periphery-to-core capital flows. 3 G LOBAL 15 Global : faster-than-expected Fed rate hikes ( GLOBAL ) 2) Banking : defensive portfolio allocation; reduced lending. B EAR Regional : escalation of tensions between US, 1) Economy : disruption of confidence and trade; lower growth; higher oil prices. G LOBAL 15 4 ( GLOBAL ) 2) Banking : defensive portfolio allocation; reduced lending. and N.Korea, EU and Russia, S.Arabia and Iran B EAR Turkey: political tensions spill over to the MENAT/ 1) Economy : lower growth, risk to foreign capital inflows, depreciation of TRY. 20 5 2) Banking : likely to cut lending rates after the regulator’s proposal. economy GCC (T URKEY ) GCC: Qatar crisis tensions increase. Qatar MENAT/ B EAR 1) Economy : declining investment; volatility of oil prices. 15 6 leaves GCC, intensifies links with Iran, Turkey GCC (GCC) 2) Banking : hedge local currencies out of the money forward; focus on cash-flow. B EAR MENAT: Opec deal broken, oil below 40 MENAT/ 1) Economy : lower growth; declining investment; higher budget deficit and debt. 10 7 (MENAT) USD/bbl 2) Banking : defensive portfolio allocation. GCC 4 Source: Burgan Bank, EIU, 2018.

G ROUP F INANCIAL P ERFORMANCE 5

2017 FINANCIAL TARGETS … S CORECARD 2017 T ARGETS B URGAN B ANK K UWAITI B ANKS (3) L OANS G ROWTH In line with the 6 % 4 % Kuwaiti Market 2017 (1) 2016 (1) Y IELD AND E FFICIENCY NIM S JAW S NIMs JAWs Improvement 2.4 % 11.7 % 2.2 % (1.2 % ) 2016 2017 A SSET Q UALITY NPL R ATIO C OVERAGE NPL Ratio Coverage At comfortable levels 2.7 % 155 % 4.1 % 120 % 2016 2017 O PTIMIZE C APITAL ROTE (1)(2) CET1 R ATIO ROTE (1)(2) CET1 Ratio Without the need for a 10.9 % 13.8 % dilutive capital hike 11.2 % 12.0 % FY17 FY16 6 (1) Excluding one-offs; (2) Net Income attributed to equity holders after AT1 cost and excluding precautionary provisions; (3) Central Bank of Kuwait Monthly Statistic Data for December 2017 in USD growth.

2017 PERFORMANCE OUTPACES LAST YEAR … Underlying (1) - US $’ mn As Reported - US $’ mn FY16 FY17 Growth FY16 FY17 Growth +10% +10% Net Interest Income 514.5 563.9 Net Interest Income 511.2 562.5 Non Interest Income 260.6 225.9 (13%) Non Interest Income 212.4 212.0 - 789.8 +2% 774.5 +7% Operating Income 775.1 Operating Income 723.6 Income Statement Income Statement Operating Expense (375.7) (360.2) (4%) Operating Expense (365.7) (348.6) (5%) +8% +19% Operating Profit 399.4 429.5 Operating Profit 357.8 425.9 Provision for Loans (57.9) (64.5) +11% Provision for Loans (57.9) (64.5) +11% CBK Precautionary Provisions (79.1) (72.7) (8%) CBK Precautionary Provisions - - - (28.9) +174% (0.9) (80%) Provision for Investment Securities (10.6) Provision for Investment Securities (4.4) Net Income (2) before AT1 cost (5%) Net Income (2) before AT1 cost +15% 225.3 214.9 270.5 311.0 Net Income (2) after AT1 cost Net Income (2) after AT1 cost 189.7 178.6 (6%) 235.0 274.7 +17% Balance Sheet Balance Sheet +6% +6% Customers Loans 13,802 14,607 Customers Loans 13,802 14,607 Customers Deposits 12,211 13,768 +13% Customers Deposits 12,211 13,768 +13% Total Equity 2,292 2,398 +5% Total Equity 2,292 2,398 +5% NIM’s 2.3% 2.4% +14 bps NIM’s 2.2% 2.4% +20 bps (4.0%) 6.0% +1000 bps (1.2%) 11.7% +1290 bps JAW’s JAW’s KPI’s 1.0% 0.9% (10 bps) KPI’s 0.4% 0.4% - Cost of Credit Cost of Credit ROTE (3) ROTE (3) 9.7% 9.0% (70 bps) 12.0% 13.8% +180 bps NPL Ratio 4.1% 2.7% (140 bps) NPL Ratio 4.1% 2.7% (140 bps) CAR 16.7% 16.2% (20 bps) CAR 16.7% 16.2% (20 bps) 7 (1) Excluding one-offs and precautionary provisions; (2) Net Income attributed to equity holders; (3) ROTE after AT1 cost.

D RIVEN BY A FOCUS ON CORE EARNINGS , YIELDS IMPROVEMENT AND EFFICIENCIES … Revenues and Margins | USD mn,% (1) Earnings Underlying | USD mn,% (2) Revenues improved, driven by healthy net interest income YTD earnings and returns are on the right track after the full growth… implementation of Basel 3 post 2014… 13.8% 2.4% 2.2% 2.6% 15.2% 2.2% 12.0% 13.0% 774 275 724 235 200 180 71 61 Q4'16 Q4'17 FY 16 FY 17 Q4'16 Q4'17 FY 16 FY 17 Revenues NIMs Net Income ROTE Capitalisation (Basel 3) Asset Quality Continue to optimize capital Asset quality in comfortable levels with lower cost of credit 10.5% 9.7% 9.7% 1.4% 0.7% 1.0% 0.4% 0.9% 0.4% 16.7% 3.8% 3.4% 2.3% 16.2% 15.6% 155% 134% 120% 11.7% 11.2% 10.9% 4.1% 3.9% 2.7% FY 15 FY 16 FY 17 FY 15 FY 16 FY 17 CET1 CAR Leverage Ratio NPL Ratio Coverage Ratio Cost of Credit COC excl. Precautionary NPA Ratio 8 (1) Excluding one-offs; (2) Earnings underlying excluding one-offs, precautionary provisions and after AT1 cost.

W ITH STABLE BALANCE SHEET GROWTH TRENDS , WHILE MAINTAINING RWA S LEVELS … Asset Mix Customers Loans | USD bn,% (1) Customers Loans by Sector | FY 17 Driven by loans… Loans grew 6% year on year supported by international operations 22.5 23.8 24.6 15.9 17.8 18.0 18.9 32% 33% 37% Oil/gas 13% 12% 13% 2% Others 17% Trade 12% Constru 58% 59% 59% ction Real 8% Estate 14.6 13.8 13.2 22% Manufa 8% 11% 9% Person cturing 7% 7% 7% al 12% 13% 12% 13% 27% FY 15 FY 16 FY 17 FY 15 FY 16 FY 17 Other Assets Loans Due from Banks RWA in US$ Bn RWA excl. Real Estate International Collateral Phase-out T. Bills & Bonds Cash US$ bn Contribution CAGR Growth impact in US$ Bn Funding Mix Customers Deposits | USD bn,% (2) Customers Deposits by Type | FY 17 Still focusing on LT stable funding… … with deposits growing at 13% year on year 22.5 23.8 24.6 104% 113% 106% 10% 10% 10% 6% 7% 9% 2% 2% 2% Other 25% 25% 28% 5% Deman d 29% 13.8 12.8 Saving 12.2 57% 56% 51% Time 5% 62% FY 15 FY 16 FY 17 FY 15 FY 16 FY 17 Total Equity Other Liabilities Perp. Tier 1 Loans to Deposits Ratio CAGR Growth Due to Banks Customers Deposits US$ bn 9

T HE 5 SUBSIDIARIES GROWING PRUDENTLY AND IMPROVING EFFICIENCIES Kuwait | KDm Turkey | TRYm Algeria | DZDm Iraq | IQDm Tunisia | USDm 2,786 14,862 25 150,737 167,006 C USTOMER 63% 27% 9% 1% 0.2% L OANS 2,884 11,750 116,224 174,900 15 142 573 13,567 19 62,823 58% 19% 15% 6% 2% R EVENUES (1) 128 496 10,403 65,366 16 30% 59% 48% 69% 43% C OST TO I NCOME (1) 31% 65% 59% 77% 47% 0.7% 1.0% 1.3% -0.7% 0.3% C OST OF C REDIT 0.5% 1.1% 0.8% 2.9% -0.2% 42% 17% 23% 43% 12% N ET P ROFIT M ARGIN 44% 22% 3% 39% 13% 16.2% 13.8% 15.9% 60.1% 21.5% CAR (2) 16.7% 14.7% 19.4% 59.1% 20.7% 10 FY17 Contribution FY17 Figures FY16 Figures (1) Excludes 1 offs items in Kuwait; (2) Based on CBK reporting and Kuwait CAR is for the Group. Note: Subsidiaries figures before consolidation adjustments.

S UMMARY 11