Investor Presentation National Bank of Oman March 2019 Table of - PowerPoint PPT Presentation

Investor Presentation National Bank of Oman March 2019

Table of Contents  National Bank of Oman Introduction  Operating Environment  National Bank of Oman Overview  Financial Performance  Corporate Governance and Risk Management  Appendix 2

National Bank of Oman Introduction The First Omani Commercial Bank Overview Ownership (as at 31st Mar 2019)  National Bank of Oman SAOG (“ NBO ” or the “ Bank ”) was the first incorporated Bank in the Civil Service Sultanate of Oman (“ Oman ”) - established in 1973 as a joint stock company, providing Employees Others < 5 % conventional and Islamic banking services Pension Fund, Ministry of holding,  The Bank’s shares are listed on the Muscat Securities Market (“ MSM ”) 11.31% Defence The Bank has 1,549 employees as at 31 st March 2019 and is the third largest bank by total assets  23.11% in Oman accounting to US$ 9.2 billion, as at 31 st March 2019 Pension Fund, As at 31 st March 2019, NBO serves approximately half a million retail customers and 25,000  7.69% corporate and SME customers via 66 branches and 196 ATM and CCDM units  In addition, the Bank has two overseas branches in the UAE (Dubai and Abu Dhabi) and one Public branch in Egypt Authority of  The Bank operates via five main segments, namely, retail banking, corporate banking, investment Social banking, treasury and international banking, and Islamic banking Insurance, Suhail Bahwan As at 31 st March 2019, NBO had approximately 11.10% market share in loans and 10.90% market  8.24% Group share in deposits in Oman  (Holdings) LLC, The Bank has won awards for excellence in banking from a number of Government and other 14.74% private sector bodies, recognizing the Bank's contribution to the development of the banking The sector in Oman: Commercial • Best Retail Bank in Oman for 2017 by The Asian Banker’s Middle East and Africa Regional Bank of Qatar, Awards Programme 2017 34.90% • Best Islamic Bank in Oman for 2017 by Islamic Finance News Awards Source: Prospectus Credit Rating Key Financials US$ in Millions 2015 2016 2017 2018 Mar-19 Total Assets 8,476 9,176 9,014 9,280 9,264 Net Loans 6,582 6,936 6,893 7,298 7,217 Deposits 5,844 6,232 6,393 6,370 6,576 Total Operating Income 353 354 343 335 84 Rating Agency Date Long-term Rating Outlook Net Profit 156 145 114 131 32 Tier 1 16.27% 15.0% 16.2% 15.2% 15.1% March 2019 Ba1 Negative Total CAR 18.15% 16.8% 17.3% 16.3% 16.2% Loans to Deposit Ratio 112.64% 111.3% 107.8% 114.6% 109.7% NPL Ratio 1.90% 2.2% 3.5% 4.3% 4.9% March 2019 BB+ Stable Cost/Income 44.2% 46.0% 48.8% 47.9% 48.4% 3

Key Investment Highlights Strong and Established Franchise Delivering a Superior Customer Experience  Founded in 1973 and is the oldest bank operating in Oman Strong and 196 ATMs and 519k Presence in 3 66 branches 1,549 Growing  CCDMs in Long term relationships with prominent companies, Government customers countries across Oman employees Franchise Oman related entities and individuals Income-to-Asset Ratio (1) Net Interest Margin (Q1 2019) Strong  NBO’s Net Interest Margin (“NIM”) is 3.0% as at March 2019, is among Profitability the highest margins among its peer group Profile Among 3.7% 3.0% 2.9% 2.9% 3.0% 2.6% 2.0% 2.5% 3.7%  The Bank has a healthy Income-to-Asset Ratio (1) of 3.7% (Mar 2019) Peers NBO CBD BM Burgan Bank Dhofar CBQ Bank Sohar Mar - 18 Mar - 19  Significant investments in technology to offer customers more Offering First bank in Oman Over 60% of customer Customers using digital efficient digital channels Superior to implement mobile banking transactions done using digital channels increased by >90% in Customer  services and adopted “Mobile Generate and manage a line of innovative solutions to increase range solutions 2017 First” approach Experience of products and services Total CAR (Q1 2019)  Strong capitalization with total CAR of 16.2% as at Mar 2019 offering Sound room for growth Capitalization  As at March 2019, NBO’s Net Stable Funding Ratio ("NSFR") and 17.4% 18.5% 16.2% 18.7% 17.4% 16.1% 17.0% 15.0% and Liquidity Liquidity Coverage Ratio ("LCR") was at 107% and 230% respectively RAK (BBB+) BM (BBB-) NBO (BB)* Bank Sohar (BB+) Burgan (A+) CBQ (A) Bank Dhofar (BB+) CBD (A-) 53% 51% 41% 42% 38%  400 60% Consistent With the consistent growth in Cash dividend year on year with the Dividend 35% 131 131 156 114 shareholder dividend payout ratio of 40%-50%, NBO is one of the reliable dividend 145 200 59 61 60 68 10% 54 Net Profit -15% value delivery yielding stock in the MSM index - -40% Payout ratio 2014 2015 2016 2017 2018 UAE – Oman Total Trade Flow (2) (US$bn) Oman Trade Activity Globally and with UAE in 2017 (2) Leveraging the  Banking license in the UAE; Oman’s largest trade partner 79% 18% Import UAE Presence 13.7 13.7  from UAE Diversification plans to focus UAE operations on trade opportunities 12.5 as an Emerging 21% UAE between Oman and UAE Export to Trade Corridor World 82% UAE 2016 2017 YTD 2018  Strong relationship with the Government on the back of the 27.93% ownership (as at 31 st March 2019) Shareholder >27.93% ownership by the Substantial stable and low cost High likelihood of support from Government of Oman deposits the Omani Government Support  Access to stable, significant and low cost deposits from Government and Government related entities Note (1): Income-to-Asset Ratio: Interest Income plus Other Operating Income divided by Total Assets Note (2): Source, Bloomberg as at September 2018 Note (*): NBO was rated BBB- by Fitch by end of 2017. As at March 2019, NBO’s Fitch rating is BB+ 4

Ratings Profile Benefiting from a Solid Domestic Franchise and Strong Shareholder Support “Fitch Ratings has downgraded National Bank of Oman SAOG's (NBO) Long-Term Issuer Default Rating (IDR) to 'BB' from 'BB+' and removed it from Rating Watch Negative (RWN). The Outlook is Stable. Fitch has also downgraded NBO's Viability Rating (VR) to “Moody's downgraded NBO's long-term local currency deposit rating to Ba1 from Baa3, 'bb' from 'bb+' and revised the Support Rating Floor (SRF) to 'BB' from 'BB +‘” and affirmed its BCA and adjusted BCA at ba2. Moody's downgraded the bank's long- term foreign currency deposit rating to Ba2 from Baa3 due to the new sovereign ceiling. “Fitch placed NBO on Rating watch negative (RWN) on 20 December 2018 following the At the same time, the rating agency has maintained the outlook on the bank's long-term downgrade of the Omani sovereign on 18 December 2018 ” deposit ratings at negative” “The downgrade of NBO's long-term deposit ratings reflects the Omani government's Fitch (March 2019) weakened fiscal capacity to support the bank in case of need, as indicated by the downgrade in the sovereign rating” “NBO's Viability Rating(VR) is at the same level as the Support Rating Floor (SRF). The “The affirmation of the BCA at ba2 reflects the resilience of the bank's standalone credit bank's Long-Term IDR is driven by its intrinsic financial strength (as measured by the VR) profile to a weaker operating environment, which is captured by the lowering of the and underpinned by potential sovereign support. ” Macro Profile to "Weak+" from "Moderate-". The bank's ba2 BCA reflects its sound capitalization (12.3% tangible common equity/risk-weighted assets at end-2018) and “NBO's VR reflects the tougher Omani operating environment, weak asset quality healthy profitability. However, Moody's expects the bank's asset quality to continue to compared with peers', high loan book concentration, and only adequate capital ratios. weaken (4.2% problem loans/gross loans at end-2018), while the bank continues to The VR also reflects NBO's moderate franchise, a competent management team, maintain modest liquid resources and a concentrated funding base” reduced risk appetite, as well as a strong retail deposit franchise relative to peers” “The negative outlook on NBO's long-term deposit ratings reflects the potential Fitch (March 2019) reduction in Oman government support capacity (reflected in the negative outlook on the sovereign rating) and/or support willingness. In addition, the negative outlook on NBO's ratings now also reflects potential pressures on its standalone credit strength, “NBO's SRF reflect Fitch's expectation of a moderate probability of support from the arising from the bank's international operations in the United Arab Emirates” Omani authorities in case of need. Fitch views NBO as a domestic-systemically important bank (D-SIB) in Oman despite it not being officially designated as such. Its SRF is therefore equal to the Omani D-SIB SRF of 'BB'. ” Moody’s (March 2019) Fitch (March 2019) 5

Table of Contents  National Bank of Oman Introduction  Operating Environment  National Bank of Oman Overview  Financial Performance  Corporate Governance and Risk Management  Appendix 6