#1Jà beli Bank Dhofar INVESTOR PRESENTATION DECEMBER 2018 Bank Dhofar#2Disclaimer بنك ظفار Bank Dhofar THIS PRESENTATION IS NOT FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, INTO AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN OR THE UNITED STATES. THIS PRESENTATION DOES NOT CONSTITUTE OR FORM PART OF AN OFFER TO SELL OR TO ISSUE ANY SECURITIES OR SOLICITATION OF AN OFFER TO PURCHASE, SUBSCRIBE OR SELL SECURITIES IN ANY JURISDICTION. IT IS SOLELY FOR USE AT AN INVESTOR PRESENTATION AND IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. THIS PRESENTATION DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS MATERIAL TO AN INVESTOR. 2#3Table of Contents Section 1 BankDhofar Overview Section 2 Operating Environment Section 3 Business Overview بنك ظفار Bank Dhofar 4-8 10-11 13-14 Section 4 Financial Performance 16-25 Section 5 Appendix 27-28 3#4BankDhofar Overview بنك ظفار Bank Dhofar Establishment Operations Business Segments Rating Agency MOODY'S Fitch Ratings Snapshot of BankDhofar ► BankDhofar SAOG ("BankDhofar" or "the Bank") was established in the Sultanate of Oman ("Oman”) in January 1990 as a public joint stock company and is engaged in retail banking, corporate banking, investment banking and treasury services. ► Second largest listed bank in Oman by total assets as at 31st December 2018 which currently stand at USD 10.944 billion and has approximately 1,600 employees as at 31st of December 2018. ► Offers both conventional and Islamic products. Operates a network of 71 branches with 61 conventional branches (including 1 corporate center), 10 Islamic branches, total 190 ATM/CDM/FFM machines made up of 121 Automated Teller Machines ("ATMs"), 55 Cash and Cheque Deposit Machines ("CCDMs") and 14 Full Function Machines ("FFMs") as at 31st December 2018 Offers its services and products exclusively within Oman. Operates via business divisions: Retail Banking, Wholesale Banking, Treasury and FI Banking, Islamic Banking (as a separate window) and Government Banking. Retail and Wholesale Banking represents the Bank's largest business segments, collectively contributing to 81% of the total assets and 82% of the net operating income as at 31st December 2018. In 2013, MAISARAH (the Islamic Banking window) was launched, offering retail and corporate Shari'ah-compliant financial services and products to its customers. Conversion Rate: 1.00 OMR = 2.5974 USD Date March 2019 March 2019 Source: BankDhofar's Annual& Quarterly Reports Long Term Rating Ba1 BB Financial Highlights USD million 2014 2015 2016 2017 2018 Total Assets 8,296 9,332 10,265 11,030 10,944 Yoy. Change -86 Total Equity 845 1,239 1,387 1,525 1,813 288 Net Loans, Advances & Financing to Customers 5,857 7,088 7,764 8,439 8,205 -234 Customer Deposits 6,447 6,732 7,494 7,970 7,596 -374 Total Operating Income 257 299 331 330 348 18 105 121 124 124 131 7 10.76% 9.43% 9.85% 10.53% 11.88% 1.35% Capital Adequacy 14.05% 14.70% 14.41% 15.44% 17.33% 1.89% Net Profit CET 1 Ratio Ownership Structure (as at 31st December 2018) BankDhofar is listed on the Muscat Securities Market (MSM) with a market capitalisation of USD 1.207 billion as at 30th December 2018 9.7% 7.0% 9.8% 23.3% 10.4% 6.8% Civil Service Pension Fund Ministry of Defence Pension Fund Public Authority of Social Insurance 8.7% ■Dhofar Intl. Development & Investment Holding Co. 24.4% Represent Govt. Entities/ownership 27.9% I ■ Eng. Abdul Hafidh Salim Rajab Al Ajuaili & his Cos. ■ H.E. Yousuf bin Alawi bin Abdullah & his Cos. ■Qais Omani Establishment ■ Other 4#5BankDhofar's Historic Evolvement 1990-91 BANKDHOFAR HAS BEEN SERVING OMANI CUSTOMERS SINCE 1990 بنك ظفار Bank Dhofar Bank purchases the assets and liabilities of BCCI (Bank of Credit and Commerce International) from the Central Bank Bank's 10th anniversary and a new head office building opened BankDhofar al Omani al Fransi and Majan International Bank merger Islamic banking window, MAISARAH launched USD 300m Tier 1 Bond successfully launched 1992 1999 2003 2001 2003 2012 2013 2015 2016 Bank acquires assets and liabilities of Banque Paribas in Oman Operations start as "BankDhofar al Omani al Fransi" Bank acquires 16 branches from Commercial Bank of Oman Change of name to "BankDhofar" Bank hires Boston Consulting Group ("BCG") to align its strategy with a 5-year business plan Bank launched its Transformation Journey in "Together 2020" Staff Convention and regional Roadshow Source: BankDhofar 5 LO#6Key Credit Strengths Strong Relations with the Omani Government 28% Government ownership in the Bank enabling strong relations with local government departments. ► Supplier of banking services and products to the employees of the Ministry of Education, the Ministry of Health and the Ministry of Defense. Strong Asset Quality Continued improvement in asset quality with a relatively low Net NPL ratio at 0.74% as at 31st December 2018. Conservative lending policy has allowed the Bank to achieve a continued decline in non-performing loans and limited formation of new NPLs. Prudent lending policy. Robust Corporate Governance and Risk Management Culture Particular focus on maintaining the highest standards of corporate governance with a well-established Risk Management framework. Islamic Banking Window Introduction of MAISARAH in March 2013 offering Shari'ah compliant products and services to retail and corporate customers. One of the fastest growing Islamic banking windows in Oman in asset book and customer base. - Maisarah Islamic Best Islamic Retail Bank Oman 2017 Banking by Global Banking & Finance Review Best Islamic bank in Oman - Maisarah Islamic Banking Services at the Middle East Banking Awards 2017 and 2018 (EMEA Finance). Most innovative Islamic Bank in Oman by the International Finance Banking in 2018. بنك ظــفـــار Bank Dhofar بنك ظفار Bank Dhofar Developed & Diversified Distribution & Delivery Channels ► Products offered through a large number of delivery channels (71 branches, 190 ATMs/CDM/FFM made up of 121 ATMs, 55 CCDMs and 14 FFM as at 31st Dec 2018) alongside innovative technology. Focus on determining optimal channel mix to customers that will maximize revenue (or reduce costs) without reducing customer satisfaction or engagement ► Actively reduce its retail customer servicing costs, where possible, by offering alternatives to the traditional branch network including internet banking, mobile banking Operating Performance and Profitability Strong financial performance has helped BankDhofar expand the network strategically across Oman. Net profit for the year ended 31st December 2018 Increased by 5.57% USD 130.6M. (vs. Dec-17 USD 123.71M.). Strong Brand Recognition Well recognized brand in the Omani market, reflecting high-quality customer service and established track record in retail banking, corporate banking. ► Proven track record in offering innovative and reliable products across business segments. Experienced Management ▸ Experienced and dedicated management team with many years of regional and global experience with leading financial institutions in both conventional banking and Islamic finance. 6#7Omani Banking Sector Comparison USD million, 31st December 2018 TOTAL ASSETS Bank Muscat Bank Dhofar 10,944 National Bank of Oman 9,280 Bank Sohar 7,913 HSBC Oman 6,131 Ahli Bank 5,949 USD million, 31st December 2018 Bank Muscat NET LOANS Bank Dhofar 8,205 National Bank of Oman 7,298 Bank Sohar 5,849 Ahli Bank 4,859 HSBC Oman 3,609 NET LOANS GROWTH 31st December 2018 Ahli Bank Bank Muscat Bank Sohar National Bank of Oman HSBC Oman -0.38% Bank Dhofar -2.77% NET PROFIT USD million, 31st December 2018 31,917 Bank Muscat National Bank of Oman 131 Bank Dhofar 131 HSBC 81 Bank Sohar 76 Ahli Bank 75 23,218 USD million, 31st December 2018 بنك ظفار Bank Dhofar TOTAL CUSTOMER DEPOSITS Bank Muscat Bank Dhofar 7,596 National Bank of Oman 6,370 HSBC Oman 5,003 Bank Sohar 4,723 Ahli Bank 4,316 CUSTOMER DEPOSIT GROWTH 31st December 2018 14.45% 7.33% Ahli Bank Bank Muscat 14.53% 14.06% 7.30% 5.87% Bank Sohar HSBC Oman 10.68% -0.31% -0.36% National Bank of Oman Bank Dhofar -4.69% Conversion Rate: 1.00 OMR = 2.5974 USD Source: Banks' Annual & Quarterly Reports Comparison includes only MSM listed banks, Excluding Islamic banks 467 21,981 7#8Omani Banking Sector Comparison بنك ظفار Bank Dhofar OPERATING INCOME GROWTH COST TO INCOME RATIO Per cent., 31st December 2018 Per cent., 31st December 2018 Bank Sohar HSBC Ahli Bank 23.58% 14.08% Ahli Bank Bank Sohar 10.64% Bank Muscat Bank Dhofar 5.67% Bank Muscat 2.47% National Bank of Oman Bank Dhofar National Bank of Oman -2.36% OPERATING COST INCREASE Per cent., 31st December 2018 National Bank of Oman HSBC Bank Muscat Ahli Bank Bank Sohar Bank Dhofar HSBC Per cent., 31st December 2018 -4.30% Bank Muscat 2.23% HSBC 3.40% National Bank of Oman 12.67% Ahli Bank 14.62% Bank Dhofar Bank Sohar 14.80% Net NPL RATIO 31st December 2018 Ahli Bank 22 Bank Sohar** 37 National Bank of Oman* 68 BRANCHES (Domestic) Per cent., 31ST December 2018 HSBC Oman Bank Dhofar Ahli Bank Bank Muscat 0.23% Bank Dhofar 71 National Bank.. Bank Muscat 169 Bank Sohar Conversion Rate: 1.00 OMR = 2.5974 USD Source: Banks' Annual & Quarterly Reports Comparison includes only MSM listed banks, Excluding Islamic banks * NPL Ratio (NPA Less Interest reserve & IFRS-9 S3 ECL/Gross Loans 0.74% 0.78% 0.89% 1.01% 1.48% RETURN ON EQUITY 37.41% 42.23% 42.61% 47.86% 50.50% 57.55% 9.59% 9.45% 9.35% 8.67% 7.84% 7.54% CAPITAL ADEQUACY RATIO Per cent., 31ST December 2018 HSBC Bank Muscat Ahli Bank Bank Dhofar 19.41% 19.38% 17.50% 17.33% National Bank of Oman 16.33% Bank Sohar 15.04% 80#9Table of Contents Section 1 BankDhofar Overview Section 2 Operating Environment Section 3 Business Overview بنك ظفار Bank Dhofar 4-8 10-11 13-14 Section 4 Financial Performance 16-25 Section 5 Appendix 27-28 6#10Sultanate of Oman - Overview Overview ► 2nd largest country in the GCC with an area covering approximately 309,500 km². Strategically placed on the Arabian Gulf, Oman is divided into eleven main governorates and shares borders with Saudi Arabia and UAE. ► Stable Political System - Monarchy led by His Majesty Sultan Qaboos bin Said Al Said. - ► Population of 4.66mn predominantly represented by Omani Nationals who account for 55% of the total population. ► Resilient and Solid Economy focus on long-term planning with the implementation of a five-year economic development strategy plan. "Vision 2020" government led diversification program aiming at reducing economic reliance on hydrocarbon sector's contribution to GDP USD billion Nominal GDP 76 79 81 68 70 73 66 Saudi Arabia Oman Yemen بنك ظفار Bank Dhofar Key Figures Key Indicators Sovereign Ratings 2018 2017 Ba1/BB/BBB- Baa3/BB/BBB- (Moody's / S&P / Fitch) Gross Domestic Product USD 60.5 bn* USD 72.5 bn Foreign Assets USD 17.4* USD 16.1bn Government Debt (% of GDP) 31.4%** Source: Central Bank of Oman website, Rating Reports: Moody's and S&P as of February 2016 (1)2015 figure represents an average of: S&P 8.1% and Moody's 11.2% estimates * Provisional **As of 31-Dec-2016 GDP Composition (2017) 2017 ■ Petroluem Activities Agriculture & Fishing 25% 30% ■ Manufacturing 8% 2011 2012 2013 2014 2015 2016 2017 6% Nominal GDP 5% Source: BankDhofar's, Central Bank of Oman, Moody's, IMF MCD Regional Outlook/World Economic Outlook, National Center for Statistics and Information 2% 10% 8% 6% ■ Construction Transport, Storage & Communication ■ Real Estate Services ■Financial Intermediation 10#11Omani Banking Sector بنك ظفار Bank Dhofar Commercial and Islamic Banks (Dec 2016) Other Financial Services Providers (Dec 2014) Commercial Banking Assets (Dec 2018) Commercial & Islamic Bank Branch Network (Dec 2017) Overview Total = 18, of which • • 7+2 locally incorporated 9 branches of foreign banks Total 8 of which • • 2 govt. owned specialised banks 6 leasing companies USD 88bn 512 branches Commercial Bank ATMs/CDMs (Aug 2018) 1,288 ATMs 225 CDMs Full Islamic Banks (Dec 2017) 2 Oman / GCC Banking Sector Resilient to Oil Price Shocks Risks of falling oil prices to the Oman and GCC banking systems are limited by: ▸ Implementation of Basel III regulation in effect from January 2014 Conservative Central Bank of Oman ▸ Adequate bank capitalization levels. ► Stable profitability despite declining oil prices as the non-oil sector continues to post solid growth. ➤ Low non-performing loans and improving asset quality. ▸ Deposit-based funding and significant liquidity buffers. ► Large government infrastructure development goals which continue to support credit growth. USD billion 54 37 40 2012 37 60 45 41 Oman Commercial Banking Assets, Deposits and Credit 68 79 50 47 47 2013 2014 2015 52 52 78 Total Assets ■Total Deposits ■Total Credit * Provisional, Source: CBO Aug-18 Monthly bulletins Source: BankDhofar's Central Bank of Oman, along with GCC Central Bank reports, Moody's Country Reports and S&P BICRA Reports 53 33 54 57 82 61 56 88 65 60 55 2016 2017 2018 11#12Table of Contents Section 1 BankDhofar Overview Section 2 Operating Environment بنك ظفار Bank Dhofar 4-8 10-11 Section 3 Business Overview 13-14 Section 4 Financial Performance 16-25 Section 5 Appendix 27-28 12#13BankDhofar Strategy بنك ظفار Bank Dhofar Long Term Strategic Goal: Aim in delivering one of the best-amongst-peers customers' experiences and streamlining its products and services and implement its "Together 2020" strategy in becoming the best bank in the gulf region Customer Experience Ensure promptness of the delivery of services. ► Tailor made product offerings to customers. Active monitoring of customer satisfaction levels. Brand Close monitoring of the effectiveness of marketing initiatives and the perception of brand. Emphasis of its strengths to customers, including the speed and variety of channels of delivery of service. Performance Based Culture ► Focus on • • setting clear objectives for staff encouraging a high quality performance-based culture monitoring performance regularly Implementation of a Bank-wide balance scorecard. Lean Operating Model ► Efforts to consolidate branches and position ATMs in strategic locations throughout Oman. ► Consolidate teams and operations in order to drive efficiency. ▸ Evaluating all operations and trying to implement the easiest and fastest way from customer perspective. Achieve growth through inorganic expansion Implementation of Strategy: Key Themes ✓ Identify, penetrate and develop new and existing market and customer segments Achieve efficiency of capital and improve cost of funding Leverage and optimise distribution Source: BankDhofar's Annual & Quarterly Report ☑ Maximise cross-selling opportunities Continue to expand Islamic banking capabilities Develop project financing capabilities Maintain and develop relationships with the Omani Government and Government-related entities 13#14Organizational Structure Board of Directors Abdul Hakeem Al Ojaili Chief Executive Officer بنك ظفار Bank Dhofar COMMITTEES AND CONTROL FUNCTIONS Board Executive Committee Board Audit Committee Board Risk Management Committee Board Nomination and Remuneration Committee Risk Management Internal Audit Compliance Division Sharia Supervisory Board Internal Sharia Reviewer Kamal Hassan Al Murazza Chief Wholesale Banking Officer Ahmed Said Al Ibrahim Chief Support Services Officer Faisal Hamad Al Wahaibi Chief Retail Banking Officer Shankar Sharma Chief Financial Officer Nasser Said Al Bahantah Chief Human Resources Officer Source: BankDhofar Sohail Niazi Chief Executive Islamic Banking Officer 14#15Table of Contents Section 1 BankDhofar Overview Section 2 Operating Environment Section 3 Business Overview بنك ظفار Bank Dhofar 4-8 10-11 13-14 Section 4 Financial Performance 16-25 Section 5 Appendix 27-28 15#16Profitability and Operating Performance Highlights Financial Performance о Net profits reported for the year ended 31st December 2018 was USD 130.60mn. compared to USD 123.71mn. reported during the same period in 2017. О Operating Income reported for the year ended 31st December 2018 was USD 348.37mn. compared to USD 329.68mn. reported during the same period in 2017, a 5.67 percent increase. о Operating Income has been on a consistent upward trajectory for the last 6 years, reflecting solid growth in the underlying business with an incline of 5.67 percent reported for the year ended 31st December 2018 compared to the same period in 2017. Cost to Income ratio as 31st December 2018 is within the historical range at 50.50%. Cost to Income Ratio 44.1% 42.6% 50.6% 46.7% USD million Profitability بنك ظفار Bank Dhofar 348 330 331 299 257 233 218 204 152 121 124 124 131 98 105 36 2011* 2012 2013** 2014 Operating Income 2011 includes legal case loss charge off of OMR 26 million. 2013 includes recovery from the legal case of OMR 26 million. The Net Profits excluding the legal case recovery in 2013 was OMR 35.4 million. 2015 ■Net Profit 2016 2017 2018 Annualised Return on Average Assets, Equity & Shareholders Equity (%) 50.5% 46.5% 15.5% 44.4% 44.6% 2011 2012 2013 2014 2015 2016 Operating Expenses/Operating Income 2017 2018 Conversion Rate: 1.00 OMR = 2.5974 USD Source: BankDhofar's Annual & Quarterly Report 20.7% 6.1% 2.1% 15.4% ✓ 13.63% 12.9% 12.22% 10.70% 9.49% 11.7% - 7.8% 9.4% 8.5% 2.5% 1.8% 0.8% 1.4% 1.4% 1.3% 1.2% 2010 2011 2012 2013* 2014 1.2% 2015 2016 2017 2018 ROAA ―― ROAE ROASE * 2013 includes recovery from the legal case of USD 67.86mn. Excluding the legal case recovery RoAA was 1.5% and ROAE was 12.5%. 16#17Asset Quality Highlights BankDhofar has witnessed a strong balance sheet growth in terms of total assets, USD million loans and deposits over the years. ► Stable loan book growth о Conservative lending approach ► Diversified loan portfolio across sectors. ► Prudent provisioning for impaired assets. ► Strong asset quality with declining NPL Ratio. 8.1% Breakdown of Gross Loans by Sector (31st December 2018) 8.7% 6.0% 4.3% 4.4% 1.8% 6.5% 15.1% بنك ظفار Bank Dhofar Loan & Financing Portfolio 8,439 8,205 7,764 7,089 5,856 4,940 4,344 3,885 155 145 152 155 169 217 274 315 2011 2012 2013 2014 2015 2016 2017 2018 ■Net Loans & Financing Non-performing Loans LLLL Non-Performing Loans & Financing 146.6% 151.9% 4.6% 135.6% 137.9% 142.7% ■ Retail 130.9% 132.6% 111.4% ■International Trade 116.1% 3.2% ■Construction 3.7% 3.0% 3.1% 3.7% 2.7% 2.6% 41.7% ■ Manufacturing 2.3% 2.67% ■ Wholesale and Retail Trade ■Communication, Utilities & Transport ■Financial Services ■Government Other Services 3.3% Conversion Rate: 1.00 OMR = 2.5974 USD Source: BankDhofar's Annual & Quarterly Reports 1.99% 1.81% 1.72% 1.55% 1.39% 1.37% 1.19% 1.10% 2010 2011 2012 2013 2014 2015 2017 Provision Coverage Ratio* NPL&F Ratio 2016 NPL (Net of Reserve) Ratio 2018 Inclusive of General Provision Gross NPL (Non-performing Loans) is 3.68% and Net NPL is 0.74% based on funded non- 17 performing exposure over funded exposure (Net NPL exclude interest reserve and ECL Provision).#18Capitalisation Overview Total Equity Breakdown بنك ظفار Bank Dhofar Capital Ratios vs. Regulatory Capital Requirements USD million ■ Capital* ■Reserves ■Retained Earnings ■Tier 1 17.3% 17.00% 15.4% 14.8% 15.0% 14.7% 14.4% 14.0% 14.1% 14.1% 12.625% 13.25% 1814 12.625% 12.625% 12.4% 12.0% 12.0% 12.0% 12.9% 11.9% 1525 12.00% Total 1387 12.0% 1238 11.2% 404 10.9% 11.1% 10.8% 10.5% 868 300 154 810 300 -8.9% 144 300 280 9.4% 9.0% 639 118 9.0% 9.0% 9.0% 547 0.0 0.0 [118] 293 9.9% 251 10.25% 0.0 314 7.00% 0.0 203 247 976 7.625% 7.625% 9.625% 140 390 390 418 453 505 648 788 2010 2011 2012 2013 2014 2015 2016 2017 2018 T Capital Adequacy Ratio CET-1 Ratio 2011 2012 2013 2014 2015 2016 2017 2018 * Constitutes of Share Capital and Share Premium Risk Weighted Asset Breakdown Regulatory Capital Adequacy Ratio Dividend Payout and Bonus Shares Regulatory CET-1 Ratio USD million 10,274 10,882 11,092 9,220 167 197 27% 148 25% 25% 25% 25% 25% 25% 25% 7,594 633 670 6617 289 583 21% 20% 20.2% 20% 20% 5,714 516 5,080 183 17% 4,400 148 15.5% 15% 12.5% 464 15% 15% 15% 14% 14% 98 12.5% 433 12% 99 11% 10% 10% 10% 110 406 371 9,544 10,082 10,225 7% 8% 8% 5% 10% 7% 328 8,415 6,947 .5% 6,037 3,962 4,610 5,209 2010 2011 2012 Credit Risk 2013 2014 Operational Risk 2015 ■Market Risk 2016 2017 2018 Total RWA Conversion Rate: 1.00 OMR = 2.5974 USD Source: BankDhofar annual & Quarterly reports 2007A 2008A 2009A 2010A 2011A* 2012A 2013A 2014A 2015A 2016A 2017A 2018A ■Cash Dividend * 2011 Bonus from Share Premium Account ■Bonus Shares ■ Total 18#19Funding and Liquidity Highlights Stable funding structure with a diversified funding base. ► Sufficient liquidity ► The Bank holds a portfolio of highly liquid investment securities which consists primarily of treasury bills issued by Central banks USD million Overview of Liquidity 13% 0.4% USD million بنك ظفار Bank Dhofar Funding Mix (USD 10,944 bn as at 31st December 2018) 4% 2% 4% 9% 36% ■ Time Deposits/Certificates of Deposits ■Current Accounts ■Savings Accounts ■ Islamic Banking Window deposits ■Margin Accounts ■ Shareholder's Equity Due to banks ■Subordinated Loans ■Tier 1 Bond 8% 11% 13% ■ Other liabilities Customer Deposits and Loan to Deposit Ratio 103.6% 105.9% 108.0% 105.3% 390 اليس 275 647 260 397 899 540 2013 2011 2012 102.3% 101.0% 98.5% 440 93.6% 90.8% 662 849 568 1,517 1,140 849 691 783 3,246 3,946 4,246 5,277 6,447 6,733 7,494 7,970 7,596 T T 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Cash and Placements with CBO Treasury Bills/Bonds Source: BankDhofar's Annual & Quarterly Reports Customer Deposits Net Loans/Customer Deposits 19#20Business Segments بنك ظفار Bank Dhofar Retail and Wholesale Banking represents the Bank's largest business segments, collectively contributing to 84% of the total assets and 82% of the operating income (as at 31st December 2018). Retail Banking (Consolidated) ► Provides banking services to over 290,000 customers as of 31-Dec-18. ►Network of 71 branches, 121 ATM, 55 CCDMs, 14 FFMs units as at 31st December 2018. ► Services offered include deposits, lending, debit and credit cards, priority banking, Hawa ladies banking and bancassurance. Wholesale Banking (Consolidated) Provides banking services to over 17,000 corporate and SME customers. ► Wholesale Banking departments consist of corporate banking, business banking, Government banking, Treasury & Financial Institutions, payments and cash management services, corporate advisory and investment banking, projects & MIS department and trade finance (with one corporate centre). Services offered include syndicated loans, structured finance, trade finance, working capital finance and term loans. Treasury and FI (Consolidated) ▸ Manages the funding and liquidity requirements. ►Network of over 200 correspondent banks. ► Services include treasury and foreign exchange and interest rate hedging instruments. Islamic Banking* Maisarah offers retail, corporate and treasury Shari'ah-compliant financial services and products, through a network of 10 branches. ▸ Deposits as at 31st December 2018 were USD 918MN (USD 979 mn: 31st December 2017) ► Gross financing to customers was USD 1,043mn as at 31st December 2018 (USD 1,008mn: 31st December 2017). December-2018 USD mn % of Total December-2018 USD mn % of Total December-2018 USD mn % of Total Total Assets 3,603 33% Total Assets 5,217 48% Total Assets 2,124 19% Net Operating 135.48 39% Income Net Operating Income 149.28 43% Net Operating Income 63.61 18% Net Profit 26.49 20% Net Profit 62.64 48% Net Profit 41.47 32% Government Banking * ▸ Dedicated division to customers in the government sector, which includes Government as well as quasi-government entities. ► Services offered include deposits, loans, credits and foreign currency exchange. *For financial reporting purposes, the Bank's business activities are classified within the following operating segments: Retail Banking, Wholesale Banking and Treasury and International Banking (consolidating both Conventional and Islamic Banking figures) Source: BankDhofar's Annual & Quarterly Reports 20 20#21Retail Banking (Consolidated) بنك ظفار Bank Dhofar Overview and Strategy BankDhofar's Retail Banking products and services are targeted at both Omani and foreign nationals. Key selling points for its retail customers are: о The breadth of services and products offered О Extended and strategically located branch network о Reliable and expanding electronic distribution channels ▸ The Bank is actively strengthening its retail customer experience by strongly promoting alternatives to the traditional branch network including internet banking, mobile banking, ATMs, CCDMs and FFMs. Products and Services i. Current, savings and term deposits: both interest-bearing and non-interest- bearing deposits products, including time deposits, current and call accounts, and savings accounts. ii. Lending: credit facilities almost exclusively to customers based in Oman, primarily housing loans, personal loans, education loans and car loans. iii. Credit and debit cards: branded credit and debit cards (including student credit and debit cards) in association with MasterCard and Visa. iv. Priority banking and Hawa ladies banking: dedicated to high net worth individuals and personalised Hawa ladies banking services. v. Bancassurance: home, family and motor insurance products in partnership with Oman United Insurance Company. Asset Growth USD million Operating Gross Revenue USD million 3,738 3,658 3,932 237 223 227 3,603 200 2,877 176 175 178 154 1,881 2,150 2,368 124 1,431 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: BankDhofar's Annual & Quarterly Reports 21#22Wholesale Banking Group (Consolidated) بنك ظفار Bank Dhofar Overview and Strategy ► BankDhofar's Wholesale Banking operations focus on corporates in Oman, predominantly large and mid-cap companies. ▸ The Bank seeks to extend its products and services to SME customers across the country by maximising the use of its delivery channels and by leveraging its technology. ▸ The Bank also aims to increase its revenue from corporate advisory and investment banking activities in the next three years. ▸ Treasury and Financial Institution and Government Banking Groups brought under Wholesale banking umbrella Products and Services i. Corporate Banking: provides services and products to large corporate customers including project finance and syndication. The corporate customer base includes trading, manufacturing, services and contracting. ii. Business Banking: provides financing solutions and advisory services to SME customers. iii. Payments and Cash Management Services: offers cash management services and solutions such as collection of revenue, disbursements of expenses and other payables. iv. Corporate Advisory and Investment Banking: advisory services to a variety of industry sectors, including oil & gas, telecommunications and financial institutions. v. Wholesale Banking Projects & MIS: projects relating to available systems and processes within Wholesale Banking. vi. Financial Institution and Trade Finance: develops and markets products in the trade finance sector such as fund-based and non-fund based credit facilities. Asset Growth USD million 5,192 5,217 4,642 3,784 4,172 2,402 2,693 3,121 1,847 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: BankDhofar's Annual & Quarterly Reports USD million Operating Gross Revenue* 295 262 212 166 142 117 119 99 104 2012 2013 2014 2015 2016 2017 2018 2010 2011 *Decline in 2011 due to a reclassification of certain items between Retail and Wholesale Banking 22#23Maisarah Islamic Banking Services (MIBS) بنك ظفار Bank Dhofar Overview and Strategy ▸ MAISARAH launched in March 2013 to offer Shari'ah-compliant financial services and products to its customers. i. ii. It aims to be the leader in the provision of Islamic financing solutions for large corporate, mid-sector corporate and SME customers. iii. ▸ MAISARAH has also introduced Shari'ah compliant retail banking channels such as ATMs, debit cards and internet banking facilities. ▸ MAISARAH also has a dedicated Treasury division which ensures that MAISARAH funds and currency positions are managed prudently by adhering to internal and regulatory limits throughout its business operations Separate Shari'ah Supervisory Board to review MAISARAH's activities and provide necessary guidance. The Bank's Shari'ah Supervisory Board reviews and approves all Islamic banking products prior to their launch and monitors compliance with Shari'ah principles. Asset Growth iv. V. vi. Products and Services Saving Account launched which is based on the Mudharaba contract. Current Account holders will receive the debit cards and secure cheque books. The contract used is Qard Hassan and is available to individual and corporate customers. Auto Finance is based on Murabaha concept and helps customer who would like to have Sharia compliant finance to fulfill their personal needs through easy installments. Home Finance is structured through ljara contracts and can be used to finance purchase of homes in Oman. Fixed Deposit is a Mudarabah-based deposit product through which you can invest your savings for periods ranging from 1 month to 5 years and earn profit on a periodic basis. Maisarah Corporate Banking offers a wide range of Shari'a compliant Islamic Banking solutions, including: 1) Diminishing Musharakah 2) Murabaha 3) Trade finance products and other Shari'a compliant products Operating Gross Revenue* USD million USD million 65 55 1,366 1,331 1,171 778 498 38 23 1 12 130 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Source: BankDhofar's Annual & Quarterly Reports 23#24Treasury and Financial Institutions, Government and Islamic Banking بنك ظفار Bank Dhofar Treasury and Financial Institutions Overview ► Predominantly manages the funding and liquidity requirements of the Bank and monitors the market risk and liquidity risk. ▸ Has a sales team which structures and sells treasury and foreign exchange and interest rate hedging instruments to the Bank's customers. Responsible for developing mutually beneficial relationships with financial institutions worldwide. i. Foreign Exchange and Derivatives Sales Desk: offers foreign exchange, commodities and interest rates solutions designed to manage a customer's financial risk. ii. Money Market Desk: manages the Bank's liquidity and is actively involved in lending and borrowing operations with both local and international banks. Also manages the Bank's investment in its equity portfolio (which is comprised primarily of equities in companies listed on the MSM) and its limited investments in local and global investment grade-rated sovereign bonds. iii. Interbank Desk: plays a key role in mitigating the Bank's market risks arising due to customer's foreign currency and derivative transactions through hedging activities. Government Banking Overview Dedicated government banking division which is tasked with leading the business development initiative with regards to customers in the government sector. Deals with Government departments and authorities to facilitate all of the Government's banking requirements including deposits, loans, credits and foreign currency exchange. The Bank has benefitted from developing relationships with Government entities through obtaining access to large numbers of new retail customers. The Bank is a supplier of banking services and products, including salary transfers and deposit taking, for the employees of the Ministry of Education, Ministry of Health and Ministry of Defence. Source: BankDhofar's Annual & Quarterly Reports Islamic Banking Rewards 'Best Islamic Community Support Bank' 2017 by Global Financial Market Review. Best Islamic bank in Oman - Maisarah Islamic Banking Services at the Middle East Banking Awards 2017 (EMEA Finance) Best Islamic Retail Bank Oman 2017 Banking & Finance Review. - Maisarah Islamic Banking by Global 'Best Islamic Bank in Oman' at the EMEA Finance's Achievement Awards 2016. 24 24#25Most recent Awards and Accolades بنك ظفار Bank Dhofar OER OMAN ECONOMIC REVIEW emeafinance Europe Middle East Africa mea No. 1 in Large Sized Banks Category at Best Banks Report by Oman Economic Review (OER) Best Islamic bank in Oman - Maisarah Islamic Banking Services at the Middle East Banking Awards 2017 (EMEA Finance) Best Corporate Banking Institution - Oman in The Business Awards 2017 by MEA Markets GLOBAL BANKING & Best Islamic Retail Bank Oman 2017 - Maisarah Islamic Banking by Global Banking & Finance Review review Finance ONE WORLD ONE bizz AWARDS PAN ARAB WEB AWARDS GLOBAL BANKING & Finance review Global Business Outlook Citi INTERNATIONAL BUSINESS MAGAZINE The Business Excellence Award from the BIZZ AWARDS (World Confederation of Business) 2018 Best mobile app from Pan Arab Web Awards 2018 Best Private Bank Oman 2017 - Bank Dhofar by Global Banking & Finance Review Best Bank for Human Resources Oman 2017 by the Global Business Outlook Award 2017 Straight-Through-Processing (STP) Excellence Award from CITI bank Best Digital Bank Oman 2018 from International Business Magazine Award Best Business Leaders award to CEO for Bank Dhofar at the prestigious MENA awards 2018 45 25#26Table of Contents Section 1 BankDhofar Overview Section 2 Operating Environment Section 3 Business Overview بنك ظفار Bank Dhofar 4-8 10-11 13-14 Section 4 Financial Performance 16-25 Section 5 Appendix 27-28 26#27Balance Sheet USD millions ASSETS Cash and balances with Central Bank of Oman Loans, advances and financing to banks Loans, advances and financing to customers Investment Securities Intangible asset Property and equipment Other assets Total Assets بنك ظفار Bank Dhofar 2012 2013 2014 2015 2016 2017 2018 543 899 1,517 1,143 691 849 783 252 314 236 358 883 779 855 4,343 4,940 5,857 7,088 7,764 8,439 291 462 460 532 662 756 8205 790 8 8 5 5 5 3 2 26 29 26 23 21 26 38.7 1,065 117 195 182 242 182 270.2 5,569 6,769 8,296 9,332 10,268 11,031 10,944 LIABILITIES Due to banks 231 275 455 803 912 1,008 958 Deposits to customers 4,247 5,278 6,447 6,732 7,494 7,969 7,596 Subordinated loans 195 195 270 270 140 299 410 Other liabilities 218 231 281 288 332 231 166 Total liabilities 4,888 5,979 7,452 8,094 8,878 9,506 9,131 SHAREHOLDERS' EQUITY Share capital 286 314 348 400 496 587 727 Share premium 104 104 104 104 156 200 248 Retained earnings 190 169 145 117 187 143 154 Other reserves 101 203 247 314 249 294 280 Total shareholders' equity 681 790 844 943 1,088 1,223 1,410 Perpetual Tier 1 Capital Securities - 301 301 301 404 Total Equity 681 790 844 1,239 1,390 1,525 1,813 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 5,569 6,769 8,296 9,332 10,268 11,031 10,944 * Numbers may not fully add up due to rounding Conversion Rate: 1.00 OMR = 2.5974 USD 27 Source: BankDhofar's Annual & Quarterly Reports#28Income Statement بنك ظفار Bank Dhofar USD millions Interest income 2012 2013 2014 2015 2016 2017 2018 244 260 278 306 369 418 454 Interest expense -75 -88 -86 -88 -132 -200 221 Net interest income 166 171 192 218 236 221 233 Net Income from Islamic Financing and Investment Activities 0 0 8 16 18 21 21 26 Fees and Commission Income 18 26 34 44 44 47 55 53 Fees and Commission Expense Net Fees and Commission Income Other Income Operating Income -3 -3 -5 -5 -8 -8 -13 18 23 31 39 39 44 34 36 26 26 39 44 49 40 49 40 218 234 257 299 330 330 348 Operating Expenses -96 -117 -119 -132 -148 -153 -176 Profit from Operations 122 114 138 166 184 177 172 Provisions for impairments, recoveries and write-backs -10 -57 -18 -31 -42 -31 -17 Profit from Operations after Provisions 112 171 119 135 140 145 155 Income Tax Expense -13 -21 -13 -16 -18 -21 -24 NET PROFIT FOR THE YEAR 99 151 104 122 122 125 131 * Numbers may not fully add up due to rounding Conversion Rate: 1.00 OMR = 2.5974 USD Source: BankDhofar's Annual & Quarterly Reports 28#29Thank You بنك ظفار Bank Dhofar 29 29