Q1 2022 Results Presentation

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Bank ABC

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2022

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#1Q1 2022 Results Presentation Bank ABC#2Key Messages Bank ABC / / / / / Q1 2022 performance of a headline net profit of US$31m marks a solid and profitable start to 2022, achieved despite geo-political, industry and market challenges. The financial results were underpinned by our consistent strategic direction which has been refreshed to reflect our increasing emphasis on Digital Transformation and leveraging our acquisition of Blom Bank Egypt (BBE). Bank ABC continues to deliver great progress across all its strategic objectives. Growth in revenues returned strongly including the consolidation of BBE, with underlying TOI increasing to US$253m +28% compared to Q1 2021. Virtually all business units are performing well against their top line targets. Costs increased +27% including the consolidation of BBE as well as the Group's return to normal levels of activity. The Group continues its relentless focus on cost discipline while continuing significant investments into its digital transformation and strategic initiatives. The Group maintains a strong balance sheet and capital position, boosted by the issue of Additional Tier 1 (AT1) capital with a 16.6% Tier 1 ratio (14.7% CET1), LCR of 247% and NSFR of 124%. The strengthened Group capital position was reflected in S&P's affirmation of the Group's investment grade rating of BBB-, while upgrading its outlook to 'Stable'. / Impairment charges (ECL) for the period were US$25m, with cost of risk returning to pre-pandemic levels and broadly in line with the Group's historic credit loss experience. 2#3Group Strategy Statement Emphasizes Digital Transformation and our Acquisition in Egypt Strategic intent Values Client Centric MENA's leading international Bank Collaborative Bank ABC Consistent Strategic objectives Build our Digital Bank of the Future / Modernize the existing bank / Transition Group Retail into ila / Build WB Digital / Leading Digital Payment Solutions Refocus our Wholesale Banking Transformation / Refocus on selective corporate growth / Reinvigorate Financial Markets and Transaction Banking products / Refresh Europe Strategy Integrate BBE to deepen Market Presence in Egypt /Integrate BBE with ABC Egypt / Build Egypt to be a primary engine of profit growth for the Group Strengthen our Organizational Resilience Operational resilience / Risk & Financial resilience Progress in Q1 2022 / ila continues to gain market share in Bahrain and is on track to launch in Jordan / AFS capital injection effected / Post pandemic expansion of corporate customers base continues / Strong deal pipeline prospects for rest of year / Intensive interaction with CBE and other regulators for merger approval / Post legal day 1 (LD1) integration planning continues / AT1 capital $390m issued, post EGM approval / S&P recognized balance sheet strength, upgraded outlook to stable, affirmed BBB- rating 3#4Financial Highlights - Solid and Profitable Start to 2022 Bank ABC Total Operating Income, $m Underlying* $253m $197m Q1'21 Q1'22 $247m Headline $182m T1 Capital Ratio, % Underlying TOI of $253m (28% growth) reflects strong recovery across most of our markets and business lines, and benefiting from the consolidation of BBE 15.9% Dec '21 16.6% Mar '22 Underlying Net Operating Profit, $m The Group has concluded an AT1 capital issuance, further strengthening its capital position / Capital base remains strong, stable & significantly above regulatory minimum levels / CET 1 Ratio (14.7%) comprises the majority of Tier 1 Ratio $72m Q1'21 $94m Q1'22 Underlying* net operating profit (before provisions and taxation) +31% growth, also benefiting from the consolidation of BBE / Net Profit to shareholders of $31m with cost of risk returning to pre-pandemic levels, reflecting a better economic outlook and the Group's asset portfolio resilience * Please refer to appendix for headline vs underlying basis calculation. 4#5Strong Headline Revenue Growth Across the Franchise Bank ABC Underlying* TOI of $253m was 28% higher than Q1 2021 levels, reflecting strong recovery across most of our markets and business lines, and benefiting from the consolidation of BBE Total Operating Income(TOI), $m +28% 247 253 Headline Underlying* Client and transaction revenues have performed well with positive growth rates reflecting resilience across most of our markets and business lines /Headline net interest income at $177m +45% year on year supported by higher loan volumes, consistent margins and the addition from BBE / Income is broad based and diversified across various business units * Please refer to appendix for headline, and underlying basis calculation. ** Other includes activities of Arab Financial Services and ila. 197 182 Q1'21 TOI by Business (Q1 2022), % 11.3% 34.0% 3.3% 27.1% 24.3% Q1'22 ABC Brasil International Wholesale Bank MENA Subsidiaries Group Treasury Other** 5#6Cost Trajectory Returning to Normal Levels Operating Expenses and Cost to Income Ratio / +27% headline increase in costs during Q1 2022 to $159m from a combination of consolidation of BBE as well as the Group returning to a more normal level of activity Operating Expenses, $m 125 +27% 159 44 Bank ABC 37 15 Other Cost Relentless focus on cost discipline and 10 continuing investments into the Group's Premises & Equipment digital transformation and strategic initiatives 100 Staff Cost 78 Cost to income ratio reflects 'flat jaws' and the continuing levels of investment into the Group's digital initiatives Q1'21 Q1'22 C/I ratio Normalized 63% 65% C/I Ratio 55% 57% (ex-Digital) 6#7Strong and resilient capital base, further strengthened by AT1 issuance Overview The Group has concluded an AT1 capital issuance, further strengthening its capital position Capital base remains strong, stable and significantly above regulatory minimum levels / CET 1 Ratio (14.7%) comprises the majority of Tier 1 Ratio / Total CAR of 17.6% as at end of March 2022 / RWA stood at $26.9bn as of Mar-2022, compared to $25.6bn as of Dec-2021 (+5%) RWA by Type of Risk, $bn 26.9 25.6 1.6 1.0 1.7 1.3 Operational Market Credit 23.0 23.9 Dec '21 Mar '22 CET1 and Tier 1 Ratios, % 16.6% 15.9% Dec '21 Mar '22 CET1 Ratio 15.5% 14.7% Capital Adequacy Ratio, % 16.9% Bank ABC Reg. level 10.5% 17.6% Reg. level 12.5% Dec '21 Mar '22 7#8Well Diversified and Liquid Balance Sheet Bank ABC / Total assets stood at $34.8 billion at the end of the period, broadly in line with the $34.9 billion at the 2021 year-end Q1 2022 Assets by Instrument, $bn 34.9 34.8 2.5 3.1 6.4 5.6 Other 9.1 9.2 Liquid Funds (2) More than half the Assets are maturing within 1-year (56%) Marketable Securities 16.8 17.0 Loans ✓ Loans increased by 2% during the quarter to $17.0bn reflecting the Group's selective underwriting and a strengthening in BRL FX rate Dec '21 Mar '22 Q1 2022 Assets by Maturity, $bn / Net loans to customer deposits ratio broadly stable at 80% compared to the 2021 year end levels / Strong liquid funds position with LCR of 247% (1) and NSFR of 124% 34.8 17.0 22% 16% 1-30 days 31 days - 1 year 34% 47% 1-5 years 29% >5years (3) 31% 15% 6% Assets Loans (1) LCR calculated net of trapped liquidity. (2) Liquid funds includes placements with banks & other financial institutions and securities bought under repurchase agreements. (3) >5 years includes undated. 8#9Cost of Risk Returning to Pre-Pandemic Levels NPLs and Coverage Ratio 3.7% 3.4% NPL ratio marginal movement to 3.7% NPL Ratio Loans provision coverage ratio remains strong at 107.3% Coverage Ratio* / ECLs during Q1 2022 were US$25 million, compared to US$20 million reported for the same period last year, broadly in line with historic credit loss levels ECL & Cost of Risk / Cost of risk returning to pre-pandemic levels with a stabilising economic outlook ECL, $m Dec '21 Mar '22 115.4% 107.3% 25 20 20 Q1'21 Q1'22 Cost of Risk** 50bps 56bps *Provision/Gross Impaired Loans. **Impairment / Gross Loans. Bank ABC 9#10Q1 2022 Summary Bank ABC Net profit of US$ 31 million marks a solid and profitable start to 2022 with revenues, costs and ECL broadly returning to pre- pandemic levels Operating Income on an underlying basis grew by +28% year on year supported by higher loan volumes, consistent margins and benefiting from the consolidation of BBE ECL charge broadly in line with our historic credit loss experience with strong balance sheet and asset quality being maintained Continuing to achieve major delivery milestones in our key organic, digital and inorganic strategic objectives 10 10#11Appendix: Normalised Financials Bank ABC US$ millions 2018 2019 2020 2021 Q1 2021 Interest Income 559 564 516 592 122 Q1 2022 177 Non-Interest Income* 309 311 233 277 75 67 Total Operating Income (TOI)* 868 875 749 869 197 244 Profit Total Operating Expenses -474 -524 -486 -569 -125 -159 Operating Profit 394 351 263 300 72 85 or Loss Provisions -79 -82 -329 -106 -20 -25 Profit before Taxes & M.I. 315 269 -66 194 52 60 Taxes* -67 -33 -9 -66 -16 -17 M.I. -46 -42 -14 -28 -6 -12 Net Profit 202 194 -89 100 30 31 US$ millions 2018 2019 2020 2021 Mar 2021 Mar 2022 Liquid Funds✶✶ 6,266 5,323 5,378 6,355 5,105 5,564 Marketable Securities 6,638 6,343 6,867 9,252 7,478 9,125 Loans & Advances 14,884 16,452 15,656 16,768 15,198 17,023 Other 1,761 1,950 2,506 2,522 2,427 3,038 Total Assets 29,549 30,068 30,407 34,897 30,208 34,750 Customer Deposits 16,464 17,065 17,667 21,459 17,819 21,151 Balance Bank Deposits 4,207 3,897 3,596 4,388 3,828 3,756 Sheet Borrowing 2,012 2,080 1,795 1,211 1,602 1,226 Other 2,550 2,537 3,205 3,604 2,857 3,965 Total Liabilities 25,233 25,579 26,263 30,662 26,106 30,098 Shareholders' Equity 3,862 4,031 3,767 3,872 3,753 3,831 Non-Controlling Interest 454 458 377 363 349 431 Additional / Perpetual Tier-1 Capital 390 Total Equity 4,316 4,489 4,144 4,235 4,102 4,652 Total Liabilities & Equity 29,549 30,068 30,407 34,897 30,208 34,750 Normalized Cost to Income, % 55% 60% 65% 65% 63% 65% Key Metrics Tier 1 Ratio, % 17.2% 16.9% 16.6% 15.9% 16.9% 16.6% CET 1, % 17.0% 16.6% 16.2% 15.5% 16.6% 14.7% ROAE,% 5.2% 4.9% 2.6% 3.2% 3.2% * TOI and taxes includes normalization of BRL currency overhedge. Headline TOI 2018 $817m, 2019 $865m, 2020 $646m, 2021 $854m, Q1 2021 $182m and Q1 2022 $247m. ** Liquid funds includes placements with banks & other financial institutions and securities bought under repurchase agreements. 11#12Appendix: Underlying Performance - Key Adjustments Underlying Total Operating Income Headline TOI Currency Hedge* Normalized TOI FX impacts and one-offs Underlying TOI Underlying Net Operating Profit Bank ABC +28% Q1 2021 Q1 2022 $182m $247m $253m $197m +$15m ($3m) $197m $244m +$9m $197m $253m Q1'21 Q1'22 Q1 2021 Q1 2022 Headline Net Operating Profit $57m $88m $72m Currency Hedge* +$15m ($3m) Normalized Net Operating Profit $72m $85m FX impacts and one-offs +$9m Underlying Net Operating Profit $72m $94m +31% $94m Q1'21 Q1'22 Regular hedging transactions to cover open USD position in Banco ABC Brasil Cayman branch that creates a corresponding tax adjustment. 12#13Contact us For more information, contact us on Investor [email protected] Bank ABC Bank ABC Head Office P.O. Box 5698, Manama Kingdom of Bahrain www.bank-abc.com 2022 middle east investor relations MEMBER OF association Bank ABC 13#14Disclaimer Bank ABC IMPORTANT: The following applies to this document, the oral presentation of the information in this document by Arab Banking Corporation B.S.C. ("Bank ABC") or any person acting on behalf of Bank ABC, and any question-and-answer session that follows the oral presentation (collectively, the "Information"). In accessing the Information, you agree to be bound by the following terms and conditions. This presentation has been prepared by Bank ABC and has not been independently verified. This document is an advertisement and does not constitute a prospectus for the purposes of the Prospectus Directive (as defined below). 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