Saudi Arabia Banking Pulse

Pulse: Muted growth in L&A and deposits as the merger effects wear off; Higher profitability due to lower impairments support return ratios Improved Stable Worsened Metric Q2'21 Q3'21 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Key Trends of Q3'21 L&A Growth (QoQ) 13.1% 2.8% Size Deposits Growth (QoQ) 12.6% 1.2% Liquidity Loan-to-Deposit Ratio (LDR) 90.0% 91.5% Operating Income Growth (QoQ) 8.4% 2.9% Operating Income / Assets 3.9% 3.7% 1 2 LDR increased to 91.5%, driven by higher growth in loan book relative to deposits 3 Growth in operating income increased to 2.9%, supported by 3.5% QoQ rise in net interest income With the economic activity in recovery phase, L&A and deposits grew marginally by 2.8% and 1.2% QoQ, respectively Non-Interest Income (NII) / Operating Income 23.1% 22.6% Income & Operating Yield on Credit (YoC) 5.2% 5.0% Efficiency Cost of Funds (CoF) 0.4% 0.4% Net Interest Margin (NIM) 3.1% 3.0% Cost-to-Income Ratio (C/I) 35.1% 35.2% LO 5 Coverage Ratio 155.6% 157.7% Risk 6 Cost of Risk (COR) 1.0% 0.5% Return on Equity (ROE) 11.1% 12.0% NIM, yield on credit and cost of funds remained stable on QoQ basis C/I ratio deteriorated marginally by ~6 bps QoQ to 35.2% in Q3'21, as operating expenses rose by 3% QoQ, driven by higher salary and rental expenses Coverage ratio increased 214 bps QoQ, while the cost of risk declined by ~50 bps QoQ RoE and RoA increased marginally as the aggregate profit for the top 10 banks increased 20.3% QoQ Profitability Return on Assets (ROA) 1.6% 1.8% Return on Risk-Weighted Assets (RoRWA) 2.1% 2.4% 7 8 RoRWA increased and in line with higher net income, moreover capital adequacy ratio also rose by 19 bps Capital Capital Adequacy Ratio (CAR) 19.8% 19.8% Note 1: Growth in loans & advances and deposits were presented QoQ instead of YoY Note 2: Quarterly income was used in the calculation of operating income growth Note 3: The growth numbers might not be comparable due to higher growth in Q2'21; given the SNB merger effect Source: Financial statements, Investor presentations, A&M analysis 5 ALVAREZ & MARSAL

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