The Saudi British Bank Directors Report 2018 Table of Contents 1. Principal activities .......................................................................................................................................... 3 Retail banking ............................................................................................................................................. 3 Corporate banking ...................................................................................................................................... 4 Treasury ....................................................................................................................................................... 5 Others .......................................................................................................................................................... 5 2. Strategic Focus .............................................................................................................................................. 6 SABB’s Vision ............................................................................................................................................... 6 Customer Experience ................................................................................................................................... 7 Digital Banking .............................................................................................................................................. 8 People......................................................................................................................................................... 10 3. Best in Class Recognition: Industry Awards ............................................................................................. 13 4. Corporate social responsibility ................................................................................................................... 14 5. Financial results and business segment performance highlights ........................................................... 15 Key financial highlights ............................................................................................................................ 15 Geographical analysis of operating income ........................................................................................... 15 Financial results for the year-ended 31 December 2018 ....................................................................... 16 Balance sheet as at 31 December 2018 .................................................................................................. 16 Business segment performance highlights ........................................................................................... 17 Retail banking ........................................................................................................................................ 17 Corporate banking ................................................................................................................................. 18 Treasury ................................................................................................................................................ 19 HSBC Saudi Arabia (investment banking) ............................................................................................. 23 SABB Takaful (insurance) ..................................................................................................................... 24 6. Risk management ......................................................................................................................................... 24 Credit risk .................................................................................................................................................. 25 Shariah Risk .............................................................................................................................................. 25 Market risk ................................................................................................................................................. 26 Liquidity risk ............................................................................................................................................. 26 SABB Credit Ratings................................................................................................................................... 27 Debt securities in issue and other borrowings ............................................................................................ 28 Operational risk ........................................................................................................................................ 29 7. Legal Entity Structure .................................................................................................................................. 29 Subsidiaries ................................................................................................................................................ 29 Structured entities ....................................................................................................................................... 30 Joint venture ............................................................................................................................................... 31 8. Corporate Governance................................................................................................................................. 31 Corporate governance principles ............................................................................................................ 31 Directors of the Board .............................................................................................................................. 34 Profiles of Directors ............................................................................................................................... 37 Board meetings ..................................................................................................................................... 39 Board committees..................................................................................................................................... 39 Executive committee ............................................................................................................................. 39 1 Audit committee ..................................................................................................................................... 40 Nomination and remuneration committee .............................................................................................. 41 Board Risk Committee ........................................................................................................................... 42 Profiles of Board committees members (not Directors of the Board) ..................................................... 43 Profile of senior executives and management team (other than Managing Director) ........................ 44 Notification relating to substantial shareholdings................................................................................. 46 Description of any interest, option rights and subscription rights of major shareholders ............................. 47 Description of any interest, option rights and subscription rights of Directors of the Board and their wives and minor children ...................................................................................................................................... 47 Description of any interest, option rights and subscription rights of senior executives and their wives and minor children ............................................................................................................................................. 48 Dividends ................................................................................................................................................... 48 Arrangements for shareholders’ waiver of rights to dividends ............................................................ 50 Arrangements for directors’ or senior executives’ waiver of salaries or remuneration ..................... 50 Accounting standards .............................................................................................................................. 50 9. Statutory payments ...................................................................................................................................... 50 10. Remuneration Report ................................................................................................................................... 50 11. Board of directors’ assurance ..................................................................................................................... 53 12. Compliance with regulatory and international standards ......................................................................... 54 13. Statement on internal controls .................................................................................................................... 54 14. Annual review of the effectiveness of internal control procedures ......................................................... 55 15. Penalties ........................................................................................................................................................ 58 16. SABB general meetings ..............................................................................................................................