ANNUAL REPORT 2016 His Royal Highness Custodian of the Two Holy Mosques His Royal Highness Prince Mohammad Bin Nayef Al-Saud King Salman Bin Abdulaziz Al-Saud Prince Mohammad Bin Salman Al-Saud Crown Prince, Deputy Prime Minister, Second Crown Prince, Minister of Interior Minister of Defence Alawwal bank Annual Report 2016 3 Content Financial Highlights 6 Board of Directors 8 Our First 90 Years 10 Directors’ Report 14 Statement of Internal Control 31 2016 Achievments 32 Members of the Bank’s Senior Management 33 Alawwal bank and the Community 34 Independent Auditors’ Report 38 Financial Statements 44 Notes to the Consolidated Financial Statements 49 4 Alawwal bank Annual Report 2016 Alawwal bank Annual Report 2016 5 Net Profit (Amounts in SAR Millions) Total Assets (Amounts in SAR Millions) Customers’ Deposits (Amounts in SAR Millions) 2012 - 2016 Financial Highlights 2,500 120,000 100,000 108,070 89,088 105,071 90,000 85,359 2,022 96,619 100,000 76,814 2,000 1,821 80,000 80,468 70,000 1,502 80,000 61,875 CONSOLIDATED INCOME STATEMENT (IN SAR MILLION) 2016 2015 2014 2013 2012 1,500 68,506 60,000 1,253 53,914 Special commission income, net 2,507 2,298 1,966 1,624 1,372 1,065 60,000 50,000 1,000 40,000 Total non-special commission income 1,178 1,302 1,216 992 847 40,000 30,000 Total operating income 3,685 3,600 3,182 2,616 2,219 500 20,000 20,000 Operating expenses 1,336 1,159 1,011 895 847 10,000 0 - - Net Operating income 2,349 2,441 2,171 1,721 1,373 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Impairment charge for credit losses & investment, net 1,288 418 346 219 120 Net income 1,065 2,022 1,821 1,502 1,253 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN SAR MILLION) 2016 2015 2014 2013 2012 Shareholders' Equity 12,863 12,027 10,742 9,401 8,306 Loans & Advances (Amounts in SAR Millions) Return on Average Equity (%) Return on Average Assets (%) Customers' deposits 85,359 89,088 76,814 61,875 53,914 Loans and advances to customers, net 72,743 76,412 65,148 53,211 45,276 80,000 76,412 %20.00 %2.50 72,743 %18.08 %17.76 Investment, net 21,258 21,263 18,784 16,849 11,379 %18.00 %16.96 %2.06 70,000 65,148 %15.95 %1.99 %2.02 %1.98 %16.00 %2.00 Total assets 105,071 108,070 96,619 80,468 68,506 60,000 53,211 %14.00 50,000 45,276 NO OF SHARES OUTSTANDING (IN THOUSANDS) 1,143,072 571,536 476,280 396,900 396,900 %12.00 %1.50 40,000 %10.00 %8.56 NUMBER OF EMPLOYEES 1,713 1,691 1,637 1,534 1,499 %1.00 30,000 %8.00 %1.00 NO OF BRANCHES 65 60 55 48 45 %6.00 20,000 %4.00 %0.50 FINANCIAL INDICATORS 2016 2015 2014 2013 2012 10,000 %2.00 Net earnings per share (SAR) 0.93 1.77 3.82 3.15 3.16 - %0.00 %0.00 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Payout ratio (dividend/net profit) % 0.00 14.70 34.00 31.19 35.48 Net asset value per share (SAR) 11.25 10.52 22.55 23.69 20.93 RATIOS 2016 2015 2014 2013 2012 Return on average equity % 8.56 17.76 18.08 16.96 15.95 2016 2015 2014 2013 2012 Return on average assets % 1.00 1.98 2.06 2.02 1.99 Total Assets 105,071 108,070 96,619 80,468 68,506 Capital adequacy ratio % (Tier 1 plus Tier 2) 17.81 15.58 15.85 18.32 17.60 Total Liabilities 92,208 96,043 85,877 71,067 60,200 Efficiency ratio % 36.25 32.20 31.78 34.22 38.10 Net Asset 12,863 12,027 10,742 9,401 8,306 Credit Rating Agency Long-Term Short-Term Outlook DISCLOSURES UNDER BASEL III FRAMEWORK Moody’s A3 P-2 Stable Certain qualitative and quantitative disclosures are required under the Basel III framework on quarterly, semi-annual or annual basis. These disclosures are made available on the Bank's website www.alawwalbank.com Ratings Fitch Group* BBB+ F2 Stable within prescribed time as required by SAMA. Such disclosures are not subject to audit by the external auditors of the Group. * Fitch credit rating revised from A- to BBB+ as of 30 March 2017 6 Alawwal bank Annual Report 2016 Alawwal bank Annual Report 2016 7 Board of Directors Alawwal Bank A Saudi joint stock company Engr. Mubarak Abdullah Al Khafrah Commercial Registration Number Chairman 1010064925 Share Capital SAR 11,430,720,000 fully paid represented by 1,143,072,000 shares of SAR 10 each Shareholders Saudi nationals 60%, ABN AMRO Bank N.V. 40% Head Office P. O. Box 1467, Riyadh 11431, Saudi Arabia Website Mrs. Lubna Sulaiman Olayan Mr. Sulaiman Abdullah Al Kadi Mr. Abdulhadi Ali Shayif Mr. Eyad Abdulrahman Al Hussain Mr. Jan Koopman www.alawwalbank.com Vice Chairperson Board Member Board Member Board Member Board Member Telephone + 966 11 401 0288 Mr. Javier Maldonado Mr. Ahmed Farid Al-Aulaqi Mr.Soren Kring Nikolajsen Board Member Board Member Managing Director* * Appointed as Managing Director effective on 01/01/2017 Dr. Bernd van Linder resigned as of 31/12/2016 8 Alawwal bank Annual Report 2016 Mr. Frank Vermeulen joined the board on 01/01/2017 Alawwal bank Annual Report 2016 9 Our First 90 Years 1928 1990 2003 2016 The Bank plays a key role in one of the most important events in the The Bank reinforces its position as an innovative force for Saudi banking by Reflecting the latest technological developments in banking services Alawwal Bank embarks on a strategic path to focus on its people: to align contemporary economic development of modern Saudi Arabia — the installing the first automated teller machine (ATM) in Dhahran Airport, while around the world, the Bank issues the first ever Smart Credit Card to with the shifting times and prepare for the new era with a new image and issuance of the first independent currency, the Saudi Riyal. the Jeddah main branch inaugurates its first Corporate Banking department. customers in the Kingdom. focus. 1926 The seeds for the establishment of the Bank are sown when King Abdulaziz sends his son, Foreign Minister Prince Faisal bin Abdulaziz (later King 1945 Faisal), to visit the Netherlands on a diplomatic mission to highlight The Bank performs an historic transfer of millions of Gold sovereigns into Saudi–Dutch relations and trade cooperation. the Kingdom at the request of the Arab American Oil Company (ARAMCO). 1930 2012 Continuing its pioneering role in the development and modernization 1990 Aware that small and medium-sized enterprises (SMEs) are a key of the Kingdom, the Bank provides financing for the first ever imports The Bank adopts a fresh logo for a new decade, reflecting engine of growth in the economy and represent the very best of Saudi of Ford motorcars into the country — a venture that would transform the changing ambitions and demographics of its customers, Arabian entrepreneurship and innovation, the Bank opens the first the landscape of the Kingdom and the lives of its people. and the people and businesses across the Kingdom. ever Business Banking center geared towards the SME segment. 1926 1950 2005 1933 1996 2015 Ushering in a new era for the people of the Kingdom, the The 1,700-km Trans-Arabian Pipe Line (TAPLINE) is Adding to its history of supporting pilgrims to Makkah Al Bank (then the Netherlands Trading Society) opens its completed, an astounding technical achievement that Mukarrama that stretches back to its earliest years, the bank office in Jeddah and becomes the first commercial bank linked the oil fields of the Eastern Province to Lebanon leads a consortium of eight Saudi Arabian banks in financing to operate in the country. and the Mediterranean. the new SR 1.5 billion Jamarat bridge project in Mina. 1927 1977 2006 Signaling the rise of a new era in the modern development of the Launching homegrown satellites into orbit put the power of modern In continuation to our constant development and closer presence towards our Kingdom, a royalty contract is signed between Saudi Arabia and the telecommunications into Arab hands. People, businesses and governments customers, we have expanded our branch network to 60 branches and Standard Oil Company of California (SOCAL), and the first oil payment is across the Arab world became more connected, entertained and secure increased our total number of ATMs to 500 around the Kingdom. In addition, received. thanks to two Arabsat satellites financed by the Bank. we have also launched our innovative new generation mobile banking application. More than 52,000 pilgrims arrive at Jeddah Port from the Dutch East Indies The highly revered Hussein Al Attas is appointed the Bank’s first The Bank celebrates its 80th anniversary in Jeddah and looks to the future in 1927, representing 42 percent of all overseas pilgrims that year. In the Chairman, and a network of new branches is developed with offices in with the launch of a new corporate logo and identity. newly established Bank they find a partner ready to serve their financial Riyadh, Jubail, Makkah, Hofuf, Madinah and Qatif.