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August 24, 2012 EQUITY RESEARCH SAUDI BANKS We analyse below the effect on the banks earnings emerging from a 10% rise in the TASI as well as 10% rise in traded volumes. Table 9: Effect on Earnings Assuming 10% Rise in Volumes and Prices Brokerage HFT investments Realisation of 10% AVS Securities Combined Al Jazira 9.96% 9.67% 9.83% 29.46% Al Bilad 1.47% 0.00% 8.25% 9.72% Samba 1.89% 0.23% 7.02% 9.13% ANB 0.98% 0.00% 4.00% 4.99% SABB 0.84% 0.00% 3.60% 4.44% BSF 1.34% 0.00% 2.64% 3.98% Riyad 0.10% 0.00% 3.78% 3.88% Al Rajhi 0.71% 1.07% 0.00% 1.78% SHB 1.06% 0.00% 0.39% 1.44% Alinma 0.00% 0.08% 0.74% 0.83% Source: ASIB Analysis, Financial Reports Al Jazira is the most correlated to equity markets, where a 10% rise in market prices and volumes adds on about 20% of EPS accretion (excluding any realisation on AVS securities). 16
August 24, 2012 NET INTEREST MARGINS BOTTOMING EQUITY RESEARCH SAUDI BANKS Saudi banks yields continue to face downward pressure, but reduced cost of funds has minimized the impact on NIMs, as banks continue to shed their excess liquidity and increase the proportion of demand deposits. With most of the re-pricing already done, we believe NIMs have reached a stage of stability. Chart 14: Demand Deposits Proportion of Total Deposits Source: ASIB Analysis; Financial Reports While re-pricing of asset yields is unlikely to have a negative effect on NIMs going forward, KSA banks now have little room to witness a margin uptick coming from lower cost of funds. Most banks used their cheap sources of funding with demand deposits jumping from 47% of total funding in 2010 to 60% in June 2012. We also view the increased penetration in syndications as a negative catalyst on NIMs (syndications typically carry lower yields). Nevertheless, with change in the balance sheet mix into more lending and retail momentum still occurring, we expect NIMs to be supported from further contraction. Chart 15: Historical NIM Source: ASIB Analysis; Financial Reports Saudi <strong>Bank</strong>s margins can be supported on the upside should lending keep on exceeding deposit accumulation. With sector’s loan to deposit ratios at 82% and liquid assets to total assets for most banks below 15%, we believe higher lending provides support for net interest margins. Table 10: Saudi <strong>Bank</strong>s Liquidity Metrics LDR Cash & Net interbank to Total Assets Al Rajhi 82% 12% BSF 87% 12% Samba 66% 11% SABB 82% 14% SHB 84% 8% ANB 83% 1% Riyad 81% 7% Inma 129% 14% Al Jazira 72% 16% Al Bilad 66% 40% Source: ASIB Analysis; Financial Reports 17
Page 1 and 2: COVERED BANKS Samba Financial Group
Page 3 and 4: August 24, 2012 INVESTMENT CASE IMP
Page 5 and 6: August 24, 2012 EQUITY RESEARCH SAU
Page 13 and 14: August 24, 2012 RETAIL LENDING STIL
Page 15: August 24, 2012 EQUITY RESEARCH SAU
Page 19 and 20: CURRENT PRICE SAR 47.6 FAIR VALUE S
Page 21 and 22: August 24, 2012 FINANCIALS EQUITY R
Page 49 and 50: FAIR VALUE DEFINITION August 24, 20

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