CFO's
review

Solid financial performance

The Bank‘s healthy performance across operating segments, despite the challenges we faced, was driven by strong financing growth. Total operating income for the financial year ended December 31, 2023 increased 22% to SAR 9,726 Mn., largely due to the contribution from funded income and notable growth in non-funded income. As a result, net income after zakat increased 34% to SAR 4,839 Mn. Operating expenses growth year on year was lower than what was seen in the earlier years of 2025 strategy execution. Operating expenses growth for the year 2023 was 10% in comparison to high teens growth noticed in the previous two years. Benefiting from increasing benchmark rates, banks’ net profit margin recorded 19 basis points expansion reaching 3.81% by end of 2023.

Our strong financing performance saw a 16% increase in Retail gross financing and a 19% increase in corporate gross financing. The growth in Retail financing was driven by strong momentum in personal and other retail financings (19%) as well as home financing (13%). Meanwhile, the improved performance in Corporate financing was attributed to excellent outcomes across all segments: large corporate & project finance (15%), mid-corporate segment (140%), and a significant increase in SME financing (31%). As of December 31, 2023, our gross financing composition was 68% large corporate & project finance, midcorporate 4%, SME 4%, home financing 12%, and personal & other retail financing 12%.

We were pleased to achieve a sturdy rise in deposits of 29% to SAR 187.9 Bn., as a result of increases in current and saving accounts (CASA) (10%) and time deposits (55%). At the year end, CASA accounted for nearly half of all customers’ deposits.

Net funded income delivered a robust increase, rising 26% to SAR 7,655 Mn., largely reflecting the higher benchmark rates. Our non-funded income increased 9% to SAR 2,071 Mn., due to higher fees from banking services and foreign currencies exchange.

Our higher non-yield income, stemmed from an increase in cross-selling activities and the expansion of our cards business and customers’ acquisition.

Operating expenses advanced 10% to SAR 3,044 Mn. Our 2023 positive Jaws, being the comparison between total operating income growth and expenses growth, contributed to our cost-to-income ratio declining from 34.7% to 31.3% by end of 2023.

Our Return on Equity (ROE) reported a remarkable improvement by 353 basis points to achieve 17.2%. This positions us as the second highest among KSA banks. Additionally, our Return on Assets (ROA) has risen to 2.2%, positioning us as the highest among KSA banks by end of 2023.

Improving assets quality

Our non-performing loans (NPL) ratio decreased in 2023 by 33 basis points to 1.61%. Non-performing loans coverage ratio increased to 154.9%, in line with our commitment to bring it up to at least market average.

The Bank has recorded an overall impairment charge for the year 2023 of SAR 1.3 Bn that represents 9% growth from the previous year. This was driven by the prudent provisioning policy followed by the Bank and also the net financing growth of 18.5% year on year.

The better NPL ratio number reflected the improvement in asset quality and our financing portfolio growth. This in turn had a knock-on effect on our cost of risk, which went down from 0.85% in 2022 to 0.77% for 2023.

Capitalization and liquidity

Capital and liquidity ratios remained healthy, with our capital adequacy ratio at a robust 17.5%. Our net stable funding ratio (NSFR) improved 2.7% to a healthy 108.8%. The regulatory financing to deposit ratio (LDR) decreased 2.3% to 80.5%, while the liquidity coverage ratio increased 13% to 147%.

This is reflecting the Banks’ focus on the importance of liquidity and efficiency. All of the above ratios are well within the regulatory limits.

Balance sheet growth

The 18% growth in total assets was driven by a significant increase in financing and investments, as well as growth in SAMA and interbank balances. Our liabilities were 20% higher, largely due to the 29% increase in deposits.

Impressive progress on strategy execution

Alinma Bank’s 2021-2025 Strategy, which was aligned to Saudi Vision 2030, focused on supporting the growth of SMEs by providing financing and banking services.

Additionally, the Bank revamped its mortgage processes to support home ownership, in line with the Kingdom’s strategic initiatives. We continued to capitalize on opportunities arising from private sector growth and diversification, particularly the growing demand for project financing from public-private partnerships (PPPs) and new sectors in the economy

The Bank has made a concerted effort to increase the percentage of female employees, and to evolve our business model to better serve women entering the workforce by creating custom products, personal finance solutions, and auto financing, among others.

Share capital increase

On December 31, 2023, the Board of Directors recommended a SAR 5 Bn. increase in the share capital from SAR 20 Bn. to SAR 25 Bn. by issuing bonus shares. The increase will enhance the Bank’s capital position to help in benefiting from credit demand opportunities.

Outlook for 2024

Our next financial year will focus on addressing the remaining initiatives and continuing to execute our strategy. The dominant driver will be our focus on becoming the fastest and most convenient bank in the Kingdom.

We will emphasize project financing to drive balance sheet growth, while our efficiencies and cost-to-income position will benefit from accelerating digitalization revamping of internal processes.

Significant opportunities resides in the gathering momentum of Saudi fintech. Accordingly, we expect to embark on more strategic initiatives and partnerships in this segment.

Our Digital Factory, which is an enabling digital innovation, rapid delivery, and improved business agility across the Bank, is expected to launch new financial solutions, particularly in our youth segment, and to fuel further cross-selling

The 18% growth in total assets was driven by a significant increase in financing and investments, as well as growth in SAMA and interbank balances.