Hello, everyone, and welcome to the Al Rajhi Bank's Q4 2025 Earnings Call. My name is Sam, and I'll be the moderator for today's call.

All participant lines are currently muted. After the prepared remarks, there'll be a question-and-answer session.

If you'd like to register a question throughout the call, please use the raise hand button on your Webex toolbar. I would now like to hand you over to today's host, Dr.

Sultan Al-Towaim, Head of Research at Al Rajhi Capital. Please go ahead.

Good afternoon, everyone. This is Sultan Al-Towaim from Al Rajhi Capital.

We are pleased to host Al Rajhi Bank Q4 2025 Earning Call. Welcome, everyone, to this event.

Without any further delay, I will hand it to Mr. Sulaiman Al-Rugaie, the Head of Investor Relations, to introduce the management.

Please, the floor is yours.

Thank you, Dr. Sultan.

Good day, everyone, and thank you for joining the call. With us on the call today, our Managing Director and CEO, Mr.

Waleed Al-Mogbel, CFO, Mr. Abdulrahman Al-Fadda, and Retail Group General Manager, Mr.

Majed Al-Rajhi. As always, our CEO will start with the results highlights and strategy performance.

Then, the CFO will cover the financial performance in more details. Finally, we will open the floor for your questions.

Please note that the results presentation is now available in both Al Rajhi Bank website and Al Rajhi Bank IR app. Now, I'll hand over to Mr.

Waleed.

Thank you, Sulaiman. Welcome, everyone, and thank you for joining our earning call for the fourth quarter of 2025.

As always, I will start by highlighting our performance, followed by an overview of our strategy, Harmonize the Group. Then I will give the floor to our CFO to cover the financial performance in more details.

Before I walk you through the 2025 performance, it is worth to me to highlight that Al Rajhi Bank announced the board of director recommendation to increase the bank's capital through the issuance of bonus shares by capitalizing 20 billion riyals from retained earnings. One bonus share will be granted for every two shares held, raising the bank's capital to 60 billion riyals from 40 billion.

The increase in the bank capital is aimed to strengthen the bank's core capital structure, which contribute to achieving our strategic objective. Also, the bank announced the board of director recommendation to distribute cash dividend to the shareholder for the second half of 2025 by distributing 1.75 riyals per share as part of our commitment to maintain a healthy payout ratio for our shareholder.

Now, let's take a closer look of our 2025 financial year performance. If we move to the next slide, for 2025 financial year, the bank delivered an excellent performance supported by our strategy execution and improved economic environment resulting in an outstanding net income of almost 25 billion, alongside with a healthy balance sheet growth.

Starting with the balance sheet, we were able to deliver a 7% growth year-on-year, with the total assets standing at 1.04 trillion riyals. This asset growth driven by a 9% year-on-year increase in our net financing book.

On the liability side, total liabilities stand at 900 billion, reflecting a 6% year-on-year increase, which brings our LDR to approximately 83%. Moving to the profitability, the net income reached almost 25 billion for 2025 financial year, higher by 26% compared to 2024.

Net yield income grew by 20%, while non-yield income increased by 28%. This resulted in a total operating income increase of 22%, reaching around 39 billion SAR.

In terms of credit quality, we continue to maintain best-in-class asset quality, with the cost of risk standing at 32 bps. Additionally, NPL stand at 75 bps, supported by a healthy coverage ratio of 152%.

If we look at key ratios, our market-leading cost-to-income ratio has improved to 23.3%, and that supported by our operational efficiency. The bank also maintains a strong financial position, with a total capital ratio of 22%, which is well above the regulatory minimum.

Lastly, our net profit margin increased to 3.16%, supported by our focus on enhancing yield and optimizing the bank's cost of fund. Moving to the next slide to highlight the progress of our strategy execution, which is worth to mention that this year is the last year of our strategy.

If we start with the first pillar of the strategy, which is business-to-consumer, B2C, our focus on retail cross-selling is a primary goal of this strategy, evidenced by an increase in the product per customer ratio to around now 45% since we introduced our strategy in early 2024. Our sales from target customer portfolio have witnessed a growth of 340% since 2023, and that backed by our effort to expand our customer base across both existing and new segment.

Our universal offering and financial solution have made us the bank of choice for over 20 million customers across the Kingdom, while we maintain high customer satisfaction reflecting in a net promoter score of 82. Moving to the second pillar, which is B2B, business-to-business, our corporate portfolio has continued to grow, reaching around 271 billion, 24% higher year-on-year.

This growth resulted from our ongoing effort to expand wholesale lending and focus more and more on SME, which has grown massively by more than 50% year-on-year. Now, the SME book representing 22% of 22% of our non-retail book and 8% of our financing book.

The bank's also focused on developing the investment banking business as a part of our strategy, and that to enhance the non-yield income. With revenue from investment banking activity also growing by 270% since 2023.

Looking to our third pillar, which is the support business, we continue to invest in technology and automation across the group to drive innovation and operational excellence, reflected by the percentage of process automated, which is reached now 60% as of 2025, while the percentage of application that are cloud-ready has also increased to reach now 90% of our IT infrastructure. On the last pillar, which is digital and data, our digital-to-manual ratio has improved to 96% by end of 2025, highlighting our digital expansion.

In addition, AI and event-driven activity are gaining momentum, generating revenue through data-driven marketing, which has increased by almost 450% since 2023. If you allow me now, I will hand over to Abdulrahman, our CFO, to give you more details on our financial performance for 2025.

Thank you.

Good day, ladies and gentlemen. I'll go over the financial performance slides very quickly so that you can have a further time during the Q&A session later on.

I'll start with the balance sheet. Our total balance sheet stands at almost a trillion, where we have seen 7% growth year-on-year and almost 2% drop on a sequential basis.

Worth to highlight that in Q4, this is the first time that we had a sequential drop since Q3 2019, due to a few securitization that we've done in the second half of 2025. To analyze the 7% growth year-on-year in our total assets, as you can see on the bottom left-hand side of the chart, it's mainly driven by our financing book, which has grown by almost 9% year-on-year.

On the funding side, we continue to further diversify our funding sources, where we can see that the majority of our funding sources are contributed to almost 12 billion increase in our customer deposits, 39 from sukuk issuance and others, and a further 15 million equity buildup that we have done in 2025. Zooming in further into the main driver of the balance sheet movements, our total financing book standard at 753 billion as of year-end, almost 9% growth year-on-year, and a flat on a sequential basis.

Retail book represents almost 64%, while non-retail book represents 36% of our financing book. To analyze the 9% financing book growth year-to-date, as you can see on the top right-hand side of the chart, mortgage have grown by 8.5 billion, i.e.

3%, although that we have securitized 10 billion of our mortgage book in the second half of 2025, which bring the overall mortgage book growth of almost 18.8 billion. Ex-mortgage of the retail book have shown a contraction of almost 2 billion.

However, we have securitized almost 4 billion of ex-mortgage of the retail book, that have bring the overall retail book growth of almost 4.3% year-to-date. Corporate and SME have grown by 19% and 50%, respectively.

Mortgage book stand at 276 billion as of the year-end, which represents 57.2% of the retail book, and 36.2% of the overall financing book. Our customer deposits stand at 667 billion, almost 2% growth year-on-year, and 4% drop on a sequential basis.

Worth to highlight that our CASA, as a percentage of customer deposits, stand at 64.8% as of the year-end, compared to 63.3% in Q3. Our CASA movements of our customer deposits, as you can see on the bottom right-hand side of the chart, CASA have dropped by 25 billion.

If you recall, in the first quarter, we had a major large account that have a transit to a term deposit. However, we managed over the last 9 months since the first quarter to negate that impact.

Term deposits have increased by almost 41 billion, i.e. 21% year-on-year.

Our investment book stand at 174 billion, almost flat on a year-to-year basis. It's worth to highlight that we had a slight drop in the fourth quarter.

This is to rebalance our investment portfolio to take an advantage of the interest rate environment. Sukuk represents 87% of our investment book.

Fixed rate represents almost 74%, while 83% of the book are in domestic. We move to the profitability section.

Our Q4 net income stand at 6.4 billion, 16% increase year-on-year, and a flat on a sequential basis. To analyze the sequential movement, as you can see on the bottom left-hand side of the chart, our NII increased by almost 12%, non-yield income have dropped by almost 12%.

However, the core fee income, coupled with exchange income, have shown a very healthy growth on a sequential basis. Our expense have increased by 463 million.

This is due to increase in communication, utility expense, IT, and software expense. Our total impairment charge have increased by only 56 million on a sequential basis.

The net income for the period stand at 24.8 billion, 26% year-on-year. Driver, as you can see on the bottom right-hand side of the chart, NII have increased by 20%, non-yield income, a healthy growth of 28.2%, while opex have increased by 14.5%, which bring the pre-provision profit to higher by 24.4%, while net impairment charge were 10% higher year-on-year.

To further zoom in on the net income driver, I'll start with the operating income. Operating income for Q4 stand at 10.4 billion, 19% year-on-year increase, and 5% increase on a sequential basis.

Our operating income for the period was stand at 39.1 billion, 22% higher, mainly driven, as highlighted earlier, by 20% growth in our NII due to the increase in our average earning assets, coupled with 3 basis point NIM expansions. Fees have grown by 25% year-on-year across all line items.

We've seen a very good healthy growth into the trade, cash management, on the retail side. As Waleed highlighted earlier, we made a very good progress in improving our cross-sell activities.

Exchange income have shown a very healthy growth of almost 21% year-on-year. Finally, other income have shown a 48% due to securitizing some of the ex-mortgage of the retail book, where we have taken the upfront gain in the second and the third quarter of 2025.

NIM stand at 3.16%, 3 basis point year-on-year expansion, and we've seen a very healthy growth in the fourth quarter driven by the management initiative to reprice our gross on the asset and increase on the gross yield, coupled with a 16 basis point improvement in our cost of fund on a sequential basis. The driver of 3 basis point NIM expansion, as you can see on the bottom right-hand side of the chart, 2 basis point on the retail repricing, giving the management initiative to reprice our retail assets, corporate was 7 basis point drop due to the SAIBOR movement, which is almost the same reason on the treasury, where we have 1 basis point drop.

Finally, our cost of fund has improved by 5 basis point. To move and analyze the second driver of our net income growth, our opex for the fourth quarter, around 2.7 billion, 30% increase year-on-year, and 20% increase on a sequential basis.

The driver of our opex increase of 14.5% year-on-year, as you can see on the top right-hand side of the chart, salaries has increased by 8%, depreciation has increased by almost 20%, this is due capitalizing some of the projects that helped us to execute the 2026 strategy, finally, G&A has increased by almost 20%, giving the earlier explanation. While our opex have increased by 14.5% year-on-year, our operating income have increased by 22%.

That healthy positive jaws helped us to reduce our cost-to-income ratio from 24.9% to 23.3%. Moving on to the asset quality, our NCL for the fourth quarter was 626 million, 13% year-on-year.

However, our cost of risk remained flat at around 32 basis point. As you can see on the bottom left-hand side of the chart, although that our gross charge has increased by 1.1 billion, however, on the recovery initiatives, we managed to negate that increase by 900 million, which will bring the net NCL movement of close to around 200 million.

Moving on, our NPL balance stand at 5.7 billion riyals, 6.7% year-on-year growth, and as you can see on the top right-hand side of the chart, we have written off close to 5.3 billion, while the net inflows were around 5.6 million. Having said that, our NPL ratio remained almost flat both on a year-to-year basis and on a sequential basis at around 75 basis point, driven by stable retail NPL, while the improvement we've seen on the corporate NPL.

Our NPL coverage stand at a healthy level at around 152%. Our ECL stock at around 8.7 billion as of the year-end, and as you can see on the top right-hand side of the chart, we have a top-up of our non-retail book, giving that we have a healthy growth in our financing book by almost 24% year-on-year.

Stage 1 exposure as of the year-end stand at 96.9%, flat compared to the same period last year. This is to show the healthy origination that we've been doing in 2025.

Stage coverage remained almost unchanged, flat on a year-to-year basis and on a sequential basis, where Stage 1 coverage 37 basis point, Stage 2 at 10.6%, and finally Stage 3 at 55.5%. Liquidity ratio remained healthy and within the regulatory requirement.

Although that our headline LDR stand at around 113%, unweighted LDR, which take into consideration the sukuk and syndicate loan, stand at 95.2%, while our regulatory LDR at almost 83%. LCR, NSFR at a comfortable level and above the regulatory requirement.

On the capital side, our total RWA stand at 674 billion, almost 10% growth year-on-year, mainly driven by 10.6% growth in our credit RWA. Worth to highlight that our RWA density has increased to 64.6%, compared to 63.3% as of the third quarter of 2025.

Our capital ratio, CET1 stand at 16.6%, Tier 1 at 20.5%, and finally our total capital at 21.9%. In 2025, we managed to improve our Tier 1 capital ratio by 120 basis point year-on-year.

As you can see, the driver on the bottom right-hand side of the chart, although that the credit growth, coupled with the dividend distribution, have contributed to almost 370 basis point of an drop in our capital ratio, however, there was almost 400 basis point improvement in our capital ratio due to internal capital generation, giving the healthy RWA density. Return matrices are considered still at a comfortable and above the industry standard, RORWA at 3.86%, ROE at 23.4%, and finally our ROA at 2.4%.

Our outlook for 2026, and I think we still expect the GDP to grow in the range between 4% to 5%, mainly driven by non-oil GDP growth, which is expected to deliver the same momentum that we've seen in 2025. Consumer spending is still healthy, where we have seen almost 11% increase year-on-year.

Finally, our expectation that the credit demand in 2026 will be slower than compared to the historical standard. On the interest rate outlook, our base-case forecast is two cuts, one in July and the other one at the tail end of 2026.

However, in the lower-rate environment, we still geared for a better NIM expansion, giving the healthy fixed-rate component of our total assets. Having said that, our financing book guidance for 2026 is low-to-mid single-digit growth, NIM to expand between 25 to 35 basis point, cost-to-income ratio to be below 23%, ROE to be above 23.5%, cost of risk stable in the range between 30 to 40 basis point, and finally, our total capital ratio to be above 20%.

Waleed, back to you.

Thank you, Abdulrahman, for the financial highlight. We are so proud of our outstanding performance and the progress made across all KPIs of our Harmonize the Group strategy.

As I mentioned earlier, this year is the last year of this strategy, Harmonize the Group. We will work on the new strategy in the beginning of this year, and once we get approved from the board end of this year, we will present it, inshallah, next year in the same time 2027.

Now, we will open the floor for the Q&A session. Operator, back to you.

Thank you. We will now go ahead and open up for questions.

As a reminder, if you would like to register a question, please use the raise hand button on your Webex toolbar. Our first question come from the line of Naresh Bilandani from Jefferies.

Please unmute and go ahead with your question. Naresh, please unmute.

Unfortunately, we're not receiving any audio from Naresh, we'll move on to the next question, which come from the line of Olga Veselova from Bank of America. Please unmute and proceed with your question.

Thank you so much. Thank you, Abdulrahman and the management team.

Please allow me to ask three questions. One is on the asset yield.

Can you give us a sense on the pace of your loan book repricing, by how much do you increase the spreads, on which products you do and you don't, and how much more can you do this year? That's question number one.

Question number two is on costs. You mentioned during the presentation that there was some capitalizing on some of the projects.

What exactly was this capitalizing? How shall we think about depreciation and amortization going forward?

We noticed there was acceleration in the D&A pace in the past several years. What should be the outlook for the next several years?

My last question is on your slide about the outlook, asking about new strategy. I understand you will be working this during the year.

You do mention that our new strategy will be focused on providing financial ecosystem through a universal bank offering. What is different in building financial ecosystem versus what you actually already have and build now?

Thank you very much.

Olga, on the asset yield, and I think if you recall on several occasion last year, we mentioned that the management focus is to improve the value rather than a focus on the volume. We focus on the high-yielding asset.

We've seen a good growth on the SME. We say a certain growth into some portion of the retail assets that provide the higher-yielding assets.

We see a percentage of the new origination or the new sales that happened in 2025, we have defined a percentage of the high-yielding asset that has been improving. This is one of the management initiative to negate the interest rate drop on the assets by maintaining a very healthy asset.

The management will continue to focus into improving that in 2026 and beyond. That's on the asset yield.

As far as on the second question related to the cost, yes, indeed, we have capitalized some of the projects, especially in improving our IT infrastructure, to speed up the customer execution, to improve the customer journey, to digitize the transaction, to build an ecosystem between the bank and the subsidiary. All of those projects are contributed to execute the Harmonize the Group strategy, which you've seen one of the main initiative for us as a management improve the cross-sell.

In 2023, 38% of the customer base having more than one product. That has improved to 45%.

Now, as far as the cost outlook, I think we as a management, we are looking to further improve the customer journey, digitizing and provide the improvement in our IT infrastructure and improve the customer experience. However, the focus for us is to build that positive jaws year after year to improve our operation efficiency going forward.

On the strategy?

On the strategy, if you remember when we start our building the ecosystem 6 years ago, we look at the market and we build it our ecosystem, and we call it Unpack the Bank. Then, in this strategy for the last 2 years and this year, we focus more on Harmonize the Group, which basically making sure that the bank, along with the eight subsidiary, they working together, getting benefit from the customer base has the bank, and increase the contribution of subsidiary net profit to the total profit of the group.

We will work, inshallah, this year with the team some workshop to identify the new strategy, as I mentioned, and once it get approved by the end of this year, inshallah, from the board, we will present it in more details next year at the same time.

Thank you, and all the best to the team in 2026.

I see we have Naresh back in the queue. If we try again on Naresh Bilandani from Jefferies, please unmute and go ahead with your question.

Yes, hi. Can you hear me now?

Yes, we can. Please go ahead.

Excellent. Thank you, and sorry for that.

Thank you for the presentation. Congrats on the results.

I'm sorry if these questions were already asked by the previous participant. I have three, please.

One, can you kindly comment on the extent to which you feel the need to raise a further AT1 debt this year beyond the $1 billion that you already raised last month and the fact that you are undertaking a capital release from securitization? I'm just trying to estimate the implied RoTE in your guidance post the AT1 got AT1 cost, unless you can offer us some RoTE indication for the year here.

That's the first question. My second question, would you please be able to quantify the impact to your fee income run rate from the recent regulatory changes, the first ones that we've had in the a second quarter on credit cards, and the recent again on the retail fees in early January?

Are these going to be a meaningful impact to the fee income trajectory for for this year? My third and final question is, we recently saw some unfavorable developments in the brokerage landscape with one of the largest brokers in the system lowering their brokerage commissions on Saudi equities to zero.

Can you please elaborate how meaningful an impact a similar move could have to your revenues given your lead positioning in the brokerage space, please? Thank you so much.

Thank you, Naresh. In regard of the fee guideline that has been imposed as a SAMA regulation, there is two elements.

One on the admin fee, it is part of our yield income and it's amortized over the contract of the period. It is calculated as a percentage of the financing provided.

The changes will be only applied to the personal finance and auto lease. Mortgage will remain the same as used to be.

The impact will not be that material, and Al Rajhi Bank has effective price strategy that can mitigate this impact. On the other banking service, they are part of the fee income with varying impact across different services.

However, the bank continue assess and evaluate market dynamic to adapt accordingly. We believe the impact can be mitigated by focusing on increasing volume on the transaction of these services.

Some of the fees will become more affordable to the consumer, and we believe that it will continue growing. Overall, we believe that the positive momentum of the fee income will continue for the bank despite these changes.

The management initiative on harmonizing the group strategy will be overcome these impact, as the effort has resulted to the outstanding growth of year-on-year of over 25%. Naresh, on the first question, on if there is any planned issuance of an AT1 in 2026 apart from the one that we've done, I think usually, as a part of our annual operating plan, we put a base-case forecast in terms of the growth.

The funding capacity, then we plan our growth outlook accordingly. Based on our base-case forecast that we put for 2026, we have not modeled in any further AT1 issuance in 2026 apart from the one that we have tapped in last month.

As far as the last question related to the brokerage, I think Al Rajhi Capital, our investment arm, is considered to be one of the top players into the brokerage in the Saudi market. They have maintained a very healthy market share.

We've seen those kinds of an announcement. Usually, it's a tactical rather than a strategic.

We've seen that similar competition into the wallet historically. We don't believe that will have a material impact as we speak.

Nevertheless, Al Rajhi Capital management team is looking like the bank in terms of the market development, looking for initiatives how they can improve their bottom line. We've seen a very good contribution on Al Rajhi Capital bottom line and contribution to the Al Rajhi Group overall.

Thank you so much for the information. Would you please be able to offer any insight on what portion of the gross fee income is coming as a brokerage from Saudi equity market trading only?

Is there any rough indication that you can provide at this stage?

It's mainly the majority of that. I think close to 90% of that.

I think as Al Rajhi giving Al Rajhi retail bank customer of 20 million customer, this is one of the competitive advantage that Al Rajhi Capital is leveraging from the Al Rajhi Bank customer to be having the highest retail market share on a brokerage in Saudi.

Got it. Thank you very much.

Thank you. Our next question comes from Jon Peace of UBS.

Please unmute and proceed with your question.

Hello. Thank you very much for taking the question.

Firstly, on the loan growth forecast, would you please be able to break that out by category for us, how much is retail versus corporate? Second question, please, is on the NIM guidance, the net profit margin guidance.

What do you assume in terms of the liability mix and the CASA share? Then lastly, great to see the dividend being restored for the second half.

How should we think about your comfort level with your CET1 ratio? Obviously, when it was at 15.5% in the second quarter, you reduced the dividend.

Today at 16.6%, you've restored the dividend. Is there a certain number in between that you'd like to manage your CET1 above?

Thank you.

On the loan growth outlook for 2026, we expect the similar growth mix. We believe that the SME is going to grow faster, given that the demand.

Retail is continue to provide a healthy growth outlook in 2026. However, we've been very selective, and we are price the risk accordingly, taking into consideration the liquidity premium.

Corporate, again, we have been very selective. Overall, we believe the non-retail book will grow faster than the retail book in 2026, similar to the trend that we've seen in 2025.

As far as the NIM outlook, and I think one of the biggest one factor is on the CASA balance in terms of the mix, how much that is projected to be on the overall. However, and I think overall, we still believe that the CASA as a percentage might drop from the current level.

However, it's not going to be materially lower from the current level, given that if you forecast interest rate cut this year and beyond, that would reduce the percentage movement that we've seen historically in the CASA as a percentage of the overall customer deposits. Lastly, on the CET1, what is our comfort zone, and I think overall, our CET1 stand at a very healthy level of close to above 16.6%, well above the Basel requirement.

Be mindful, John, that this is just only a Pillar 1. We have the add-on of Pillar 2, which we have taken into consideration.

The management position is to always maintain a very healthy buffer above 50 to 100 basis point range above the Pillar 1 plus Pillar 2 to maintain a very healthy capital ratio and to continue to pay dividend as the historical range of the payout ratio between 50% to 60%.

Thank you. Moving on to the next question.

The next question comes from Gabor Kemeny from Autonomous Research. Please unmute and proceed with your question.

Hello. A couple of questions on similar topics, please.

Firstly, on the NIM guidance, some further clarification. You guide for 25 to 35 bps NIM improvement this year.

I think your Q4 NIM was already about 20 basis points above the full-year level, maybe 5 to 15 basis point improvement from here. When we think about the timing, to what extent do you think it should be backloaded given that you expect the rate cuts to occur in the second half of this year?

Shall we expect more like flatish dynamics in the first half and improvement in the second half? Or do you see room to improve your NIM in the first half already?

That's the first question. The second one would be again on the loan growth.

I think you mentioned credit demand in your opening remarks and also talked about some supply questions, you being selective in your remarks. Can you talk a bit about the situation in the mortgage market and its interaction with the availability of funding, to what extent do you see funding driving your growth outlook there?

Thank you.

Gabor, in terms of the NIM, absolutely correct. The NIM for the fourth quarter were around 3.35%.

I think the guidance that we provided from 3.16% to expand by 25 to 35 basis point, so that is expected to be around close to 3.41% to 3.51% range for 2026. Now, historically, or based on the last couple of years, usually for the NIM to start I would say improve it take around 2 to 3 months to see the full impact, given that the customer deposits are usually within 2 to 3 months duration.

Given that we are having our total floating liabilities almost 2.1x for total assets, that you're absolutely correct that directionally the NIM is expected to improve as and when we've seen a further reduction into the SAIBOR in 2026.

As for mortgage, if you see last year 2025, there was a slowdown on sales during 2025. That is compared to last year, that is come from several reasons.

New regulation in white lands, the government initiative in affordable residential, freezing rent, and liquidity interest rate. Overall, we believe that mortgage will continue grow over the long term, backed by the government initiative toward achieving the vision of 2030 of increasing homeownership to 70%, where it's currently at 65%.

We believe that it's continue on the long term.

Thank you.

Thank you. Our next question comes from Mohammed Al-Rasheed from Hassana.

Please unmute and proceed with your question.

Assalamu alaikum. Am I audible?

Yes, you are loud and clear.

Yeah. Thank you, gentlemen, for the presentation, and congratulation on the results.

Just one follow-up question from my side, which is regarding the repricing. Based on the repricing table in your annual financial statement, the interest-bearing assets that get repriced within 3 months is around 25% to 30% of your total interest-bearing assets.

If I see the impressive improvement in your asset yield sequentially and try to calculate how much was the repricing, it sounds very massive. It's about 80 to 100 basis point.

I just want to understand whether this movement in asset yield was purely driven by repricing and mix, or was there other factors such as timing of the loan book growth during the quarter, etc.?

There wasn't a one-off gain into the yield income in the fourth quarter. I think all is due to repricing, coupled with changing the asset mix.

Very clear. Thank you.

Thank you. Our next question comes from the line of Mehmet Sevim from JPMorgan.

Please unmute and proceed with your question.

Good evening. Thanks very much for the presentation and taking my questions.

Just on the NIM outlook, if I may ask, would you please elaborate once again for my understanding on the underlying assumptions and the drivers of this pretty positive outlook, given as I understand, there's only one rate cut, the one in July baked in that would affect this year's results? Just on the loan growth, I recall you saying in the past that mid-to-high single-digit levels would be more normal for Rajhi now given your focus on protecting NIMs and basically what you were saying on value over volume.

What is driving this gap this year as you're guiding for now even a more slower outlook? Is this just the liquidity pressures, or is there any other reason like, for example, protecting capital or anything else?

Finally, just on the Harmonize the Group strategy, I believe one of the most visible results of it has been the increase in the share of customers that have more than one product. It seems like recently this has been slowing down, at least the increase quarter-on-quarter over the last two quarters or so after a very strong delivery.

I was just wondering if we've come to the end of it for now, especially as now you're also looking at the new strategy, or should we expect some further growth in that through 2026? Thanks very much.

On the growth outlook, yes, I think probably till the tail end of '23 and probably in '24 and even last year, I said that the medium-term outlook or the normalized is somewhere around mid-single to high single-digit growth. However, we are a management looking at the operating environment, assessing the liquidity situation, assessing the capital requirement, assessing the credit demand and the opportunity and to protect our competitive advantage of a very conservative organization with a stable cost of risk.

I think the demand is still there. We could further increase our, I would say, growth outlook on the financing.

However, we don't believe it is wise to chase volume rather than a value, especially we see an opportunity to improve the ROE for the shareholder. If we see a further deterioration on our forecasting and the ROE, that will be a different discussion.

I think overall, we assess the operating environment taking into consideration all the aspects: liquidity, capital, demand, cost of risk, the cross-sell as well activities.

In terms of your last questions, I think we should look at the customer base. When we start our strategy, Harmonize the Group, if you remember, we start with below 16 million customer in the beginning of the strategy, and now we are talking almost 21 million customer.

Although that probably the percentage is probably going the last couple of quarters going lower than what we have delivered from '24 and beginning of '25, however, on an absolute basis, it's still growing, which is contributed positively to the 25% fee income growth that we have delivered in 2024 2025.

Yes, super. That's very clear.

Thank you. May I ask if you had any further comments on the NIM drivers, the improvement in the first half especially because there will be no rate cuts in your assumptions?

Again, our guidance is 25 to 35 basis point. I think our base-case forecast in terms of the rate cut, first cut is in July, followed by the tail end in 2026, which is in line with the Fed fund forecast.

Thanks very much.

Thank you. Our next question comes from Rahul Bajaj from Citi.

Please unmute and go ahead with your question.

Rahul Bajaj from Citi. Thanks for taking my question.

I have three quick ones, actually. The first one is on loan growth.

Just wanted to understand this low to mid-single-digit guidance that you've provided. Are you baking in any securitization as part of this guidance, or any securitization you will do will be on top of that?

Also, you mentioned there were some securitization transactions in the second half of the year. Could you clarify both on the mortgage side and the non-mortgage retail side, has there been any securitization in the fourth quarter?

That's my first question. My second question is on dividends and kind of capital.

After the dividend adjustment, to say, you've done in 2025, is it fair to assume you would revert back to the kind of usual 50% to 60% payout ratio in 2026, or you expect further adjustments in 2026 as well? That's my second question.

My third and final question, if I may squeeze in, please, this is on loan-to-deposit ratio, the SAMA loan-to-deposit ratio. Has there been any discussion from the regulator around changing how they calculate the SAMA LDR?

Those are my three questions. Thank you.

You asked four questions, not three, Rahul. I'll answer them one by one.

Securitization, did you forecast anything? Yes, we did.

What you see is a net, not a gross. That's first part.

Second question, mortgage securitization. Yes, we've done close to around 10 billion in the second half: 5 billion in Q3, and another 5 billion in Q4.

In the ex-mortgage of the retail book, we've done 4 billion, around 50% of that in Q2, 50% in Q3. That's in terms of the securitization.

Third question, dividends. I think the first half dividend, we reduced our payout ratio to build and to restore our minimum capital buffer.

We've said that we believe it's going to be a short term. We believe over the medium term, we'll continue to maintain the healthy payout ratio range, 50% to 60%.

I think, as Waleed mentioned earlier in his opening remark, our second-half dividends was around 1.75 DPS, which contribute to almost 55% payout ratio. The way that we look at the payout ratio, we will assess on a regular basis.

The growth outlook versus maintaining the capital demand versus tapping in debt capital market, a lot of factors that we take into consideration. However, base-case forecast, we still believe that we are restoring our old payout ratio range between 50% to 60% in the medium term.

The fourth question related to the LDR, along with the other colleagues on the street, we are part of the ecosystem, we continue to have a dialogue with the regulator in terms of the loan-to-deposit ratio, not only loan-to-deposit ratio, but multiple subjects that we've been discussed. Far, we are not aware of any potential changes, and it's something that we will continue to assess on a regular basis.

It's totally clear. Thank you so much.

Our next question comes from Chiro Ghosh from SICO. Please unmute and proceed with your question.

Chiro Ghosh from SICO Hi, this is Chiro Ghosh from SICO Bahrain. A couple of questions.

First one is on securitization again. Over the years, you have spoken a lot about it.

We just want to get a sense, your strategy behind securitization, especially of longer duration fixed-rated loans, especially in a downward trending interest rate environment. What kind of calculations do you do?

How do you decide on that part? That is slightly intriguing for me, especially if you are considering more going ahead.

On similar context, the next question is you are having a loan growth guidance of, say, low to mid-single digit, say let's assume 3% to 4%. Within this also, you are assuming a lower retail loan growth compared to the rest of it, might be even lower than that.

Again, in a downward trending interest rate cycle, why is there such a gloomy picture, especially for the retail side of the loan book, especially you have such a big base and you have made a lot of favorable inroads in that direction? Why such a gloomy picture on the retail side?

Those are my two questions.

On the first part, securitization, and I think it's a very simple. As long as the delta between the new origination versus what the rate of the securitized book is a net positive, that a NIM and an NII accretive over the time.

All the securitization that we've done since 2022, we have not sold it at a discount. If you look at our capital liquidity ratio are at a very comfortable level, we're not looking to do any fire sale.

If we see an opportunity to further improve the yield, and I think that will take a call. We've done it, and we'll continue to do this over the medium term.

As far as the second is on the retail side, the growth, indeed, and I think if you recall our earlier comments being mentioned by Waleed, my colleague Majed, the management focus is onto the value rather than a volume. Despite that we have a very huge retail book as of the year-end, and I think our total retail book were close to around 482 billion, but still we managed to improve the overall yield by almost 2 basis point on a 482.

The management focus is value rather than a volume. There is no question about the demand.

It's just a matter of we plan our funding first, then we plan our growth outlook accordingly. Thank you.

Got it. That's all from my side.

Thank you.

Our last question on today's call comes from Adnan Farooq from Jadwa Investment. Please unmute and proceed with your question.

Hello. Assalamu alaikum.

Thank you for the opportunity. I just had one question on the cost side.

Just wondering if there were any one-offs in the operating cost during the fourth quarter?

No one-off.

Would it be fair to say because there was quite a jump in other G&A, could it be because of accruals during the year showed up during the fourth quarter?

Again, no one-offs. I think we've seen a big increase into the communication, utilities expense, also IT and software.

There has been a lot of licenses that we have imported into our IT infrastructure to help execute the 2026 Harmonize the Group strategy.

Okay. Thank you.

We have reached the end of the Q&A session, handing back to the management team for closing remarks.

Thank you, everyone, for attending the call and for your trust in us. We will continue to achieve our strategy goal for this year and beyond, inshallah, forward with our new strategy.

We look forward to meeting you in the next earning call. Thank you.

This concludes today's webinar. Thank you all for joining.

You may now go ahead and disconnect.