Good afternoon everyone, and good morning to those joining us from the US. This is Mehmet Sevim from J.P.

Morgan. Thank you for being with us.

It's our pleasure to host Alinma Bank management this quarter as they walk through their second quarter results and take your questions. With that, I'll hand over to Arwa Al-Shehri, Head of Investor Relations, to start us off.

Arwa, please go ahead.

Thank you, Mehmet, and thank you, J.P. Morgan, for hosting this call.

Hello everyone, good day, and thank you for joining us today for Alinma's earnings call for the second quarter 2026. We will begin today with our MD and CEO, Abdullah Al-Khalifa, who will be providing an overview of the bank's financial highlights, followed by the 2030 strategy recap and key achievements, including with the initiatives that have been progressed for this year.

After that, our CFO will give you a detailed presentation for the financial performance and ending with the guidance for the year. We will make sure to have proper time for Q&A, where our Deputy CEO covering retail, digital, and private, Saleh Al-Zumaie, and Chief Corporate Officer Jameel Al-Hamdan will be answering your questions along with our CFO and CEO.

With that, I'll hand it over to you, Abu Faisal, to begin.

Thank you, Arwa. Welcome everyone.

Thank you for allocating the time for our earnings call. I'll start my presentation from slide six, high level financial performance.

In Q2, our financing increased by 6% year-to-date, that aligns with our current guidance. Total assets also increased by 6% year-to-date.

Our operating income increased by 7%, while our net income increased by 6%. Our coverage ratio is 96, sorry, our NPL is 96 basis points, and our coverage ratio is 176.

Customer deposits increased faster than loans, 8%. More importantly, CASA increased by 6% year-to-date.

As a result of faster increase in total assets compared to growth in CASA, our CASA's percentage of deposit is 47.3%. Cost-to-income improved to 31.5%.

This is the half year, but compared to first quarter, Q2 was much better. Net profit margin decreased by 6 basis points compared to the same period last year.

Our ROE reached 17.8%. On slide eight, a quick reminder of our current 2030 strategy.

The main headlines is basically the most customer centric, most innovative bank underpinned by laser focus on profitability, followed by next page gives you more details by business. In retail, one of the pillars is for primacy for all our customer segments, and also innovate with segment specific offering, delight our customer with memorable customer journey across all channels.

In private banking, want to set up market differentiating value proposition for our customers, offer world-class, global, and exclusive investment opportunities. Corporate banking, again, the word primacy comes back because that's our target for all our customers, as well as upgrade transaction banking and build best-in-class scalable operating model, leveraging obviously the cutting edge technologies and AI.

Digital banking, want to develop intelligent banking platform to drive primacy, launch beyond banking digital offering through more strategic partnership, and enhance operating model including monetization, improvement, and same like collaboration with other business units. Treasury, want to expand the options of funding local and international, as well as grow our FX and other derivatives, and shift investments toward better yield income for the bank.

Next slide shows you more aspiration in our current strategy. Want to be similar to what we had in our previous strategy, want to be a leading employer of choice, number one basically, and establish the bank as a digital leader by driving innovation, technology, and data, leading also risk adjustment decisions and pricing, as well as being among the top five brands in the country, and market leader in operation excellence driven by digitalization and heavy use of AI.

On next slide, 11, shows you some of the achievements so far in Q2. We completed two AI use cases: one is proactive customer engagement, and credit underwriting for retail.

We also entered into financing guarantees program under the Environment Fund. We launched Alinma Fantasy around the recent FIFA World Cup, resulting in over 100,000 new to bank customers being onboarded.

Also introduced tailor lending and mortgage program for affluent expats. We also as maybe mentioned before, we're the third largest in terms of asset under management by fully-owned subsidiary.

They've experienced significant growth year-on-year, 39% year-on-year as of half year. Also had experienced 28% increase in SME, as well as 23% increase in mid-corporates.

We issued SAR 3 billion as well as $500 million AT1 sukuk. Basically, this is to refinance our previous issuance that we did in 2021, SAR 5 billion, that was paid in at the beginning of July.

We had also 24% year-on-year growth on profit rate swaps, 106% year-on-year growth on FX forward. Some of the things that will be continue to be working on this year: want to build obviously R&D and innovation hub to drive innovation in the bank, as you know innovation is one of the main headlines in our current strategy; want to advance comprehensive customer engagement; develop customer-focused use cases, additional use cases, driving personalized journeys; want to continue to build more strategic partnerships with global asset management to develop the region-specific investment opportunities for our customers; develop and roll out client-centric primacy model for target customers; strengthen trade finance through partnership with global corporate banks; develop GenAI and AI-powered app companions to drive more usage of our customers, more engagement by our customers, and more hyper-personalized journeys.

With that, I give the floor to the CFO to take you for detailed presentation of the financial performance.

Thank you. A very good afternoon to you all and welcome again to our earnings call for the first half this year.

As said, they will be walking you through the details of the financial performance for the first half, and then that will be followed by our outlook and the guidance for the remaining of the year. Starting from slide number 14 on the balance sheet trend, we have seen a growth of 6% in the total assets.

Clearly this was driven by the financing growth, 14.2 billion for the first half from December, which represent 6%. On the total liabilities, total movement, we have seen a 6% growth, primarily driven by 8% growth in customer deposits, and also we have seen 2.2 billion growth in our other than customer deposit funding, which is the sukuk and the certificates of deposit that have been active in issuing during the first half of this year.

Moving to the second slide, slide number 15 on the P&L trend. The overall growth in the net income year-on-year is a 6%.

This was driven primarily by 7% growth in total operating income, a 6% growth that was offset by 6% growth in operating expenses. We have 9% year-on-year growth on the increase in the impairment.

We'll have more details on the expenses and also the income side. The overall operating income composition as end of June, 82% is in the funded income, 12% is the fees from banking services, and 3% each for investment and dividend gains and FX income.

On the following slide, slide number 16 on the financing, a 2% growth on a sequential basis from Q1. We have seen from December 4% growth in corporate financing and also 14% growth in the retail financing from December.

The lending book composition by end of June, large corporate and project financing represent 61%, 7% is mid-corporate. You've seen mid-corporate is taking more size on the pie from the base of 248 billion overall lending book.

SMEs remains 5%. Mortgage book represents 13%, and 14% for other retail products, for consumer financing, which includes also the credit cards and also auto lease.

In the following slide, which is slide 17 on the deposits, the overall growth in customer deposit is 8% from December. This was driven by time deposits growth of 10%.

We have seen CASA growth 6%. In fact, the growth in time deposits being higher than the growth that we have seen in CASA in the first six months has diluted the CASA as the percentage of total deposits, as you can see in the graph in the center of the page, where CASA's percent of total deposit in Q1 was 49.5%, got diluted by end of June being 47.3%.

On the following slide, which is slide number 18, on the funded income coming from investment and financing, we have seen a growth in sequential basis from Q1 is 4%. The growth year-on-year is 7% from financing and also the funded income from investment is 9% growth year-on-year.

In the bottom of the slide, you can see the movements in the net profit margin, 3 basis points contraction on investment yield and also financing yield contracted 25 basis points, which was offset by reduction in cost of funding rate by 20 21 basis points. The overall contraction for the six months year-on-year is 6 is 6 basis points, moving from where we were in Q1, 3.47%, only 1 basis point by end of June where the net profit margin is 3.46%.

On the next slide, slide number 19, on the non-funded income, from what we have seen in the first quarter where there was a drop 26% of the non-yield, we started to see slight improvement on the sequential basis where the growth from Q1 was 8%. If we look at the movement of non-funded income year-on-year, fees from banking services is lower by 14%, exchange income is lower by 9%.

This was partially offset by 44 million increase in the investment gains and dividends, and also there was a 5 million reduction in other income. The overall fees from banking services, 50% is in fund management, 4% the card services, with the reduction we have seen in card services where it used to be 7% from the overall fees from banking services.

We have 12% related to trade fees, and 8% on the brokerage, and 26% 26% on the others. On the following slide, which is slide 20, in the operating expenses, there is a reduction in the expenses in a sequential basis from Q1 by 3%.

As you can see from the slide, there is a 3% sequentially in the G&A, there was a reduction there, and also 14% on the depreciation. This reflects a 6% growth year-on-year on the overall expenses.

The positive chose that we have seen during purely the quarter by end of June has positively impacted the cost-to-income ratio, where it was by end of Q1 32.6%. If we look at the cost-to-income ratio for Q2 alone is 30.36%.

On the following slide, slide number 21, which is on the impairments, just maybe to remind you that last quarter, which is Q1, the charge was 154 million. There was a sizable recovery during Q1, which was totally 472 million.

This quarter alone, the impairment charge for financing is 388. Of course, you've seen the P&L a total of 400 because there is a 12 million related to investment-related provisions.

The growth in the provision year-on-year is 8%. This increase that we have seen in the second quarter of this year on the overall impairment has increased the cost of risk clearly from where we were in Q1, 26 basis points.

We are standing by end of June at 45 basis points cost of risk. In the following slide, which is slide number 22, on the NPL and the NPL coverage ratio, we have seen an 11% growth on the NPL, if you look at this sequential basis, almost the NPL is flat, and this is also a reflection of when we were in Q1, 93 basis points on the NPL ratio.

We are at 90 96. We have seen a slight improvement on the NPL coverage ratio as well, standing at end of June at 175.9%.

On the stage-wise coverage, as you can see in the bottom of the slide, we have seen a reduction on the stage two coverage. Stage one remains at 40 basis points flat.

Stage two reduced to 9.8% from 11.6%, and also we are able, part of the provision that was taken, to build up also stage three coverage that is increasing from Q1 standing at 73.9%, almost 74%. On the following slide, slide 23, on the capitalization and liquidity, on the capitalization, tier 1 and tier 2 capital for pillar 1 risk is around 20%.

We have seen a drop on the ROE. Q1, we were at 18.4%.

Now, ROE is standing at 17.8%, and also we have seen 10 basis points reduction on return on assets. As far as the liquidity and prudential ratios, all remain healthy.

LCR is at 159%, and also LDR is around 80, which is well below the regulatory maximum, and we have the NSFR is at 111.3%, almost flat from where we were in Q1. In the following section on the outlook and the guidance for the remaining of the year, we have achieved a growth of 6% on the financing YTD.

We are keeping the guidance at low teens for the full year of 2026. The 6 basis points contraction on the NIMs year-on-year where we are at 3.46%, we are keeping the guidance also unchanged from -5 to -10 basis points.

Also, the guidance for cost-to-income remained unchanged, below 30.5%. The two guidance that we have changed, as you can see, it's the cost of risk.

Cost of risk is revised from being 45 to 35. With the due trend that we are seeing on the provision that's been taken during Q2, we are revising the guidance from 35 to 45, and of course, as a result of that, revising the return on equity guidance from previously being above 19% to the new guidance which is 18% to 19%.

Pillar 1 for tier 1 and tier 2 capital remains around 19. Just a reminder maybe in the long-term guidance that we gave for 2030, on the asset growth, low double digits remain as a CAGR, return on equity above 22%, and cost-to-income is below 29%, and we are still keeping the long-term guidance for pillar 1, tier 1 and tier 2 capital for pillar 1 risk is at above 18%.

With that, I'll hand it back to the operator for the questions and answers.

Can I check back with the operator, are we audible?

Yes, you are audible. Hi, Operator, can you start the Q&A session, please?

Thank you.

Hi, can you hear me? Hello?

Yes, we can, Naresh. Go ahead.

Excellent. Hi, Abdullah and Adel, it's Naresh Bilandani from Jefferies.

Thank you so much for the presentation. Really useful.

Two questions, please. Just keen to hear more color into the notable pickup that we've had in the impairment charges, which I think has taken the sheen off of what is a good set of numbers actually in the second quarter.

Just keen to understand what led to this pickup. I know you had a big recovery in Q1, but I think the Q2 charge still seems to be elevated.

Is it linked to the projects that were cancelled, and you have previously highlighted that there have been some exposures into projects that were cancelled? Is this what is causing pressures?

If yes, do you feel that the second quarter sort of like impairment charges, the elevation the risk of elevation is behind us, or do you feel that conservatism is sort of justified as we go into the second half of this year? Just keen to understand the pickup behind the impairment charge.

That's one. My second question is on the fee incomes, and this is more of an industry-wide question also as much as for Alinma.

Do you feel the industry at this stage has fully borne the pressure of the fee income from regulatory changes that were implemented in the previous quarters, and sort of like the worst is behind us and we could see a recovery on the fee income line, especially for the industry as a whole as we go into the second half of this year? Maybe one final question if I could please just add.

I think if I take a look at the slide 18, if I take a look at the net interest margin, clearly I think the NIM has held up very well in the in the in the interim periods. Do you see the case for getting a better-than-expected NIM than what is baked into your guidance by a year by the year-end, or you're just being somewhat conservative with your guidance?

I'm just keen to hear some some thoughts on the NIM line. Thank you very much.

Thank you, Naresh. Let's cover the first point about the impairment charge.

Yes, there was a large project that we financed a contractor and has mutually agreed to suspend or cancel that project. Now, we understand that there should be some amount, some compensation paid to the contractor.

However, being prudent and being conservative, we felt that this may call for obviously set up some provision against that, and that's why our change in cost of risk from 35 to 45 basis points previous guidance, now to 45 55, another effectively 10 basis points increase in that guidance. The difference between obviously Q1 and Q2, as you mentioned, Naresh, is because we had sizable recovery in Q1, and that's what led to big variance between Q1 and Q2.

It's better to be prudent and building up provision. We don't know at this moment how much compensation will be paid to the contractors that will allow them to pay our exposure, and whether that will take time.

That's obviously something that they can find out quickly. On the fee income, yes, look, the fee income story this year has been impacted by multiple factors.

One, as you mentioned, the regulatory changes in terms of pricing on the cards business, as well as remittance fees, as well as the upfront management fee that we collect on consumer and mortgage fees, and that has been reflected in our results this year. We understand that we've already have taken half the impacts roughly of that already, but there are other stories within fees or fee income also.

Maybe it's a chance to expand on that. One of the factors obviously, international spends, I guess the number of travelers overseas has reduced, we see lower international spend that affected our fee on cards.

Another important factor is we've done a new arrangement with a major supplier or vendor of point-of-sale machines that has changed the business model to include profit sharing there. Unfortunately, you see half the story because the point-of-sale business previously had the fee, which obviously on transactions, but there's also the leasing expenses that shows in G&A.

What you saw, you saw the impact on the fee. However, it doesn't show the impact on the saving on the leasing of these machines.

Net-net impact is actually positive with this new deal that we've done, but unfortunately because the amounts split, cost goes into other operating expenses, but the revenue on the top. That's another factor to consider.

Also, we lost some market share in trade finance. However, overall, probably saw from statistics from SAMA, the level of imports in the first six months compared to the same period last year has reduced by 5%, and that obviously has an impact on all fees business specifically.

We've also seen an overall reduction in brokerage income because of the overall volume, traded volume was lower in the first half this year versus last year. I think that in a way summarizes the impact that we had on fee income.

Thank you very much. And

Maybe on the NIMs, Naresh, can take this. As you rightly said, if you look at the NIMs following the Q2 numbers, it's still looks like it's holding up.

We're keeping the guidance as contraction 5 to 10. Could we end up with a year based on any development at the end of the guidance?

Will definitely keep on reviewing the same, and of course, following Q4 based on any development that would be communicated on time. However, you're rightly said, the NIMs that we are seeing is holding up so far, but the range, as you said, from 5 to 10, could this be at the end of the range of the five, we'll definitely re-update that whenever any change is needed following Q4, but this is the way we see it as of Q2.

Got it. Thank you very much.

Sorry about that. Can you hear me now?

Thank you very much for the presentation. I have a question around your margins expectations.

There is an increasing chance of a rate hike this year. I was just curious in this assumption of NIMs that you've kind of or the guidance for NIM, what kind of rate expectations have you built in?

If you can also please remind us what's your sensitivity to a 25 basis points increase in interest rates? That would be pretty useful as well.

Thank you.

Hey Shabbir. We're rolling out with our forecast.

We really take the rate yield curve what market see it. Now, as you can appreciate, the volatility was huge really recently, and also the probabilities for the rates that we have seen, that's what's reflected in the yield curve that was applied in our forecasting as far as the guidance is concerned.

The guidance, there are probabilities of a rate hike, but this probability, as I said, it's really volatile, and hence the yield curve that we have taken probably did not reflect that. As you mentioned maybe to Naresh in the previous question, it's actually, as we see it in Q2 is holding up, and along with the repricing that's being done, expectation if it's achieved on the CASA growth internally that we have, we'll definitely update the same.

Could we end up in the year by as I said, at the end of the range of this guidance, probably, but to be sure, we will be again updating this whenever needed following Q3. As far as the Q2, this is where we see it, and it could be as I mentioned by the end of the guidance, that's really probable.

In terms of NIM sensitivity, if you can point towards that? Maybe if I can ask one more question.

Year-to-date, your loan growth has been about 6%. You're targeting low teens.

That kind of suggests an uptick in the second half. If you can comment on that as well.

Thank you.

On the NIM sensitivity again did not change much as we've previously communicated. We checked this based on our position by end of June.

It's 1 to 2 basis points for every 25 bps. As far as the 6% growth that's the guidance suggest for the financing, you'd assume portion of that would come from corporate and primarily maybe project financing along with SMEs, and you will see a small portion of that coming also supported by retail growth for the second half of this year, both in mortgage and consumer financings.

Thank you. Okay.

Hi. Thanks for taking my questions.

The first one is just on the cost of risk. Can you remind us what sort of run rate you had embedded in your 2030 plan?

Should we imagine in the medium term it stays around this 45 to 55 basis points range? A second question, please, was just a little bit more color on the lending outlook.

Firstly, on retail, you seem to be gaining some good market share versus your peers. What's really driving that?

Is it the products you're playing in? Is it the pricing?

Just a little more color there. Secondly, on the project finance market, we can see in the data that the second quarter seems to have had quite a nice acceleration in new government project awards.

What are you seeing in your pipeline? Thank you.

Thank you. No, with your cost of risk, we give guidance on a yearly basis, and we obviously update it every quarter.

We haven't given specific guidance on 2030 what we use every year. Every year, we'll come to you and give you guidance on that yearly.

We give few 2030 guidance like capital adequacy, ROE, cost-to-income, but the cost of risk is not something that we provide a guidance for. On retail growth, Saleh here?

Yeah. Again, we emphasize on this.

We're not going in any war price. We have enough customers, we have to see the opportunities within the bank.

As mentioned in this presentation and previous presentations, that we are one of the biggest bank in acquisition customers. Now we are the third largest in retail customer base.

We also, as mentioned by the CEO, we invest a lot in customer journeys, especially in digital channels. A lot of our products in retail, you can name it, mortgage, personal finance, credit cards, auto lease, are on our application, end-to-end journeys, and we're monitoring this.

Customer experience, full range of products that we have, turnaround time, this is what we always capitalize on in our retail business.

I may add this is not one-off. We've been long track record now outperformed the industry in terms of loan growth in retail.

On project finance, as you have rightly said, yes, there were announcement of some project, and we have captured good portion of infrastructure, as well as power generation that will feed up our future pipeline in this sector. In fact, significant portion of the growth from now to the end of the year is also coming from project finance, what we see in our pipeline.

Great, thank you. Okay.

Operator, can you make sure that Olga has access to unmute herself?

Operator, can you go next in line and then come back to Olga?

Hi. This is Rahul Bajaj from Citi.

Thanks for taking my questions. I have two questions mainly.

The first one is on cost of risk, and as you mentioned, the increase in cost of risk in 2Q was largely driven by a particular project which was cancelled, and you're taking provisions prudently and [unclear] is good on part of that project. Are you concerned that there are other projects in your portfolio which have been cancelled or are facing delays, and these could drive higher cost of risk maybe in the second half of this year or through 2027, '28?

Do you see that likelihood kind of shaping up as we move ahead, or are you saying that the second quarter charge was just a one-off and you're not expecting any material change in sort of cost of risk expectations as we move ahead? That's my first question.

My second question is on margins. I think the second quarter margins have actually held up pretty well.

Just trying to understand how this moves from here on. I see your guidance.

It's a 5 to 10 basis points. Then if I think about the components of margin, cost of funding, yields, how are you expecting these two components independently to move over the next few quarters?

Also linked to it is the repricing of corporate loans that was happening at the system level, and Alinma was also part of it. Just was trying to understand is the repricing all done, or you expect some more repricing to happen on the corporate side as we move ahead?

Thank you.

Thank you, Rahul. Obviously, every year, it's normal that you see some projects maybe delayed, maybe cancelled, but it's usually small size.

Nothing significant that we've seen. We had some projects before was cancelled, but this time when I mentioned this specific project, it was large.

The size of the project is what really mattered. We've seen smaller ones that had really small impact or little impact on our cost of risk, but this one is large, that's why.

In terms of margins, as Adel already covered that, before the earning call, we do reforecast again using the latest forward yield curve. We don't build our own model for yield curve, we use the market itself.

Our assessment is shown maintaining that guidance of 5 to 10 basis points. Now, as Adel mentioned, there's also, if you look at the market, the probability of rate hike and it keep changing significantly, sometimes it's close to 100, now I think recently is about 80.

It's obviously that has an impact on the forward yield curve. I guess on daily basis that forward yield curve is changing, and we reassess it again every quarter, and if we see a guidance is changeable, we will change the guidance.

Thank you, Abdullah. Just to clarify on the NIMs bit, from a cost of funding perspective, are you seeing any major change in cost of funding outlook in terms of competition, or it remains pretty stable now?

Actually, Rahul, I forgot today to comment about this. One of the very positive things that happened over this year compared to same period last year is obviously the ample level of liquidity that we see in the market.

The level of liquidity has increased. As a result, it reduced the aggressive competition on deposits, which means we're getting now deposit at SAIBOR, at SAIBID even.

Unlike the same period last year where we had to pay more to get the deposits. I'm talking about the institutional depositors.

That is have lowered the cost of funding. At the same time, if you look at three-month average, SAIBOR three-month average compared to first six months last year, it actually gone down by almost 61 basis points.

You have the benchmark itself is lower by 61 basis points, but at the same time, the ample level of liquidity has improved and reduced the aggressive competition on those deposits.

Understood. This is very clear.

Thank you.

Yes, hi everyone. Thank you for the conference call.

Thank you for taking my questions. I think what I'd like to ask is on your medium-term program, right, that you announced earlier in the year.

To what extent does it assume that you need to ramp up your costs pretty aggressively at the start of this program in order to produce results later on? What are the implications for the cost-to-income ratio, right?

Obviously, you're tracking slightly above your full-year target for the time being, right. What are the chances we're going to see that excess in cost-to-income ratio in the next 3.4 quarters?

That's first. Secondly, I can see that your loan growth that continues to be quite good, right, compared to what the sector is delivering so far, right?

You are outperforming, right? How should we think about the implications of this stronger loan growth for you, in particular for your asset quality, and what do you think about growing above sector in an economy which is slowing down?

What are your thoughts?

Thank you, Aybek. Obviously, on the point-of-sale business model that we've done started somewhere during Q1.

As we've seen so far, it has a positive net impact on the bottom line. The difference is obviously between fees and expenses, which is positive.

That's the first phase. We're expecting further improvements.

I don't want to get into details, but there are additional phases that should help us grow our business even further in that area. On finance growth, obviously, as Aybek, we've been talking about it in the previous I think questions.

Our retail team has done a fantastic job outperforming the market for years. It wasn't like one off two years or three years, we've been now outperforming the market for at least five years now, growing much faster than the market.

This is to do with customer acquisition, level of service quality that we provide our customers, turnaround time, you name it, and the simplicity of applying to these products. We're going to continue in our strength.

We've gathered a significant customer base now that allows us to continue our growth. In terms of project finance also, as it's another inherent advantage that we have.

We've been one of the major players in that project finance business. As under 2030, there's a lot of projects being done with private sector, and we're in very good position to penetrate that business.

As well as obviously, we started, I have to say, started late, a little bit late on mid-corporates and SMEs. Our growth rates continue to be significant as we've already highlighted in the first half, and that will continue to be there.

Hello, this is Abdullah Buraidi from Emirates NBD Capital KSA. Thank you very much for your great presentation, and congrats for the great results.

I have maybe two follow-up questions. The first one regarding the cost of risk.

You mentioned that you're being prudent on a single contractor regarding a certain type of a project, and you're increasing that cost of risk guidance in reference to this. Could it be that when all the exposure at default being realized, that we get out of such a guidance, or you believe this guidance is covering all of such exposure?

That's the first question. The second one, how do you see the evolution of the non-funded income going on into the second half?

Do you expect us to appear on a second half that is somewhat close to the second half last year, of course, excluding the market-related income that is dependent on instrument movements? That's it.

Thank you, Abdullah. Obviously, on the second point, we don't give specific guidance on fee income or non-funded income, whether it's for the full year or second half compared to the first half.

It's part of our guidance on the cost of risk, it's part of our guidance on the cost-to-income and ROE. We don't give specific guidance on non-yield income.

Now, in terms of cost of risk, as I mentioned, the contract that was cancelled, sizable, and we felt that we need to be conservative, prudent, and start building provision because the final outcome of how much compensation that contractor will get is not yet clear to us. We know some estimates, we will see how and that takes time.

That is not something, I would say, yeah, you know what, maybe in Q3, we'll fully understand and we may revise the cost of risk. At the moment, it should take time, and this is our best estimate for this year.

Okay. Just to follow up on the non-funded income, maybe not a guidance, but rather an evolution.

Do you see it picking up from where we are, or is it still as slow as it is?

I think I talked about the point-of-sale business model that we've done, and I mentioned there are phases to come, and that phases should help us in growing our bottom line and or the business or the income on that business. Other than that, if we see significant increase in shares traded in the market in the second half, that should help us grow our brokerage business.

It's very hard to give specific guidance, and we do the forecast, we understand, but we don't really communicate that to the market.

Okay. Thank you very much.

Yes. Assalamu alaikum, gentlemen.

Thank you for the presentation. Just one question on on dividends.

You've you've clearly laid out over last year your plans, that you want that dividend payout ratios are going to be lower than what they've historically been, and we saw that last year, three interim dividends and then a bonus stock dividend at the end of the year. This year seems to be, you've given out two interim dividends similar to last year.

Is the playbook similar to last year, that we have three interim dividends and possibly a fourth quarter skip? If you could give us any indication on on how do you how are you thinking on the on the dividend payouts?

Thank you.

Thank you, Murad. Obviously, on dividends, it's really hard to give comments about the potential level of payouts as this is obviously, as subject to the board and to our regulators.

I think even though similar level of amounts paid to last year, I think the net income is obviously higher than last year, payout ratio is lower. We expect that our net income in the quarters to come will be improved further, and we'll see what level of payout.

We're not going to be aggressive in payout ratio, certainly would be not far off from what we had maybe last year.

Great. Thank you so much.

That's it.

Hello, can you hear me? Hello?

Thank you. Again, I have two set of questions again.

They're both again relate to NIMs as well as cost of risk. For NIM guidance as well, I think you've half elaborated it, but just for a bit more clarity, the 5 to 10 basis point decline that you are assuming, do you think it will be coming from further repricing of the asset yields or do you feel that there is still further room for the asset yields to come down, or are you seeing some pressure to come in cost of funds going forward?

This is my first question. Second question is regarding the provision that you have taken.

If you may elaborate on that, have you taken the entire set of provision that is required on that project, or is it still something that can come in Q2 or in Q3 and Q4? These are my two questions regarding that project.

Sure, Nauman. On the first question on the NIMs, as I mentioned maybe earlier, we're still guiding for a contraction of 5 to 10 bps.

Could this change following Q3 results or to be, as I mentioned, at the edge of the guidance, could this be 5 rather than 9 or 10? We'll definitely take the yield curves and reflect that following Q3.

As we speak, this is the way we see it. Ideally, we have as rightly suggest that this is both.

The continuous repricing on the corporate, even though we've seen the benchmark south moving, as the CEO mentioned, the 61 basis points in three-month SAIBOR, but also the level of liquidity that we are not seeing really an immediate intense competitions on deposits, which could help. As far as the Q2, this is the guidance for the full year.

Again, how the market is reading the yield curve, it's really becoming so volatile, and we're taking the latest. Maybe it's changing as we speak now, but of course, following Q3, we'll be updating the same.

As far as the cost of risk, and beside what was mentioned by our CEO, have to clarify maybe some things. It's maybe probably an uplift from one contractor where the project was cancelled.

I hear some questions regarding have we taken the all, build back, not run back. It's an IFRS 9 based model that reflects the nature of of course, it allows for the management overlays, but at the end, there are stage movements, there are conditions for every client, when to move and how to move, and a third level of provision based on the PDs and LGDs, as you know the technicalities behind this.

Besides that there is maybe the big movement, still remains subject to the requirements of the model itself that we are validating and reviewing obviously every year.

Thank you very much. Thank you.

Hello, am I audible?

Marvelous. Congratulations on the results.

Just a quick question on the costs side. I see that Q2 opex base was about three 3% lower sequentially.

Were there any one-offs in the opex in Q2, or can we assume that the Q2 the Q2 opex is a sustainable run rate for the rest of the year?

As you rightly observed, the 3% reduction in Q2 sequentially from Q1, there are two major parts of that. Of course, besides the ongoing exercises we are running to on the efficiency side, but of course at the same time we continue to invest for the strategy.

There are two main parts: one is what was mentioned by the CEO earlier on the point-of-sale related program, you'll see some reduction of the leasing of point-of-sale terminals that used to be part of the G&A. Now, the bank is not paying anything on that, is part of the profit sharing on the income side.

Also, another major, and you will see this was on the financial statements, we put a separate notes, note number three on that, which is in the depreciation side, we have seen the layout the benchmark on assessing the useful lives of buildings and softwares, and that we have taken the impact in this quarter. Of course, the impact that we have taken this quarter is not from beginning of the year, it's from April, it's reflecting the three months.

On the notes to the financial statement, you will see that there is 23 million for the second quarter that was the immediate impact. On the financials also, as part of the assessment, we've seen that close around 76 million will be for the remaining of the year from Q2 until year-end.

Of course, in disclosure as well, 105 million will be for 2027 assuming the new lives. The changes is on the buildings and also the software.

Oh

yeah, thank you. Just to confirm, both of these changes, were they embedded in the guidance that you gave at the beginning of the year, or were these not budgeted in?

How should we think about them versus the guidance? Are these a benefit to the guidance, or were they budgeted in?

These changes are already part of the guidance that was mentioned during this call.

Thanks so much.

Hi, assalamu alaikum. Congratulations on the results, and thank you for the presentation.

I just wanted to ask on the ROE guidance, the revision of the ROE. Could you talk through the main factors behind that revision other than obviously the cost of risk?

Obviously, the cost of risk was the main driver behind that revision. As I mentioned, I think the revision is effectively, we look at the two ranges, about 10 basis points shift, so that obviously has a negative impact on ROE.

Thank you very much.

It's also reflecting the changes in regulatory pricing for the consumer products, that's that part of it, as well as I mentioned the impact that we've seen negative impact on lower international spend by our customers because of the geopolitics maybe, and the impact on trade finance that you've seen because of lower imports that we've seen so far.

All right. Thank you for the guidance.

Thank you for the call. My question is on NPLs.

Given the current environment, we've had a lot of businesses and corporates getting impacted. How do you see the NPLs shaping up over the next couple of quarters?

Obviously, there will be a lag effect on the bank. Is the management prudently going to increase the cost of risk in the short term to cushion any increase in NPLs over the coming quarters?

We don't see any significant change in formation of new NPLs. I mentioned already the one large project that was suspended or cancelled, and as I mentioned, it will take time to find out exactly how much contractor will get in compensation and how much money will be recovering, and maybe a year or so to find out exactly how much that.

It will take time, but I don't think we've seen specific change in the migration of NPLs. As the NPLs level now is below 1%.

I don't expect that to change significantly.

Okay. My second question is on the dividends.

Any change in dividend policy, do you plan to increase in line with the profitability?

I think I already covered that the dividends level or payout ratio already covered in previous questions. Thank you.

Thank you.

Thank you, everyone. Please reach out if you have any follow-up questions.

Especially Olga, we would be happy to receive your questions. Thank you so much.