Alinma Bank (1150.SR) Earnings Call Transcript & Summary

[Presentation] Good day, everyone. Welcome, and thank you for taking the time to join us today. During the past 5 years, Alinma has been working into achieving its 2025 strategic goal of being recognized and celebrated as the fastest and most convenient bank in Saudi Arabia. With a focus on growth and customer acquisition while making sure to communicate progress to the investment community throughout the journey. Today, I'm glad and delighted to welcome you all to our Alinma Strategy 2030 Reveal Call. I hope you enjoyed the opening film, and it gave you a flavor of what we will present today. As of now, we have attached this strategy pack in a newly launched tab in Alinma IR website for our strategy to provide easy access, continuous progress updates and better transparency. In today's call, our MD and CEO, Mr. Abdullah Khalifa will start by presenting some of the financial transformational growth achieved throughout the bank's previous strategy. He will also touch points on nonfinancial and ESG key accomplishments. After that, he will take you through Alinma vision for the next chapter and detailing by business lines and beyond. The CEO will conclude by providing the bank's 2030 ambitions and aspired targets. We will definitely leave enough time to receive your questions during our Q&A session, where our Deputy CEO, Mr. Saleh Alzumaie, covering retail private and digital, our CFO, Mr. Adel Abalkhail; and our Chief Corporate Officer, Mr. Jameel Alhamdan will be joining us. With that, I'm pleased to pass the floor to you [indiscernible] to walk us through the journey.

Thank you, Arwa. Hello, everyone, and thank you for joining our meeting today. As 5 years ago, we laid a clear plan to transform the bank from one level of maturity to a much higher level of maturity, and we did deliver on that. Some of you may remember from the earnings calls and discussion we had on one-to-one and conference meetings, that when we started this journey, we were missing a lot of products in retail and corporate and treasury we were missing also focus on cross-sell. We're missing underserve lots of segments in the country. We will mainly focus on lending to large and project finance and just provide a quality of service for retail without the sales efforts, the sales forecast and the cross-selling and we couldn't offer our clients in the derivatives, for example, from treasury. Now we've actually delivered as you're going to see in the presentation, the bank has moved from much from one level of maturity to a much higher level of maturity, and we will be talking about this in the next few minutes. Today, we are -- we're here to talk about a new chapter of the bank 2030 strategy. It's a plan that designed not just to navigate the opportunities and challenges ahead. But to actually widen the gap between us and our competitors and provide -- or continue to create better value for our shareholders. So in terms of achievement of the current strategy, as you see on the screen, Slide 4, we're more than doubled revenue from SAR 4.1 billion in the first 9 months of 2020 compared to SAR 8.7 billion of revenue in the first 9 months of '25, while profits increased more than 3x from SAR 1.6 billion to SAR 4.7 billion in the same period. Cost to income, we started with 36.4% for the full year of 2020, and we managed to reduce this by 4.8 percentage points to 31.6% in September. ROE, as mentioned in the introduction, more than doubled during that period. So 8.4% was the ROE in 2020. As of September, the ROE is 18.4%, more than 2x increase. Assets also almost decreased by 2x from SAR 156 billion [indiscernible] in 2020 to SAR 307.2 billion in September this year, 2025. Customer deposits also doubled from SAR 119.5 billion in 2020 to SAR 234.6 billion in September. CASA also 1.8x increase from a level of SAR 70.1 billion to SAR 124 billion in September, and ROA also 1.5x increase from 1.4% to 2.1%. On the digital side and nonfinancial achievements, digital base, which we started measuring this in 2022. At that time, the base was 54 basis points and now is 74 points in September, 20 points improvement digitally active customers was at 64% of our clients in '21, now 76%. Credit card and Personal Finance sold digitally, absolutely nothing. In 2020, we didn't have that. And now we have 30% of sales coming through digital channels. Financial transactions using the mobile app was 74% in 2020. In September, that reached 86%, 12 percentage points increase. Straight through processing, another one that we were lacking in 2020, we had nothing, no straight through processing. STP now is offered through multiple products in the bank. Mobile app, our mobile app has been highest ranked in mobile apps in among the Saudi banks in '24 and '25. OHI, Organizational Health Index which we started measuring this in 2021, we improved this by 14 points to reach 78. As some of you know, the top quartile worldwide starts at 76. So we are in the top quartile in the whole world all industries. In terms of AI, we've introduced 10 cases, mainly on the lead management, marketing, risk and cross-sell. On the next page on the ESG between '23 and '24, we're 100% increase in sustainable financing, 18x increase in employee volunteering hours, more than 6,000 solar panels installed 65% increase in female workforce. The Board established a Board committee for governance and sustainability, and we improved our ranking in MSCI into ESG MSCI. Let's talk now about 2030 vision. As most of you know and the headlines in our previous strategy has been recognized and celebrate as the fastest and most convenient bank in the country. Our focus at that time was growing in customer base and growing our balance sheet. Obviously, that has shown very good results, as I mentioned, we're going to be seen later on. We are the third largest bank in the country in terms of retail customer base. That was a major achievement. Now we're going to shift toward a new way of looking at the strategy. So from being the fastest and most convenient bank is the main focus, to be the most innovative and customer-centric bank in the country. From being focused on growth and customer acquisition to more focus on profitability and building distinctive differentiation leverage in AI. And with the next page, we're going to talk about the main components of that. So obviously, most customer-centric, as you mentioned, most innovative and underpinned by sharp focus. Let's talk about more customer or most customer-centric. And that we aspire to privacy with every customer that we serve through seamless AI power journeys, strengthening our trusted by inspirational brand. Most innovative, in disrupt with innovative offering that takes the value proposition to the next level, develop the best and most scalable AI-based operating model, underpinned by sharp focus on profitability, want to foster a monetization-driven mindset to becoming the choice of capital deployment in case segments. Obviously, as a very important components of our strategy is the focus on data and AI. So as I mentioned, we currently have 10 use cases using AI. We are going to introduce more than 100 use cases in the next 5 years, built on our future ready tech stack and data architecture with all the built-in governance and ethical standards. So data and AI is obviously for customers for innovation and for scalable operations. And for customers, enabling customer privacy through proactive needs, anticipation and hyperpersonalization journey -- or personalized journey. On innovation, we want to unlock the banking ecosystem to drive new revenue through data products and open APIs, data AI for scalable operations is to be boosting the productivity by leveraging the eye to streamline and automate operations. Through these investments, we estimate that anywhere between SAR 600 million to SAR 1 billion impact on the bottom line. in the 5 years. And that is, I would say, 65% of that estimate is coming from revenue uplift and 35% on cost efficiency. I'm going to dive more into business. So currently we have our core business, which is going to talk about first and then at a later section, we're going to talk about the new business build. So on retail and private mention before, were more than doubled the customer base in the previous strategy. And we have achieved 1.5x growth in assets and about 80% increase in liability. Our focus on retail and private for next year -- for the next strategy as to basically, as I mentioned, this primacy is going to be important for all the businesses. So obviously, for retail, reimagine privacy-driven engagement model and cable infrastructure. Gen-AI enabled daily companions and Intelligence wealth advisory, smart tech-powered offering, elevating customer experience and tailored segment level value proposition and service model, including next-generation wealth. And corporate banking, from the achievements in the previous strategy has been 2x in growth in total assets, 8x growth in total liability growth in mid-corporates and financing. And that's important to show the results of the previous strategy. We were -- as I mentioned before, we're really focusing on serving or lending to large and the project finance. And we said that mid -- basically have revenue in excess of the SME benchmark of SAR 200 million up to SAR 1 billion of sale of revenue. These important segments was not really been served by the bank. So we're really focused on the build the right team. We managed to achieve this 18% growth in financing. And also another important element of our previous strategy. Strategy has been the growth on SME. So we introduced more program-based lending and more focus on cross-selling product to them and we've achieved 3x the growth in SME financing. For 2030, again, aspire to privacy to all clients across segments and sectors with distinctive edge and SME financing. We also have leading AI-enabled digital platforms with personalized journey. We I enhanced transactional banking proposition across key corridors, want to develop structural investment opportunities in KSA corporate credit. On treasury, some of the achievements in the previous strategy has been 70% increase in total assets. 80% increase in yield on the investment book. We also part of our process to diversify funding. We've issued SAR 4.4 billion of Sukuk, whether it's Tier 1 or Tier 2 or senior. In addition to that, we've done more done 1.1 billion -- roughly $1.1 billion of CDs. We've done bilateral loans. We've done repo to maturity as part of our effort to diversify our funding. The focus for 2030 would be to expand on the level of diversification. So innovative funding instruments, targeting both our customer base and future customer base, also in addition to that, international funding partners. We want to accelerate the focus on sale of FX and derivatives growth through deeper cross-sell and deeper cooperation and partnership with the businesses, one optimized investment portfolio structure with refined liquidity and focus on higher yield opportunities. On the site in which we also we consider as a core business for us. Now some of the achievements in previous strategy, about 95% of new customers onboarded digitally. NPS score for digital for the Internet banking and mobile has reached 74 and 76 respectively. More than 3 million customer was onboarded digitally. The focus for 2030 would be AI-powered intelligence platform, enable us very important to us enable hyper personalized customer journeys, expand beyond banking digital offering levering strategic partnership and investments to drive innovation, enhance operating model, including monetization level driving accelerated value realization. On Alinma capital, fully owned subsidiary in investment and brokerage. Some of the achievements in previous strategy has been reaching #4 in overall assets under management. With 40% growth in asset management revenue and 8x growth in principal investment revenue. The focus for 2030 would be leading wealth advisory services and disruptive offering, including new asset classes, distinctive brokerage-related engagement models and capability elevate the investment banking brand through deeper global expertise and partnership and cooperation -- through cooperation with them. And finally, revamped AI-powered operating model to instill intelligent decision-making. That has been the focus on our core activities today. But in addition to that, we're going to talk about new business build. Unfortunately, because this is a work in progress and I can't really get deeper details because a lot of that requires obviously regulatory approval. And I'm sure, as always, we're going to be fully transparent as soon as we get the approval ready to launch this. We're going to come to the market and announce it. As you know, the country vision on the right side, you can see the investment horizon first innovation in power and SME entrepreneurships, privatization and deeper private sector partnership and the whole idea is driving economic diversification. So we took that, we look at that, and that's where we fully operate. We operate 100% within Saudi Arabia. The country vision is very critical and important to us. So we're going to focus on delivering new businesses, including without a lot of details, I have to say, premium multi-asset financing, short-term credit solutions for underserved segments. Some of that, by the way, the second part is already launched, which is the [ ES ] business, focusing on micro and very small SMEs. So that's one aspect of it, but we're looking to expand this further to other segments. Also a comprehensive bancassurance suite. It's really important that insurance business is growing in the country. We -- the outlook is very good. And I think we need to leverage our network, our staff to sell more of this insurance business and to do it through omnichannel delivery model. As I said, there's not a lot of details on the new business builds because what I mentioned before, I can only expand on this once we get the -- once the approval is received. Now finally, we're going to give you some of the guidance on our 2030 strategy. So in terms of ROE in September 2025, our ROE was 18.4%. In our current strategy, we expect that to go beyond 22%. Cost to income in September was 31.6%. We should expect to drop this by 3 percentage points. Asset growth on CAGR over the [ lost ] period almost 5 years, it was 15.2%, and the new strategy, low double-digit growth in terms of CAGR. On capital adequacy for capital for Pillar 1, including Tier 1 and Tier 2, 19.2% is in September, and we expect it to be above 18% by 2030. With that, we are ready to open the floor for your questions. Thank you.

[Operator Instructions] We will now take our first question from Naresh at Jefferies.

It's Naresh Bilandani from Jefferies. Good luck with achieving these ambitions targets, I wish to the best. I have a few questions, please. One is, could you please delve a bit more into how you see the evolution of the regulatory landscape currently and over the medium term, for achieving these objectives. We've been hearing about some getting a lot more conservative on the capital outlook and also on the liquidity metrics for the banks. So if you can please elucidate on that, that would be extremely helpful. That's the first one. My second question is, could you please elaborate a bit more on how you foresee your comfort on capital in order to achieve these objectives. Clearly, you set up a strong growth path for yourselves in achieving a higher level of profitability as we can see it from your ROE metrics. But the current level of capital optically and looks at the lower end of where the broader industry averages are. So if you can please talk about your comfort on capital and how do you intend to build up the capital base for achieving your growth targets, that would be super helpful. And my third and final question is on -- could you offer some more thoughts on what is the management accountability for achieving these targets? Are there any specific KPIs that you put in place for the C-suite as well as for the business heads in order to achieve in order to align their incentives with achieving these ambitious targets. So if you can throw some more light there, that would be extremely helpful.

Thank you, Naresh. Now obviously, through the Central Bank is becoming more conservative. And I think it's public news that came out about the countercyclical a 100 basis point additional countercyclical buffer as needed. And May, I think starts in May 2026. However, for our case, the way we're going to support our growth is basically a combination of lower dividend payout, coupled with higher profits, obviously, on a yearly basis, that should give more internally generated capital as well as the efforts to continue to issue Tier 1 and Tier 2 Sukuk in the Asian market and even in the local market if the opportunity is there. And that will continue to support us on that aspect. Similar -- I would say your first question, second is similar. I think we've shown an improvement in recently in September. We used to be one of the lowest now. I think we're moving towards the mid, I guess, in terms of the banks. I look at this as a more efficient use of capital rather than excessive higher level of capital. In terms of management accountability, Naresh, of course, one of the things that the Board has introduced is a long-term incentive plan is actually linking long-term incentive plan to the strategy. So when we first introduced the 2025 strategy, the Board introduced long-term incentive plan, linked directly to the KPIs in that strategy. I would expect, obviously, there is a discussion about the new [ LTIP ] so that should be similar to. So our -- as management, all senior management will be subject to this long-term center plan, and it's actually conditional to achieving the financial targets that we mentioned in our strategy.

May I please just have a very quick follow-up. And please allow me to be a bit more direct on this question. I'm sure you encountered from multiple investors and stakeholders with regards to an emerging risk being perceived by the market on a potential rights issue that should come for Alinma in order to beef up the capital base to ensure that your future growth plans continue seamlessly. In the previous strategy, and you had mentioned this in investor meetings that you don't necessarily foresee a risk of a rights with the new strategy now in place over the medium term, do you believe that is a risk that investors and analysts should keep in context in order to see you achieving your growth targets?

Well, as you mentioned, I've been very transparent. As I said, to support our growth, we need to generate more internal capital through higher profitability and lower payout ratio, that's one the important elements of supporting the capital, but as well as issuing Tier 1 and Tier 2 instruments and the local and international markets, mainly really international markets. So if there is a situation in the next few years that suddenly, there's not much appetite internationally for those capital instruments or even locally, then certainly the first choice for us would be to cut dividends. even suspend dividends completely if we need to. Last option would be to actually think about rights issue. Right issue is not something that we plan to it. It's not in our current strategy. We don't foresee a scenario where we had to -- and I would keep it that way. Obviously, there is a certainly a risk. We may have to slow down the growth, coupled with suspension, even possible suspension of dividends, that will allow us to continue to grow. Maybe at a lower pace, but certainly in the current strategy, we're relying on capital or internally generated capital plus capital instruments that we can issue.

We'll now take our next question from Olga at BofA.

Good day, and thank you so much for this presentation. I have several questions. The first one is, if you can please add for us, digitalization of components on your ROE improvement over the next 5 years. So how much can come from margin, how much can come from cost of risk, fee generation. You put some number for AI. But if you can help us understand this -- it's a big improvement, 3.6 percentage points. So that's question number one. Question number two, I appreciate your preference to cut dividends over other capital management choices. So what is your dividend strategy? What shall we think is comfortable dividend payout ratio for you for the next 5 years? And my last question is your outlook on the risk management of these 5 years, what do you think you will do differently versus the previous 5 years in risk taking in project financing, construction real estate exposures, what would be comfortable coverage and cost of risk going forward? Thank you.

Thank you. I think I missed the first point, then maybe Adel will handle it. But in terms of the on the level of dividends. We certainly, as I mentioned in our presentation, we're going to have lower payout ratio, not necessarily the actual cash paid, but because our profitability is going up. That can reduce dividend payout. In terms of the risk, we continue to invest in our risk capabilities whether it's human capital, whether it's on training, whether on certifications and also, as I mentioned, in the AI and the use of AI and risk on credit and others. We don't see specific area of risk. Obviously, every year, we go with the Board for risk appetite in terms of diversification, in terms of different industries. That's something that we do annually every time. And if there is a sector that showed up some unexpected risk, we would be proactive in terms of reducing the risk appetite for that sector.

And on the other question on digitalization and the breakup of the sources of either the revenue uplift or the efficiencies. As mentioned on the slides by the CEO on the SAR 600 million to SAR 1 billion cumulative throughout the next 5 years will be, of course, driven by the AI. Now talking about digitalization. Digitalization is already embedded in our operations. It's not something that we can completely start with the new strategy. It's a continuation of what we are doing already. But the revenue uplift and the efficiencies would be that was mentioned on a range. Specifically, on how we will be building -- utilizing the either for the business direct business use cases or what we want certain 10 use cases already live as we speak. Those that would -- that is supporting the back office in credit as mentioned by CEO and also operation. So to break down on the cumulative numerical impact of the digitalization in the next 5 years between yield, non yield and cost of risk given. I wouldn't go into those details as much as what really matters when it comes to the overall revenue uplift, which is the total operating income and also what we will have as part of the efficiencies or operational efficiency.

Yes. Thank you. So I appreciate you give a figure for improvement in digitalization and. My question is rather digitalization or components of improvement in ROE over the 5 years. So what comes from margin, from fees, from cost income ratio, from cost of risk. So that is possible to digitalized, that would be very helpful.

So yes, sorry, I didn't mentioned that you're specifically talking about the breakup of the components within the ROE that you are guiding for. And just taking this back to the statement I was saying before that the overall impact on the P&L as a bottom line would be the revenue uplift and the cost efficiency, which be all going into the ROE calculation. Breaking down 1 basis points to ROE. That is not something that maybe we have or we don't disclosed today, but rather the overall P&L impact from the AI and the overall digitalization.

Yes, I apologize, I maybe ask this unclearly. I asked note about digitalization components, but ROE improvement from 18.4% to over 25%. So that improvement if we can break down components, not digitalization components, but this improvement?

Yes. That's -- again, it will be distributed throughout the P&L. We -- it's not -- it's coming from all lines, not necessarily specific topline with all and yield or specific lines related to the specific cost optimization. But will be collectively a positive impact that would result eventually in this high ROE.

No, if I may add, a with Olga, with the guidance we gave on ROE, you mentioned 25%, we said above 22%. Obviously, we were talking about the ability to -- when we measure like primacy for customers, that means more balances back in then NIMs, right? Because obviously, the NIMs have an impact on the cost of funding and more fees because of the number of transactions digital sales and cross-selling and so on will also lead to a combination of NIMs if it's cash and trade on fees, if it's like credit card and remittances and others. Also the new business build that we mentioned that also have an impact on overall return on equity. So there are multiple components. Obviously, it is built in our financial model that we've developed for the 5 years coming 5 years, but it's not something that we disclose. We don't give specific guidance on the level of revenues, components of revenues or growth and fees and others. Also NIMs, we were reluctant because NIM is obviously so many moving aspects when you look at 5-year outlook. So we didn't prefer to issue guidance on NIMs. But certainly, on a yearly basis, every year, we're going to give guidance on a yearly basis, and that guidance will be continuously updated on a quarterly basis. But given the guidance for NIM in the next 5 years, it's really -- it's already built into it, but there's so many assumptions. And any change and different assumption may have an impact on NIM.

We'll take our next question from Rahul at Citi.

[ This ] [indiscernible] presentation and best of luck with this new strategy. I have a few questions actually. The first one is on provisioning. So you've talked about how revenue accretion and sort of cost normalization are kind of the key components of ROE expansion to your 22% guidance. I just wanted to understand, is your base case guidance basically assumes your strategy assumes cost of risk will remain flat or flattish, to achieve the 22% ROE guidance? Or are you expecting a significant change in cost of risk over the horizon? So that's my first question. My second question is around the loan growth sort of outlook that you provided, which is low double digit. I just wanted to understand how are you thinking about market share trends on retail and corporate. And so what I'm trying to understand is, when you say low double digit, growth for Alinma.What do you -- what are you baking in for the market? Are you expecting market to grow single digit and you're growing double digits, so you're gaining market share? Or you think you will grow in line with the market or ahead of the market? How are you thinking about sort of market trends over the next 3 to 4 years? That's my second question. And my third and final question, just on ROEs, again, we've talked about ROEs going from this 18.5% handle to over 22% handle. Just trying to understand what the shape of that curve will be. Will it be a straight line from 2025 to 2030, incrementally moving higher every year? Or you think it will be more back-end loaded, front-end loaded, we are moving into a phase where interest rates will be lower for the next few years or maybe a year or so will we see lower ROEs for the first 1 to 2 years, and then it kind of takes a step up when you start seeing the impact of AI-related investments. So I'm just trying to understand how that curve will unfold roughly according to you. So those are my three questions.

Thank you, Rahul. Now on the provision and cost of risk, we've always been conservative, prudent in terms of cost of risk. We're not going aggressive in a very low cost of risk. We're assessing the market and risk in the market and we worked very closely with our risk management team to build this expected cost of risk. We will give guidance on a yearly basis. We don't -- we didn't give guidance for the cost of risk throughout the period or by 2030. But it's something that will be given on an annual basis. Now you have to realize we also, as I mentioned, the new business build. There are certain we mentioned like financing to underserved segments. Certainly, that typically attract higher cost of risk for that business. However, that is more than compensated by the pricing that we offer those products, too. So I mean, obviously, it would be small compared to the overall size of the bank. So it's not going to significantly shift the cost of risk, but they want to be conservative, as I said, we'll give guidance on a yearly basis. And that's exactly also the same in the that you mentioned. Obviously, when you say new business builds, when you look at significant investment, it is certainly not going to show the very positive benefits from day 1. It takes time. So the new business build, the addition to building that business and then possibly the first year or 2 on the loss side because obviously, you're building that business, you need the volume to scale. So naturally, the ROE cannot be a straight line. And certainly, we're giving guidance on 2030, but we also will be giving guidance on ROE on a yearly basis, and you can look at your own assessment in terms of how the ROE is moving. Now loan growth, I have no doubt that the loan growth is very strong in the next 3 to 5 years in the market, driven by the country vision, by the project finance, by the growth in SMEs growth in multiple sectors and mining as today, I think there's a big conference about mining. There's significant economic activity in the next 3 to 5 years. The recent commitment to the country, whether it's Expo 2030, whether world covers just to give examples. So that is not going to result in a lower demand on credits. To be fair and transparent, I think it's in the supply side now rather than of the borrower side rather than the lending. So certainly, liquidity, capital adequacy is a factor. But our plan, we, as I mentioned, in terms of capital, in terms of diversifying liquidity, we have good assurance that we'll be achieving the growth that we anticipated we've never got targets for market share. We certainly monitor with certain review is, even on a monthly basis. The question is, if I put that as a main headline of our strategy, it may actually result sometimes may result in negative through aggressive pricing to achieve the market share, which is not something we want to achieve. Or maybe you achieve a better ranking in the market share or increasing market share just because others didn't do well. [ Some of the ] competitors do well, not necessarily your success so. I will look at it, we monitor it, but we don't have targets for market share. So I expect the market to show still as -- back to my first point, I think the market will show strong growth. Now whether it's high single digits or low double digits, remains to be sale.

We'll take our next question from Jon Peace UBS.

Yes. Thank you. So first question is, I appreciate that we will get some detailed 2026 guidance with the full year results. But could you maybe just talk a little bit about how you're seeing the project finance market after the slowdown in government spending in 2025? Do you still expect that to be robust double digits in the medium term? And are you seeing any margin pressure from competition from overseas perhaps? And then just a small point on the financial targets. For things like the CAGR and the cost income improvement, do you want us to use the 9-month '25 as the starting point? Or should we apply it to the full year '25 when you report that?

Thank you. On the second point, certainly, unfortunately, we have not -- we came out to this -- the call today without actually yet announcing our Q4. So we had to use the latest public information, which is September. We couldn't use obviously December numbers because it's not public yet. So that's the reason why we used the September numbers. Now in terms of project finance, we heard some of the news that came out. I hear it a lot from some of the investors when we meet them analysts. But in reality, we haven't seen a decline in project finance. Actually, there is an acceleration on renewables. For example, as an example of that. The demand is strong, as I mentioned, and we don't expect to see the decline I mentioned. And also the recent commitment by the country commitment about World Cup and Expo and Asian Cup and Asian Winter Olympics, among others. So -- and the focus on different sectors that require more investment, continuous investments. So I don't expect to see a reduction in the project finance. On the margin pressure, actually, in the first half, if I look at only 2025, I think in the first half, we've seen aggressive pricing on wholesale. Especially on large corporate loans. I think coupled -- unfortunately, it was also coupled with the higher cost of funding. So -- which is unusual to have both events happening at the same time. Typically, when cost of funding goes up, it's actually higher margin, higher pricing to pass all of that incremental cost you to our client. And I have to say that I think in the second half this year, we see a lot less in terms of aggressive pricing. We're actually able to continue to increase our margin on new proposals or existing facilities -- some of the existing facilities. So I think that's good news. So yes, that's what I can talk about in terms of the margin pressure.

We'll now take our next question from Aybek at HSBC.

Yes. Thank you for the strategy update. Very useful as always. Well, I guess I'd like to ask three questions. The first one, I'm just curious to hear how you see Alinma Bank? Is it a price taker or a price leader in your opinion in the corporate core market and also in the funding markets. And how fundamental is like being a price taker or price leader, it is it to achieving your long-term ROE targets. You're quoting 22% and higher, right? That's the first one. Second one is -- we've seen your cost of funding over the last couple of years, right? I think it's been a bit vulnerable in my personal view. As part of your strategy, what can you do to materially improve your cost of funds, especially your competitive position in the funding markets, what can be done on that front? And I think thirdly, are you having any disposals or spin-offs in mind over this period in order to improve your balance sheet position, release some capital.

But can you repeat the first point because I think it wasn't clear to me, sorry.

Yes. The first point, do you see Alinma Bank as a price taker or a price leader in the market?

Okay. Now obviously, we do compete in the market, but we don't -- volume is important to us, but volume is not the only criteria. Volume -- we only go and compete aggressively if it's profitable products or profitable segments. So we mentioned that, for example, we've grown significantly in mid-corporate, which is much better margin than large corporates. We've expanded significantly in SME, which is again better we've gone aggressive on revolving credit card because it's a better yield. We actually not growing strongly in large corporate because of the pressure on pricing that we've seen, especially I would say, late last year and the first half this year. But I think it's now things improved, so we'll be able to grow that segment again. We focus on cross-selling. So we no longer just look at pure lending facilities. We look at the ancillary business and the potential for cross sell, the NIBs and so on. So that is something we are not actually competing on pricing. -- we've actually lost -- I think we've seen in the first 9 months, we were -- at least in the corporate side, we were lower than the market average growth because we did not go aggressive on pricing. I don't mind losing market share of its ridiculous pricing that we've seen an example of 50, 60 basis points, even 45 basis points. And even recently, I had like around 15 basis points, which is really crazy. Now in terms of the cost of funding. Now we have done a good job in growing our CASA business throughout the year. through customer acquisition and through cross-selling of cash and trade. We're going to continue on that effort for sure. We are diversifying our funding. We'll look at all possible instruments. As I mentioned, the part of the diversification is the Sukuk insurance, CDs, bilateral loans. And these are not necessarily just looked at as just expensive. It actually have longer term. So it reduces the pressure on us competing on customer deposits, especially coming from institutional depositors. Those deposits that truly have a full digital -- sorry, follow the treasury department talking to all banks, and they really just move funds just because of 5 or 10 basis points. So the more we go with institutional deposit outside of the country, medium term, long term, 5 or 3 or 5 years or even the CDs themselves, even though typically around full 1 year, but it's better than taking a 2-week deposit, 3-week deposits, that continuously putting pressure on us, and we've seen the higher level of competition on that. In addition to that, I think the outlook for interest rates is going to go down, and that should help also on the cost of funding. Any spin-off for disposal, not in our current strategy. We have not built anything to do with the spin-off or our disposal for any businesses.

Can I ask one follow-up question? Is that okay? You mentioned about the underserved segments of the economy, that's something that you'll be focusing on. Can you elaborate what you see as really underserved? Is there any particular opportunity left, which can transform your business in terms of customer numbers. For example, if I refer to consumer finance, I think Saudi Consumer finance is very much like prime market. and there are lots of opportunities there. But for you as a bank, what are the main underserved opportunities or segments in the economy that can transform your profitability? What do you see? Anything that is out of the box that we are not capturing.

Yes. As I mentioned, I back that I will not try to expand on that business build, but I did mention the [ ES ] business, which is a digital application to all digital even credit system to serve basically the very micro and very small -- the micro on very small SMEs, which is really underserved in the country. A lot of these business owners, they want the new funding they have to actually apply for personal finance rather than a business lending. So that's a segment that is we believe there's good opportunities. We just launched that product. Now there are certainly other segments, whether it's blue collar, whether it's low income and so on. But I can only talk about it once we get the right approval in place.

We'll now take our next question from Mohammed at Hosana.

Just one question from my side, which is regarding the mix of your capital. So you're guiding for a total capital adequacy ratio above 18%. But if I think about it from a common equity perspective, how much you are targeting when it comes to how much your common equity will represent out to your total capital by 2030? Because as of now, I think that 3% of your capital is Tier 1 and Tier 2. And related to that, if it would be possible to share what is your targeted ROE after Tier 1 expense. That would be very helpful.

So on the first part, on the -- how much the common equities would be as a percentage of the total equities as mentioned earlier, I would be relevant to the previous question on how we are actively managing the capital to support the growth on a low double-digit CAGR on the total assets for the next 5 years. As mentioned as earlier by the CEO, it's a combination really by which we can do when it comes to the increase in profitability, as evidenced by the guidance on the ROE and also what could be done towards the dividends. And also the [indiscernible] the continuation of the support on the capital support when it comes to Tier 1 and Tier 2 instruments. Unfortunately, we're not -- we don't guide for the CET1 by itself. So the -- it's a combination, as mentioned, how increasing CET1 through the lower dividends or also the internal generated capital but also in the meantime, the forecasted issuances for the capital instruments, again, as I mentioned, Tier 1 and Tier 2. So we don't disclose really the specific guidance on how common equities would be as part of the total equity or indirectly guiding for the CET1 by itself.

Okay. What about the ROE after Tier 1 expense or let's say, ROE, return on common equity?

So obviously, we don't -- we guide actually, as we have been always communicating to investors in the ROE, which is the one also we are guiding on now. which is excluding the impact of the Tier 1, that's the shareholders' return on equity. Just the other side of the question, just saying what is the ROE based on the guidance on the -- with the Tier 1s, which reflects how much the common equities is going to be by 2030. But this is how we have been reporting ROE, and we will continue as mentioned earlier, also to guide for every year separately in the same manner that the ROE would be the ROE return on shareholders' equity after excluding the Tier 1.

I'm afraid that's all we've got time for in terms of questions. So I'd just like to hand it back to management for closing remarks.

Thank you, everyone. Please refer to the strategy tab in the IR website for further information. Otherwise, please contact IR for any follow-up questions.

Just final comment also from my side. Obviously, Soon, we'll go for -- once we announce our financial results, we will go for [indiscernible] call. As usual, I think fourth early February, I would say, and that will be another chance also to talk about the new strategy for the bank. Thank you all. Appreciate it.