Alinma Bank (1150.SR) Q4 FY2025 Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to Alinma's Full Year 2025 Earnings Call. This is Mehmet Sevim from JPMorgan CEEMEA Financial's research team, and we are honored to host Alinma's management today. Without further ado, I'll now hand the floor to Arwa Alshehri, Head of Investor Relations, to begin the call.

Thank you, Mehmet and JPM for hosting this call. Good day, everyone. Welcome, and thank you for joining us after we met earlier in the bank's Strategy 2030 review call. On that, I would like to let you all know that the [indiscernible] webcast [indiscernible] is now available in the newly launched strategy tab in the IR website to maintain transparency and continuous disclosure. Presenting first is our Dear MD and CEO, Mr. Abdullah Al Khalifa. He will begin by providing an overview of the bank's performance and financial highlights, followed by the strategy overview. After that, our CFO, Mr. Adel Abalkhail, will be presenting a detailed financial performance for the full year 2025, concluding with the guidance for the rest of the year. As always, we will make sure to make proper time for Q&A, where we will be addressing your questions along with our Deputy CEO, Mr. Saleh Al Zumaie, covering retail, private and digital and Chief Corporate Officer, Mr. Jameel Al Hamdan. With that, I'll pass the floor to you, professor.

Thank you, Arwa. Hello, and welcome, everyone. I'll start my presentation on Slide #6, high-level performance review. Our financing or our loan portfolio increased by 14% to reach SAR 229.7 billion. Total assets increased to SAR 311.1 billion, 4% year-to-date. That puts us now as the fifth largest bank in the country. Our operating income increased 9%. Net income increased by 10%. NPL ratio is 92 basis points and our coverage ratio is 150%. Our Q4 customer deposit is SAR 227.4 billion, an 8% increase. However, CASA increase is only now down to 1%. I think we had large movement towards the end of the quarter, Q4 by some of the government [indiscernible] government institutions. That's why if you recall, we were showing significant growth up to the September up to Q3. As a result, CASA as a percentage of deposits declined to 48.3%. Cost-to-income ratio is 31.2% and net profit margin was also about 23 basis points to 3.47% and ROE improved to 18.7%. As you know, 2025 is the end of our previous strategy, 5-year strategy. And as a result, I'm going to show you just the results -- quick results of that strategy and the accomplishment during those 5 years on page -- on Slide #8. Now you've seen we've been growing our assets from 2020 to end of '25 at an average growth rate of 15% per annum. Our loan portfolio was also similar growth, 15%. Our customer deposit not far off by 14% on an annual basis. CASA was grown at 9% would have been higher if we had did not have that loss at the end of Q4. Corporate financing loans has grown by 14% on average. Project finance included in that was growing at a faster at 15%. Mid-corporate, as you recall, we didn't have actually any focus on mid-corporates, grew at an astonishing rate of 111% per annum to reach SAR 15.1 billion from the base of '21. Actually, we didn't have much in 2020, so it's [ SAR 750 million ]. SME is growing at a fast rate of 27% to reach SAR 12 billion. Our retail was growing much faster than the industry is growing at an average growth rate of 20% to reach total portfolio of SAR 59.2 billion. Mortgage had even faster growth from SAR 11.5 billion to SAR 29.3 billion, that's an average growth rate of 21%. Auto loans and revolving credit card, we had none at the beginning -- at the end of 2020. Now it reached a level of auto loans of SAR 3.9 billion and SAR 1.1 billion for revolving credit cards. Another thing that we're very proud of, if you look at the return on equity, we started with a low base of 8.4% and now we closed the 2025 at 18.7%. That's 10.3 percentage points increase over that period. Return on assets also increased by -- from 1.4% to 2.2% and cost to income improved from 36.4% down to 31.2%. Now on the next slide, I'm going to take you quickly through a 2030 strategy. We did a full presentation on January 14, but I'll just be very quick here into summarizing the headlines in our strategy. So if you recall, our previous strategy was really mainly focused on fastest and most convenient bank. That was important because of the digital transformation required as well as the expanding our customer base. So now we're shifting to be the most innovative and customer-centric bank in the country with a clear focus on profitability, building distinctive differentiation. Now if you look at the components of that, most customer-centric, we want to focus on seamless and memorable AI-powered journeys. We want to be the main bank for all our clients, which we did not mentioned in the details to follow. And also most innovative means we lead with cutting-edge technology. AI is a strong component of our 2030 strategy with a focus on it. On the profitability, we want to drive profitability through scalable operating model, improved monetization and streaming cross-functional collaboration. Slide #10 gives more details by business. Again, that headline, you probably have seen more details in the presentation in January. But for retail bank, we aspire to be aspire to primacy with all customer segments that we serve. We want to also have our customers have memorable journeys, customer journey across digital and also physical channels. In private banking, we want to set up market differentiating and proposition for our clients. and offer world-class and exclusive local investments opportunities. For corporate banking, similar thing, we aspire to primacy for all our customers that we serve and also want to create even more distinct on SME financing, upgrade transaction banking for large corporates to become the private sector preferred gateway to -- in the Kingdom. For digital bank, obviously, we talk about innovations and so on, that is going to play a continuously important role there. So for digital bank, we want to develop intelligent banking platform to drive primacy. We want to launch beyond banking digital offering, leveraging strategic partnerships and investments to drive innovation. Treasury, we want to continue to expand our array of funding instruments from local and international partners want to shift investment composition to better yield enhancements without taking significant risk there. On the next slide, cover the bank, like in human capital, we aspire to be the leading employer of choice among the Saudi banking sector on AI, digital and technology and data. We establish a bank as a digital leader to drive innovation and technology and data that sets local benchmark. On credit risk and compliance, we also have leading risk-adjusted decisions and pricing practices. In marketing, we want to be among the top 5 brands in the country, not just among banks, but all corporates or brands in [indiscernible]. Operation market leader and operational excellence. by driving digitalization and client-first mindset. So that was a quick, as I mentioned, we've actually covered more in detail in our January meeting. With that, I give the floor to our CFO to take you through the detailed financial.

Thank you. A very good afternoon to you all, and welcome again to our earnings call for Q4 2025 results. I will start with the financial performance, the details, then that will be as usual, followed by an outlook and the guidance for 2026. So starting with Slide #13 on the overall balance sheet trend. The total asset growth is 12% year-on-year. Total assets has reached SAR 311 billion by end of December, which, as mentioned by the CEO earlier, makes the Alinma Bank the fifth largest bank as of December in terms of total assets. And also the total liabilities, we have seen 12% growth in the overall liabilities, clearly driven by 8% growth in deposits, which we'll come to later. But also, you can see in the graph in the bottom right graph, the growth of SAR 7.8 billion. These are the new source of fundings ranging from senior unsecured and also the certificates of deposits that we have been -- we have issued throughout 2025. Moving to next slide, Slide #14, on the P&L trend. Overall, net income year-on-year is 10% the growth that was driven mainly by the growth in funded income of 8%. Also nonfunded income has grown year-on-year, 10% that was offset by 10% growth in the operating expenses, and we have 11% overall impairment -- lower impairment charge year-on-year. So the operating income composition by December, around 80% of the funded income and also the 15% would be relating to the pure fees from banking services, and we have the investment gains and dividends related plus the exchange income, 3% each. Moving to Slide #15 on the financing. We've seen, as you can see in the graph, uplift the graph, Q4, the growth in financing was a bit slowing down on a sequential basis, 1%. That was mostly driven by retail that has grown by SAR 3.6 billion. The growth year-on-year in retail portfolio overall was 17% versus 12% on the corporate portfolio. The financing composition did not change 25% as of December for retail and 75% for corporate. 63% relates to project finance and large corporate, 52% of the 63% relates to the project financing. Mid-corporate represents 6% of the portfolio, 5% for the SMEs and the consumer financing and mortgage is 13% each as end of December. On the second slide, slide -- on the next slide, Slide #16, on the deposits. As you can see from the graph, total deposits has dropped 3% on a sequential basis. However, year-on-year, we have seen 8% growth. CASA was 1% growth, but 18% was the growth on the time deposits. The lower growth in CASA from what we have seen in Q3 has lowered the CASA as a percentage of total deposits being 48.3% from what it was same period last year at 15.6%. The overall deposits, 68% of them is being managed by retail and the remaining is managed by the non-retail segments within the bank. On Slide #17, on the NIMs and the income from financing and investments, given the slower growth that we have seen in the financing side, almost the total funded income on a sequential basis was flat. However, year-on-year, the growth was 8% was driven by 8% growth in the financing and also an 18% growth in the investment income. So on the NIMs movement, we have seen a contraction on the NIMs by 23 basis points from the same period last year, and this was mainly a drop on 51 basis points from the financing yield. This was offset by 25 basis points improvement in the overall cost of funding. And also we have 2 basis points improvement in the investment-related yield. So the net profit margin at the 23 basis points year-on-year contraction. However, we have seen on a sequential basis, 8 basis points improvement in Q4 versus Q3. Q3 NIMs were at [ 3.8% ] while Q4 stand-alone Q4 was 3.46%. Moving on Slide #18 on the fees and nonfunded income. We have seen a very good growth on a sequential basis for Q4, 21%. And also year-on-year, the growth is 10%. As mentioned earlier, the fees from banking services was 8%. We have seen a drop in the FX income year-on-year by 4%, but this was also offset by the investment gains and dividends and also other income. The overall fees composition as of December, mostly in the fund management, 36%. We have 22% related to card services. And also we have trade-related fees is 13%, 8% is the brokerage fees and there are other fees, other cash management-related fees representing 21% of the overall fees at the end of December. On the next slide, Slide #19, on the operating expenses. We have seen a pickup on a sequential basis, 3%. There was one-off there in Q4. However, overall, year-on-year, 10% growth is mostly -- personnel-related cost was 9%. And also, we have seen the other G&A 9%, 22% even though smaller base on the depreciation and amortization, but in a net amount, the increase is SAR 77 million. This increase in the cost with 8.8% growth on overall operating income with 9.8% growth in overall OpEx I think drove the cost-to-income ratio to be 31.2%, up from 30.9%. However, this is a cost-to-income ratio by year-end is lower where we have seen the 9 months where it was 13.57% by end of September. Slide #20 on the impairments. We have seen 15% growth on a sequential basis. However, the overall impairment year-on-year is lower by 2%. So the overall impairment allowance is a balance. Most of it, 82% obviously relates to corporate and 18% relates to retail. So we have seen cost of risk reaching 47 basis points by end of December versus where we were same period last year where it was 55 basis points. On the next slide on the NPL and NPL coverage, we have seen 22% drop on the NPLs for Q4. And part of that is most of the movements, but also there is impact of the write-offs that the bank has done during quarter 4. This has dropped the NPL ratio from Q3 1.2% to be 92 basis points by end of December. Also coverage ratio has dropped from 158% to -- was still 50% -- 150.3%. On the stage-wise coverage, you might notice that the Stage 3 coverage went down from September, it was 66.4%. It's standing at 45.6% and part of that would be -- would be related to the write-offs that I mentioned earlier. Slide #22, relating to the capitalization and liquidity. The overall Tier 1 and Tier 2 for Pillar 1 risks stands at almost 20% by the end of the year. The ROE standing at 18.7%. It's a 10 basis point drop from where we were last year. Looking at the prudential ratios, LCR is at 131%, which is still well above the regulatory minimum. And also, we have seen a pickup in the LDR still way below the regulatory maximum standing at 82.1% and so far remained healthy at 110.5% by [indiscernible]. In the next section on the Slide 24 on the guidance for this year and where we are with the guidance for this year and also next year. So for 2025, the mid-teens guidance was achieved on the financing growth where we closed the year by 14%. On the NIMs, the guidance was 10 to 20 basis points. The contraction was 23 basis points, which is 3 basis points at the lower end of the guidance. Cost to income is going to 20 points per thousand higher than the guidance given, which is below 31%. However, for return on equity, cost of risk and also the total CAR, it's all within the communicated guidance for 2025. Looking into the guidance for 2026. The financing growth to be at low teens for throughout 2026. The guidance for net profit margin is a further lower contraction, and we are guiding for 5 to 10 basis points contraction for 2026. The cost-to-income ratio guidance is 30.5% below 30.5% and also return on equity guidance is above 19%. Cost of risk is 45 to 35 basis points for 2026 and the CAR Pillar 1 for Tier 1 and Tier 2 capital is around 19%. Just a quick reminder on 2030 guidance, what we have communicated back in January for the asset growth double digit -- low double digit on a CAGR basis on the asset growth, return on equity above 22%, cost-to-income ratio below 28.6% and the overall CAR for Pillar 1 -- Tier 1 and Tier 2 capital to be above 18%. So with that, I will hand it back to the operator for the Q&A. Thank you.

We will now start with the Q&A. And our first question comes from Olga Veselova of Bank of America.

I have 3. First question is on provisioning outlook. What makes you comfortable to guide decline in cost of risk this year? And actually, the guidance is below through the cycle normalized level for Alinma. And how does this sit with the increase in cost of risk in the fourth quarter and a decline in coverage ratios by the end of the year? So that's question number one. Question number 2 is on margin on asset yield. Do you do repricing of existing or only new corporate loans? And by how much do you amend [ spreads ] over SIBOR? And maybe even more important, how much room do you think you can have to keep repricing spreads on financing? And my last question is on fees. There was a very nice pickup in fees quarter-over-quarter by the end of the year. Which -- so were there any one-offs? And what were the drivers in this quarter? And what would be your estimate of impact from recent regulatory changes on fees in the first quarter?

Okay, Olga. Obviously, on the cost of risk, it's in line with the good economic conditions in the country in all aspects. All sectors are doing very well with these projects that's happening in the country. The country is really a huge workshop, plenty of activities, whether it's in real estate, whether it's manufacturing, whether it's on tourism and entertainment, renewables, you name it. So these are obviously have a positive impact on cost of risk typically. The other thing is also it's in line with the trend that you see in the market for us. We've been always higher as a conservative bank in deciding on the provision and the staging and so on. We've always been over the last 5 years, higher than the market average. However, it has been also a declining cost of risk throughout the last few years. And we believe that even with the strong economic conditions, we've always had this view that we should have significantly low cost of risk. So -- and I've been transparent with the investors, and I'm saying that even in the good conditions, we should have at least [ 40 ]. If it goes below [ 40 ], it should not go significantly below that. So we're comfortable with that level of cost of risk. On the asset yield repricing, obviously, as you know, the portfolio is segmented in most of the retail -- all the retail actually exposure is not repricable. However, there is always a refinancing and top of that gives you a chance to improve on the yield on the portfolio. In corporate, also it depends if you look at syndicated loans, highly unlikely to have flexibility to reprice. On bilaterals, you have better options and repricing, especially on new facilities or renewed facility like revolving working capital and so on. And we've seen a better trend in the last half of the year with our ability to reprice. I think we've -- I would say towards the most of the second half last year and the first half this year, we've seen this aggressive pricing. And I think that is now disappearing in the markets, and that helped us in repricing some of the assets that we have. On the fees, Adel?

Olga, on the fees on a sequential basis from Q3, there was an increase in the overall fees. A part of it is business as usual, but definitely, there was some one-offs there, not all of it one-offs, but this is in line with what we have mentioned before about a continuous effort to improve our collaboration with certain. This is related to card services income, and this is part of our continuous improvement on the operating model that we have with most of the card schemes and providers that we continue to improve, which reflects positively on the P&L.

And the impact from the recent regulatory changes?

Saleh.

Everyone. Yes, there are some extent towards the end of the year, some changes in the fees, especially in the consumers. We've calculated this and we budgeted for next year. We know that there are new ways that we could generate more fees, especially we focus now on the bancassurance and other fees. So the good thing that it was communicated to us before our budget for 2026, and we do believe there are some impact, but not that significant. It's through some service and products, and it will be through other fee income products that we will introduce this year.

[Operator Instructions] The next question comes from Jon Peace from UBS.

So firstly, on the NIM, sorry if I missed it, but how many rate cuts do you assume? And what is your liability mix or your CASA assumption that's embedded within the NIM guidance. And then second question, please, on cost growth, could you give us an idea of what the absolute run rate of cost growth might be in 2026? And then finally, and sorry if I missed it, do you have a CET1 ratio for year-end? And I know you've done the bonus issue, but is there a cash dividend as well?

Yes, Jon. So on the rate cut, we -- whatever we construct our business plan, we take whatever the market would assume. So probably at that time when our targets has been set for the year is probably one rate cut, another rate cut could be towards the end of the year. And we don't really disclose the mix of those liabilities, but there are, of course, internal targets for both IBs and NIMs, of course, and the CAR's also. But it's part of the overall calculation of the NIM guidance. I we don't disclose really the targets of the CAR's as a percentage of total deposits for as a specific guidance. On the cost, we are -- as mentioned, there are still -- we are getting into a new strategy. Of course, we continue to invest. However, if you recall, we have mentioned in our call, I don't know if he was there or not in January, part of the strategy is also to build the operating model all around AI. We have been talking about 600 million to 1 billion financial impacts of what we are trying to do for the next 5 years. And 55% of that is relating to cost efficiency. So of course, that is part of the overall growth direction. So the 10% growth that we have this year is technically around the number. It's single digit, 9.8%. However, we always continue to look for the path here and there. But also the implementation of the new strategy is definitely going to be driven -- part of it is going to be driven from the efficiency. On the CET1, on looking into at least where we are in the market, we're #7 when it comes to the CET1. We're still around slightly above the 13% CET1 -- so that still did not change much as end of December because any cash dividend that would be announced, which we didn't, it will be reflected in the subsequent period rather than December's reporting period itself. Hope that answers the question, CTO, [ Andrew ].

Yes. And sorry, just to confirm on the dividend. Did you announce a cash dividend yet? Or is it just the bonus issue?

We did announce the bonus here already right after the announcement of the results.

The next question is from Rahul Bajaj from Citi.

This is Rahul Bajaj from Citi. I have 2 quick questions actually. First one is on Stage 2 and 3 coverage. I see the coverage levels have declined quite materially in the final quarter of 2025. Actually, it's the lowest level in the last several quarters. Are you looking to build coverage levels from these levels -- coverage from these levels for Stage 2 and Stage 3? Or do you think the current levels are kind of adequate, so you'll run with that. So that is my first question. My second question is on the growth rate we have seen in the investment portfolio, which has been much stronger than the financing sort of book growth. Is this a deliberate strategy to grow investment portfolio at this stage? And going forward, how should we think about growth in the investment book vis-a-vis the growth in the financing book?

Thank you, Rahul. Obviously, I think Adel mentioned in his presentation that the drop in Stage 3 coverage ratio that was main reason for this was the write-off that took place in Q4. Obviously, we write off a loan, 100% provision against 100% exposure and which is 100% coverage. So that obviously, when you write it off both sides disappear, mathematically lower the coverage ratio. And certainly, it's not the level that we want to maintain. We want to continue to increase that and go back to within the line of the average of the markets. In terms of the growth rate and growth in investment portfolio, obviously, as our business grow, we have to buy more high-quality liquid assets. And obviously, for us, it's mainly Saudi government sukuk the funding part of that is much easier because obviously, you can do a repo or we can also finance it from Interbank, finance it from the equity, growth in equity and finance it from the extra remaining deposits that you get from the clients because obviously, LDR is 90% or whatever extra deposit is used for investment.

And the next question is from Naresh Bilandani from Jefferies.

It's Naresh Bilandani from Jefferies. Three questions, please. One, does the current CAR guidance build in an AT1 issuance this year? Or do you believe that the capital buildup will be done internally only? That's the first question. The second, on the write-off that you have reported, is this a bilateral exposure, which was specific to Alinma that moved the needle? Or was this exposure syndicated among other banks, too, within the industry? And my third question is, as you discussed earlier, I hear your comfort on the cost of risk given the current economic momentum. But given your significant exposure to project finance, just keen to understand if you have had any exposure to projects that have been canceled or scaled back? And how do you see your comfort on these exposures? So 3 questions. So the CAR guidance and buildup internally on AT1, the write-off that was specific to Alinma or syndicated among banks and your comfort on the cost of risk and exposure to projects that have been canceled or scaled back.

Thank you, Naresh. Obviously, on the CAR guidance, certainly, we've been very clear that we'll continue to tap in the international markets. We have a SAR 5 billion Tier 1 support is coming for callability in July. And as I mentioned, clearly that we're always going to fall back on time because that's the market expectation, that's the investor expectation will go back on the first following period. So something that we continue to do. So unless the appetite disappeared from the international market, then that will be a different scenario. But in our plan, we are going to go and issue for more of Tier 1 or Tier 2 or a combination of both. On the write-off, it's bilateral loans not syndicated. On the cost of risk, Naresh, you mentioned that because of our exposure to project finance. Most of the project finance that we've done is really to do with either renewable utility, sewage treatment with the clear offtake by ultimately government entities. We don't see any risk there. In fact, we should carry much lower cost of risk for those types of projects.

And the next question is from [ Murad Ansari ].

Yes. On the NIM's guidance, so for this year, you're guiding to a small compression. I just wanted to get a sense of, a, how the liquidity situation in domestic market has been given that we've seen a slowdown across the sector on loan growth momentum and at least some of the other banks that have come up with guidance for next year are guiding to single-digit or mid-single-digit kind of growth. So it seems like the pressure on liquidity probably is not going to be as much as it was over the last couple of years. So that liquidity situation and also, how does that feed into your NIM guidance? I mean, I would have thought that given how the pressures have been on liquidity and given that we have -- on funding costs, my impression was that we might see funding cost coming off at a faster pace versus the asset yield decline. So just your thoughts on that. I mean the decline in NIM, is that more driven primarily by rate, the impact of the rate cuts? My second question is on the loan growth spread. I mean, in terms of sectors or rather in terms of segment, consumer versus corporate, how do you see 2026 to be more, again, stronger? Do you expect corporate to be stronger? And fourth quarter, as you mentioned in the presentation, was quite strong on retail. So just your thoughts on what's driven that? And finally, on dividends. So you've been very, I think, transparent about talking about your views on capital and how to build that up. It appears that the fourth quarter dividend has been skipped and we've got a stock dividend this quarter. How should we think about 2026 in terms of dividends? You're the only bank that pays out a quarterly dividend but has a history. So has your -- are you comfortable with where your capital ratios have improved to after there's a dividend skip? And -- what should we think about in terms of dividends going into 2026?

Thank you, Murad. On the liquidity, I wish I can say that liquidity will going to improve in 2026. I've heard about some of the guidance that some of our banks given maybe mid- to high single digit. If that's the case for the industry, that's good news. That means less competition on deposits. Yes, the rate is expected to go down. However, the amount or the number of basis points that banks are paying on top of that is not really helping to get the benefit of the decline in rates. So that's our assumption that we build it there that liquidity costs will still be -- or liquidity itself will be still tight. On the loan growth, yes, we're very comfortable with the loan growth demand on the next -- not only next year, but I would say, easily the next 3 to 5 years. We're comfortable with the growth on both sides. On the wholesale side, there's obviously, as I mentioned, there's a lot of activity, a lot of sectors. In fact, there are new sector in the economy that haven't yet came for a significant demand for credit, something like mining, maybe tourism and defense industries and so on. These are segments we know it's in the country vision, but we have not translated that into yet strong demand of credit. It's most likely going to come. On the retail side, unemployment is low, demand affordability on mortgage is helping. So that the demographics are young. So I think that will continue to have a strong demand on retail. On the dividend side, obviously, again, we've been in multiple occasions, talking to the investors and analysts has been clear that we know that we have strong demand on credit. We know that we needed to continue to have the capacity to continue to grow from liquidity side, which we're diversifying, obviously, in multiple instruments and multiple regions to get the liquidity. However, on the car, certainly, the Sukuk Tier 1, Tier 2 held, but we need also to improve on generating internal capital. And we announced in Q4 bonus shares. We have not announced dividends whether the Board will decide on it or not. But I mean our announcement is clear, it's a bonus share. I think if you go back in the short history in 2023, we did issue also bonus share for Q4, and we did not pay any cash dividends for Q4. And next year, 2026 will be certainly lower payout ratios than what we've seen like in the first 9 months of the year, we were paying, I think, an average 47 basis points -- 47% payout ratio. So that will be lower.

And the next question comes from Adnan Farooq from Jadwa..

A couple of questions from my end. First was on the -- when you were describing the costs in the fourth quarter, did I hear you correct, there were one-offs in the cost? Can you quantify how much were those one-offs? And secondly, on the write-offs that took place, can you tell us which sectors were they related to?

So Adnan, on the first question on the cost, you're right. I mentioned that Q4, if you see on a sequential basis, OpEx a bit higher than what we have from Q3. It's not one-offs. It's a part of the increase is also a one-off and one-off by nature, we don't expect that to be repeated. So yes, there was part of it not really material, but it's still a one-off that was recorded during Q4 within the G&A. On the...

Write-off, it's a contracting and construction. It's a legacy lending that was for many years, but however, we did write-off during this year.

The next question comes from Shabbir Malik from Morgan Stanley.

Can we take the next question in line and then come back from Shabbir if he is still waiting his turn.

Yes, audio doesn't seem to be working. So the next question will come from [indiscernible].

Am I audible?

Yes.

Congrats for the very, very great results. I have a few questions. The first one regarding the asset pricing. We noticed that the -- the asset yield spread versus SIBOR has increased this quarter, which is typical given that cost of funding repricing is quicker than the asset yield. But if we look at the repricing table for 2024, which is I know it is outdated by now and compare it with 2023, we noticed that most of assets has turned to be repriced in the first 3 months to be between 3 to 6 months. So should we expect that asset yield versus SIBOR to be under slight pressure in the first and second quarter for this year? This is for the first question. The second question regarding the other income. We noticed a huge pickup in the fourth quarter and now the -- sorry, not the other income, the nonfunding income. And now the nonfunding income consists out of 1/5 of the operating profit. So how do we -- should we see this going forward, especially that with maybe lower mega and Giga projects pickup, the exchange income might be impacted a bit. The other -- the last question regarding the mortgages, we noticed that big players with high duration mismatch has a slowdown in mortgages and started securitization and given the balanced duration of the book that it has, it might be advantaged to take advantage of such mortgage uptick. How do you see this going through?

So the first part -- I'll take 2 parts, the repricing and also the fees [indiscernible] part or the nonfunded income or the other income side. So the repricing, we're targeting today to upload our 2025 financials, where you will see, as you rightly said, maybe 2024 is a bit 1 year back. But you will still see on the note to the financial statement where we segregate the repricing on the asset side, you will see that there is still about the [indiscernible] on the net assets, which exposed us positively if there are rates increase, obviously, it will be negative vice versa. So that's on the repricing. Of course, repricing, that would maybe somehow relates to the sensitivity as well, which is something theoretical as you know, when you look at the note itself, it tells you [indiscernible], the mix of the corporates will tend usually to extend the benchmark rates on a lower benchmark rate environment versus if rates are picking up. So the financials will be out to give the most recent picture about the net commission sensitivity net assets that we have. On the other income on the nonfunded income, as I mentioned, besides there was an improvement on the operating model again on the expected card business, -- but the other income also, it's volatile in nature. You'll see certain increases in certain quarters, certain drops because the part of the nonfunded income that is not relating directly to the fees of banking services, it includes, as you know, those 3 investments related mark-to-market that is held as a fair valuation through the income statement, and these are volatile in nature. This is including mostly the funds that we are investing in, and we do the NTM on a monthly basis. So that's why we have seen a pickup on that. And also, there were other small other incomes that have been added to the nonfunded income on the other income side. On the mortgage side, I think the question was...

If I understand you well, that there is a drop in the mortgage market in the market, but we are increasing. Yes, this is our strategy. If you remember in the last 5 years, we focus on customer acquisition, and we did. Today, we are ranked as the third largest customer base in the country. And this reflects the assets sold to our customers, mortgage, as you mentioned, and also an increase in our liabilities and current accounts. This is a result of the acquisition. Now we cultivate the strategy of the first 5 years of customer acquisition, and we'll continue to lead the market in retail in the coming years or so.

Okay. Just a follow-up on the nonfunded income. So do you see it to grow faster than the funded income or within the same pace?

So as we don't really guide on the nonfunded income separately, however, we've been communicating as part of also the strategy communication that the nonfunded income part of the P&L is a focus by management. And there are certain areas definitely. I know we are maybe in the lower side of the market average when it comes to nonfunded income as a percentage of total operating income. So certainly, there are rooms for improvements within that, but we don't specifically guide as a percentage of the total operating income.

The next question comes from Nauman Khan.

Can you hear me?

We can hear you, go ahead.

I think -- sorry, I think I had some problems with it. I think majority of my questions have been answered. I just wanted to have a sense of what do you think of the overall loan growth for the sector in 2026 as well. I think one of the participants also asked you earlier as well that the other people have come out and have come up with a slightly conservative loan growth of single digits and high single-digit numbers. So your loan growth guidance is quite different from what the other people have come out with. So how -- what do you have the sense of what do you think the total loan growth of the sector would be in 2026? And are you -- and in terms of strategy, are you still going for volume over value? -- margins is something that I think if you can do to. These are 2 questions.

Thank you. Nauman, Obviously, I think in the last -- in the next few days, maybe a week or so, max, you will see all the guidance of the banks, probably give you a better idea -- our focus is obviously always on improving the bottom line. So we're not fighting for market share on the expense of better yield. In fact, we -- if you look at in the first half, of this year, if you go back even a couple of years, we've been missing growing at all because of the aggressive pricing that we saw in the market. So yes, certainly, we can offer match those prices, but that's not good in the long term. So that's -- we didn't do that. We didn't do that for retail. When there was a fight on consumer loans and mortgage, we didn't fight for it. We actually always focus growing our core business, but at the same time for better yield to our bottom line.

Okay. Can we come back to Shabbir Malik?

Can you hear me now?

Yes, Shabbir. Go ahead.

Great. So this year, we've seen good growth from the bank in retail, especially in auto financing. I just want to get a sense of how the margins on auto financing compares with other products such as personal finance. And secondly, if for -- we've seen some of the banks securitize part of their mortgage book to generate liquidity. Is there any scope to potentially securitize some of your project finance loans in the near to medium term? Has there been any such transactions?

Obviously, I'll leave the first question to Saleh. But on the securitization, we've done this. We're going to continue to focus on potentially doing further deals with [indiscernible] Saudi real estate or refinance company. Saleh on the first part?

Yes. To us, Auto lease is almost similar to the personal loan pricing. We do monitor this, and we introduced some products that we could also refinance the auto lease after 2 years, which will give us better yield as well. So -- and it's in line with the budget that sits for us. We do place the [ Riyal ] in the right place, and we have to offer this Auto lease financing, which is in line with the budget that set out for the portfolio.

Abdullah, my question was more on project financing side. So is securitizing project financing loan, is that a possibility in this market? Or that's not something that you've seen happening in the Kingdom as of yet?

I heard it like auto finance. Project finance is something, obviously, we are -- continue to expand it. We feel that it's actually better -- typically better yield than a large corporates, bilateral loans for large corporates. And the risk is lower. because of the fact that we know the investment, the investor or the consortium of investors in that project as well as the offtake of that project by government or government entities. We feel it's a very -- it's a good risk. We have built strong expertise and knowledge and a long track record on these types of projects. We're going to continue to focus on growing that business. So generally speaking, it's better yield than bilateral large purpose.

We have time for one more question. Abdul Aziz [indiscernible].

Two questions. One on the dividend payout. So you mentioned the payout to be lower in '26 versus '25. If you can just provide maybe a range of payout -- potential payout ratio. And the second thing is, I heard you saying you're factoring in one rate cut in 2026 in terms of your NIMs. Is that accurate? Or are you factoring one rate cut in the first half of the year and then one towards the end?

On the dividend payout, as I mentioned, the common sense is that we're still going with the growth in terms of the demand on credits. And naturally, we cannot continue to be like the level like 47, 50 basis -- 50 payout ratio. So it's common that should be lower. It may not be an absolute value, it's actually growing because our profitability is growing. Exactly the guidance on this is not in my control. It's actually the Board, and we have to get the regulator approval on every dividend announcement, but we should normally expect to see lower. On the rate cuts, look, we actually do not develop our own forward yield curve. We do -- when we do our business plan, we take from the market the forward yield curve. That's how the market looks at it. We don't put our own factors into it. And before the earnings call, typically, we rerun our forecast based on the latest forward yield curve. So we don't actually build it. It suggests what Adel mentioned suggests that this will be like a rate cut this year.

Sorry, it suggests one rate cut this year. Is that what you said?

As mentioned by our CEO, we take the yield curve, the yield curve that is being developed by the market, it suggests that our rate cut and maybe another rate cut towards the year-end. And again, for the guidance, as just mentioned by CEO, we always take the rollover forecast for the full year also because if you're linking this back to the NIMs, it has other factors, not necessarily how the benchmark rate itself or the rate cut itself because also the movement of SIBOR we have seen recently different movements against pure rate cuts as basis points, but also the funding mix, the level of CASA growth, also growth in the assets and the mix of the asset growth also retail and within retail and for corporate and within corporate as well.

There will be no further questions on the webinar. I will now pass back to management for closing remarks.

Thank you, everyone, for joining this call. Please contact [email protected] for any follow-up question.