Alinma Bank (1150) Earnings Call Transcript & Summary

Good day, everyone, and welcome to the Alinma Bank's Q2 2023 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Waleed Mohsin from Goldman Sachs. Please go ahead, sir.

Thank you, Linda. Good day, everyone. Welcome to Alinma Bank's Second Quarter '23 Earnings Call hosted by Goldman Sachs. It is my pleasure to welcome Alinma management represented by the CEO, Mr. Abdullah Bin Al Khalifa, the CFO, Mr. Adel Saleh Abalkhail and the Head of Investor Relations, Mr. Ahmed Sager. The call is intended for analysts and investors only, and any media person on the call should disconnect immediately. Please also note that the call is being recorded. So without any further delays, I will pass on the call to Alinma Bank's CEO, Mr. Abdullah Khalifa.

Yes. Good evening, everyone. Thank you again for attending our earnings call. I'll take you through a quick presentation as usual about the high level of financial performance as well as our progress on implementing our 2025 strategy. That will be followed by a detailed presentation by our CFO, and then we'll open the floor for the Q&A. So just jumping on to Slide #6 in the presentation. Our financing increased by 10.4% to reach 161.8% driven really by all the segments. In retail, we had strong performance as well as in corporate. So it wasn't like corporate only or retail on this is really a balanced growth. Total assets increased by 13.2% year-to-date to reach SAR 226.9 million. Our first half operating income increased by 23.4% and our net income increased by 25.4%. NPL ratios reduced to 1.89%. Our coverage ratio improved from Q1 when we used to be at 122, now we're at 130. Customer deposits increased by 22.5% to reach 177.9%, but more importantly, as we mentioned before, we're putting a lot of efforts and focus on growing our CASA. And we've done a good job this year by increasing CASA year-to-date by 6%. Our cost to income decreased from 34.9% last year, first half last year to 32.6%. Our net interest margin increased from SAR 342 million in first half last year to SAR 379 million. Our CASA as a multiple times mentioned, our CASA as a percentage of deposits because of the strong growth in loan that has to be accompanied by growth in town deposits continue to dilute 49.9%. Nevertheless, the overall balance has grown as I mentioned before. Our capital adequacy ratio reached 18.2%. On the strategy, [ a bit ] reminder on Page 8, basically, we want to be the fastest and most convenient bank in the country. We want to be the best service provider in terms of quality of service through being #1 in net promoter score and want to be employer of choice. On the next page, it shows more details from business-wide. So retail want to focus on the affluent and high net worth franchise. We want to focus on our youth segments as well as, as I mentioned before, is the best service provider. In corporate, we want to be the core bank, not only for large and project finance, but also for mid-corporates, selling all products that we can offer, whether it's trade or treasury. The second area of focus in corporate is growing our SME business. The third pillar within our corporate is growing the cash on trade. Treasury, obviously, now we're offering the products or it's hedging, whether it's customer needs and hedging all investments, hedging interest rate risk as well as FX risk. We've grown our FI business and maintain a high-quality airline function. To do that, obviously, we're building and we built a digital factory to cater for this quick transformation and better innovation in our products. We want to obviously continue to develop our analytics through the use of the huge data that we restore as well as obviously a contract transformation not only to attract talent, but also to the retailer. On the next page, Page 10, it gives you some level of things that we completed so far. If you recall, we had 77 initiatives, of which we finished 58 by end of June. In fact, this week, we closed another one. So as of today, we actually closed 59 initiatives out of 77. Some of the things that we've done in retail, for example, we launched the Youth app and the one I was talking about it before. It's in sandbox stage. It's friends and family. We also launched Marketplace through our new growth app that we launched. We also implemented the systems for the anti-fraud. In retail, I'm not going to go through H1, but just give you a flavor. And within also retail, we implemented digital sales or digital ability to apply for digital products like credit cards and personal loans. We launched Alfursan, it's a loyalty program in Saudi Airlines, which created a significant demand. We continue to install our TCR machines. So TCR, 29. We continue also to our process of merging men and women branches into 1. In corporate, we worked with Saudi Fintech subsidiary [ by us ] to focus on growing the e-commerce through ClickPay. We've had significant growth in mid-corporates. As you recall, that's an area that start focusing on '21 based on our strategy. And we also had significant growth in SME, including 70% growth in program-based lending. We continue to expand our derivatives and treasury. We also introduced more products like report maturity. We also have colored profit rate swaps. On the next page shows some of the things that we're working on. We're working now on '18 technically because we just closed one. So 18 initiatives we're working on, things like we're going to continue to expand on our digital factory for the transformation needed. We want to develop our credit scoring, which is important for non-salaries some were hard to develop. Retail, we're going to enhance the family ecosystem by actually targeting different life stages of the members of the family. We want to digitize our mortgage journey. We want to continue to improve the turnaround time through use of digitalization and automation. We want to continue to implement, obviously, the branch merger that we mentioned. Incorporates, we are working to implement a new loan origination system as well as an integrated portal for corporate segments, all corporate segments. We continue to enhance our work on our structure originate distribute structuring that we're working on. And of course, for treasury, the focus is obviously cross-selling some of the products that they have. With that, I give the floor to the CFO to take for a detailed presentation.

Thank you. A very good afternoon to you all. Welcome again to our Q2 results conference call. I will be walking you through the detailed financial performance, and that will be followed by the latest guidance update for the remaining of the year. As usual, I'll try to cover this a bit faster that will allow more time for the Q&A at the end. Q2 was a very excellent quarter, both from balance sheet growth and also from P&L perspective. If we look at Slide #13, on the balance sheet trend, total assets has grown YTD 13%. And this was mainly driven by 10% growth in the financing. And also we have 4% growth in the investment portfolio. And also, we have SAR 9 billion growth YTD on the interbank and [ finance ] with SAMA. The total liabilities movements, we have 15% total liabilities growth to YTD, and this obviously was driven by SAR 32.7 billion growth in customer deposits, which translates into 23%. On the next slide, Slide #14, on the P&L trends. The 6 months year-on-year net income has grown 25%, and this was mainly driven by SAR 869 million that translates into 52% growth in funded income. Operating expenses are up 15%, and we will have a separate slide on the expenses later on. And year-on-year impairment charges are up 38%. On the next slide, Slide #15, on the financing. If you recall, we had 4% growth during Q1. This quarter, the growth in financing is 6% on a sequential basis. This translates into 10% overall growth in financing. On the top right graph, total corporate financing, including SMEs, represents 75% of the overall financing of total SAR 165.9 billion overall financing portfolio for the bank and the remaining 25% is for the retail financing. In the bottom left graph on the financing growth, YTD, we have seen home financing growing 7%, personal financing and other retail products, which include revolving credit cards and also the newly launched products of Autolease, growing 16%. The major growth in volume was on corporate, 9%, and this was driven mainly by project financing segment and also SMEs continued to grow with a growth of 17% YTD. On the next slide, Slide #16, on the deposits. We have, as mentioned earlier by the CEO, we managed to grow CASA by 6% to YTD. In the meantime, also, we have a growth in time debate to YTD, SAR 28 billion, which represents 45%. So the graph in the center of the slide, you can see that CASA as a percentage of total deposits, as has been mentioned always before that the percentage will dilute as time deposits goes up to fund the growth in the balance sheet. CASA's percentage of total deposits stand at 49% end of June, down from the BIC that we had in Q2 last year of around 71%. On the next slide, Slide #17, on the income from financing and investment. We have seen a 91% growth year-on-year on the gross commission income, gross yield income. 98% of that was from the financing and 51% of that was from the investments. Looking into the NIMs in the center of the slide, net profit margin, if we compare quarter-to-date net profit margin, we are 2 basis points below the quarter-to-date NIMs of Q1. And clearly, there was growth of 37 basis points between Q1 and 2 in the gross yield income. However, this was offset by 39 basis points as cost growth in cost of funding. The graph in the bottom right on Slide 17, net profit margin, if you can see the trend from June last year until June this year, we have seen the gross yield increasing from 3.93% to reaching 60 point almost double. And we are seeing the cost of funding moving from 50 basis points back into last year to 2.49. So the graph shows the level of the movement of cost of funding that has been offsetting the growth that we used to see as the corporate book gets repriced. So this resulted on a year-on-year net profit margin NIM expansion of 37 basis points, moving from 3.42 reaching 3.79. On the next slide, on the fee and other income, the net commission income. We have seen good growth in fees from banking services even though the overall growth in the non-yield income is almost flat 1%. But the driver of the growth was the fees from banking services. This was offset by slightly lower other income where some one of the transactions were booked during Q1 of last year. Fund management represented 33% of the fees from banking services as a composition, card services represent 24% rate finance services, 11% and brokerage, justly 9% and the remaining will be for other banking services fees. On Slide #19, what I was referring to in the operating expenses and as the bank is almost keeping out of the investment cycle. We are seeing the control of our expenses and the trend. If we recall Q1 on a sequential basis, expenses overall OpEx were up by 1%. In fact, this quarter on a sequential basis, it's lower by 1%, as you can see on Slide #19. So this resulted along with the growth in income, resulted in 8.2% positive jaws that also positively impacted cost to income. You recall cost-to-income ratio was standing at 34.8% end of Q1 this year as the Q2 cost-to-income ratio was 32.6%. On the next slide, which talk about Slide #20 on the embedment for financing. First half impediment charge for finance increased by 55%. That translates into SAR 174 million. Even though on a sequential basis, provision charges are lower by 3% from Q1. The graph in the center of the slide shows the movement in cost of risk. We have seen an improved cost of risk in Q2 in the first half, reaching 84 basis points versus 88%, if you recall, Q1, 88 basis points cost of risk. On Slide #21 on the NPL coverage. We have seen on a sequential basis drop in the nonperforming loans by 5%. And this further improved the NPL ratio reaching now 1.89%, down from 2.11% in Q1. In the bottom left graph on the inbuilt coverage ratio, as mentioned by the CEO earlier, coverage ratio has improved from 12 around 122%, reaching 130.1% end of Q2. We have seen an improvement in Stage 2 and Stage 3 coverages and Stage 1 coverages remain almost flat with the previous quarters. Slide #22, last slide in the capitalization and liquidity. Capitalization CAR below one standing at 18.2%. This is down from 21.8% that was back in June last year, and that's, of course, the result of the growth that the bank has seen since then. On the profitability, we've seen an improvement in ROE also reaching 16% end of June versus 13.4% in October last year. Looking into the liquidity ratios and the regulatory KPIs, LCR stands well above the regulatory minimum at 156% at end of June. Some LDR ratio, the regulatory ratio is 76.4%. That is well below the regulatory minimum. And also we have seen an improvement in air end of June standing at 12.1% by end of June. Moving into the outlook and the guidance, in the finance guidance, talking about the financing growth and as we experienced a 10% growth YTD at the end of June, and you're seeing the pickup in the corporate financing also the continuous growth from retail as well. We are revising the guidance from mid-teens to high teens. On the NIM, the net profit margin, already 37 basis points year-on-year expansion. I would expect slight pressure from cost of funding. We are revising the range of the expansion and the guidance from 35 to 45 bps to a range of 30 to 40 basis points. Cost-to-income guidance unchanged below 2%. Return on equity also guidance remains about 17%, no change. Cost of risk and the effort to improve further the coverage ratio levels, the cost of risk guidance. We revised that from range 60 to 70 basis points. We are revising the guidance to 65 to 75 basis points. CAR Pillar 1, 18.2% remains unchanged as guidance, 17% to 18%. A reminder of the 2025 long-term guidance on CAR also unchanged above 18%. Just maybe before I hand over in the index that Alinma Bank has issued during Q2 its first sustainability report which has actually been prepared using a materiality matrix methodology, which identifies ESG elements of our business that will tell you the most important for both the bank and all the stakeholders. So the report is already uploaded in my website. With that, I will hand it over back to the operator for the Q&A. Thank you.

[Operator Instructions] While we wait for questions, I would like to hand the conference back over to Waleed.

While we wait for questions, maybe I can ask a couple of questions. Alinma Bank delivered one of the strongest growths across the sector in terms of balance sheet and the NIM trends were also amongst the strongest. And we've been seeing cost of funding pressure across the banks. Now if you look at your revised guidance on net interest margin, it implies roughly a 4% NIM for the second half of the year versus first half at around 3.8%. So just wanted to get a sense of the drivers to achieving that 20 bps of expansion during the second half so that you meet your guidance range. If you could talk about that, that would be helpful. Secondly, it seems cost of risk across the sector has been sticky. Most banks have reported cost of risk, which is in the 80s. If you could talk about what would lead to second half being lower? Is it the recovery that you've historically talked about, which will move it lower? And any updates on timing? And finally, we're seeing very good momentum on the loan growth side. And even beyond June, we've seen some new loans being signed. So just wanted to get your sense on timing on drawdowns and if there is further upside to your revised loan growth guidance.

Obviously, on the NIM, we had to revise it done because obviously, the pressure on the cost of funding. If I, for example, in the average cyber 3 months ever in Q1 versus the average 3-month cyber in Q2, that increased by 33 basis points. You've seen the news just last night. So we would imagine that could be more pressure because the faster growth now loans has to be supported by higher levels of deposits. So that's not a significant change. But we basically say the rate impact from end of June, all the way from the second half of the year, the rate movement is going to be less of severity in terms of what we saw and repricing that came in late last year, which has obviously an impact on this quarter, on this first half as well as the pulp taken at a higher rate this quarter. We believe there could be volume because we continue to grow our loan. It will be volume backed, but be lower volume of cost of funding. But we continue to forecast and that's how we see it. Another potential lower by 5 basis points. So it's not a significant move. But as I almost promise, we will give the guidance as we, as management, see the forecast. In terms of cost of risk, we've taken higher this year so far compared to the first half last year, but it's true, we are expecting very highly likelihood in the second half, we're going to have settlements on [ exposures ]. One, we're expecting full settlement for recovery. So that will help. And obviously, on the coverage ratio. There's another case that we'd expect a better recovery than what we provided for. So we've had those [indiscernible]. We're trying to just finalize them within a few months. That will really improve our coverage ratio. However, we said, okay, we aspire to go even higher than 150 significantly higher. So that's why we give a little bit of the cost of risk. Loan growth, actually, as I mentioned earlier, if you take retail as a whole, they grew 11.6% year-to-date. If you take corporates, they grew almost 10%, 9.8%. So that's why I said that all segments are contributing to this. Obviously, in terms of percentage of growth, as Adel mentioned, the new relaunch [indiscernible] is obviously the highest, followed by the mid-corporate commercial lending. But as an amount, a significant one came from, obviously, project finance. We see the pipeline. We see what's happening, the expected drawdown and the amount is expected. We always continue to forecast every quarter we continue to forecast, and that's why we upgraded the guidance to high teens. Could there be an upside risk? It could. But as I said, we continue to forecast. This is how the best forecast so far come in the next quarter. You may get some customer utilizing more than what we expected today. You may book higher loans wasn't really in the pipeline. The utilization may help to improve this guidance. But at the moment, as I said, we report our guidance is exactly what we see is the best of our knowledge.

[Operator Instructions] We'll take our first question from Naresh Bilandani from JPMorgan.

It's Naresh Bilandani from JPMorgan. I have 4 questions, please. The first one is on the non-yield income. Now the strength is quite robust. Could you please talk about the sustainability of the strength that we've seen in the fee income into the second half and beyond? I'm just keen to know if there's any seasonality in this number or a one-off that does not repeat in the 2H or will the momentum continue? That's the first question. Second is, looking at the liquidity, with your time deposits mixed having increased steadily, it feels like in an era when assuming rates decline next year, your NIM could actually be a lot more resilient than what the sensitivities would have suggested at the start of this year. Is that right? Could you please refresh us on the sensitivity of your NIM to the rates based on the current balance sheet structure? That's the second. The third one is on you have a very comfortable LD ratio now, and the NSFR seems to be improving quite rapidly. So keen to understand if we should expect the current healthy pace of deposits to continue. Or will the deposit growth from this point on now pretty much match the loan growth and you will maintain the current LD ratio? Or do you still feel the need to build this up further? And my final question is, given that you have had a strong consumption on the capital side, given the fast growth, can you please talk through some of the initiatives that you're taking or intended to build up the buffer for future funding growth?

Naresh, yes, I'll take the first question on the non-yield income. As you rightly said, we have a 30% total non-yield income growth where we have reached during Q2 SAR 577 million. As I mentioned in my presentation, this was mainly driven by the fees from banking services. And we are seeing the results of the -- when we talk about the fees from banking services, whether being fund management and in the card services, we are seeing a pickup on the fees there. Also, trade finance contributed to that brokerage fees as well, we are seeing an improvement. And also on the other side, when we talk about the other non-yield fees drivers talking about the payrolls and all the transaction banking. If you're talking about this quarter, there is a one-off. Actually, the one-off was, as we mentioned in Q1 last year. And you can see this is obviously on Slide 18. Again, in my presentation, we have around SAR 50 million was booked in the last year. So we are seeing the value coming from the various diversifications and offerings but also the results of the cross-sell that we are seeing. Effects also foreign exchange income. We have seen 29% growth if we compare this year-on-year, and we are seeing the pickup also in this area. So it's actually a balanced growth for most of the nonyield or non-commission income drivers. So we confirm that, not really one-offs that was booked in the non-yield in this quarter.

Pardon for the interruption. My question was also on whether this strength is -- do you expect this to continue? Or whether there was a seasonality of some form that contributed to the strong fee income growth?

I wouldn't relate this to any seasonality, but we are seeing, as I mentioned, the growth in the various drivers of the non-yield income. And it's an income that as I mentioned, cost balance the growth in most of the drivers. As I mentioned, when we talk about the fees from banking services. And also the drive boards related to the FX income as we are seeing the volumes and also the cross-sell being materializing as we go along.

Got it. Sorry for the interruption.

That's all right. On the liquidity and the outlook for NIM, as we always do, we will give the outlook for the year. Generally speaking, though, when interest rates are declining, the first step that comes into the -- as an impact is the cost of funding because it always seems to be shorter term. So the repricing is an impact. For assets, you do have a combination, obviously, of some of the Sukuk and maybe retail, which doesn't get any price. But on top of that, the corporate side, you have assets linked to 6 months cyber, even sometimes 12 months cyber. So it will take longer time. It's pretty much early to talk about the NIM guidance for next year, but I was talking in general terms. On the LDR, there is, I think, a technical and Adel maybe you can explain us the technical impact on the.

Of course, to add on this as maybe SAM has effectively allowed banks starting from June 1 this year is to wait the Sukuk when it comes to the deposits for the calculation of the India regulatory LDR. So previously issued to cook used to be weighted as the current accounts are as 100%. So starting from June this year, Sukuk is allowed to be weighted. And as you know, we hold the SAR 5 billion Tier 1 Sukuk is being weighted now and this around 200 basis points or slightly more impact on the LDR itself.

So if we're comparing the previous methodology, LDR here, the 76 would have been 78 if it wasn't for that change. However, 78% is still low. But if you look at maybe Slide 22, and I spoke about this before, we had a period where we're really targeting to be very efficient in liquidity, and we experienced a significant drop in the NSFR. We reached 10.2% in the third quarter '22. And this obviously could not [ valerate ], we made it clear to the business that we need to improve this significantly. We can't really be close to the 100% limit. And that's how you see LDR significantly [indiscernible]. Having said that, though, there is enough liquidity to support further growth in the third quarter without necessarily having to take more deposits. But surely, for the growth in Q4, we still have to take more deposits. In terms of capital, as we were mentioning before in terms of be efficient and liquidity, we were not happy about – I think, a couple of years ago, we were the highest in capital adequacy. That was an efficient use of the capital. I think we're reaching a level that is much more efficient, i.e., better ROE. However, in order to continue our growth next year and the year after, which we expect this cycle of growth to continue really because driven by the significant projects due to the 2030 vision. We are planning to work some Sukuk, either Tier 1, Tier 2, most likely in the first half next year in order to continue that level of growth.

[Operator Instructions] We'll move next to Shabbir Malik from EFG Hermes.

I have a question around your deposit growth. So we've seen pretty robust growth for the last 3 quarters. And I felt that even at the end of first quarter, your liquidity has become quite satisfactory. So can you maybe tell us how this recent quarter, second quarter, we've seen another good quarter in terms of deposit growth? Where is this deposit coming from? Is this being actively mobilized by the bank? Or are we seeing more of a sector-wide trend and Alinma benefiting from that? That's my first question. My second question is after the first quarter, I think you indicated that you have adequate liquidity, and that should help you achieve your NIM target for 2023, which where you were expecting it to be around 35 to 45 basis points. In the second quarter, what has changed? I think you've given some details, but if you can please reiterate what has changed for you to reduce that guidance by 5 basis points? And thirdly, in terms of return on equity, the first half, you're trending at around 16%. Your full-year target is about 17%. So that's a bit of a step-up for the second half. So what do you think are going to be the levers that is going to take you there?

In terms of the deposit growth, I have to admit that what we've seen so far from the other bank's growth in loans wasn't all in double digits. And let's put it this way, that made it easier for us. We don't have to compete as hard. Having said that, I don't expect that trend to continue for the other banks to be also single digit going forward. Maybe we'll see higher growth, which means more competition on deposits. The first is deposits, obviously, multiple sources. While we said, we focus on the affluent segment, more customer acquisition, trade, especially cash products, but also trade the margins that generated CASA. So we focus on acquiring new customer cross-selling that helps things that encourage clients to move from one segment to another through deposing additional funds in their accounts, but obviously, the biggest provider of this is the normal usual institutional departers. I don't have to go through the names, but I think it's been clear in the market this institutional deporter there. In terms of guidance and what has made us change, we saw actually higher impacts on the cost of funding in the first half. You've seen we lost 1 or 2 basis points compared to the Q1. That's why we say and when we forecast again, we take into consideration the expected rate as well as the volume and the growth in the assets that this may reduce this guidance to 30% to 40% instead of 35% to 45%. It's not a big change. We could have left it to be honest with you. But as we promise you over time, whatever we forecast before doing this earnings call, we give you exactly how the management see these numbers.

Great. So back at the end of first quarter, the interest rate expectations [Audio Gap] in some ways more favorable.

I think you keep your voice keep cutting. I can't hear you.

Sorry. I was saying that at the end of the first quarter, probably the rate outlook was less favorable for you than it is now. I think back then, there were, I guess, higher expectations of rates, probably flatlining or maybe even declining, but now the rate outlook is more upward trending. So that doesn't favorably shape your NIM outlook?

Yes. No, honestly in the following Q1, we were expecting at that time, the yield curve was a bit different than now. And when there is expected more growth on the rates, typically, what hits you first is the cost of funding. It will take time for your assets to reprice it to this. That's why it's a small change. But nonetheless, as I said, we could have left it as is, but as we promise you we'll keep report it as we see it.

We'll hear next from Rahul Bajaj from Citi.

This is Rahul Bajaj from Citi. I have 2 quick ones, actually. If you look at Slide 15, the chart on Slide 15, which talks about different components of lending growth year-to-date. So I see that home financing has grown by 7%, which is the smaller growth rates there across all the buckets. Just wanted to understand, is this growth coming from subsidized home financing products or non-subsidized products? And if it is subsidized, to what extent have you seen the recent or not recent actually, the 1Q subsidy changes impact growth in subsidized mortgages at your end? So that's my first question. My second question is around the app refresh, which was done, I think, towards the end and the Youth app, which was launched around the same time. So I just wanted to understand, it's been almost like 2, 3 months now since you've launched your new app. What has been any interesting learnings from you learnings for you from the launch? And have you seen any major delta in terms of business volumes or any other factors post the launch of your refreshed app?

Thank you. I'll take the first question, Rahul, as you refer to Slide 15, 7% growth in home financing, again, if you compare this percentage with the other business line. Again, SMEs was higher, of course, in the corporate was mainly a driver as well. But also if you look at the business financing and also other retail products, we have a smaller base when it comes to revolving credit cards and also, as I mentioned, the newly launched product, which is [ Alfursan ]. So on financing continues to grow. I would say the growth of 7% in non-financing will be a balanced growth between subsidized and also non subsidized loans, which we continue to see the growth in both of these segments under the home financing. So I would did say the bulk of it subsidized or we're seeing a balanced growth in the own financing portfolio as a bank in both and hence, the 7% growth that we have seen YTD.

And also, Rahul, on the app, obviously, we launched a new version of our banking application. We have not yet -- still keeping the old version, possibly towards the end of this month, we're going to suspend the old ones and force migrate to the new ad and make sure the experience some of the stability. But I think we're in a good position now to do this. On the Youth app, different story because the approval we got from Central Bank for a period of initiatives like 3 months. There were some conditions required, which did not allow us to launch it immediately. We have to reprogram some of this. They put a limit, for example, on maximum financial transactions for each client during every month. That is not something that you can just launch a product and say, hope your customer will not reach this. You have to force and that means reprogramming. So that's also delayed us, but we have a few thousands already registered. We have a long waiting list. We haven't gone public yet, but we're going with friends and family and some of the populations that we selected. We continue to enhance this. When do we go public? It will depend on the Central Bank. I suspect, obviously, maybe towards before the end of Q3, hopefully. Otherwise, it will be early Q4.

At this time, we'll move next to [ Sander Irum ] from [ Consilium ].

A couple of questions. One, in terms of your asset repricing, you said that there is a lag that happened. What percentage of asset is had to be repriced?

Sorry, what's the last part of your question?

What percentage of your loan book is yet to be repriced?

[Audio Gap] Percentage. Okay, anything else?

That's one. And secondly, the 30 basis points increase in cyber that was witnessed in Q2 over Q1, is that completely absorbed in terms of the deposit in terms of cost of funds? Or do you think that there could be a little more effective in Q3 as well? Just to understand the NIM guidance, a little bit more clarity.

Obviously, I'll cover the second part. Adel will tackle the first one. Yes, there have been, obviously, as I mentioned, there have been a change in the average cyber. Some of the deposits that reprice during the Q2, we'll obviously have a full quarter impact in Q3, assuming it remains with us because, obviously, they tend to be short-term. But the rate has been, I would say, for the last couple of months been stable, maybe around 590 plus. So it hasn't significantly moved a lot compared to the average last first quarter, yes, it has moved by that basis point. So it's a safe assumption that majority would have already attracted the recent price may not be a full quarterback again. It could be something that repriced 1.5 months within the quarter. So it will have a 3 months if it stays with us 3 months during the next quarter. Adel, the percent pricing.

Yes, on the assets, the percentage of the assets repricing. And as you know, we issued the assets and liabilities, the whole balance sheet profile and maturity as part of the financials every year, just in the quarter, the repricing or also the majority profile keep on changing, of course. And that's why maybe the previous comment that was maybe mentioned in the previous inning calls about the theoretical sensitivity and to what extent this is really a reflection of what's going to happen in reality. Most of the corporate book is either maturing or gets repriced. If we talk about the 3-month window, that would be, of course, a lower percentage if you compare it to 6 months window, which is something around 60% to 70%. Of course, if you go to the months window, you will see within the corporate portfolio. The majority of short-term or also the repricing of most of the loans, which would be as a percentage of 90%. But that's the pricing profile, as I mentioned earlier, keep on changing. But of course, as I mentioned in my slides, on the composition of financing, 75% as a profile to Alinma is corporate. And given the smaller base for SMEs and also mid-corporates, most of the large corporates in project financing, the repricing and this goes to what I was saying when you look at -- depends on the window that you're looking at, if you are taking the longer term over 12 months from now, you would see almost 90% plus repricing percentage of corporate loans out of the total corporate.

So ideally, what we are looking at is that incrementally, we have a tailwind of further expansion in our NIMs beyond the current calendar year because of this benefit of asset repricing happening.

Now of course, we have mentioned…

Sorry, sorry, please go ahead.

Yes. We are talking -- we are repairing on the guidance and the expansion. And of course, this expansion comes as the repricing happened. Of course, we have been talking about the lag that we haven't maybe experienced during Q4 and also maybe start to see this Q1. And also, we are seeing the -- this coming in Q2 and bigger values. But we are guiding product expansion. And we're talking about 30% to 40%. The changes to the 35% to 45% is just the maybe expected some rush from cost of funding itself. So you could still reprice when it comes to NIM, if you're being really on devolvement that you take to fund the growth and also depends on the liquidity situation. You will still be having an expansion on NIMs. But as you price, of course, there might be a lag. There might be still some assets yet to be revised, but that wouldn't be a bigger portion. And again, you will still also be paying on deposits different as the market changes. And this is, as I mentioned, the reflection in the guidance revision of only 5 bps, which as the CEO was saying, this could have been even keep the same. But this is how we reported the way we see it.

Got it. And sir, on the asset quality front, if I may, we are guiding from 60% to 65% basis points credit cost. But we did mention about 2 particular settlements happening in the latter half of this year. So will we be retaining the current run rate? Or do we see in terms of the provision coverage? Or do we see that there would be a sharp utilization of the buffer provisioning that will be coming in because of this recovery?

So the question on the coverage ratio, as I mentioned, coverage ratio has improved 30% from 122% in Q1. As was mentioned by the CEO and the expected settlements that we were talking about before, this is the improvements, of course, settlement for MBL's accounts that, of course, positively impact coverage ratios. And as I mentioned also in the guidance, we are beating this up to reach 150 also above that is to definitely revise the guidance for cost of risk for the year-end. And the range that we are changing is 5 bps from, as I mentioned, the range of 60 to 70 to 65 to 75 by year-end.

We'll move next to Olga Veselova from Bank of America.

I have several questions. My first question is about financing growth again. So in personal financing in personal retail financing, year-to-date growth of 16% has been very solid really versus the SEC average. What is behind this large difference? Do you offer much better interest rates? Or this is the digital advantage which you have? Or did you have any active marketing campaign? So any color would be appreciated, what was happening there really? And who are these customers? Is it [indiscernible] market, new rather than existing customers? So anything that could explain to us why the difference was so big. So this is my first question. My second question is where do you see CASA ratio stabilizing? Or do you think it will keep going down gradually despite the net inflow of costs in the next quarters or years? 2 more questions. My third question is, why do you think SAMA is LDR regulation if the stock average LDR is actually comfortably below 90% limit? And the last question is on corporate loans. Did you have any large ticket loans? The figure of year-to-date growth is again very good figure, which is well above the sector average. And if we move on a level up holistically, why Project Finance segment is growing so much better for you than the other types of lending?

Okay. That's a long list. Now obviously, on retail, we said year-to-date growth is 11.6%. And explaining how did we achieve this, it's pretty difficult for us to let the methodology that we follow. But however, we forecast, as I mentioned multiple times before, we focus on customer acquisition. We've introduced incentives for our sales team. We brought in the right team to run these sales forces. We've introduced Balance [ Cord ]. We really, on a monthly basis, discuss with the business the exact performance, including new sales and so on. So there is a much more focus on our sales efforts as well as more customer acquisition. That's why we achieved this. On the CASA ratio, honestly, may expect further dilution industry-wise, for sure, because now obviously, we don't grow your loans only in the mid-single digits, for example, less pressure for you in terms of taking time deposits, which means you may maintain or maybe a little bit of move [ for the CASA ]. For us, we're growing fast. So I would expect further dilution. But what really matter is we continue to grow our CASA as a balance. That's important through customer acquisition through what I mentioned before and different things. Why would SAMA have introduced this change? It's pretty much similar to the long-term liability, if you take in a 3-year time deposits and you issue a 3 years to book in a way it's pretty similar. But I guess that question exactly why I can't speak on behalf of our regulator. If you get access to them, that's maybe the question that you can raise to them. On CPG, well, I remember the project finance question because I think multiple questions. But project finance, why are we doing better? Project finance is no secret. The competition is less. We are focused on growing our loan portfolio in a fast way through the early days of the bank days. I mean, 2009 started. At that time, we launched Project files. We want to grow a loan to portfolio very fast. So we build that credibility. We build it through so many deals we've done in the past. So we're among the best in the market. I'm not saying we are, by far, the best, but we are among the best in the market when it comes to project finance. So we are very successful in winning deals. And that is reflected in the growth to continue. Project finance is really the supply side, at least from our point of view has been mainly the introduction of the new country strategy, the 2030 vision, which called for a lot of projects to be done on the PPP model, private public partnerships, where the private sector is actually building operating and financing these products, so that created so much pipeline for us. I forgot your question about CPGs, [indiscernible] your questions?

Yes, exactly. You covered all my 4 questions. Just a follow-up on the last one. Alinma has been indeed very strong in this project finance segment. Why do you think your strengths are not replicable? So why other banks are not jumping into the segment and then compete for high-yield financing in this segment?

I think on the earnings calls when other banks were asked on these questions. I know there are 2 maybe other banks who have very good capabilities. When we want to be really a strong player in this field, it takes time to build the credibility. Obviously, the team, we need to build a team. But more importantly, you need to have the track record in running these projects or financing this project, construction in these projects. But it takes time, I'm sure our competitors are aware of what are in the country. Maybe they are building at the moment, it takes time to build the track record.

So there would be no know-how in credit assessment process, which would be very different. Yes. So there would be nothing specific that you would say, look, we designed a standout platform and credit assessment. So it's just time which is needed.

No, you're right. Credit assessment is different because when we lend to through project finance, if that project failed, you have no recourse in the company that or the investors that build this project. You're really financing the project that it fails that your money is gone. So that's why I said track record is very important because that really allowed you to understand these projects, allow you to understand the partners, the technical partners that's running, who's who, and that's really important to assess the risk. That capability, it will take time. It will take people, resources, calipers as well as a long track record to be part of it.

Perfect. As we're close to the hour, Mr. Abdullah, I'll pass on the call to you for any final remarks.

Thank you all for attending this meeting. I know it's summer time, but I thank everybody for taking the time to attend this.

Thank you very much to everyone for attending, and thank you very much to the Alinma management for their time and insights. Thank you very much. This concludes today's call.

That does conclude today's teleconference. We thank you all for your participation. You may now disconnect.