Alinma Bank ($1150)

Good afternoon, everyone. Thank you for taking the time to join us today. My name is Mehmet Sevim, MENA Banks analyst at JPMorgan, and we're delighted to host Alinma Bank for their First Quarter 2026 Results Call. Please note that this call is being recorded. The management team will take us through the quarterly highlights before we open up for Q&A. And with that, let me hand it over to Arwa Alshehri, Head of Investor Relations.

Thank you, Mehmet. Good day, everyone. Welcome, and thank you for joining us today in Alinma's earnings call for the first quarter 2026. Our MD and CEO, Mr. Abdullah Khalifa, will begin by providing an overview of Alinma's performance, financial highlights, followed by our new strategy recap and update on the strategy achieve. After that, our CFO, Mr. Adel Abalkhail, will be presenting detailed financial performance for up to this March 2026, ending with the guidance for the rest of the year. We will make sure to have time for Q&A, where we will be addressing your questions along with our Deputy CEO, Mr. Saleh Zumaie covering retail, digital and private; and our Chief Corporate Officer, Mr. Jameel Alhamdan. With that, I will hand it over to you professor to begin.

Thank you, Arwa. Hello, everyone, and welcome. I'll start our presentation on Slide 6 on high-level financial performance. Our financing increased by 4% year-to-date as well as our total assets reached SAR 324 billion. Our operating income increased 7%, and, at the same time, our net income increased 11%. First quarter NPL ratio was 93 basis points and coverage ratio is 167 basis points. Cost of risk is obviously lower than our guidance due to a large one-off recoveries that we managed to get in the first quarter. Customer deposits increased 5% year-to-date. More importantly, the growth in CASA experienced 11% compared to the overall growth of 5% in customer deposits. As a result, CASA now reaches 49.5% of our total deposits. Our cost to income stands at 32.6%. Our NIM is 3.47%, 16 basis points lower than same quarter last year. However, it's 1 basis point higher than Q4. Our ROE reached 11.4%. On the Slide 8, I'll take you through the presentation on our current 2030 strategy. The main headline in our current strategy is to be the most innovative and customer-centric with a clear focus on profitability and building distinctive differentiation with technology and AI. So in terms of more centric -- customer-centric, we want to engage our customers' seamless and memorable journeys throughout their journeys through digital and even physical channels. We want to be most innovative, leading with cutting-edge technology and AI to deliver segment-specific offering, intelligent platforms and beyond bank and digital offering. Underpinned by laser focus on profitability, we want to drive profitability through scalable operating model, improve monetization and streamline cross-functional collaboration. The next slide, we go with more detail by business. So on retail bank, we want to aspire for primacy with all our customers. We want to innovate with segment-specific offering. We want to delight our customers with their memorable journey using technology and AI. In private, I want to create a market depreciating value proposition and service model for our private bank customers. We want to offer world-class global and exclusive local investment opportunities and services. In corporates, again, the aspiration is for primacy for all our customers, but also building distinctive edge on SME financing. We want to upgrade our transaction banking through the use of technology and AI and build best-in-class scalable operating model. In digital banking, digital banking will help us in developing intelligent banking platform to drive primacy. We want to launch beyond banking digital offerings and obviously enhance our operating model through the use of monetization and technology and AI. In treasury, we want to diversify and innovate on the funding instruments. We want to grow our FX and other derivatives through other products to our customers through the unlocking the flows from the business units. We want to obviously continue to work on enhancing our yields on our investment portfolio. On the next page, I'm not going to go through line by line, but some of the other financial KPI goals. One of them is to become a leading employer of choice among the Saudi banks. We want to establish the bank as a digital leader, specifically on innovation and on AI and leading on risk-adjusted decision pricing practices. On Page 11, this is some of the things that we've achieved during the first quarter. We've launched 2 open banking products, microfinance for [indiscernible]. We also launched -- allow creditors to open wallet in our Alinma Pay. We launched 4 new private funds with AUMs of SAR 22 billion. We've increased our growth in SME by 29%, mid-corporate by 31%, 2 fully digital products. We've issued our first-time Tier 2 private placement, $300 million as well as $475 million in CDs. We've increased our profit rate swaps, which is the IRS, the Islamic version of the IRS by SAR 2.7 billion, and we had a significant increase on FX forward by 266% year-on-year growth. On Page 12, this is some of the things we're working on. We want to continue to drive end-to-end process streamlining and digitizing customer journeys, build research and development and innovation hub, develop customer-focused use cases to hyper-personalized customer journeys as well as obviously develop a robust client-centric primacy model, strengthening the trade finance through the use of technology and partnerships, develop AI and other use cases, of which the total initiative -- this is now a group. We're going to continue to update you as a group-wide rather than just a bank. So this is -- this current strategy have 87 derivatives -- sorry, initiatives. [indiscernible] derivates I guess, and -- but we started working on 61 out of those 87. Some of them will be completed this year, some will be completed in next year and maybe some others will maybe go 2, 3 years. But we started already in 61 out of the 87 initiatives. With that, I give the floor to our CFO to take you through detailed financial presentation.

Thank you. Good afternoon to you all, and welcome again to our earnings call for the results of the Q1 of this year. As usual, I'll be running you through a bit of more details on the financial performance for the quarter. But as I was saying before, will be followed by the guidance, and then we'll open up for Q&A. So starting with Slide #14 and overall balance sheet trend, we have seen total assets growing 4% that was driven by financing that's grown during the quarter by 4% and also this was coupled by 2% growth on the investment portfolio. On the total liability side, 5% was the growth in the total liabilities driven as mentioned earlier by CEO, 5% on the customer deposits. We will come maybe later on more details on the same. But also worth mentioning the SAR 2.9 billion growth on the other funds that we continue to tap on, including the Q1, which is the Sukuk, the $300 million private placement for the Tier 2. And also we continue to have CDs $475 million during the first quarter of this year. On the second slide, Slide #15 on the P&L, net income growth was 11% year-on-year. This was a growth of 8% on the funded income. We have seen a modest growth on the nonfunded income side year-on-year, along with growth in the overall OpEx -- operating expenses by 9%. So the impairment also is lower. As mentioned earlier, there was a sizable recovery. We have charged the P&L SAR 156 million during the quarter, and this is 50% lower year-on-year. On the next slide, Slide #16, on the financing, 4% growth that we have seen mostly was driven by 10% growth in retail in absolute amounts SAR 6 billion growth in retail portfolio during the first quarter and the remaining SAR 4 billion, which translates into 2% was the corporate growth from December 2025. So with the growth of retail, we start to see the composition slightly changing from what we used to see in the overall financing portfolio. Corporate now represents 73% and retail is 27%. Clearly, large corporate and project financing as a composition as part of the overall financing represents 62% by end of March, 6% and the mid-corporate SMEs is still 5% and the home financing is 13%. The remaining is for personal consumer financing and other retail products. On the next slide, Slide #17, on the customer deposits, as mentioned as well on the CASA growth, we have seen a good growth from Q4 last year on CASA, which is 8% growth and also the time deposits has grown 3% from December. If you recall, CASA as a percentage of total deposits by the end of last year was 48.3%. We've seen the growth of CASA 8% this quarter. CASA as a percentage of total deposits now represent 49.5%. On the next slide, Slide #18 on the yield income. So the income from financing and investment, we have seen 7% growth on the financing income. That was also coupled by 10% growth in the investment related yield income, which in total translates to year-on-year 7% on the funded income growth. Maybe in the the lower section of this slide is the analysis around the clarification around the movements on the NIM year-on-year. We have seen 3 basis points drop on the investment yield. The financing yield was lower by 53 basis points, which was offset by positive impact on cost of funding rate by 9 basis points. So we've seen the first quarter NIM is 47 basis points, which is equal to the full year NIM of last year that was standing at [ 347 ] basis points. Looking at the quarter, Q4 NIM improved 1 basis point during the quarter if you compare it to the qu-to-date NIM of last year. On the next slide, Slide 19, on the yield income, there was a drop on the NIM yield income overall on a sequential basis by 26%. If you recall, Q4 last year has included some one-offs that were booked during the quarter -- last quarter of last year. If we normalize the same, the Q1 NIM yield income would be lower by 12% if we normalize it for the one-offs that we have taken in Q4 last year. We have seen also the drop year-on-year on the FX income, and this is part of it relates to the volume impact that we have seen up to February for the market. We are yet to see March, but there is also -- there wasn't really bigger growth in the volume for FX. This was compensated by SAR 27 million. That was an increase of 47% for the investment and dividends and investment-related gains. On the Next slide, Slide #20, on the operating expenses, we have seen 2% growth on a sequential basis from Q4 on the overall OpEx. Nevertheless, the G&A was lower than Q4, but the big part of the growth was in the personnel cost, and we used to see this always in the first quarter of the year that would relate to certain adjustments related to the personnel. The depreciation also 22% growth in those small base. So this translates into year-on-year 9% growth on the OpEx. So the drop from Q4 on the total operating income by 5%, coupled with sequential growth on the OpEx by 2%, has negatively impacted cost to income, going up from 31.2% last year in Q4 for the full year to 52.6% by the end of the first quarter. On the next slide, which is a slide on impairment, Q1, as you can see, 46% on a sequential basis from what we have taken in Q4. And this is a reason for lower charges because of the one-off recovery that we have realized during the first quarter. And this is more details on it in the financials that we have published already in Note 16 to the financials. So this has dropped the overall impairment charge for financing only by 32%. And this has clearly lowered the cost of risk for the quarter to be 26 basis points down from 47 basis points for the full year of last year. On the next slide, which is Slide 22, on the NPL NPL has increased 5% [indiscernible] specifics normal accumulation. Also the NPL ratio, if we compare it to Q4, it's almost within the 90 basis points. And also the coverage ratio has improved from 150% by end of last year to 266.5%. On the stage-wise coverage, maybe there was a swing on the Stage 3 coverage on the last 2 quarters. But I would say that Q4 Stage 3 coverage was exception because of the write-off that was we talked about it in Q4. And now we are seeing Stage 3 coverage is getting back to the norm, standing at 63.2%. And also, we did -- there's no big drop in Stage 2 slightly from Q4. Stage 1 coverage remains flat at 40 basis points. On the next slide, slide on capitalization, Slide #23. On Pillar 1, Tier 1 and Tier 2 total CAR is 19.9%. We have seen drop as mentioned earlier as well, 30 basis points on ROE from which we have to close at the year-end last year. At the bottom of the page is the ratios remain healthy. LCR is at 152%, above the 100% minimum regulatory minimum there. And LDR as well remains healthy at 80%. This is the weighted one again, well below the 90%, which is the regulatory maximum. And then also NSFR remains healthy at 111% or almost 112%, well above the 100%, which is the regulatory minimum. And the next section is overall on the outlook and the guidance for the remaining of the year, the way we see it after closing the first quarter. So no changes to the guidance is all the guidances were given following Q4 results. No changes to any of the guidance. So financing growth, we realized 4% growth for Q1. So the guidance remains low teens for the full year. Net profit margin year-on-year at 16 basis points, yet with the expectations on better funding cost and also the repricing, we are still keeping the guidance as a contraction from 5 to 10 basis points. Cost-income ratio 52.6%, guidance remains below 30.5%. Return on equity is 18.4%, and the guidance remains above 19% by year-end. Cost of risk, 26 basis points. That's the actual for the quarter and the guidance remains 45 to 55 basis points. And the overall CAR for Pillar 1, Tier 1 and Tier 2 remains at a guidance around 19%. Just a reminder on the 2030 long-term guidance is the asset growth by 2030 is a low double digits on a CAGR basis and also the return on equity to be above 22% and cost-to-income ratio below 29%. And again, the total CAR Tier 1 and Tier 2 will be above 18%. With that, I'll hand it back for the Q&A. Thank you.

[Operator Instructions] The first question will come from Shabbir Malik.

A couple of questions from my side. Just the first one is around the recovery that you spoke about. Is this recovery unique to Alinma? Or is that a sector-wide exposure, which -- and we could have -- other banks would have experienced something similar as well? My second question is around the loan growth outlook in light of the potential recalibration of Vision 2030. PIF has also come out with the new plans for the next few years. How do you see those evolving -- plans evolving from the government and the authorities affecting your loan growth prospects? Anything in particular that you think is likely to feature more strongly in the coming years in your loan growth versus other sectors? So any color on loan growth outlook, that would be pretty useful. My third question is around the AT1. I believe you're in the market to renew or raise new AT1 capital. Can you give us a sense of pricing on these AT1s relative to your existing AT1 notes?

Thank you, Shabbir. On the recovery, first part of your question, on the recovery, we believe it's a one-off that's unique to us, not it's industry-wide. It's one of the clients that we got more than SAR 400 million of recoveries, and that's what drove the cost of risk lower for this quarter, yet our guidance for the year remains 35% to 45%. In terms of the new PIF strategy and prioritization, but at the end of the day, I don't think it may lead to a bit of slowness in certain projects, but acceleration in others. So to give you an example, due to this geopolitical risk, and we know that's going to be an acceleration, certain investments in, say, logistics [indiscernible] industries and others, the focus on energy, the focus on renewables, the focus on PPP type of project is going to continue to be there. So we don't believe that this may change. The overall demand in credit may shift a little bit from one sector to another, but I'm still very positive about the growth of credit or the demand on credit for the years to come. On AT1, obviously, in terms of pricing will be announced in due course. So as you know, Shabbir, it all depends on market conditions and the appetite and so on. We'll announce that, I think, in due course.

Our next question comes from [indiscernible].

Am I audible?

Yes.

This is [indiscernible] from BF Capital. I have 3 questions from my side. The first one, given the recent pickup in deposits across the sector, to what extent do you see this inflow as transitory versus structural? And if you can comment on the current liquidity environment? The second one in nonfunded income. We saw a decline during the quarter 3. Did it imply a reset in run rate in line with the recent regulatory changes? And the last one, with some changes in project momentum recently, have you observed any early sign of risk in contracting or project finance exposure?

Thank you. Obviously, on liquidity, we see it in a very good position compared to, let's say, maybe a year ago. [indiscernible]. We've seen overall loan growth in the industry. I'm not talking about any industry was lower, so that obviously leads to lower demand on liquidity. Typically, geopolitics, so whatever happens in the region may lead to some more deposits going back to the country rather than place maybe in the region. We -- so in terms of liquidity, I think it's the level is satisfactory now compared to a year ago. The other question on non-funding?

So on the non-yield part, the growth, as you mentioned, it was modest 1% drop from Q4. As I mentioned, if you compare it to the quarter of the previous quarter, is obviously one-off. But looking ahead and where we are now in Q1, there was actually a decrease in certain areas within the nonyield. I would, of course, see the FX income. There was a drop by 10%, as you mentioned this is broadly relate to the volume that we have seen lower in the market overall. But on the fees from banking services specifically, the drop that we have seen came from certain areas. Clearly, the brokerage was lower, much lower. If you compare the same, we're talking about year-on-year comparison here. And also a slight drop on the investment banking side. And also, we have seen some drop in the cards related fees. We have communicated before that the regulatory limits on certain fees did not have really a material impact as far as the number of cards and the size of the business there. But just the other side of the business that was lower year-on-year, as I mentioned, specifically in the brokerage and also slightly on [indiscernible].

Our next question comes from Abdullah [indiscernible].

Am I audible?

Yes.

My question is regarding the noninterest income, which the strategy heavily depends on. We noticed that on some banks that the decline in noninterest income came from the curve movement. However, what we noticed in Alinma is that it is both -- it's coming from a decline in trading income due to maybe cap movement and even the fee income and the exchange income. I'm not talking about comparing it to a one-off, I'm talking as last year average. This is for one. On the other hand, when we compare larger banks to smaller banks, we noticed that all banks has gained quite a bit loan book growth in the first quarter, except maybe the larger 2 or 3 banks. Would you expect some competition in the upcoming quarters from the larger ones given that their growth in loan book hasn't been that strong in the first quarter?

So the yield, Abdullah, not a good -- not only comparing maybe I was referring to Q4 as well on what was booked but also in Q2 last year, if you recall, there was also certain one-offs there during the second quarter of 2025. So the average of last year might not be the right number. And just the -- what we are referring to on the fact that this is -- will remain a focus on the bank strategy. We've talked earlier about the continuous cross-sell and also we've talked during our strategy as well that the bancassurance also is going to be a big part of the overall growth. We're talking about also the focus on card. But just exceptionally this quarter, I believe in the coming quarters, we hope to see a bit of picture there on the yield itself. However, if you finish the quarter, I think I referred to the brokerage specifically and investment banking along with part of the card fees and also almost flat on the trade that was [indiscernible].

Yes. On the other part, on the growth or loan growth among banks, and the point you mentioned about the large banks showing single-digit growth, are we worried that in the future, they may be more aggressive and growing? No, not really. I mean the market is very competitive anyway. Competition is there. It's healthy, but the pie is getting much bigger. The demand is -- like the old days, the demand is very strong. Competition never worries us, except when a certain point of time where we saw aggressive pricing on the assets at the time where cost of funding was going up. That is hopefully behind us now. I've seen our ability and other banks, I'm sure, are proven pricing on corporate loans. This is something we could not do when the aggressive competition on pricing was there. Now we see it as much better, I would say, over the last possibly at least 6 months, things have improved significantly.

Okay. Given the guidance, we noticed that the loan book growth for this quarter has been really strong. It might be higher than one anticipated. Do you expect that the interest income to offset the noninterest income for the return on equity guidance for the year?

I didn't get that, Abdullah, if you can repeat, please?

We noticed that the loan book growth for the first quarter has been quite strong, and it might be even higher than what internally guided for. So do you expect that the growth in the interest income to offset the slower noninterest income for the year to achieve the return on equity guidance?

Yes. We certainly -- as I mentioned, we started our -- aggressively on our repricing of the corporate loans. Now as you may appreciate, not every single loan reprice, there are term loans and our ability to reprice some of those is limited. The new loan and revolving facilities and unutilized portion is something that we can -- we try to move pricing on. We need to see better also lower cost of funding continues lower cost of funding. There are also investments, which is fixed rate. It's not something that we're going to be able to reprice. It's also most of the retail loans, which is basically effectively fixed rate. So certainly, we're expecting to improve on the interest income going forward, but not necessarily exactly much in any, let's say, or similar growth to the loan itself.

Next question comes from Naresh Bilandani.

It's Naresh Bilandani from Jefferies. Just 2 quick questions, please. One, the decline in the card services fees is quite notable in Q1. Is the Q1 level a good number to extrapolate from? I'm kind of thinking that the second quarter will also be under pressure as we bake in the full quarter impact of fee regulations. Is that the right way to think about this that's perhaps not? But I think it's quite visible that the first quarter pressure on card fees was quite notable. So I'm just trying to think if Q2 will be just around the same or it could be worse, at least on this line? That's the first question. And second is, also the benefit of recoveries, will that be limited only to this quarter? And by second quarter, we go back to our old SAR 250 million to SAR 300 million impairment charge run rate? Or do you sense that the recovery that you enjoyed this quarter does have a portion that spills over into Q2 and so Q2 could also be subdued?

Thank you, Naresh. I will take the last part and my colleagues here can address the previous one. And in terms of the recovery, we all do our best to continuously improve our process and our capability, our also team capabilities as well as technology to improve the collections and recoveries generally speaking. The one that we had in Q1, I would love to see that every quarter happening, but it's one-off, which basically done and dusted is not going to have a second part in second quarter. It's one case. Hoping to see that level of recovery and continuous improvement. We try our best. You can drive whatever expected in terms of churn based on the guidance of cost of risk that we were given already.

And on the other part, Naresh, on the NIM yield again and the focus on the lower card services related fees. Of course, there will be a small impact as we communicated earlier from regulatory limits on certain charges. However, I wouldn't really take Q1 as really the guidance for the full year. Again, maybe also back to the previous question -- asked the question previously is this how the yield would be covering the gap between the ROE that we have and this will be -- whether this will be fully compensated by the yield itself? So it was many factors. Card services was lower, of course, but it depends also where you compare it to. You compare it to the average full year, as I mentioned, certain one-offs there. But also the other part that we've talked about within the yield that were surprisingly lower year-on-year. However, it will remain a focus to improve going forward, which, as we mentioned always that the yield would remain the main driver our main focus as part of the overall strategy.

Our next question comes from [indiscernible].

Am I audible?

Yes, we can hear you.

I have 3 questions. The first one -- first question is related to retail growth. It's very impressive this 10% growth in the quarter. I just want to get an idea how much of this growth is coming from mortgages and how much from the non-mortgage side? And how you were able to do it considering that one of the other leaders like the larger banks were not able to achieve this growth in the retail side in the first quarter? That's my first question. Secondly, in terms of deposits, you've got, again, good -- decent amount of deposits, mainly CASA. And I want to understand whether is there any transitory element in those deposits which came in? Or do you expect these deposits stable for some time? And thirdly, I want to understand, I mean, if you factor in that -- you said the recovery is around SAR 200 million, but -- so if you factor that in, the gross impairment will be around SAR 500 million. So I just want to understand if you applied any overlays on the ECL model to factor in any downside risk going forward?

On the recoveries, obviously, there are continuous recovery in the likes of like, for example, retail. There is always a certain level you expect on a monthly basis. This is not -- what you see in the financial is overall recovery, but there is a one-off corporate recovery over SAR 400 million. That's what basically increased the level of recoveries. But typically, there are an expected level of recovery on retail. And every once in a while, you've been successful in getting some recoveries from the corporate or written off loans in the past. On the other part is...

The -- yes, the other part, first question is on the retail growth that we have seen at the SAR 6 billion net absolute amount in the quarter versus last quarter. This is mortgage. The growth in retail was almost 50-50 coming from mortgage and the same coming from the consumer finance. On the casa, question on the CASA because these are transitory to deposits, I would say the growth is really a mix of both, but was there a good growth in CASA. You would assume always that the nature of those deposits. Part of it would be transitional, but still it's a mix of both so...

If I may add on the CASA, I mean, I think we have a very good track record over the years in terms of growing our CASA. Yes, obviously, nobody has any assurance about whether some of it is transitory or permanent. But I think historically, we've been focusing and been able to grow our CASA throughout the period. So I think in Q4, we had some unexpected drawdown, but majority, our track record shows that we continue to improve

Just a couple of follow-ups. As far as mortgages are concerned, did you kind of conducting campaigns or anything to attract this loan growth? And secondly, following up on the impairments, just to confirm, you -- have you applied any overlays like any buffers to factoring any potential future loan losses in this quarter?

So again, the growth in specific, there will be always here and there, which is business as usual. But to your question on the environment and what did we do to assist the current geopolitical situation, you can see on the financials themselves, actually, what we did -- there are 2 parts of it. One is the impact of the macroeconomic factors. And clearly, you would see negative impact from, for example, GDP growth that maybe it's lower now for this year. But again, the expansion of the growth the year after will be higher. But if you take this year, the growth would be negative. But then on the other hand, of oil prices as a macroeconomic factor to the overall model is positive. That's in one hand. So you would assume that the overall macroeconomic factors would be on a net basis positive. But there is the other part, which we already disclosed in our financials is our review of the scenarios for the IFRS 9 model itself. If you -- as of December, the scenarios for the base scenario was 50%. We have 30% for the upturn and we have 20% for the downturn. What has happened during the quarter, we have changed the upturn from 50% from the upturn to be 20% and then we have increased the downturn from 20% to 50%, where the base scenario remains 50%. So this triggers certain overlays that was not significant at all, but was taken already as part of the ECL charge for the quarter.

The next question comes from Mohammed Al-Rasheed.

Just one question from my side, which is regarding the spread of your interest-bearing liabilities over benchmark rates. So it has declined significantly over the last 2 quarters, currently stand at just 3 basis points. That's around 40 basis point decline on a quarter-over-quarter basis. So my question is, how much of this is attributed to better funding position for the bank and overall better liquidity in the system versus movements or inter-quarter movement where basically majority of the interest-bearing liability growth came towards the end of the quarter? In other words, is this 3 basis points over benchmark rate for your interest-bearing liabilities sustainable throughout the remainder of the year?

Of the spread, the split would remain in total. So to be specific on the size of deposits, the maturity, maybe the split that you have driven maybe it was in total and of course, employees averages of the quarters. But we have maybe mentioned also earlier by the CEO on the overall liquidity position, especially in Q1 this year. And also not maybe factoring the fact that the diversification of funding, especially in Q4 and also Q1 that you wouldn't see on the time deposits that we published because it's another line under the Sukuk and other certificate of deposits that we have issued about SAR 1.5 billion in total up to end of this quarter. So liquidity position is high. We have seen maybe as we have seen before, the liquidity that would trigger more spread that we have to pay in deposits. But I believe, I guess, the alternative funding that we have secured to fund the growth also help letting go most of the cost of deposits that we have.

The next question comes from [indiscernible].

Just one question on fee income. So first quarter had seasonality over there. You had Ramadan, Eid and then the conflict as well later in March. And you did mention about lower trade fees to a certain extent. So the question I just wanted to check on the -- how have the -- on the fee income momentum, how has that recovered in April? If you can give us some idea if there was any impact of the conflict given how trade was disrupted. And obviously, we have some regional banks that have also talked about the fact that international travel was restricted and hence, card fees on international spend was lower. Have you seen any of those impacting your fee income as well? And how have they kind of behaved now in April? If you can give us a very broad brush idea on that.

Yes, you're spot on. We see the international initiative declined due to the unrest in the region and the restriction on travel. And we do believe the impact will continue in April. But going forward from May and we have also the World Cup, we do believe the international will be increased in the coming few months and will recover decline happen in the Q1. Also the decline is also coming from the international remittances. We see some decline because people tend to keep their money inside the country nationals or expat. So those 2 factors impacted the income and mainly fees from [indiscernible]. And maybe just to add one point on the trade. Trade, just to correct, I did not say it was datically lower. I was just referring to it as being flat.

The next question comes from Abdullah [indiscernible].

Am I audible?

Yes.

I have 2 questions from my side. First, when we exclude the recoveries this quarter, the cost of risk actually has increased significantly, and I believe it's the highest in the last 5 years. Could you please clarify what are the drivers? And what is your outlook for the coming quarters? Second, on the guidance. I believe -- and correct me if I'm wrong, I believe that when you communicated your guidance, the market was pricing 2 rate cuts. However, this is not the case anymore. So why would you expect further lower contraction on your NIMs? That's my second question.

Thank you, Abdullah, On the cost of risk, I think in the presentation with the CFO on the stage-wise coverage as what happened in Q4, I think the level of coverage on Stage 3 was, I think, 45%, was it? So naturally, we've been transparent that stage-wise coverage is also important. We want to be among the industry average. And that's one of the reasons we took the opportunities to obviously increase coverage on Stage 3, and that's why that's gone up from 45%, I remember to 63% coverage in Stage 3. So that's the reason for that. In terms of the guidance, we actually prerun our forecast every literally a day or 2 before the earnings call, taking the latest -- at that time, the latest forward yield curve in our forecast. We don't build our yield curve, forward yield curve based on our own assumption when is the rate cut, how much is -- we take the markets, which is more of the average of the market, how we see the forward curve. And that's why our guidance hasn't changed following that recast.

The next question comes from Olga Veselova.

Am I audible?

Yes, you are.

This is Rahul Raj from Bank of America. Two questions from my side. Firstly is on the real estate reform [indiscernible] what's the kind of trajectory been or what's the kind of impact...

Rahul, can you repeat the question?

The sound quality wasn't good.

Yes, I will repeat. In terms of the real estate reforms, if you can sort of talk about any implications that you're starting to see, be it in terms of the quality, cost of risk or the real estate prices in Riyadh especially? That's number one. And second question is on the strategy part, if you can talk any specific new initiatives that you have taken? You mentioned in the starting of the presentation, but something which is more material and which you have started to see an impact because of the new strategy?

Obviously, our real estate reform honestly -- I see this as quite positive impact on the economy. because basically, that drives more demand on development than building. If you drive around Riyadh, it's now a city of city of cranes. There is cranes everywhere, the projects, the towers being built everywhere. The supply for the mortgage -- more for the mortgage, which is -- helps the affordability. The money for the land or the value of the land is basically sitting doing nothing in the economy. Now whether it's developed or sold to a developer, it's actually having a positive impact on construction material, on contractors and ultimately on furnitures and sales and all other positive impact on the economy. The other part was about strategy. Obviously, we've been quite successful in our previous strategy, and we're working very hard from -- as soon as the Board gave us the green light back in September last year, we started working on some of these initiatives. We didn't wait for the clock to change to January 1. We actually started early. There are a variety of initiatives and each one has different financial impact and some of them have better impact on our staff, customers, and that will drive more and more growth in our business. And so it's certainly, we did not implement those initiatives because of lower impact. Certainly, we believe we have a strong impact. That's why 87 initiatives. What example, these are not initiatives, by the way. This is just we can't obviously disclose what are exactly our initiatives. We sort of put our target, but the exact initiatives is not [indiscernible].

Our next question comes from Murad Ansari. And we will take a question from Abdullah [indiscernible].

I have a question regarding the cost of risk guidance. So you're noticing that handsome recovery that took place that made the cost of risk appear lower than the first quarter, and I understand that the gross provisioning is still the same. But keeping the cost of risk guidance as is means that you will achieve the same cost of risk guidance by having a higher gross provisioning in the upcoming quarters. Is my understanding correct?

Expectation, of course, we're keeping the guidance at 35% to 45% and Q1 was [ 26% ]. Certainly, that means on average quarterly -- the next quarters, you will see higher provision than what we disclosed in Q1 -- what we took in Q1.

Yes. But I mean, that means that the upcoming 3 quarters we will have an average of the same guidance to even out the guidance for the whole year, right?

Well, look, every -- actually on a monthly basis, our risk team run this IFRS 9 model, then discuss with the impairment committee, which is basically because it's chaired by me and all the most relevant [indiscernible] 1 team. And so I can't forecast -- we do our best to forecast today, but things may change from one quarter to another. We may have unexpected recovery. We may have unexpected customer deterioration that can happen. But generally speaking, we try to forecast every quarter to reassess our guidance. And based on that latest forecast that we did, our expected cost of risk remains.

There are no further questions at this time. I'll pass back to your host.

Maybe I can jump in with one question, and this is with regards to your direct or indirect exposure to some of the recently canceled projects like [indiscernible]. Last time we spoke, you gave us an optimistic outlook on those, you've mentioned those contracts included termination for convenience clauses. The residual values would be positive. Has there been any change in that assessment at all so far? And do you expect any impact at all coming from those exposures?

Yes. I mean, obviously, we don't talk specifically about our customer exposure. But certainly, we have a contractor that was involved in one of the projects for specifically preparing [indiscernible] for the [indiscernible] Olympic in '29. And since that is postponed or changed, the hosting nation changed, yes, some of the contractors was canceled, and we don't believe...

We do have sufficient coverage and as per the agreement with the project owner that all payments or any cost incurred by the contractor will be covered by the project owner.

Thank you very much for your time today. And let me hand it back to you for closing remarks.

Thank you, Mehmet. Thank you, everyone. Have a good day. And for any follow-up questions, please reach out to the IR department. We'll be glad to get back to you. Thank you so much.