Q2 2026 Riyad Bank Earnings Call

August 11, 2026

Operator: Bank Q2 earnings call. My name is Adam, and I will be your operator for today. If you would like to ask a question during the Q&A portion of today's call, please use the raise hand icon towards the bottom of your Webex window. I will now hand the floor to Mohammed Faisal Potrik to begin.

Speaker #1: Bank, second quarter earnings call. My name is Adam, and I'll be your operator for today. If you'd like to ask a question during the Q&A portion of today's call, please use the raise-hand icon toward the bottom of your Webex window.

Speaker #1: And I will now hand the floor to Mohamed Faizal Pottrick to begin.

Speaker #2: Many thanks, operator. Riyad Capital is pleased to host the management team for Riyad Bank's second quarter 2026 earnings call. Today's call is being recorded.

Mohammed Faisal Potrik: Many thanks, operator. Riyad Capital is pleased to host the management team for Riyad Bank's Q2 2026 earnings call. Today's call is being recorded. Please note that this call is open for analysts, investors, and shareholders only. Media, including social media, are requested to disconnect at this point. With that, I would like to hand over the call to Mr. Rayan Al Shuwaibi, Head of Investor Relations. Please go ahead, Rayan.

Speaker #2: Please note that this call is open for analysts, investors, and shareholders only. Media, including social media representatives, are requested to disconnect at this point. With that, I would like to hand over the call to Mr. Rayyan Al-Shoaibi, Head of Investor Relations.

Speaker #2: Please go ahead, Rayyan.

Speaker #3: Thank you, Pottrick. Good day, everyone, and thank you for joining the call. We'd like also to thank Riyad Capital for hosting the call today.

Rayan Al Shuwaibi: Thank you, Potrik. Good day, everyone, and thank you for joining the call. We would like also to thank Riyad Capital for hosting the call today. With us today, our CEO, Nadir Al-Koraya, CFO, Abdullah Al-Oraini. As always, CEO will start with the performance highlights and strategy update, followed by CFO to cover the financial performance in more details. Then we will open the floor for your questions. Before we begin, a quick reminder that today's call includes forward-looking statements and discussion on financial performance. So I would like to remind everyone to refer to page 2 of the earnings presentation for the disclaimer notice. Also including on this page, clarification around the production of any of Riyad Bank's material and today's discussion in line with applicable laws and regulations. With that, I hand it over to our CEO. Nadir, over to you.

Speaker #3: With us today are our CEO, Nader Qayya, and CFO, Abdullah Raini. We will start with the performance highlights and strategy update, followed by the CFO, who will cover the financial performance in more detail.

Speaker #3: Then we'll open the floor, for your questions. but before we begin, a quick reminder that today's call includes forward-looking statements and discussion on financial performance, so I would like to remind everyone to refer to page 2 of the earnings presentation for the disclaimer notice.

Speaker #3: Also, included on this page is clarification regarding the reproduction of any of Riyad Bank's materials and today's discussion, in accordance with applicable laws and regulations. With that, I'll hand it over to our CEO, Nader.

Speaker #3: Over to you.

Speaker #4: Thank you, Rayyan. Good afternoon, everyone, and thank you for joining us today. I'm pleased to walk you through the key highlights of our performance for the first half 2026.

Nadir Al-Koraya: Thank you, Rayan. Good afternoon, everyone, and thank you for joining us today. I am pleased to walk you through the key highlights of our performance for the H1 2026. Before I turn to our performance, just a quick word on the regional environment. Clearly, it remains dynamic and we continue to monitor the developments closely. From our perspective, our priorities haven't changed. We are focused on supporting our clients, maintaining the resilience of our operation, and managing the business with discipline. We are not seeing any material deterioration in our business. While we remain vigilant, we believe we are well-positioned to navigate the current environment and the opportunities ahead. We come into this period from a position of strength. Our balance sheet is strong, our risk approach remains disciplined, and our business model is well diversified.

Speaker #4: But before I turn to our performance, just a quick word on the regional environment. Clearly, it remains dynamic, and we continue to monitor the developments closely.

Speaker #4: But from our perspective, our priorities haven't changed. We are focused on supporting our clients, maintaining the resilience of our operations, and managing the business with discipline.

Speaker #4: We are not seeing any material deterioration in our business, while we remain vigilant we believe we are well-positioned to navigate the current environment and the opportunities ahead.

Speaker #4: We come into this period from a position of strength. Our balance sheet is strong, our risk approach remains disciplined, and our business model is well diversified.

Speaker #4: Asset quality remains solid, customer behavior is stable, and liquidity remains strong. This confidence was also reflected in the successful completion of our public 81 perpetual sukuk issuance yesterday, with a landmark coverage where order reached almost 3 times coverage of the initial size.

Nadir Al-Koraya: Asset quality remains solid, customer behavior is stable, and liquidity remains strong. This confidence was also reflected in the successful completion of our public AT1 perpetual Sukuk issuance yesterday with a landmark coverage, where orders reached almost three times coverage of the initial size. This great coverage is a testimony of the investors' trust in Riyad Bank as a leading financial institution in the kingdom. On the back of this significant demand from a diverse base of institutional, private, and retail investors, we upsized the issuance to 10 billion Saudi Riyal to cater for the strong interest. The issuance will strengthen our capital and liquidity position, improve our funding profile, and further optimize our capital structure. Based on our position in June, this issuance will add roughly 200 basis points to our Tier 1 capital adequacy ratio. That additional capacity is important.

Speaker #4: This great coverage is a testimony of the investor's trust in Riyad Bank as a leading financial institution in the kingdom. On the back of this significant demand from a diverse base of institutional private and retail investors, we upsized the issuance to 10 billion Saudi Riyal to cater for this strong interest.

Speaker #4: The issuance will strengthen our capital and liquidity position. Improve our funding profile and further optimize our capital structure. Based on our position in June, this issuance will add roughly 200 basis points to our Tier 1 capital adequacy ratio.

Speaker #4: And that additional capacity is important. It puts us in an even stronger position to capture these opportunities we see ahead, particularly as we execute our 2030 strategy and participate in the significant pipeline of projects and investment across the Kingdom.

Nadir Al-Koraya: It puts us in an even stronger position to capture these opportunities we see ahead, particularly as we execute our 2030 strategy and participate in the significant pipeline projects and investments across the kingdom. We enter the second half of the year. I feel very confident about our position. We have a resilient balance sheet, sound risk management, and great financial flexibility. We remain focused on delivering sustainable growth and the long-term value for our shareholders. With that, let me now take you through the key highlights of our performance. Starting with the balance sheet. Our total assets reached 534 billion. That is up 3% since the beginning of the year. What is important here is not just the growth, but the mix. We have been quite deliberate in shifting towards higher quality, more capital-efficient opportunities.

Speaker #4: So we enter the second half of the year I feel very confident about our position. We have a resilient balance sheet, sound risk management, and great financial flexibility.

Speaker #4: And we remain focused on delivering sustainable growth and the long-term value for our shareholders. With that, let me now take you through the key highlights of our performance.

Speaker #4: Starting with the balance sheet, our total assets reach 534 billion, that's up 3% since the beginning of the year. What's important here is not just the growth, but the mix: we have been acquired deliberately, in shifting toward higher quality, more capital-efficient opportunities.

Speaker #4: Our investment portfolio grew strongly, up 16% year to date. While long growth was more moderated at around 1.2%. Credit demand remains healthy, so this is not really about lack of opportunity, it's more about being selective.

Nadir Al-Koraya: Our investment portfolio grew strongly, up 16% year to date, while loan growth was more moderated at around 1.2%. Credit demand remains healthy. This is not really about lack of opportunity, it is more about being selective. We continue to prioritize returns and the quality over simply chasing growth. On the funding side, we also made good progress. Liabilities increased by 2% over the same period to 453 billion, supported by 5% growth in customer deposits. What is important here is that the deposits grew faster than loans, which further strengthen our funding base and gives us a very comfortable liquidity position. Overall, I am pleased with the balance sheet. We are growing selectively, maintaining discipline, and preserving the capacity to take advantage of the right opportunities as they come. Turning to profitability, the picture is also solid. Despite the more moderate loan growth, revenue remained resilient.

Speaker #4: We continue to prioritize returns and quality over simply chasing growth. On the funding side, we also made good progress. Liabilities increased by 2% over the same period to SAR 453 billion, supported by a 5% growth in customer deposits.

Speaker #4: And what's important here is that the deposits grew faster than loans. Which further strengthened our funding base and gives us a very comfortable liquidity position.

Speaker #4: So, overall, I'm pleased with the balance sheet. We are growing selectively, maintaining discipline, and preserving the capacity to take advantage of the right opportunities as they come.

Speaker #4: Turning to profitability, the picture is also solid. Despite the more moderate loan growth, revenue remained resilient. Total operating income increased by 4% year on year, on the back of 4% growth in net interest income, and 2% growth in fees and other income.

Nadir Al-Koraya: Total operating income increased by 4% year on year on the back of 4% growth in net interest income and 2% growth in fees and other income. At the same time, we continue to see the benefit of our focus on efficiency. Our cost-to-income ratio improved to 29.2%, around 70 basis points better than last year. We are not only growing revenues, but we are also continuing to improve the efficiency of the bank. As a result, net income for the period reached 5.3 billion Saudi Riyal, up around 4% year on year, while return on equity remains strong at 16%, reflecting the resilience of our earnings. Finally, let me touch on the strength of our financial position.

Speaker #4: At the same time, we continue to see the benefit of our focus on efficiency. Our cost-to-income ratio improved to 29.2%, around 70 basis points better than last year.

Speaker #4: So we are not only growing revenues, but we are also continuing to improve the efficiency of the bank. As a result, net income for the period reached 5.3 billion Saudi Riyal, up around 4% year on year, while return on equity remained strong at 16%.

Speaker #4: Reflecting the resilience of our earnings. Finally, let me touch on the strength of our financial position. Asset quality remains strong, with NPL ratio improved to 88 basis points, down 25 basis points from a year ago, while the coverage remains robust at 149%, which reflects the quality of our underwriting and the disciplined approach we continue to take toward risk.

Nadir Al-Koraya: Asset quality remains strong, with NPL ratio improved to 88 basis points, down 25 basis points from a year ago, while the coverage remains robust at 149%, which reflects the quality of our underwriting and the disciplined approach we continue to take toward risk. Our capital position also remains strong, with total capital adequacy ratio of 19.4%. This was supported by ongoing capital planning and strong internal capital generation. Liquidity also remains very comfortable as well. Our SAMA-weighted LDR stood at 81%, and we continue to maintain stronger buffer of high-quality assets. Overall, our financial position remains strong, supported by prudent risk management, a solid capital base, and a continued focus on stability and long-term value creation. Let me now turn to our Saudi Vision 2030 strategy and give you a sense of where we are.

Speaker #4: Our capital position also remains strong, with total capital adequacy ratio of 19.4%. This was supported by ongoing capital planning and strong internal capital generation.

Speaker #4: Liquidity also remains very comfortable as well. Our SAMA-weighted LDR stood at 81%, and we continue to maintain a stronger buffer of high-quality assets. Overall, our financial position remains strong, supported by prudent risk management, a solid capital base, and a continued focus on stability and long-term value creation.

Speaker #4: Let me now turn to our 2030 strategy and give you a sense of where we are. As you know, we have introduced our new strategic direction earlier this year.

Nadir Al-Koraya: As you know, we have introduced our new strategic direction earlier this year, and we have been building momentum in its execution with good progress made during the H1. The environment around us is changing rapidly. Customer expectations are evolving, digital and AI are accelerating, and the banking sector itself is becoming increasingly competitive. Our strategy is designed to respond directly to that. At a high level, we are focused on scaling retail, strengthening wholesale, embedding AI, and modernizing our technology platform. Our ambition is to become the most innovative bank in the kingdom, and everything we do is anchored around our five strategic pillars, which will provide the foundation for how we execute our strategy. The H1 of 2026 has demonstrated the strength of Riyad Bank's strategy and our focused execution against it.

Speaker #4: And we have been building momentum in its execution, with good progress made during the first half. The environment around us is changing rapidly. Customer expectations are evolving, digital and AI are accelerating, and the banking sector itself is becoming increasingly competitive.

Speaker #4: Our strategy is designed to respond directly to that. At a high level, we are focused on scaling retail, strengthening wholesale, embedding AI, and modernizing our technology platform.

Speaker #4: Our ambition is to become the most innovative bank in the kingdom, and everything we do is anchored around our five strategic pillars which provide the foundation for how we execute our strategy.

Speaker #4: The first half of 2026 has demonstrated the strength of Riyad Bank's strategy, and our focused execution against it. We remain confident in delivering our 2030 strategy ambitions, and creating sustainable long-term value for our shareholders.

Nadir Al-Koraya: We remain confident in delivering our Saudi Vision 2030 strategy ambitions and creating sustainable long-term value for our shareholders. With that, I will now hand over to my colleague, Abdullah Al-Oraini, our CFO, to walk you through the financial performance in more details. Abdullah?

Speaker #4: So with that, I will now hand over to my colleague, Abdallah Alarainy, our CFO, to walk you through the financial performance in more detail.

Speaker #4: Abdallah?

Speaker #2: Thank you, Nadir. On slide 7, as you can see, the expansions on the balance sheet footing was driven by increased investments. I think these investments have been consistently growing in Q1 and Q2, purchased equity, y, building up our investment portfolio in a more appropriate from a balanced reward-risk perspective.

Abdullah Al-Oraini: Thank you, Nadir. On slide seven, as you can see, the expansions on the balance sheet putting was driven by increased investments. I think these investments has been consistently growing in Q1 and Q2, opportunistically building up our investments portfolio in a more appropriate from a balanced reward risk perspective. Loans expanded by 1.2% on a year to date basis or 7% on year on year basis. Those were funded by customer deposits, which grew by 5% on a year to date basis and around 9% on a year on year basis. Our non-interest-bearing deposit shares of the total deposits has declined to reach 43.7% as of end of June this year. I think this is also we have seen on the system as a whole, continued migrations towards interest-bearing deposits.

Speaker #2: Loans expanded by 1.2% on a year-to-date basis, or 7% on a year-on-year basis. Those were funded by customer deposits, which grew by 5% on a year-to-date basis and around 9% on a year-on-year basis.

Speaker #2: Our non-interest-bearing deposit shares of the total deposits has declined to reach 43.7% as of end of June this year. I think this is also we have seen on the system as a whole a continued migrations towards interest-bearing deposits.

Speaker #2: The operating income growth, as well as continued to derive efficiencies, have sustained our profitability metrics reflected by a 4% or 3.5% growth in the net income for the period, while return on average equity has recorded 16%, coming from 16.9, a similar period of last year.

Abdullah Al-Oraini: The operating income growth, as well as continuing to derive efficiencies, have sustained our profitability metrics, reflected by a 4% or 3.5% growth in the net income for the period, while return on average equity has recorded 16%, coming from 16.9% similar period of last year. I think it is worth highlighting that there is also a continued growth on the equity capital, which has slightly impacted the return on average equity. Cost to income ratio with our remained focus derived on efficiencies, as well as on the expense productivity, has reached to the historical level low of 29.2%. Cost base has grown by 1.1% compared to the similar period of last year. Both cost of risk, as well as the NPL ratios, registered 0.4% as well as 0.88%, respectively.

Speaker #2: I think it's worth highlighting that there is also continued growth in equity capital, which has slightly impacted the return on average equity.

Speaker #2: Cost-to-income ratio with our remained focus drive on efficiencies as well as on the expense productivity has reached to the historical level low of 29.2%.

Speaker #2: Cost base has grown by 1.1% compared to the similar period of last year. Both cost of risk as well as the NPL ratios registered 0.4% as well as 0.88% respectively.

Speaker #2: As highlighted by Nadir, funding and capital and liquidity ratios remain very strong, at 16.7% Tier One ratio and a total CAR of 19.4%. Both LDR, SAMA-weighted LDR, and LCR remain at very comfortable levels.

Abdullah Al-Oraini: As highlighted by Nader, funding and capital and liquidity ratios remains very strong at 16.7% Tier 1 ratio and total CAR of 19.4%. Both LDR, SAMA-weighted LDR, and LCR remains at very comfortable level. This is to highlight that incremental investments of SAR 15 billion, as well as SAR 4.3 billion of loans, has driven the registered assets growth. The loans portfolio, primarily the most of the growth coming or predominantly by the MSME segments, where we are strategically focused on expanding that. The loan mix, in terms of compositions, has remained stable by having 26% SMEs portfolio, 48% the corporate, while mortgages registered 18% and retail non-mortgages 8%, respectively. On slide number nine, this is to show the key movements of the customer deposits. I think it continued to drive the funding for the incremental growth that we have witnessed during the period of the last six months.

Speaker #2: This is to highlight that incremental investments of 13 billion as well as 4.3 billion of loans has driven the registered assets growth. The loans portfolio primarily the most of the growth coming or predominantly by the MSME segments where we are strategically focused on expanding that.

Speaker #2: The loan mix in terms of compositions has remained stable by having 26% SMEs portfolio, 48% the corporate, while mortgages registered 18% and retail non-mortgages 8% respectively.

Speaker #2: On slide number 9, this is to show the key movements of the customer deposits. I think it continued to derive the funding for the incremental growth that we have witnessed during the period of the last six months.

Speaker #2: Clearly here the 16.5% our 16.5 billion which represents 5% growth on a year-to-date basis were primarily driven by interest-bearing deposits. Both NSFR and the headline LDR have shown improvement.

Abdullah Al-Oraini: Clearly here, the SAR 16.5 billion, which represents 5% growth on a year-to-date basis, were primarily driven by interest-bearing deposits. Both NSFR and the headline LDR have shown improvement. The NSFR recorded 112%, which is 2.8% year-to-date growth, while the headline LDR reached to 108.4%, just slightly below the system level of 109%. As highlighted before, the SAR 21 billion increase in NIBs represents 12% year-to-date growth, while we have witnessed reductions on NIBs on a year-to-date basis by 3%. The net special commission income has witnessed a modest increase, probably by volume growth, as well as the repricing activities that we have been embarking on since the H2 of last year. That was partially offset by an increased cost of funding, which has increased on a year-on-year basis by 9%.

Speaker #2: The NSFR recorded 112% which is 2.8% year-to-date growth, while the headline LDR reached to 108.4% just slightly below the system of level of 109%.

Speaker #2: As highlighted before, the 21 billion increase in NIPS and EPS represents 12% year-to-date growth, while we have witnessed a reduction in NIPS on a year-to-date basis by 3%.

Speaker #2: The next special commission income has witnessed a modest increase troubled by volume growth as well as the repricing activities that we have been imparting on since the second half of last year.

Speaker #2: But that was partially offset by an increased cost of funding which has increased on a year-to-date on a year-on-year basis by 9%. I think we remain focused on enhancing our funding mix and further optimize where possible all the key components of the funding structure that we have, in line with our funding plan, but more importantly also we are continue to increase our corporate spreads progressively and this is will remain towards the end of the year.

Abdullah Al-Oraini: I think we remain focused on enhancing our funding mix and further optimize where possible, all the key components of the funding structure that we have in line with our funding plan. More importantly, also, we are continuing to increase our corporate spreads progressively, and this will remain towards the end of the year. This has resulted by 4% increase on net special commission income. I think the lower chart, the lower part of the page, reflects the movements of the net special commission income margins, which is relatively stable. We have witnessed a seven basis point reduction on our quarterly margin for the Q2, and that was primarily driven by the cost of fund, including all the Tier 2 Sukuks that we have issued during the H2 of the year and the beginning of the year. So it is all reflected in that one.

Speaker #2: This has resulted by 4% increase on NIPS special commission income. I think the lower chart the lower part of the page reflects the movements of the NIPS special commission income margins, which is relatively stable.

Speaker #2: We have witnessed a 7 basis point reduction on our quarterly margin for the second quarter, and that was primarily driven by the cost of fund, including all the tier two sukuks that we have issued during the second half of the year, and the beginning of the year, so it's all reflected in that one.

Speaker #2: So, it has partially diluted our assets' yield stabilizations that we reached. I think it's worth noting here that the earning assets as well as the interest-bearing liabilities have been growing at 11% respectively.

Abdullah Al-Oraini: So it has partially diluted our assets yield stabilizations that we reached. I think it is worth noting here that the earning assets, as well as the bearing liabilities, have been growing on 11%, respectively. We continue to focus on our cross-sell activities, as well as the cross products between segments. I think this was very important for us to cater for the reductions of the credit facilities, as well as some other fee incomes that were impacted by, A, the volume reductions compared to the previous period in terms of loan growth. Second is by the regional situations where we have seen some investment banking activities, as well as the brokerage, still is lagging behind on a year-to-date basis compared to the previous periods. This has resulted in a 2% increase in fee and other income.

Speaker #2: We continue to focus on our cross-sell activities as well as the cross-products between segments. I think this was very important for us to cater for the reductions of the credit facilities as well as some other fee incomes that were impacted by A, the volume reductions compared to the previous period in terms of long growth.

Speaker #2: Second is by the regional situations where we have seen some investment banking activities as well as the brokerage still is lagging behind on a year-to-date basis compared to the previous period.

Speaker #2: This has resulted in a 2% increase in fee and other income. I think the key message here that I would like to reiterate that we continue to be focused on the non-funded income in general, we see a more stabilizations and decent growth compared to the previous quarters, with the exceptions of Q3 as it was one of the strongest record NFI that we have recorded.

Abdullah Al-Oraini: I think the key message here that I would like to reiterate that we continue to be focused on the non-funded income in general. We see more stabilizations and decent growth compared to the previous quarters, with the exceptions of Q3, as it was one of the strongest record NFI that we have recorded. I think it is also worth highlighting that we have seen restorations of the trade finance on the second quarter, and particularly in the month of May and June, where we see that has come back to the pre-regional conflict levels. I think we continue to be focused around generations of these kinds of fees on the coming periods, as it is one of the key components and metrics that we look at it in comparison to our operating expenses.

Speaker #2: I think it's also worth highlighting that we have seen restorations of the trade finance on the second quarter, and particularly in the month of May and June, where we see that it has come back to the pre-regional conflict levels.

Speaker #2: I think we continue to be focused around generations of these kind of fees on the coming periods as it's one of the key components and metrics that we look at it in comparison to the our operating expenses.

Speaker #2: As I highlighted and Nader as well, at the beginning of the call, the cost discipline that we have been imparting on over the last two years, we further introduced a few initiatives at the beginning of the year.

Abdullah Al-Oraini: As I highlighted, and Nadir as well, at the beginning of the call, the cost discipline that we have been embarking on over the last two years, we further introduced a few initiatives at the beginning of the year. We will continue to derive more cost disciplines, monitoring very closely our expense productivity while we continue to execute our strategic initiatives that are emanating from our 2030 strategy. Having said that, this on a year-on-year basis, we have seen a growth of 1% on our cost base, and it is worth highlighting that most of the main driver of that cost is related to the depreciation, which is linked to our CapEx depreciations plan, as well as the significant investments that we have made in our infrastructures, as well as on other fixed assets.

Speaker #2: We will continue to derive a more cost discipline monitoring very closely our expense productivity, while we continue to execute our strategic initiatives that is emanating from our 2030 strategy.

Speaker #2: Having said that, this on a year-on-year basis we have seen a growth of 1% on our cost base, and it's worth highlighting that most the main driver of that cost is related to the depreciation, which is linked to our capex depreciations plan, as well as the significant investments that we have made in our infrastructures as well as on other fixed assets.

Speaker #2: Quarterly expense, as you can see, from the second quarter of last year has shown very stable trend over periods, and if we measure it on quarter to quarter of similar quarter last year, it translates to a 3% as a growth rate.

Abdullah Al-Oraini: Quarterly expense, as you can see, from the second quarter of last year, has shown a very stable trend over periods. If we measure it on quarter to quarter of similar quarter last year, it translates to a 3% as a growth rate. Cost-to-income ratios continue to be trending in the right directions, and I think this is something that we continue to work on. Our proactive risk management, as well as the assets quality, resulted in continued healthy NPLs in terms of stock, as well as in terms of coverage, while we see more stabilization as well on the cost of risk. NPL ratio registered 0.88% for the second quarter, while it is worth highlighting that there has been a movement on the NPL. These were primarily from the commercial book, and this is scattered around many customers as well.

Speaker #2: Cost to income ratios continue to be trending in the right directions, and I think this is something that we continue to work on. Our proactive risk management as well as the assets quality resulted in a continued healthy NPLs, in terms of stock as well as in terms of coverage, while we see more stabilization as well on the cost of risk.

Speaker #2: NPL ratio registered 0.88% on for the second quarter, while it's worth highlighting that there has been a movement on the LPL NPL, and thus these were primarily from the commercial book, and this is scattered around money customers as well.

Speaker #2: Impairments for credit losses grew 22% year-on-year for the first half. I think it’s worth highlighting that the recoveries we have seen in the first half are relatively lower than what we recorded last year, but we are expecting that recovery to gain more traction in the second half, in line with our practice as well as the progress we have made in a few accounts.

Abdullah Al-Oraini: Impairments for credit losses, it grew 22% year-on-year for the H1. I think it is worth highlighting that the recoveries that we have seen in the H1 is relatively lower than what we have recorded last year. But we are expecting that recovery to gain more traction in the H2, in line with our practice as well as the progress that we have made in a few accounts. NPL coverage ratio stood at 149% for the period. Putting all of these together, I think the quality earnings that we have registered for the first 6 months reflects our focus on the quality revenue generations as well as more optimizing our assets and capital allocations towards our businesses while we continue to focus on our efficiencies during the whole 6 months of the year.

Speaker #2: NPL coverage ratios stood at 149% for the period. Putting all of these together, I think the quality earnings that we have registered for the first six months reflects our focus on the quality revenue generations as well as more optimizing our assets as well assets and capital allocations towards our businesses, while we continue to focus on our efficiencies during the whole six months of the year.

Speaker #2: This has resulted in a year-on-year growth of net operating income before impairments by 5%, which has supported our profitability of 16% of return on average equity and 2% in terms of return on average assets.

Abdullah Al-Oraini: This has resulted in a year-on-year growth of net operating income before impairments by 5%, which has supported our profitability of 16% of return on average equity and 2% in terms of return on average assets. Capitalization remains very healthy, and I think, as highlighted and mentioned by my colleague, Nadir Al-Koraya, that the landmark transactions of our public AT1 Sukuk that we have issued yesterday and successfully completed across a wide range of investors will boost our Tier 1 capital ratios in the H2, which is already at the 16.7% level. The capital formations is trending in the right directions.

Speaker #2: Capitalizations remains very healthy, and I think the as highlighted by and mentioned by my colleague Nader that the landmark transactions of our public debt sukuk that we have issued yesterday and successfully completed across wide range of investors, will boost our tier one capital ratios in the second half, and which is already at the 16.7% level.

Speaker #2: The capital formations is trending in the right directions, so we see that the movements in terms of regulatory capital registered 8% growth in year-to-date basis, while capital demand or capital consumptions in the form of risk-weighted assets has grown by 6% on year-on-year basis, while regulatory capital grown by has grown by 22% on a year-to-year basis.

Abdullah Al-Oraini: We see that the movements in terms of regulatory capital registered 8% growth in the year-to-date basis, while capital demand or capital consumptions in the form of risk-weighted assets has grown by 6% on a year-on-year basis, while regulatory capital has grown by 22% on a year-to-year basis. Reflecting near-term market dynamics while we stay and remain on track for our long-term goals. As we mentioned in our last earnings call, that we are due to revise our guidance after we reflected on the Q2, and we see some restorations in terms of operating environment conditions, in terms of also some credit demand on our pipeline as well. We are revising our loans to be mid to high single digit for the remaining part of the year. Net special commission income also in the same tandem, mid to high single digit.

Speaker #2: Reflecting near-term market dynamics, while we stay and remain on track for our long-term goals, and as we mentioned in our last earnings call, that we are due to revise our guidance after we reflected on the Q2, and we see some restorations in terms of operating environment conditions, in terms of also some credit demand and our pipeline as well, so we are revising our loans to be mid to high single digit for the remaining part of the year net special commission income also in the same tandem mid to high single digit cost to income ratios is unchanged below 30%, and we are tracking very well against that.

Abdullah Al-Oraini: Cost-to-income ratios is unchanged, below 30%, and we are tracking very well against that. Our return on equity, we have slightly revised that guidance on the back of our capital formations in the form of equity to be above 15.75%. Our cost of risk has slightly been increased by 5 basis points in terms of both ranges, and this is just the reflections of some macro model-related components that we expect that will drive some additional expected credit losses as per our estimations. Tier 1 capital ratios has been revised up on the back of the successful Sukuk of SAR 10 billion to be above 17.5%. I think it is very important to reiterate that our 2030 medium term strategic aspirations in terms of ROE remains to be unchanged at high teens. With that, I will hand back to my colleague, Rayan Al Shuwaibi. Back to you, operator, to open the Q&A session.

Speaker #2: Our return on equity—we have slightly revised that guidance, on the back of capital formations in the form of equity, to be above 15.75%.

Speaker #2: Our cost of risk has slightly been increased by 5 basis point in terms of both ranges, and this is just a reflections of some macro model related components that we expect that will drive some additional expected credit losses as per our estimations.

Speaker #2: Tier one capital ratios has been revised up on the back of the successful sukuk of 10 billion to be above 17.5%. I think it's very important to reiterate that our 2030 medium-term strategic aspirations in terms of ROA remains to be unchanged at high teens.

Speaker #2: With that, I will hand back to my colleague Rayyad. Back to you, Operator, to open the Q&A session.

Speaker #1: Thank you. As a reminder, if you would like to ask a question on today's call, please use the raise hand icon towards the bottom of your Webex window.

Operator: Thank you. As a reminder, if you would like to ask a question on today's call, please use the raise hand icon towards the bottom of your WebEx window. We will take our first question from Naresh Bilandani from Jefferies. Naresh, please unmute and ask your question.

Speaker #1: We'll take our first question from Naresh Bellandani from Jefferies. Naresh, please unmute and ask your question.

Speaker #3: Yes, hi. Thank you very much. Hi, Nader and Abdullah, and Rayyan. Thank you for the presentation. Two questions, please. The first one was on the new sizeable AT1 issuance that you've done.

Naresh Bilandani: Yes. Hi. Thank you very much. Hi, Nader, Abdullah, and Rayan. Thank you for the presentation. Two questions, please. The first one was on the new sizable AT1 issuance that you have done. Would you please be able to share some thoughts on the deployment of this new SAR 10 billion that you have raised? If you can please share what are the immediate opportunities where we can see this being deployed, that would be helpful. Also, while we are on AT1, there is about SAR 9.4 billion of Perps that are up for a call next year. Do you intend to replace those with Perps or other structures? Because including this new AT1 cost, the costs are starting to now weigh quite a lot on the EPS.

Speaker #3: Would you please be able to share some thoughts on the deployment of this new 10 billion SAR that you have raised? If you can please share what are the immediate opportunities where we can see this being deployed, that would be helpful.

Speaker #3: Also, while we are on 81, there's about SAR 9.4 billion of perps that are up for a call next year. Do you intend to replace those with perps or other structures?

Speaker #3: Because including this new 81 costs, this new 81, the costs are starting to now weigh quite a lot on the EPS. So any color there on how you're thinking about the perps that are up for the call next year, that would be super helpful.

Naresh Bilandani: Any color there on how you are thinking about the Perps that are up for the call next year, that would be super helpful. The second one is on stage 2 loans. Could you please share the source of the 38% increase that we have seen in the stage 2 loans in the H1 of this year, and how do you see the movements as we go into the H2? Do you anticipate seeing some of these go into stage 3, and is that the reason why, if I saw right, you have increased your cost of risk guidance for the year? Or, if you can please offer some more color there, that would be extremely helpful. Thank you so much.

Speaker #3: The second question is on stage two loans. Could you please share the source of the 38% increase that we've seen in stage two loans in the first half of this year, and how do you see the movements as we go into the second half?

Speaker #3: Do you anticipate seeing some of these go into Stage Three, and is that the reason why—if I understand correctly—you have increased your cost of risk guidance for the year?

Speaker #3: Or if you can please offer some more color there, that would be extremely helpful. Thank you so much.

Speaker #2: Thank you so much. Regarding the sukuk issuance, first of all, we are very proud of the successful reception of the sukuk. It was one of the largest ever in the Saudi market.

Nadir Al-Koraya: Thank you so much. Regarding the Sukuk issuance, first of all, we are very proud of the successful reception of the Sukuk. It was one of the largest ever in the Saudi market. The demand was huge and the original plan was to issue around 5 billion. But given the demand, we increased to 10 billion to support not just our short term, but the midterm growth plan on loan, whether it is corporate loan or on retail. Obviously, given all the major projects, and the pipeline that we have, I think it will be deployed over the next five years. I do not know if you want to add anything on that.

Speaker #2: The demand was huge, and the original plan was to issue around 5 billion, given the demand. We increased to 10 billion to support not just our short-term but the mid-term growth plan on loans, whether it's corporate loans or retail, obviously given all the major projects and the pipeline that we have.

Speaker #2: I think it will be deployed over the next five years. I don't know if you want to add anything to that.

Speaker #3: Yeah, yes, absolutely. That's very well put, Nader. And also, Naresh, I think maybe you have mentioned this in the past. It might be worth mentioning it again.

Abdullah Al-Oraini: Yes, absolutely. That's where we will put Nader. Naresh, I think, maybe you have mentioned this in the past, it might be worth mentioning it again. When we developed our 2030 strategy, as an integral part of that strategy was the business plan, and the capital and funding plan is an integral part of that business plan. Yes, I think the deployments will be done over time. I think this is something that strengths the capital structure and the bank position. I think we have a 3-year rolling capital plan, always being updated consistently. I think any due or call dates, et cetera, it is an integral part of that plan. I think we will continue to optimize our balance sheet structure. We will continue to optimize our capital structure. Is this upsizing is for a specific person?

Speaker #3: When we developed our 2030 strategy, an integral part of that strategy was the business plan, and the capital and funding plan is an integral part of that business plan.

Speaker #3: Yes, I think the deployments will be done over time. I think this is something that is strengthening the capital structure and the bank position.

Speaker #3: I think we have a three-year rolling capital plan always being updated consistently. I think any due or a call dates, et cetera, it is an integral part of that plan.

Speaker #3: I think we will continue to optimize our balance sheet structure. We will continue to optimize our capital structure. Is this upsizing is for a specific person?

Speaker #3: No, I think it's very clear. My colleague Nader has clearly mentioned that, due to the strong demand as well as the successful perception of the instruments, we would like to position the bank more in the medium term.

Abdullah Al-Oraini: No, I think it's very clearly, my colleague, Nader, has clearly mentioned that due to the strong demand as well as due to their successful perceptions of the instruments, I think we would like to position the bank more in the medium term. This is to answer the first part of the question. The second question is on staging. If you recall in the last earnings call, I did mention that the migrations took place to 3 customers. One of them is something that we have done on a proactive basis. We will deal with these accounts, and we are on top of it. I think the right level of seniority from both the risk and the business are on a consistent and regular basis in terms of the update.

Speaker #3: So this is to answer the first part of the question. The second question is on staging. If you recall in the last earning call, I did mention that the migrations took place of three customers.

Speaker #3: One of them is something that we have done on a proactive basis. We will deal with these accounts and we are on top of it.

Speaker #3: I think the right level of seniority from both the risk and the business are consistently and regularly involved in terms of the update.

Speaker #3: And Q2, there were a few accounts that have also been migrated. And I think I wouldn't extrapolate aside from ordinary course of business activities at this stage.

Abdullah Al-Oraini: In Q2, there were few accounts also have been migrated, and I think I wouldn't extrapolate asides from an ordinary course of business activities at this stage. Would that be translating into a higher cost of risk in the future? I think not necessarily, but we will continue on a quarterly basis, look through the whole portfolio and what are the progress made on these accounts. I think everything that has been done so far during the course of the year is in line and as per our internal risk policies. I hope I answered your questions.

Speaker #3: With that being translated into a higher cost of risk in the future, I think not necessarily, but we will continue on a quarterly basis to look through the whole portfolio and assess the progress made on these accounts.

Speaker #3: I think we everything that have been done so far during the course of the year is in line and as per our internal risk policies.

Speaker #3: I hope I answered your questions.

Speaker #2: Got it.

Speaker #3: Yeah. Abdullah, thank you very much. And also, thanks, Nader. Just a very quick follow-up on the new liquidity. So, I mean, clearly, I'm also focusing a lot more on how should we think of 2026.

Naresh Bilandani: Got it. Yeah, Abdullah, thank you very much. Also thanks, Nader. Just a very quick follow-up on the new liquidity. Clearly, I'm also focusing a lot more on how should we think of 2026. Is it fair to think that you will use the new liquidity that has been garnered to replace some of the expensive time deposits so we could see the headline LDR move up from your current level in the H2 of this year? Probably because you've cut your loan guidance, we could see this liquidity continue to be placed in the investment book, which clearly I see you are adding quite a lot in the H1 of this year, especially on the fixed rate side. Is that a fair way to think how we should model the balance sheet for the rest of this year?

Speaker #3: Is it fair to think that you will use the new liquidity that has been garnered to replace some of the expensive time deposits, so we could see the headline LD ratio move up from your current level in the second half of this year?

Speaker #3: And probably because you've cut your loan guidance, we could see this liquidity continue to be placed in the investment book which clearly I see you are adding quite a lot in the first half of this year, especially on the fixed rate side.

Speaker #3: Is that a fair way to think about how we should model the balance sheet for the rest of this year?

Speaker #2: To a high extent, yes. We are letting expensive deposits go. And actually, we are not planning in the future to issue new bonds.

Abdullah Al-Oraini: To a high extent, yes. We are letting expensive deposits go.

Abdullah Al-Oraini: Okay.

Abdullah Al-Oraini: Actually, we are not planning in the future to issue new bonds. I don't think with this big size and it's perpetual, don't forget, it has a huge impact on the liquidity and on the capital. So your assumption is correct.

Speaker #2: I don't think, with this big size and its perpetual, don't forget it has a huge impact on the liquidity and on the capital.

Speaker #2: So your assumption is correct.

Speaker #3: Okay, thank you so much. That's clear.

Naresh Bilandani: Okay. Thank you so much. That's clear.

Speaker #1: The next question comes from Abdullah Al Baridi from Emirates. Abdullah, please go ahead. I'm muted to ask your question.

Operator: The next question comes from Abdullah Al Buraidi from Emirates. Abdullah, please go ahead, unmute and ask your question.

Speaker #4: Hello. Hi, Adil. Yeah, this is Abdullah from AMBD Capital. Thank you very much for the presentation. Congratulations on the very great results. And maybe just a follow-up on the Tier 1 Sukuk.

Abdullah Al Buraidi: Hello. Am I audible?

Abdullah Al-Oraini: You are.

Naresh Bilandani: Hello.

Abdullah Al Buraidi: Yeah. This is Abdullah Al Buraidi from Emirates NBD Capital. Thank you very much for the presentation. Congrats for the very great results. Maybe just to follow up on the Tier 1 Sukuk. If we look at the capital Tier 1 ratio, as you have mentioned, it is healthy at 16.7% and way above the needed level. If we look at the liquidity situation of the bank, the financing book has not grown that much yet. I see that the investment book has grown. Do you see all that Tier 1 mandatory at the current situation for the upcoming 5 years? We are raising this amount before the deployment by many years. Do you see that necessary?

Speaker #4: If we look at the capital tier one ratio and as you've mentioned, it is healthy at 16.7, way above the needed level. And if we look at the liquidity situation of the bank, the financing book hasn't grown that much.

Speaker #4: Yeah, I see that the investment book has grown, but, I mean, do you see all that Tier 1 mandatory at the current situation for the upcoming five years?

Speaker #4: I mean, we are raising this amount before the deployment by many years. Do you see that as necessary?

Speaker #3: Thank you. Let me clarify a few components of the questions. One is that the size of the issuances also caters to the maturities, as well as the anticipated calls that we have.

Abdullah Al-Oraini: Thank you. Let me clarify a few components of the questions. One is, the size of the issuances caters also on the maturities as well as the anticipated calls that we have. It is in line with our expectations. I think we opted to upsize it because of the strong performance of the issuance, as well as also in order to anticipate that the financial markets might not be at the best access points in H2. What we have done is basically we front-loaded some additional issuances that we wanted to do through that issuance, which is the right thing to do because first, this is the first public debt for us. Second, it is a SAR, so we are not subject to the international market conditions. The third one is the deployments. The deployments is a progressive deployment.

Speaker #3: It is in line with our expectations. I think we opted to upsize it because of the strong performance of the issuance as well as also in order to might not the financial markets might not be at the best access points in the second half.

Speaker #3: So, I think what we have done is, basically, we front-loaded some additional issuances that we wanted to do through that issuance, which I think is the right thing to do because, first, this is the first public debt for us.

Speaker #3: Second, it's a SAR, so we are not subject to the international market conditions. The third one is the deployments. The deployments is a progressive deployment.

Speaker #3: So that does not mean that we will go aggressive on underwriting. I think the value assets preferences as well as the quality of businesses that we are anticipating to go to put in the second half are already preloaded in the banks in terms of the pipeline.

Abdullah Al-Oraini: That does not mean that we will go aggressive on underwriting. I think the value assets preferences as well as the quality of businesses that we are anticipating to put in the H2 are already preloaded in the banks in terms of the pipeline. We do understand the certain drawdowns that is taking place. We do understand them better. I think the marginal opportunity or the cost here is with how we are continuously managing our funding structure. This has been business as usual for us. We continue to optimize our balance sheet. We continue to optimize our funding mix as well as the components or the sources of funds. While doing that will continue to progress and absorb that issue.

Speaker #3: So, we do understand certain drawdowns are taking place. We do understand that one. I think the marginal opportunity, or the cost here, is in how we are continuously managing our funding structure.

Speaker #3: And this has been a business as usual for us. We continue to optimize our balance sheet. We continue to optimize our funding mix. As well as the components or the sources of funds.

Speaker #3: While doing that, that will continue to progress and absorb that issuance.

Speaker #2: Absolutely, Abdullah. And as you know, we are aligning very closely to the government vision 2030 project. We have a strong pipeline of major government projects in the next five years.

Nadir Al-Koraya: Absolutely, Abdullah. As you know, we are aligning very closely to the government Saudi Vision 2030 project. We have a strong pipeline of major government projects in the next 5 years. This is also to support our funding needs.

Speaker #2: So, this is also to support our funding needs.

Speaker #3: And maybe one point: we mentioned this in the last call, as well as in the Q4 call, or the year-end call, that the operating environment has changed over the last 18 months.

Abdullah Al-Oraini: Maybe one point, we mentioned this in the last call as well as in Q4 call or year-end call, that the operating environment has changed since the last 18 months. We are operating in a high capital demand environment. You are very well aware that the countercyclical buffer of 1% has kicked in in May this year, and that needs to be taken into considerations. Perhaps this also has encouraged us to cater for our ambitions in terms of how we are growing in the medium term.

Speaker #3: So we are operating in a high capital demand environment. You are very well aware that the countercyclical buffer of 1% kicked in in May this year.

Speaker #3: And that needs to be taken into consideration. So perhaps this has also encouraged us to cater to our ambition in terms of how we are growing in the medium term.

Speaker #4: Yeah. Thank you very much. That's quite informative. Just a small added question. You've mentioned that the cost of risk guidance has been revised up due to a macro variables in the model.

Abdullah Al Buraidi: Yeah. Thank you very much. That is quite informative. Just a small add-up question. You have mentioned that the cost of risk guidance has been revised up due to macro variables in the model. Does that mean you do not see any material deterioration on the loan book or even slight deterioration? It is all just because of macro variables, right?

Speaker #4: So does that mean you don't see any material deterioration on the loan book or even slight deterioration? It's all just because of macro variables, right?

Speaker #3: I think material deteriorations, no, we haven't seen yet. I think, slightly, it depends how we are reading it, but we are reading it more towards it's an ordinary course of business.

Abdullah Al-Oraini: I think material deteriorations, no, we haven't seen yet. I think slight, it depends how we are reading it, but we are reading it more towards it's an ordinary course of business. There is no systematic signal or evidence that there is a formations of problem credit on a specific sector yet.

Speaker #3: So there is no systematic signals or evidence that there is a formations of problem credit on a specific sector yet.

Speaker #2: Just to add, yeah, we haven't observed any material impact from a portfolio perspective. Our corporate book is well diversified and conservatively underwritten, and we are always focused on high quality and sectors aligned with, as I said, national priorities.

Nadir Al-Koraya: Just to add, we haven't observed any material impact from a portfolio perspective. Our corporate book is well-diversified and conservatively underwritten. We are always focused on high quality, and also sector aligned with the, as I said, national priorities. Asset quality remains very strong. No sign of deterioration.

Speaker #2: So, asset quality remains very strong—no sign of deterioration.

Speaker #4: الله يعطيكم العافية. وفقكم الله. شكراً أستاذ نادر. شكراً أستاذ عبد الله.

Speaker #1: The next question comes from Rahul Rajan from Bank of America. Rahul, please go ahead. Unmute and ask your question.

Operator: The next question comes from Rahul Bajaj from Bank of America. Rahul, please go ahead, unmute and ask your question.

Speaker #4: Hi, good evening. I have a few questions from my side, please. Firstly, on the deposit side—can you help us understand the dynamics behind the outflow of non-interest-bearing deposits year to date?

Rahul Bajaj: Hi. Good evening. A few questions from my side, please. Firstly is on the deposit side. If you can help us understand the dynamics behind the outflow of non-interest-bearing deposits year to date. We did see an inflow at the end of Q1, but I think Q2 has seen a lot more outflow. How or what's driven this, number 1, and how should we see non-interest-bearing deposits from here? That's 1. Secondly is on the non-funded income side of things. Within that, we have seen that the fee income remains lower than, say, the quarterly run rate of 2025. How should we see fee evolution from here to the rest of 2026 as well as into 2027?

Rahul Rajan: Hi. Good evening. A few questions from my side, please. Firstly is on the deposit side. If you can help us understand the dynamics behind the outflow of non-interest-bearing deposits year to date. We did see an inflow at the end of Q1, but I think Q2 has seen a lot more outflow. How or what's driven this, number 1, and how should we see non-interest-bearing deposits from here? That's 1. Secondly is on the non-funded income side of things. Within that, we have seen that the fee income remains lower than, say, the quarterly run rate of 2025. How should we see fee evolution from here to the rest of 2026 as well as into 2027?

Speaker #4: I mean, we did see an inflow in at the end of first quarter, but I think second quarter has seen a lot more outflow.

Speaker #4: So, how or what has driven this—number one—and how should we view non-interest bearing deposits from here? That's one. Secondly, on the non-funded income side of things...

Speaker #4: Within that, we have seen that the fee income remains lower than say the quarterly run rate of 2025. So how should we see fee evolution from here?

Speaker #4: So the rest of 2026 as well as into 2027. And within that, I think in the non-funded income, there has been a substantial trading gains both in one Q as well as two Q, which is much higher than the historical run rate.

Rahul Bajaj: Within that, I think in the non-funded income, there has been a substantial trading gains, both in Q1 as well as Q2, which is much higher than the historical run rate. How should we see trading gains from here? That is number two. Finally, is on the entire liquidity front. I think in Q3 so far, the SAIBOR rates has probably trended a bit up compared to the average levels of Q2. Is this something that you are seeing even at Riyad Bank in terms of liquidity? Does this mean that as credit growth comes back to the system, we might actually see an environment where the liquidity pressures start coming back up on deposits? Thank you.

Rahul Rajan: Within that, I think in the non-funded income, there has been a substantial trading gains, both in Q1 as well as Q2, which is much higher than the historical run rate. How should we see trading gains from here? That is number two. Finally, is on the entire liquidity front. I think in Q3 so far, the SAIBOR rates has probably trended a bit up compared to the average levels of Q2. Is this something that you are seeing even at Riyad Bank in terms of liquidity? Does this mean that as credit growth comes back to the system, we might actually see an environment where the liquidity pressures start coming back up on deposits? Thank you.

Speaker #4: So, how should we see trading gains from here? So that's number two. And finally, on the entire liquidity front, I think in the third quarter so far, the SAIBOR rates have probably trended a bit up compared to the average levels of Q2.

Speaker #4: Is this something that you're seeing even at Riyad Bank in terms of liquidity? Does this mean that as credit growth comes back to the system, we might actually see an environment where the liquidity pressures start coming back up on deposits?

Speaker #4: Thank you.

Speaker #2: Thank you. So I'll start with your final question regarding liquidity. We are actually in the second quarter, and we are seeing a gradual improvement in the liquidity condition in the system.

Nadir Al-Koraya: Thank you. I will start with your final question regarding liquidity. In Q2, we are seeing a gradual improvement on liquidity condition in the system. You can see it on the funding cost over the benchmark. It has moderated a lot. Deposit in the system grew around 7%, while loan growth is around 3.7%. It is actually doubled for the first time in many quarters. The average weekly reverse repo with SAMA in Q2 has increased SAR 59 billion, which a number that we have not seen for a while. Overall, however, liquidity conditions remain tighter, if you look at from a historical average. It is improving, and we expect liquidity to basically normalize through H2 2026. Obviously, provided that market condition remain broadly unchanged.

Speaker #2: You can see it on the funding cost. Over the benchmark, it has moderated a lot. Deposit in the system grew around 7% while loan growth is around 3.7.

Speaker #2: So it's actually doubled for the first time in many quarters. The average weekly reverse repo in Q2 has increased by $59 billion, which is a number that you haven't seen for a while.

Speaker #2: But overall, however, liquidity conditions remain tighter if you look at them from a historical average. But it is improving, and we expect liquidity to basically normalize through the second half of 2026.

Speaker #2: Obviously, provided that market conditions remain broadly unchanged.

Speaker #3: Thank you. Thank you, Rahul. With respect to the first question on deposits in particular, and how we are seeing this—if you recall, we clearly highlighted that in Q1 we had transitory deposits in the form of NIBs.

Abdullah Al-Oraini: Thank you, Rahul. With respect to the first question on deposits, in particular, and how we are seeing this. If you recall, we clearly highlighted that in Q1 we had transitory deposits in the form of NIBs, and that has diluted the position of the bank. I think carving out that impact in Q2, we saw some marginal decrease on our NIBs. The growth was mainly in the IBs. I think this is consistent also on the system-wide measure. If you look into the year-to-date basis, time deposits has grown by 17% for H1. Non-interest-bearing deposits or demand deposits only grew by 1%. That continued to put a consistent pressures on the systems and in the cost of funding for us as well.

Speaker #3: And that has diluted the position of the bank. So I think carving out that impact in Q2, we saw some marginal decrease on our NIBs.

Speaker #3: But the growth was mainly in the IBs, and I think this is consistent also on the system-wide measure. If you look on a year-to-date basis, time deposits have grown by 17% for the first half.

Speaker #3: Non-interest-bearing deposits, or demand deposits, only grew by 1%. So that continues to put consistent pressure on the system and on the cost of funding for us as well.

Speaker #3: However, I think the thing that I would like to reiterate is that we, as a bank, are focused on growing our cheaper funding sources. This includes NIBs; this also includes saving deposits.

Abdullah Al-Oraini: However, I think the thing that I would like to reiterate, that we are, as a bank, focused on growing our cheaper funding sources. This includes NIBs. This includes also saving deposits. We are introducing also in the short term, some few products. That is the aim, but it is an area of focus and, hopefully, in H2, we will see some positive progress. On the second question, the non-funded income or as we explain it as fee and other income. Riyad Bank has been consistently, over the past years, showing very strong generations of this kind of non-interest income. I think this reflects our business model, our focus on cross-sell.

Speaker #3: We are introducing, also in the short term, a few products. So that is the aim. But it is an area of focus, and hopefully in the second half we would see some positive progress.

Speaker #3: On the second question, the non-funded income—or as we explain it, fee and other income—I think Riyad Bank has consistently, over the past years, shown a very strong generation of this kind of non-interest income.

Speaker #3: And I think this reflects our business model, our focus on cross-sell. And I think if we recall back in Q1, or in year end 2023, I think that was part of the strategic priorities that we have focused on in increasing the cross-sells within businesses as well as inter-segments.

Abdullah Al-Oraini: I think if we recall back in Q1 or in year-end 2023, I think that was part of the strategic priorities that we have focused on in increasing the cross-sells within businesses as well as our intersegments. What you see is a reflection of that. Yes, our strong loan growth in H1 2025 has enabled us to register a very strong fee income generations related to that one. But we were able to offset that through the treasury solutions, and particularly on offering to our customers and new to bank customers, hedging solutions for their exposures. I think we have captured very decent transactions on that one, and this was a result of a very close collaborations and coordinations between treasury and the corporate and the SME segments in particular.

Speaker #3: What you see is a reflection of that. Yes, our strong loan growth in the first half of 2025 has enabled us to register a very strong fee income generations related to that one.

Speaker #3: But we were able to offset that through the treasury solutions, and particularly by offering to our customers and new-to-bank customers hedging solutions for their exposures.

Speaker #3: I think we have captured a very decent transactions on that one. And this was a result of a very close collaborations and coordinations between treasury and the corporate and the SME segments in particular.

Speaker #3: I think that's what you see in here, the increase of 309 million in investments-related income. It's purely customer business; this is not a capital gain.

Abdullah Al-Oraini: I think that is what you see in here, the increase of SAR 309 million investments related income. It is purely customer business. This is not a capital gain.

Speaker #2: Mainly coming from derivatives and the cross-sell.

Murad Ansari: Mainly coming from derivatives and the cross-sell.

Speaker #3: And the cross-sell, exactly. But I think the key message here that I wanted to highlight is that we remained focused on our financial performance measurements around the non-funded income in a very big way.

Abdullah Al-Oraini: And the cross-sell. Exactly. But I think the key message here that I wanted to highlight, we remained focused on our financial performance measurements around the non-funded income in a very big way. Hopefully this answers your question.

Speaker #3: But hopefully this answers your question.

Speaker #4: Yes, absolutely. Thank you.

Speaker #2: You're welcome.

Rahul Bajaj: Yes, absolutely. Thank you.

Rahul Rajan: Yes, absolutely. Thank you.

Abdullah Al-Oraini: You are welcome.

Speaker #1: The next question comes from Murad Ansari from GCM Middle East. Murad, please go ahead. Your line can be opened.

Operator: The next question comes from Murad Ansari from GTN Middle East. Murad, please go ahead. Your line can be opened.

Speaker #5: Yes, thank you for the presentation and the opportunity to ask a question. Firstly, circling back on capital now—so 10 billion riyals, that roughly adds about, if I'm not wrong, close to about 200 basis points to your Tier 1 capital.

Murad Ansari: Yes. Salaam Alaikum. Thank you for the presentation and the opportunity to ask you a question. Firstly, on circling back on capital now. So SAR 10 billion, that roughly adds, if I am not wrong, close to about 200 basis points to your Tier 1 capital. I am just trying to connect it with your loan growth guidance and H1 delivery. It is not a huge number to achieve to get to the mid-single digit growth for the year, but it is almost 3 times the rate at which you have expanded the book in H1. Does that increase in capital, even the mid-single digit guidance suggest that you are seeing a pickup in growth for H2? Just that 100 basis points that you have increased in Tier 1 capital, are you seeing a strong pickup starting from H2 going into next year as well?

Speaker #5: And I'm just trying to kind of connect it with your loan growth guidance and first half delivery. So, it's not a huge number to achieve in order to get to the mid-single-digit growth for the year.

Speaker #5: But it's almost like three times the rate at which you've expanded the book in the first half. So, does that increase in capital mean even the mid-single-digit guidance?

Speaker #5: You kind of suggest that you're seeing a pickup in growth for the second half, but just that— I mean, that 100 basis points that you've kind of increased in Tier 1 capital, are you seeing a strong pickup starting from the second half going into next year as well?

Speaker #5: I understand that this is more of a five-year kind of strategy on the capital side, but there's 100 basis point of extra tier one capital that you've added on.

Murad Ansari: I understand that this is more of a five-year strategy on the capital side, but there is 100 basis point of extra Tier 1 capital that you have added on. Just wanted to get a sense and also tying it up with the off-balance sheet commitments. Those at least show that they have declined on LGs, LCs, extended commitment to extend credit. All those numbers have come off from year-end base. That is suggesting a slowdown in the H1. Just wanted to get how to connect all of these together in terms of growth over the next, let us say, H2 and also into 2027. The second question I had was on the deposit mix. Yes, those transitory deposits have left, and we are seeing system-wide shift in CASA and term deposits.

Speaker #5: So, just wanted to get a sense, and also tying it up with the off-balance sheet commitments. Those at least show that they've declined on LGEs, LCEs, extended commitments to extend credit—all those numbers have come off from the year-end base.

Speaker #5: So that's kind of suggesting a slowdown in the first half, and so I just wanted to get how to connect all of these together in terms of growth over the next, let's say, second half and also into 2027.

Speaker #5: The second question I had was on the deposit mix. So yes, those transitory deposits have kind of left and we're seeing system-wide kind of shift in kasa and term deposits.

Speaker #5: But is this more driven by the banks trying to lock in liquidity over the next, let's say, six months, or is it more a customer preference to lock in higher rates at this point in time?

Murad Ansari: Is this more driven by the banks trying to lock in liquidity over the next, let us say, 6 months, or is it more a customer preference to lock in higher rates at this point in time that is driving that shift from CASA to term deposits? Yeah, that is it. Thank you.

Speaker #5: That's driving that shift from CASA to term deposits. Yeah, that's it. Thank you.

Speaker #3: Thank you, Murad. I'll try to decompose your questions into a flow of responses that connects with each other. First, I think in the last earning call, we clearly highlighted that we do expect second half to be in a better way because I think a lot of more clearer path post on the regional conflict is expected.

Abdullah Al-Oraini: Thank you, Murad. I will try to decompose your questions into a flow of responses that connects with each other. First, I think in the last earning call, we clearly highlighted that we do expect H2 to be in a better way because I think a lot of more clearer path post on the regional conflict is expected, and we are starting to see that as well. Also more importantly, as I mentioned before, that we are seeing healthy credit demands as well. The pipelines that we have been consistently focusing on is also telling us the same. So we do expect a pickup in the H2. I think this is something that we anticipated, and we have also been prepared for.

Speaker #3: And we are starting to see that as well. Also, and more importantly, as I mentioned before, we are seeing healthy credit demand as well.

Speaker #3: And the pipelines that we have been consistently focusing on are also telling us the same. So, we do expect a pickup in the second half.

Speaker #3: I think this is something that we anticipated, and we have also been prepared for. The 1% increase on the new rough estimates—I think whatever the percentage is—I think this is not only for 2026.

Abdullah Al-Oraini: The 1 percentage increase on your rough estimates, I think whatever the percentage is, I think this is not only for 2026. We are not rushing to deploy that capital. I think we will deploy it in a very efficient as well as in a profitable manner. I think this is also, we are in the Q3 now, and we will start the budgeting process for that for 2027, and we are starting to build towards that one. So I think the deployment comes in a very timely manner. Also the growth, the revisions of the loans is based on our anticipation of drawdowns as well as the underwriting that is going to happen during the course of the H2 of the year. So putting all of these together, okay, it is very important that we do have the right capacity and capabilities that we capitalize on.

Speaker #3: We're not rushing to deploy that capital. I think we will deploy it in a very efficient as well as in a profitable manner. I think this is also we are in the third quarter now and we will start the budgeting process that for 2027 and we're starting to are building towards that one.

Speaker #3: So I think the deployment comes in a very timely manner. And also, the growth—the revisions of the loans—is based on our anticipation of drawdowns as well as the underwriting that is going to happen during the course of the second half of the year.

Speaker #3: So, putting all of these together, it's very important that we have the right capacity and capabilities that we can capitalize on.

Speaker #3: And I would also like to bring to your attention that the first half and the second half, or the full 2025, was one of the strongest growth periods that we registered in terms of our loan book, where we grew the book by 16.5%.

Abdullah Al-Oraini: I would like also to bring your attention that the H1 and the H2 or the full 2025 year was one of the strongest growth that we registered in terms of our loan book, where we grew the book by 16.5%. We are talking from a higher base effect here. I think this is something that is useful to consider. In terms of the deposits and the migrations, et cetera, I think if we look into the data on the statistical bulletin that is being published on a monthly basis, you see that the non-private sector consolidated deposits continue to shift towards the time deposits. Also, I think the elevated level of the SAIBOR compared to 18 months ago, I think this has also gone.

Speaker #3: So we are talking from a higher base effect here, so I think this is something that is useful to consider. In terms of the deposits and the migrations, etc., I think if we look into the data on the statistical bulletin that is being published on a monthly basis, you see that the non-private sector consolidated deposits continue to shift towards the time deposits.

Speaker #3: Also I think the elevated level of the cyber compared to the 18 months ago I think this has also gone. I think also some other factors that impacting I'm talking about Riyad Bank here we consider we do have our ALM metrics.

Abdullah Al-Oraini: I think also some other factors that impacting, I am talking about Riyad Bank here, we consider we do have our ALM metrics, we do have our regulatory metrics, we do have our key ratios that we need to maintain at all times. I think adding all of that resulted into that situation. I think we are not seeing significant shift from the beginning of the year of these customers. But I think you will always have customers preferences changes over time. I think we have seen that in our order book of our public AT1 Sukuk, where we have seen a very diverse range of investors, whether this is a retail or a private or institutional investors or funds. I think that tells us that they are trying to lock in some interest for quite a period of time.

Speaker #3: We do have our regulatory metrics. We do have our key ratios that we need to maintain at all times. So I think adding all of that resulted in that situation.

Speaker #3: I think we are not seeing a significant shift from the beginning of the year with these customers, but I think you will always have customer preferences changing over time.

Speaker #3: I think we have seen that in our order book of our perpetual sukuk, where we have seen a very diverse range of investors, whether this is retail, private, or institutional investors, or funds.

Speaker #3: So, I think that tells us that they are trying to lock in some interest for quite a period of time.

Speaker #5: Thank you. And just a follow-up on dividends. So, your interim dividend for the first half is roughly in line with what your regular run rate on dividends has been.

Murad Ansari: Thank you. Just on a follow-up on dividends. Your interim dividend for the H1 is roughly in line with what your regular run rate on dividends has been. Last year, we did see a slight reduction in your payout ratio for the H2. With these capital actions that you have taken, improvement in capital ratios that have come across over the last six, 12 months, are we comfortable on the capital ratios, and how should we think about now the dividend policy going into the H2 of the year?

Speaker #5: Last year, we did see a slight reduction in your payout ratio for the second half. With these capital actions that you've taken and the improvement in capital ratios that have come across over the last 6 to 12 months, are we comfortable with the capital ratios? And how should we think about the dividend policy going into the second half of the year?

Speaker #3: I think it's very important to reiterate that our dividend guiding principles have not changed. I think for the interim dividend of 2026, in terms of the amount, it is in line with what we paid last year.

Abdullah Al-Oraini: I think it is very important to reiterate that our dividend guiding principles have not changed. I think, for the interim dividend of 2026 has been, in terms of amount, in line with what we have paid last year for the similar period. I think the payout ratio is slightly below, so it translated to around 48% compared to a 50% or 51% compared to the similar period of last year. I think we have not changed any components of our dividend guiding principles that we have communicated to the market. I think what we have done in the H1 is a clear reflection of our restorations from the H2 of last year. I think it is very important to reiterate the message that we have been consistently giving to the market participants after the year-end 2025.

Speaker #3: For the similar period, I think the payout ratio has slightly below. So it translated to around 48% compared to a 50% or 51% compared to the similar period of last year.

Speaker #3: I think we haven't changed any components of our dividend guiding principles that we have communicated to the market. And I think what we have done in the first half is a clear reflection of our restorations from the second half of last year.

Speaker #3: I think it's very important to reiterate the message that we have been consistently giving to the market participants on and after the year-end 2025.

Speaker #3: We the board of directors as well as the general assembly has approved the bonus shares transactions that the board of directors recommended to it.

Abdullah Al-Oraini: We, the board of directors as well as general assembly, has approved the bonus shares transactions that the board of directors recommended to it. I think that has resulted in inching up our common equity Tier 1 to 14% level as it is clearly mentioned. I think aside from that, we have been consistent in terms of our focus on our business growth and the originations on the assets allocations, on the capital efficient allocations as well, and a more balanced way on a risk-adjusted basis.

Speaker #3: I think that has resulted in inching up our common equity tier one to the 14% level, as it's clearly mentioned. I think aside from that, we have been consistent in terms of our focus on our business growth and the originations on the assets, allocations, and the capital-efficient allocations as well.

Speaker #3: And in a more balanced way, on a risk-adjusted basis.

Speaker #2: Our final question today comes from Chiro Ghosh from CECO. Chiro, please go ahead. You're muted. Please ask your question.

Operator: Our final question today comes from Chiro Ghosh from SICO. Chiraag, please go ahead. Over to you to ask a question.

Speaker #4: Yeah, hi. First, this is Chiro Ghosh from CECO Bahrain. Most of the questions have been answered, I mean quite comprehensively. Just one sense I want to get is that most banks are looking to get into the SME sector, which used to be the forte of Riyad Bank.

Chiro Ghosh: Hi. Hello. First, this is Chiro Ghosh from SICO Bahrain. Yeah, most of the questions have been answered, I mean, quite comprehensively. Just one sense I want to get is that most banks are looking to get into the SME sector, which used to be the forte of Riyad Bank. I mean, they are quite strong there. Are you witnessing additional competition there and margin pressure on that aspect? Yeah.

Speaker #4: I mean, they're quite strong there. Are you witnessing additional competition there, and margin pressure on that aspect? Yeah.

Speaker #5: Thank you very much. Competition has increased, particularly from large banks, which obviously reflects the attractiveness and growth potential of the SME segment. But despite that, Riyad Bank continues to maintain its leadership position.

Nadir Al-Koraya: Thank you very much. Competition has increased, particularly from large banks, which obviously reflects the attractiveness and the growth potential of the SME segment. But despite that, Riyad Bank continues to maintain its leadership position. Our market share is around 25% of the market based on the latest disclosed data for Q1. So our competitive advantage is supported by our longstanding experience in the segment dedicated to the SME centers, a broad distribution network, continuing investment in digital origination, trying to always improve the customer experience, and faster turnaround times. I believe the market is large enough for all the banks, but I think we will continue our leadership position.

Speaker #5: Our market share is around 25% of the market based on the latest disclosed data for Q1. So, our competitive advantage is supported by our long-standing experience in the segment, dedicated to the SME centers and our abroad distribution network.

Speaker #5: We are continuing to invest in digital origination, always trying to improve the customer experience and achieve faster turnaround times. I believe the market is large enough for all the banks.

Speaker #5: But I think we will continue our leadership position.

Speaker #4: Okay. Okay. Okay. That's all from my side. Thank you.

Speaker #5: Thank you.

Chiro Ghosh: Okay. That's all from my side. Thank you.

Speaker #2: This concludes today's Q&A session. If you have any further questions, please direct them to the Riyad Bank Investor Relations team. I will now hand back to the CEO for closing remarks.

Nadir Al-Koraya: Thank you.

Operator: This concludes today's Q&A session. If you do have any further questions, please direct them to the Riyad Bank investor relations team. I will now hand back to the CEO for closing remarks.

Speaker #5: Thank you. Thank you all for taking the time to join us today. We appreciate your continued interest in Riyad Bank and look forward to updating you in the coming quarters.

Nadir Al-Koraya: Thank you. Thank you all for taking the time to join us today. We appreciate your continued interest in Riyad Bank and looking forward to updating you in the coming quarters. Goodbye.

Speaker #5: Goodbye.

Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect.

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Q2 2026 Riyad Bank Earnings Call

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