Q2 2026 National Bank of Bahrain BSC Earnings Call
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Speaker #2: Particularly reinforcing profitability and net interest margin resilience, and sharpening commercial intensity. So I think before I move on from this slide, what I really want to emphasize is that the results you've seen, that we've announced for the second quarter of 2026, are record results.
Speaker #2: These are results that demonstrate that our strategy is working. It's actually the highest second quarter in history for NBB, and it reflects a 16% growth on a year-over-year basis.
Speaker #2: But it's not just one quarter's effort; it's really a sustained effort over the period that I've given you the overview for, over the last three years in particular.
Speaker #2: And our efforts are not to be growing in any particular product or any particular geography just for the sake of delivering better financial results.
Speaker #2: Our efforts are truly directed at building a sustainable franchise in all the key five areas of growth that I've mentioned, so that the financial results are essentially an outcome of truly having enhanced connection and relationship with our customers. Of course, this demonstrates that they are increasingly moving towards NBB, as the growth rates that you see here are largely faster than the growth of the individual market and the segments that we've got.
Speaker #2: I think, moving on to the next slide, NBB, being a true national champion institution in the Kingdom of Bahrain, has an overall track record of growth in loans and deposits that is, again, both impressive in terms of the growth that we've registered, with deposits being at a 9% compounded annual growth rate since 2023, and loans—sorry, loans—being at 8%.
Speaker #2: But the important thing here is that this is also balanced growth. It's not on one side of the balance sheet. It allows our balance sheet to be resilient, and it allows us to fund ourselves through the deposits that we are able to generate.
Speaker #2: And I think that is a very important element of why our best-of-both-worlds distribution strategy is so important, and so resilient at the same time.
Speaker #2: You see that we have the large branch network in the Kingdom, we have the largest ATM network in the Kingdom, but at the same time, we are making continued investments in technology, and digital equipment transactions are growing at a far faster pace than the overall growth of the market.
Speaker #2: I'll demonstrate that now in each of the business areas that we have emphasized earlier on in my opening slide. So if you go to the next slide and we look at some of the key drivers in the retail, strategic accounts, private banking, and wealth management business, you can see that our growth momentum here is substantially driven by—if I start with the pillar on the right-hand side—the growth that we're seeing in our digital banking transactions.
Speaker #2: Our digital loan portfolio growth is 185% on a year-over-year basis. Our digital loan account growth is 122%, and our app transacting customers have gone up by 21%.
Speaker #2: I've already mentioned the emphasis on CASA growth, and our Taraf Price account is our flagship savings product for individuals. But beyond that, I think it's important to also look at how our transaction volumes are growing in the credit card business.
Speaker #2: Our active card customers have grown by 19% on a year-over-year basis. But they're not just more active; they're also spending more—in terms of the number of transactions they're doing, as well as the spend per card.
Speaker #2: So, what that means is that our card customers are using us more frequently, as well as using us for more significant purchases than what we saw last year.
Speaker #2: Equally, on the mortgage side, we remain very strong and well positioned. Our overall accounts have grown by 17% on the mortgage side, our portfolio has grown by 12%, and of course, we continue to see very strong proof of concept on our wealth management business where, in addition to the revenue growth that was mentioned earlier, we've also seen a 37% increase in active customers and a 70% increase in our digital T-bill accounts.
Speaker #2: I think on the corporate banking side, similarly, taking a quick snapshot—and if you move to the next slide, you will see that here, across all key areas of corporate banking and transaction banking, we are seeing very strong growth in our key business drivers.
Speaker #2: And these growth numbers indicate that we’re becoming more and more relevant to our corporate customers on a day-to-day basis. We are more and more integrated with their treasury operations, their working capital financing, and their working capital management.
Speaker #2: So we're involved in collections, we're involved in payments, we're involved in helping them to do their trade finance, as well as, of course, meet their funding requirements both for the short and the medium term.
Speaker #2: I think the business drivers here are very self-explanatory, so I won't cover them individually. But we're happy to answer any questions on these at the end of the presentation.
Speaker #2: Moving on to the next slide, here we take a bit of a further look into the UAE and the KSA franchises, as well as into our Islamic banking business.
Speaker #2: So, in the UAE, we launched our SME value proposition. This is a liability-centered business, and we've seen, again, a very strong opening of that business.
Speaker #2: Over the last, I would say, one year, CASA growth is up 200%, deposit growth overall is 84%, and we've recorded a 9% increase in relationships that we've onboarded.
Speaker #2: We expect to accelerate this as we move ahead, because we have now built in systems that are able to handle higher customer volumes on the corporate and non-retail side in the UAE.
Speaker #2: In the Kingdom of Saudi Arabia, our trade loans are up over 100% on a year-over-year basis, driven by strong growth in our LC business as well as in our guarantees business.
Speaker #2: I think this is important because it allows us to be more relevant again on a day-to-day basis to key corporate clients in Saudi. It also gives us an angle to develop our markets business—our FX business in particular—when we're involved with import financing and import LCs for our clients in Saudi Arabia.
Speaker #2: We're also going live with our online banking, corporate online banking platform in Saudi Arabia. It's essentially the same platform that we have already launched in the UAE and Bahrain, and that will allow us to really have a very strong value proposition to connect all three markets for our customers.
Speaker #2: Similarly, on BISP, I think across both retail and business banking, there has been very strong uptake in underlying volumes and business drivers for both segments on a digital banking basis.
Speaker #2: And our transaction banking business, again, which is now a group role and group function from NBB, is allowing us to transfer success, transfer technology, and transfer experience to BISP.
Speaker #2: We're also seeing very strong growth, with deposits up 20% on a year-over-year basis. Moving on, I think what I've described to you hasn't gone unnoticed.
Speaker #2: We did win the Best Retail Bank Award in Bahrain by Euromoney this year. This was reconfirmed independently by also winning the Best Retail Bank Award by MENA Banking this year.
Speaker #2: And of course, we've been recognized for our efforts on sustainability by being selected as the best bank for sustainable finance in Bahrain by Global Finance Magazine, and we've been specifically recognized for our DFI financial institutions syndicated loan that we did.
Speaker #2: Actually, it was last year, but it was officially signed at the beginning of this year. That was actually recognized as the syndicated loan deal of the year.
Speaker #2: By a Global Banking and Markets award. So with that, I will pass it over to my colleague, Mohsen, Group CFO, to give us further details on the first half results.
Speaker #3: Thank you, Osman, and good afternoon, everyone. As our GTEO mentioned, this is the highest second-quarter profit that we have reported for NBB, of BHD 22.5 million in the attributed and BHD 23.1 million as the consolidated profit.
Speaker #3: I would like to highlight that NBB, as a group, has maintained a dividend payout ratio of 10% as the interim dividend. And our growth, as you have seen in our previous slides—in terms of the drivers and in terms of the numbers that I will be talking about—is on the back of growth in our core business, right?
Speaker #3: And this is all organic growth that we are experiencing. It does not include any inorganic or acquisition-related growth. Last but not least, our fundamentals remain strong because of our prudent risk management approaches.
Speaker #3: So if you look at slide 9, I would like to mention a few things. Number one is we experienced strong demand from our customers across retail, corporate, and overseas branches, and we grew 6% versus December 2025 when I look at the balance sheet.
Speaker #3: Aspects of the loans and advances, and liability growth, was 2%, but customer deposits were up 12%. Balance sheet growth overall is about 2%.
Speaker #3: With respect to our second bullet—10% higher normalized attributable profit—you can see the increase from 39 to 43.1 million shown on slide 11. The group core business remains resilient, and we have 13% NII growth on a year-over-year basis.
Speaker #3: And the normalized other income was down 7% because of the timing of the Treasury gains that we have in our financials.
Speaker #3: If you look at our normalized operating income, we are up 7%. With respect to the credit quality, our cost of risk remains in the 30 bps range. As I mentioned in the previous call, we see around 30 to 40 bps as our normal cost of risk.
Speaker #3: With respect to our ratio, we maintained it at a similar level as Q1, including non-performing Poki, which was at 3.6%. So we have a slight improvement to 3.5% on a first-half basis.
Speaker #3: And our coverage ratio is up from Q1 to 88.5%, which is a good indicator of how we are managing our stage three coverages.
Speaker #3: With respect to other key ratios, like the cost-to-income ratio, we have invested, even as I mentioned previously, in modernizing the bank and its infrastructure. Also, when we look at new products and the expansion of our overseas branches.
Speaker #3: Our target is to maintain somewhere around 55% cost to income ratio or slightly below that. And we would strive towards that. And it is not a surprise when we look at our low-mid 50s as part of the cost to income ratio.
Speaker #3: Our core remains healthy and very strong. That means we are managing and ensuring that we are fully utilizing our balance sheet. We maintained about 20%—20.5% back in December and 19.8% in the first half. The NIM has also been very stable.
Speaker #3: In fact, in Q2 alone, our NIM is 2.7%. For the first half, it's about 2.6%. All in all, you can see this sums it up very, very well.
Speaker #3: What we are focusing on, and how we are driving our balance sheet from a structural standpoint. If we go to the next slide—from a financial snapshot perspective, as you can see on the left-hand side—Q2 attributable net profit is up 16%.
Speaker #3: And this is being driven primarily by three areas. Number one is the NII growth. Number two is the profit on foreign exchange the bank earns.
Speaker #3: And last but not least, the Treasury gains that we have in the second quarter. With respect to the first half, we are down 9%, from 47.5 to 43.1, as you may see a note below that we had a one-off gain in 2025 in the first quarter, which was fairly substantial.
Speaker #3: And after normalizing for that, we are up 10%, to 43.1 profit for the first half on a normalized basis. Similarly, if you look at the operating income, it commensurates with the net profit, with attributable net profit up 17%.
Speaker #3: And again, on a reported basis, we are down 3%. That is, again, related to the one-off adjustment or the one-off income that we have booked.
Speaker #3: On a normalized basis, it is high in the single digit, which is about 7%. And this is the overall view from what we have reported on our Q2 financials versus on a first-half normalized basis.
Speaker #3: How does it look? Moving along to the next slide. If you look at Bahrain's national champion, from a total assets standpoint, as well as the capital ratios, liabilities, and the mix that we are seeing, there is a 33% total assets shift that we are seeing from 2022 to the first half.
Speaker #3: 2026. Obviously, this has grown because we are showing strong growth on the liability side on the chart below, which is at or almost at 38%.
Speaker #3: So this is a good mix if you look at it from a structural standpoint, in that you have the liabilities—or the deposits, or the borrowing capability—to fund the asset growth in a responsible manner.
Speaker #3: And this also shows, if you look at the liabilities, from December 2025 to now, the overall deposits—overall market within Bahrain—has gone up by about $1 billion as well.
Speaker #3: So, NBB being the largest and the biggest bank, obviously we will attract a portion of that to our balance sheet. CET1 and CAR remain strong.
Speaker #3: This shows that we are at about 20%. And this is, again, a very efficient use of our balance sheet. Below, you are seeing good work, and almost 77% of our liabilities are driven by customer deposits—almost $4.5 billion out of $5.8 billion.
Speaker #3: And the rest is obviously, you maximize by going through the repo process as well as making sure your borrowing remains strong to fund, and ensuring these ratios are well within our regulatory requirements.
Speaker #3: Next page, please. On the balance sheet credit side, you are seeing about 7% asset growth, which is, again, a strong view of our balance sheet since first half 2025 to first half 2026.
Speaker #3: We are also showing at the bottom what the movements were that took place within the asset side, as well as the liability aspect. If you look at the last asset side, we are making sure our customer loans are managed within a risk appetite framework.
Speaker #3: We do not wish to stretch our balance sheet too much in this stress environment. However, when you look at the movement on the liability side, you will see we have reduced our interbank borrowings as well as our repos, given the fact that the channel that we have now adopted—digital channel, operating account, para accounts—a deposits coming in from non-banking financial institutions, retail clients, and strategic clients.
Speaker #3: Our customer deposits have gone up, which helps us in reducing our dependency on the interbank, as well as on other facilities. So this gives you a good picture of how we are looking at the movement of the assets versus liabilities.
Speaker #3: And at the top, we are just showing the key line items on the balance sheet, with respect to overall assets as well as liabilities and equity.
Speaker #3: Next page. On this slide, we are showing, from a growth standpoint, that this is on a consolidated basis, which means that this is not an attributable view.
Speaker #3: And net profit for the period is $23.1 million. Again, just wanted to repeat, this is the highest second quarter profit that NBB has reported.
Speaker #3: And from a Q1 versus Q2 net profit growth standpoint, we are showing how much we are adding as part of our determination and previous communication over the last one year.
Speaker #3: The focus is on our net interest income. This is not only driven by deposits, but it is a culmination of how we've managed our interest rate risk management framework, how we are looking to manage the gaps, how we are looking to improve our asset yield, as well as the deposits aspect, which fundamentally helps us on the 5 million.
Speaker #3: We are not stopping here from a net interest contribution, as we are targeting to grow our core business fundamentally higher given the strong benefit, or the tailwind, we are seeing across the board.
Speaker #3: So, having said that, if you look at it on a normalized basis, some of the growth areas—net interest income is up $8.5 million.
Speaker #3: Other income is down because of the treasury-related gains. We have experiencing lower our expenses obviously have gone up on a year-over-year basis. The year's inflation, which is playing the role then we have the strategic expenses that are the merger-related expenses we are taking upon us as well as some of the other areas that we have some of the improved by some of the loans or some of the provisions that we have taken in managing the overall business framework.
Speaker #3: Next page. This is just a repeat of what I said. This gives the attendees a flavor of how we are taking a trajectory from a net interest income standpoint all the way to the operating profit of $22.5 million.
Speaker #3: As you can see on the left-hand side, our growth is almost 20% on the net interest income. So you see in Q2 2025, 33.7 going up to 40.3.
Speaker #3: Similarly, our other income is up from 12.3 to 13.6. And operating profit is a healthy 31%. So, strong results, strong quarter, and at the same time, we are making sure that we have adequate provisions for the names that we may see some challenge coming ahead.
Speaker #3: Next page. First half, similarly, we are just providing a view of, on a reported basis, how it looks like. However, as I mentioned, if we take out the one-timers that we have in 2025, we are showing a 10% growth.
Speaker #3: Versus a 9% decline. Next page. Operating income trend remains very strong—up 17% if you see from Q2 2025 to $53.9 million versus $46 million.
Speaker #3: Normalized operating income grew from $102.8 million to $196.4 million. Our margins remain very much within the levels that we expect in the first half.
Speaker #3: Our net interest margin is 2.6%. However, I just wanted to mention that, on a standalone basis, for Q2 it is 2.7%. So, all in all, we are maintaining our trajectory of 2.7% and higher for the rest of the year.
Speaker #3: Operating expenses, up 8%. Again, as I mentioned, this is not a surprise given the fact that we are working to modernize the bank’s infrastructure and offer new products.
Speaker #3: Improving our customer support models, as well as the resiliency that we have to build in the event of challenging environments—these are some of the things which are not a surprise, but we just wanted to make sure that we maintain our operating income growth being better than the operating expense growth.
Speaker #3: So here are some of the key drivers, what trajectory looks like from 53.2 on a first half normalized basis, up to 56.4.
Speaker #3: And it is within the realm of, on the old basis for the first half, about close to $3 million in increase, which is not very substantial.
Speaker #3: Normalized cost-to-income ratio is about 54.6% in the first half, and 56.6% in the first quarter. As I have mentioned, our approach and focus is to maintain a cost-to-income ratio somewhere around 55%.
Speaker #3: On a normalized basis, as you can see, it is below the 55 target. We are managing and ensuring our operating expenses remain well under control.
Speaker #3: However, depreciation and amortization continue to be a driver for our expense growth. But it is definitely a driver of our previous year's expenditure as we grow the bank in a responsible manner.
Speaker #3: Next page. Liquidity trends, LCR, NSFR, et cetera, all remains very healthy. We can see as you can see, within the on this slide, the LCR is dropping from 415 to 324 is primarily driven by the growth in the loans and advances which was funded through the reallocation of our Bahrain government bonds.
Speaker #3: So you will see that. But it remains, we have 3.24% higher than what we absolutely require from an LCR maintaining perspective of 100% from a regulatory perspective.
Speaker #3: NSFR is 139.3. Obviously, there is a jump in the NSFR, and there are some questions that came up from some of our shareholders. It is obviously driven by the deposits that we have experienced within the bank, across the retail, strategic corporate, overseas branches, and specific accounts related to Tara, which is performing very well.
Speaker #3: And all these items sort of contribute towards the NSFR calculation. High quality liquid assets are also about $2 billion. As you can see, as I mentioned earlier, this is just some of the reallocation and some of the adjustments driven by the placements that we have, the debt securities, as well as the other GCC government paper that we anticipate having on our books.
Speaker #3: Growth in loans and a drop in money market borrowing reduce the CBB placement, and therefore, that is essentially the impact. On the cost of risk, or the impairment asset side—if you look here on the slide, as you can see, we have managed to improve our impairment and asset quality.
Speaker #3: What we as part of our BAU measures, right, we continue to have prudent risk management framework which also ensured which always ensures that the bank has enough buffers to absorb any shocks without any severely impacting the shareholder returns.
Speaker #3: And that approach that we have taken, and the changes that are embedded in our model runs, and the risk buffer that we have, covers more than sufficiently the shocks that come through from time to time.
Speaker #3: That being said, we continue to have sufficient and adequate coverage ratios. And as you can see, below the 3.5% NPL ratio—3.5%—and the Stage Three, including collateral coverage ratios of 88.5%.
Speaker #3: So this is a slight improvement versus Q1. And we will continue to report and come back to the shareholders as well as to the analysts where we stand upon our ratios.
Speaker #3: Risk-weighted assets, as you can see here on the left-hand side, we are providing a breakdown between operational, market risk, and credit risk.
Speaker #3: The change in the market risk is mainly attributed to some of the changes in the type of risk that we have taken, which reduces or increases the weightage on the RWA side. However, it's not significant if you look at it from an overall standpoint of BHD 2.7 billion of our risk-weighted assets.
Speaker #3: Total capital obviously remains very strong. We have the dividend payouts, as well as some impact associated with the fair value changes of the debt that we have on the balance sheet, which has an impact not only at the NBB level but across all banks in the sector.
Speaker #3: Capital ratios, as I have mentioned—CET1 ratio as well as the other ratios—remain strong. You can see some of the things that we are showing here on how we have built up nicely to provide our shareholders with a view of what the waterfall looks like and how we are reporting the numbers.
Speaker #3: So, this is a good depiction and a very strong disclosure of our insights compared to the previous slides that you have seen in Q1 and before.
Speaker #3: This gives the level of comfort on the elements of our management framework, especially on our capital, our risk, our coverages, as well as our core engine drivers.
Speaker #3: Next slide, please. So, here's the RWA return. As you can see, we are improving the RWA return on RWA—3.2%. Our earnings per share is strong at 15.6, and we try to ensure that our trajectory remains around a 15% ROE standpoint.
Speaker #3: ROA remains healthy at the 1.4 level, and as we grow our balance sheet, we will be able to maintain and ensure that we have quality assets coming onto our balance sheet.
Speaker #3: So all in all, we feel very confident that ratio management remains a top priority for the bank and its management. On a year-to-date basis, you can see the stock performance. We have included this slide at the bottom; it shows how much capital or the dividends that we have paid out.
Speaker #3: Right. Strong dividend payout. You can see the ratios—our dividend yield is 6.4%, which is very, very strong given the environment. Our market cap from an overall standpoint, our shareholdings, as well as the closing price, you know, as of June 30th.
Speaker #3: So, we are trajecting and our trajectory is very strong. We continue to, as we have mentioned, manage the dividend payouts and bring value to our shareholders.
Speaker #3: Last 90 days' market performance—again, this is a combination of how we have experienced it over the last six months, which also included some of the stress coming in due to the geopolitical tension. But overall, I think we are doing very well, given the framework of where the Bahrain index is, as well as the NBB share prices.
Speaker #3: That's all from my side. I'm happy to take any questions after Hisham and everyone else.
Speaker #1: Perfect. So, thank you, Weston. Thank you very much. I think, Dana, we will go to you. Our Group Team Strategy and Facility Officer's name is Leonie.
Speaker #1: He can give us the summary. I know you have a one-slider, but it's quite a meaty slide over there, so please, the floor is yours.
Speaker #3: Thank you, Hisham. So maybe I'll begin. Good afternoon, everyone. I'm very happy today to share with you the key highlights and our ESG, showing the progress in our sustainability journey.
Speaker #3: If we look at our sustainable finance portfolio, our social housing program value has increased by 17% year on year, and our total sustainable finance portfolio has grown by 20% year on year.
Speaker #3: Zooming in onto the environmental KPIs we can our current waste recycling ratio stands at 11%. We have managed to reduce our scope to by 16% that's the intensity and then the total scope to emissions have reduced by 10%.
Speaker #3: In terms of Scope One intensity per employee, that has reduced by 45%, and total Scope One emissions have been reduced by 41%. That's mainly because of the introduction of our electric car fleet compared to last year, when we had the normal cars.
Speaker #3: Our total energy consumption has reduced by 8%, and our total waste produced has reduced by 22%, while the total waste produced per employee has reduced by 27%.
Speaker #3: The main driver of the significant decrease of this quarter is because of some of the work from home arrangements resulting from the geopolitical situation in the quarter.
Speaker #3: Moving on to the social aspect, we have 65% of our employees who have attended the sustainable awareness program, and we have averaged 18 training hours per employee. Our volunteering hours have totaled about 1,193 hours, and our donations and contributions stood at $1.7 million as of Q2 2026.
Speaker #3: In terms of our diversity and inclusion KPIs, we have increased our number of employees of determination to nine people in Q2, and we stood at 38% representation of women in the workforce, 29% representation of women in middle management, and 12% in management.
Speaker #3: That resulted in achieving different rankings in Bloomberg and NSDG. We stood first among the banking services sector in Bahrain by Bloomberg and were second across all sectors in Bahrain.
Speaker #3: By NSDG, we rank in the top 33% among the banking services sector in MENA, and in the top 10% globally of financial services by NSDG.
Speaker #3: And that's it for our sustainability KPIs for the quarter. Thank you.
Speaker #1: Thank you very much, Dana. That's fine. Before I start the financial questions, since we're in the mode of updates, an anonymous attendee asked a question about the update on the BBK merger.
Speaker #1: So you can enlighten us on that, after which we can jump into the questions.
Speaker #2: Sure. I think we've been updating on a monthly basis on the Bahrain board on the merger. So, where things stand is that we are still in negotiations among both parties. As was reported earlier, due diligence was completed on a reciprocal basis, and we are not at a stage where a final agreement has been reached on the exchange ratio. But talks are ongoing and discussions are continuing, and we shall be continuing to report further updates on that as matters progress.
Speaker #1: Thank you, Hisham. I'll start with the first three questions, which were provided to us by Mr. Ali. Thank you very much for the questions. I'll ask them to you since they're very numerical.
Speaker #1: So question number one is about ECL NBB standalone versus BISP. So the group ECL was BD 2.4 million, while BISP alone reported BD 3.7 million.
Speaker #1: Does this imply that NBB standalone recorded an ECL release, and if so, what drove it? You can answer the first question. We'll jump to the second question.
Speaker #2: As I have just mentioned right we when we look at our risk management framework whether it's NBB or NBISP standalone basis and as we are mentioning all the time that we in the previous quarters that we continue to manage and ensure there is absolute prudent risk management framework is adopted and both levels and bank has the ability or is in a position to absorb any severely severe shocks and not having to impact our shareholders.
Speaker #2: Given the approach we have taken, the exchanges are embedded in our model run. When you look at the specific numbers, and as we have previously stated, we have risk buffers to cover any shocks or any impact. That being said, we continue to have adequate coverage, we have sufficient provisions, and we will continue to maintain these at times of stress, whether it's at the BISP or at the NBB level.
Speaker #1: Thank you very much for that. The second question is related to Q2—sorry, the second question is related to ECL prudence versus loan growth.
Speaker #1: So, NBB Group assigned a higher weighting to the downside scenario while loans and advances continue to grow. Why has this not translated into higher provisioning in the P&L, and what is offsetting the expected ECL impact?
Speaker #2: I think I have just covered the same response that I have just given.
Speaker #1: Okay. And the last question is related to the BD 400 million deposit growth and NSFR. So, what is the source and composition of the BD 400 million increase in customer deposits? Based on the NSFR disclosure, it appears that over BD 300 million relates to retail and SME deposits. Is this correct, and how stable are these deposits?
Speaker #2: As our GCO just mentioned right where we are seeing a trend in the deposit growth right so allow me to expand on that. Retail benefit liabilities has been benefited from the current geopolitical environment right growth was supported by lower spending reduced travel activity as well as lower loan payment due to the deferral of the loans.
Speaker #2: Having said that, we have invested, as you can see in our investment or the growth in expenses on our digital capabilities. That is helping us significantly.
Speaker #2: We have an operating account strategy across our corporate platform, and last but not least, the Tara account, as we mentioned in the beginning, is attracting a lot from a customer standpoint.
Speaker #2: They are seeing value, and these are some of the areas besides, you know, our strategic accounts as well as the retail platform. So all engines, including our overseas branches, are performing well, and we are seeing not just one but a combination of sectors helping us grow our deposit base.
Speaker #1: Fantastic. Thank you very much. Hisham, a question from Sumayan Jaziri. Probably I'll transfer the question to yourself. He says, "Good afternoon. Congratulations on a good set of results—a strong quarter, which has come as a beat to our estimates."
Speaker #1: I have a couple of questions, if I may. So, question number one: I may have missed it, but could you clarify if 2026 is the last year of the three-year cycle? And would management be sharing the next cycle's KPIs in the upcoming quarters?
Speaker #2: Yes, it is the last year of the three-year cycle, and we will be doing our management strategy offsite towards the end of September, after which we will be engaging during the last quarter with the board for a detailed board strategy offsite session. Once these priorities are agreed and approved at the board level, which I expect to be the case by the end of the year, we will be happy to share the key priorities and, obviously, keep everyone updated on progress against the priorities and the KPIs related to those priorities.
Speaker #1: Thank you, Hisham. And the next question is: could you elaborate on the fee decline? What has resulted in that, especially given that we see quite a jump in LCs, which typically should earn the buyer fees? And what would be a fair run rate of fee income growth?
Speaker #2: So as I mentioned at the given the impact on the retail spending side right so this is mainly attributed specifically across the BISP as well as NBB as we have lower spending and you will see some impact on the fee side but at the same in the same token you will see improvement on the liability side from a balance sheet standpoint.
Speaker #2: So, the culmination of that is impacting our fee income, which is not very significant, and we—you know, some of the things that we had anticipated in the first half, based on our second half and first half performance of last year, they—there may be delays due to the geopolitical tensions, especially on our corporate side.
Speaker #2: Which we hope to cover in the second half of this.
Speaker #3: I think generally there's been less deal activity on the corporate finance side because of the situation, and that has had some impact on a year-over-year basis on the fee income in the corporate finance business.
Speaker #3: But as I mentioned earlier, the underlying core drivers of our corporate banking and retail banking business, and transaction volumes, trade finance volumes—as has been noted by Sumayan—they are all up.
Speaker #3: As you know, corporate finance fees are generally more lumpy by nature. So if we had something last year, on a year-over-year basis it could represent a relatively significant growth portion that is missing this year because of the situation and the market environment.
Speaker #3: But again, we've got a robust pipeline, and we do hope that we can catch up on this for the rest of the year.
Speaker #1: Well, thank you, Hisham. Thank you, my son. To our shareholders, and I think we'll say, rounding. Two questions from Mr. Ahmed Fakro. He says, "Dear NBB Executive Management, I want to table the following two questions for discussion."
Speaker #1: Please find them structured below for clarity. So, question number one is about Q2 net interest income and the increase. There is a statement, and then there's a question.
Speaker #1: So the statement is: NII increased significantly in Q2 2026 versus Q1, alongside approximately BD 400 million in deposit growth. Now, the question that relates to that statement from Mr. Ahmed is: What factors drove the NII increase, and to what extent was it related to these deposits?
Speaker #1: Are these balances low-cost and sustainable, or temporary?
Speaker #2: Allow me to respond to that. Number one is with respect to NII improvement this is one of our key areas of focus and I keep saying that we have been mentioning it in our previous calls but we are mentioning it in our so number one there is better quality data and visibility which is helping us managing the interest rate gaps right and better than you know from previous years from an IRBB standpoint which reduces the NII volatility.
Speaker #2: That's number one. Number two, we are executing different balance sheet strategies, such as lower spread pricing on short-term deposits, which helps us in reducing our costs.
Speaker #2: We are also reviewing the deposit pricing curves across all currencies in the market based on the policy rate that we anticipate.
Speaker #2: So, IRSs and cross-currency swaps to close the interest rate gaps – we are managing and executing those as appropriate. And last but not least, we are also looking at balance sheet reallocation – holding back growth on low-spread products versus where we want to enhance and increase the NII.
Speaker #2: So this is not just a one-time event that you are seeing; it is coming in since last year, and as I've said, if you look at historically our trajectory on the NII, that remains our focus.
Speaker #2: Does it mean should we stop here? Probably not. We will continue to look and attract deposits right make sure that we have bank has enough liquidity to meet the customer demand and support the market as a as a key national bank of and continue to do a strong focus and have a strong focus on balance sheet management.
Speaker #2: Very simple.
Speaker #1: Thank you for that. The next question from Mr. Ahmed Fakro is related to the USD 450 million syndicated loan. The statement says NBB announced the $450 million syndicated loan facility on the 27th of January, 2026.
Speaker #1: The question was: Was it drawn by Q2? If so, where is it reflected on the liability side of the balance sheet and under which line item?
Speaker #2: Yes, so it was successfully closed and reflected under the Q2 banks and other financial institutions on the balance sheet.
Speaker #1: So, in Q2, because of the first part, was it drawn by Q2?
Speaker #2: Yes it was yes.
Speaker #1: Okay, okay. Thank you, Mr. Ahmed, for those questions. I have another four questions, so I'll start with an anonymous attendee. For our retail bank, the cost-to-income ratio is high.
Speaker #1: It's more comparable to wholesale banks. What is the reason for this high ratio?
Speaker #2: Yeah. So in the first quarter as we have mentioned that we attracted some more expenses because of the geopolitical tensions. We had to invest in some of our technology related aspects to strengthen our cyber security risk our you know any other risk that we were seeing there is also some cost that has gone up.
Speaker #2: In addition to supporting the financial institutions, the second thing is we are also seeing that the maintenance cost of our equipment has gone up significantly.
Speaker #2: The cost of because we are seeing higher demand on the chips right so the we're seeing an increase in our infrastructure related expenses. So all these factors enlap but not least the as I mentioned the merger related expenses that we have to incorporate right coming into our P&L which are required to be taken as it comes.
Speaker #2: So we cannot keep them on the balance sheet. It is not correct from a financial and accounting standpoint. So these are some of the things that are pushing the cost up from our standpoint.
Speaker #1: Okay, thank you for that. Since we talked about the stress environment, we also talked about expected growth. A question from Mr. Hussein Safiuddin—I hope I'm pronouncing the name correctly.
Speaker #1: Either Safiuddin or Saifuddin—so please forgive me for that. Given your cautious growth stance in the stressed environment, what level of full-year 2026 loan growth are you comfortable with?
Speaker #1: And what conditions would need to improve before you accelerate lending?
Speaker #2: Sure. I think maybe if I can just share some thoughts, and then mostly you can add as required. So, we are not driven by any specific loan target percentage, first of all.
Speaker #2: I think we're purely driven by, as I mentioned earlier, our efforts to build customer franchises in the target segments, in the geographies, and in the business lines that we have outlined in our strategic roadmap.
Speaker #2: As far as the environment is concerned, I think we have seen that even within the stressed environment, there is opportunity for selecting profitable growth and for selecting growth that is prudent.
Speaker #2: Our priority right now is to maintain more liquidity than what we would have in a normal operating environment, but that doesn't mean that we are not able to expand our balance sheet on the asset side where the returns are. So, I think we will continue to be prudent, but as we've demonstrated in the first half, we are able to find growth, we are able to find profitable growth, and we will do that on a transaction, relationship, and specific case-by-case basis. We're not really chasing a particular budgeted, you know, percentage growth in our assets in the current environment.
Speaker #1: I think the interesting question is the latter part: what conditions would need to improve before you accelerate lending? I mean, as you said, we're not targeted to that, so okay.
Speaker #2: I mean, I think if you look at the growth that we've had in the first-half lending already, it's actually higher than the growth we know on market.
Speaker #2: So, I wouldn't say we've slowed down.
Speaker #1: Okay. Now, I've got two questions related to NIM. One of them is sort of forward-looking, but let's start with the first question and then we'll come back to Mr. Hussein.
Speaker #1: So so thank you very much for the question on NIMS. Merced mentioned that the bank looks at maintaining the trajectory the trajectory of higher NIMS 2.7% in line with what has been achieved for the whole year.
Speaker #1: Could you just elaborate on what drivers are expected to support that level of NIMS? And the second part of the question is, is it lower cost of funds, higher yields from non-trading investments? I think she's giving you this as a—you know, the answer in the second part, if.
Speaker #2: Yes, I covered that, but I will allow you to elaborate further.
Speaker #1: I'm using it as an introduction to the next sort of forward.
Speaker #2: So this is if you look at the what the question that you are asking is what do we expect for the second half and is that lower cost of funds which are using and is that the trajectory this on surface it looks these are some of the alerts but behind the scene there is a lot more effort that goes into it when we look at IRBB when we look at the the gaps when we look at the overall how we can be able to manage and close the interest rate gaps more specifically on whether on a low cost basis or high cost do we have the timeline appropriately managed given the shift in the curve on an ongoing basis do we can we be able to reallocate assets from balance sheet standpoint and last but not least do we have the data and the and the availability on a timely basis to react in in closing the interest rate obviously the every bank will focus on improving the returns or the yield but there are a lot many other factors that go behind in managing the NIM it is it appears straightforward but at the same time it's a very complicated and a lot of work is required in managing our aspects.
Speaker #2: So when you say the higher yield from non-trading related investments is I'm I I think it it takes into account obviously what investments we have on the book can we be able to recycle can we be able to take opportunity given the pricing movements etc so these all these factors help us in managing our NIM better besides the obvious ones of yield enhancement gaps etc etc.
Speaker #1: Thank you Russell. So the next question is is is is from Mr. Hussein again Safiuddin or Saifuddin. What is your full year 2026 NIM guidance and how should we think about the H2 trajectory given the Q2 improvement and asset yields and funding costs?
Speaker #1: So I don't know it's the forward looking question. I know the the the question is related to guidance but yeah I just want to be as as prudent as we could.
Speaker #2: Go ahead. So, from our standpoint, our aspiration is maintaining our NIM trajectory, right? And obviously, the end result is the NIM. If we manage the net interest income efficiently, and if we are able to improve our net interest income by looking at interest income and what we have on the interest expense side, obviously the outcome will be the NIM percentage.
Speaker #2: But the thing is that, you know, I think they're looking for a specific number, and I would say that we would like to at least maintain what we have achieved in the second quarter and hopefully look to build on this positive momentum as well.
Speaker #2: It is not something that is easy in the current environment, because we are seeing elevated cost of borrowing and elevated deposit rates generally, as a result of the environment.
Speaker #2: However, you know we are very focused on our operating accounts strategy for both individual as well as corporate customers, and we would like to really continue with going on cost of analysis as a result of the focus that we have on collections and payments, on lending, and the overall financial solutions and the seamless financial solutions that are referenced being our focus under our vision and our strategic objectives.
Speaker #2: So, we hope that that will translate into the same sort of continued momentum that we've seen in the second quarter, notwithstanding the headwinds that we are facing from the operating environment that we have.
Speaker #1: Okay, thank you very much, Sir Osman. With that, we have concluded all the questions from all the shareholders, both in the comment section, in the chat, as well as the questions submitted earlier.
Speaker #1: So, on behalf of the National Bank of Bahrain Group, we would like to thank you all for attending the investors meeting and, most importantly, thank you very much for your questions and feedback. Until we meet again for the next update, allow me to express our collective gratitude for your continued support.
Speaker #2: Thank you very much for your engagement. Thank you for your time and we look forward to seeing you again next quarter.
Speaker #1: Bye.
