Middle East United Arab Emirates

Company
Banking

10 April 2011
Industry Update
MENA Banks Top picks

Q1 11 preview - core GCC Qatar National Bank (QNBK.QA),QAR142.80

First Gulf Bank (FGB.AD),AED16.45
Buy
Buy
Global Markets Research

Al Rajhi Bank (1120.SE),SAR77.25 Buy

Masraf Al Rayan (MARK.QA),QAR24.10 Buy

markets remain resilient Emirates NBD (ENBD.DU),AED3.47

Banks Cur (m)

Buy

Net income (Q1 11)

Rahul Shah Ryan Ayache Riyad Bank SAR 679
Research Analyst Research Analyst Bank Aljazira SAR 19
(+971) 4 4283-261 (+971) 4 428-3781 Saudi Investment Bank SAR 182
rahul.shah@db.com ryan.ayache@db.com Saudi Hollandi Bank SAR 207
Banque Saudi Fransi SAR 680
Egypt, Lebanon banks most affected by recent events; Qatar, UAE resilient Saudi British Bank SAR 513
We present our Q1 11 forecasts and our assessment of the key issues facing the Arab National Bank SAR 491
Samba Financial Group SAR 1048
sector. We believe Qatar and UAE bank results should be largely immune to the Al Rajhi Bank SAR 1601
events that have engulfed the region. Saudi banks should also be minimally Bank Albilad SAR 19
affected, save for the one-off salary boost given to workers. The Egyptian National Bank of Abu Dhabi AED 1013
economy was disrupted in Q1, although better times are likely ahead; the Abu Dhabi Commercial Bank AED 510
Lebanese banks (and NBAD) may provide the earliest indicators of how events in First Gulf Bank AED 1018
the country have affected local banks. Top picks: ENBD, FGB, MAR, QNB, Rajhi. Emirates NBD AED 2258
Dubai Islamic Bank AED 268
Qatar – earnings boosted by QCB bond and government spending Commercial Bank of Qatar QAR 492
We expect record earnings in Q1 for Qatari banks and excellent FY numbers as Doha Bank QAR 970
Qatar Islamic Bank QAR 502
well. System liquidity is at an all-time high due to peak LNG production and solid
Masraf Al Rayan QAR 525
global energy prices. As such, funding costs continue to be favorable, while BLOM Bank* LBP 130
system assets received a huge boost by the QCB’s QAR50bn bond and sukuk Bank Audi* LBP 107
issuance to domestic banks in January. High levels of government spending * Figures in bn
should continue to provide the bulk of credit growth. Top picks: QNB and MAR. Source: Deutsche Bank

Saudi banks – one-off salary boost to hit bottom line in Q1

We believe the Saudi banks will likely seek to emulate the recently announced two Companies featured
month extra salary being awarded to public sector employees. While this should Riyad Bank (1010.SE),SAR26.30 Buy
have a limited impact on FY results, the effect in Q1 could be more material. Yet, Bank Aljazira (1020.SE),SAR20.05 Sell
we believe investor sentiment should be more closely driven by loan volume Saudi Investment Bank (1030.SE),SAR20.25 Hold
Saudi Hollandi Bank (1040.SE),SAR30.80 Buy
growth; we see momentum slowly improving. Announced stimulatory measures Banque Saudi Fransi (1050.SE),SAR50.00 Hold
should lift corporate credit demand; the anticipated Mortgage Law could boost Saudi British Bank (1060.SE),SAR45.50 Hold
demand for housing loans. Al Rajhi, Saudi Hollandi, Riyad are Buy rated. Arab National Bank (1080.SE),SAR34.80 Hold
Samba Financial Group (1090.SE),SAR56.50 Hold
UAE banks – lower risk costs to fuel earnings growth Al Rajhi Bank (1120.SE),SAR77.25 Buy
We believe the pace of the new NPL formation is likely to slow significantly, Bank Albilad (1140.SE),SAR19.45 Sell
Alinma Bank (1150.SE),SAR10.00 No
reflecting a sharp moderation in real estate price deflation and improving Abu Dhabi Comm Bank (ADCB.AD),AED2.57 Hold
economic activity. Volume trends are likely to be muted, although Abu Dhabi Bank Audi (AUDI.BY),USD7.12 Buy
based banks should continue to pick up market share. Top picks: FGB, ENBD Blom Bank (BLOM.BY),USD9.00 Buy
Dubai Islamic Bank (DISB.DU),AED2.16 Sell
Lebanese banks – growth still likely despite hitting Egyptian speed bump First Gulf Bank (FGB.AD),AED16.45 Buy
Political uncertainty is likely to have had a dampening effect on deposit growth in Emirates NBD (ENBD.DU),AED3.47 Buy
the domestic business, but the main consequences of recent regional turmoil is Nat Bank of Abu Dhabi (NBAD.AD),AED10.45 Buy
Qatar National Bank (QNBK.QA),QAR142.80 Buy
likely to have been felt in the Egyptian operations, where we saw minimal volume Commercial bank (COMB.QA),QAR76.00 Buy
growth and a pick-up in provisions. However, we continue to expect decent Doha Bank (DOBK.QA),QAR58.00 Hold
(double-digit) earnings growth this year. We have Buy ratings on Audi and BLOM. Qatar Islamic Bank (QISB.QA),QAR84.00 Buy
Masraf Al Rayan (MARK.QA),QAR24.10 Buy
Valuation and risks CIB (COMI.CA),EGP31.58 Hold
We value the MENA banks using a two-stage Gordon Growth Model that bases NSGB (NSGB.CA),EGP39.78 Hold
EFG Hermes (HRHO.CA),EGP21.51 Hold
target prices on discounted terminal value and adds back the discounted value of
interim dividends. Median inputs across MENA banks include a 5% risk-free rate,
7% equity risk premium, 1.0 beta, 4% terminal growth and 19% mid-cycle ROE.
Key risks include: the possibility of further significant asset quality deterioration,
potentially arising from political/economic uncertainty; the prospect of restricted
access to wholesale funding markets; regulatory pressure to increase provisioning,
solvency or liquidity; and the scope for margin erosion due to enhanced
competition.

Deutsche Bank AG/London

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.
MICA(P) 007/05/2010
10 April 2011 Banking MENA Banks

Qatar
Main investment themes
The QAR50bn QCB bond will likely boost earnings and asset growth
The QCB’s January issue of QAR50bn of conventional and Islamic paper (5% coupon, three
year tenor, zero RW) should be a major theme underlying earnings and assets growth in
FY11. The biggest relative gainers are MAR (QAR10bn allocation) and QIB (QAR9bn
allocation), which will see assets rise significantly in Q1: 31% QoQ growth for the former,
19% QoQ growth for the latter. The allocations should also boost earnings and again the
same two banks will likely be key beneficiaries, though DHB should also see a nice boost to
its bottom line. The smallest allocation was given to CBQ (QAR1.5bn), and consequently, we
expect it to derive comparatively smaller benefits in terms of its assets and earnings growth.

Government spending remains the defining feature of the market

High levels of government spending, channeled through various means such as semi-
government agencies, will likely remain the defining source of credit demand in the domestic
markets for the foreseeable future. While we believe that private sector and retail credit
demand is likely to improve from FY10 levels on a YoY basis, this should still account for a far
smaller share of growth than the public sector at large. The key beneficiaries are banks with
proportionally higher share of government ownership, QNB and MAR, and banks whose loan
book has a high historical bias toward the public sector, again QNB and MAR.

Record liquidity supports low funding costs, but should eventually pressure margins
Peak LNG production capacity was reached in Q4 last year. Combined with rising energy
prices in Q1, this means that state liquidity levels are exceptionally high. Deposit growth is
therefore likely to remain exceedingly solid, given the high share of public sector funding in
the banking system at close to 30%. Deposit costs have already fallen substantially YoY in
FY10 – between 50bps and 150bps at our banks – and are likely to remain subdued this year.
It is therefore only a matter of time before asset yields also come under pressure. Thus, we
expect NIMs to remain broadly flat YoY as the asset pricing lag effect begins to weigh on
margins by H1.

Asset quality remains solid; DHB and CBQ will likely charge lower risk costs
NPLs have never been a defining issue for Qatari banks, with QNB, QIB and MAR at or below
1% NPL. CBQ and DHB, on the other hand, did see a rise in non-performing loans in FY09/10,
and have paid the price in terms of risk costs. CBQ’s risk costs already dropped significantly
in FY10, but we see scope for the bank to further lower these by around 10bps to 40bps of
net loans. Investment provisions should also fall, contributing to better earnings. For DHB this
trend is likely to be more pronounced – we expect it to lower its risk costs by around 20bps
to 90bps of net loans. Lower investment provisions should also help to boost earnings
further. We believe lower risk-cost dynamic will not impact QNB, MAR or QIB, as we think
these names are elsewhere on the asset quality cycle.

What has changed?

The main change for Qatari banks is the skewed earnings and asset growth resulting from
the QCB bond. Funding and credit sources and overall earnings directions are otherwise
broadly similar to FY10. The impact of the regional unrest on Qatari banks should be minimal.

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10 April 2011 Banking MENA Banks

Top picks
Our top picks in the sector are QNB and MAR. In essence, we view Qatari banks as a play on
state liquidity and spending. Proximity to the government in terms of ownership and loan
book bias has historically been a good guide as to the direction of governmental flows. This
premise underlies our preference for these names on a thematic basis, as these banks enjoy
the highest government ownership and the highest bias to the public sector in their
respective loan books. The implication of the mix of ownership and proximity to government
is seen in deposit volumes, asset growth and asset quality – on all counts, both QNB and
MAR score exceptionally well.

Deutsche Bank AG/London Page 3

10 April 2011 Banking MENA Banks

Saudi Arabia
Main investment themes
How rapidly will credit growth recover?
Loan growth has been extremely weak since mid 2008, but growth rates have steadily
improved since September 2010; credit growth now stands at 5% versus the long-term trend
growth rate of 12%. While retail credit growth has been running at high single-digit levels,
corporate credit (which accounts for two-thirds of system loans) has been broadly stagnant.
We believe improving corporate profitability, strong sales growth and a supportive macro
environment (high oil prices and strong fiscal support), should (over time) lead to a robust
recovery in corporate credit demand.

Have NPLs peaked?

At December 2010, system NPLs/loans stood at 2.9%, marking an improvement from the
June 10 (3.2%) and December 2009 (3.3%) levels. While heightened political tensions in the
MENA region have highlighted that the potential for asset quality deterioration exists, we
believe the Saudi banks should be relatively sheltered from any fallout, reflecting their focus
on the domestic market.

When will margins improve?

Saudi banking margins declined from 3.7% in 2007 to 2.9% currently. The biggest driver of
this downtrend has been accommodative monetary policy, although lower risk appetite by
the banks has also likely contributed. Stronger loan growth should boost margins, as this is
likely to allow the banks to shift out of currently high holdings of liquid assets. Saudi banks’
margins are the most positively exposed within the GCC to any normalization in interest
rates.

What has changed?

Q4 10 results were 12% above our forecasts, reflecting lower-than-expected loan impairment
charges. This signals to us that: 1) regulatory pressure to lift coverage ratios has eased – we
note that the sector coverage ratio now stands at 115% and 2) asset quality trends appear to
have stabilised – NPLs could start to decline if economic growth (aided by expansionary fiscal
policies) persists. While we regard recent stimulatory measures as positive, Q1 results are
likely to be affected by measures to match the recently announced one-off salary boost for
public sector workers.

Top picks
Al Rajhi Bank is the largest retail bank (hence being exposed to current positive consumer
credit trends) with the size and capital strength to participate in public infrastructure projects.
We believe above average profitability and superior loan quality support high valuation
multiples.

Riyad Bank is one of the largest banks in the Kingdom, well capitalized and with strong links
to the public sector. It should be well placed to benefit from growing infrastructure
investment and should also be able to boost market share in the growing retail banking
segment, where the bank is now significantly under-represented.

Least preferred
Bank Albilad is a 2005 start up, which is winning market share as the franchise builds critical
mass. However, the bank’s cost efficiency significantly lags that of its peers (65% cost-
income ratio), while loan quality (5.8% NPLs/loans) and provisions coverage (89%) also

Page 4 Deutsche Bank AG/London

10 April 2011 Banking MENA Banks

compare unfavourably. We note that the consumer loan book grew by 54% in 2010 (to 36%
of all lending); expansion at this pace could result in additional NPLs crystallizing in the future.

Bank Aljazira – the bank has been winning banking market share in recent years as
management has sought to grow the balance sheet to offset sharply declining brokerage
revenues (to which Aljazira is heavily exposed). However, rapid credit growth may have
contributed to high NPLs (7% of the loan book); high credit risk costs and low operating
efficiency (69% cost-income ratio) have resulted in depressed profitability.

Deutsche Bank AG/London Page 5

10 April 2011 Banking MENA Banks

UAE
Main investment themes
Where do we stand in the asset write-down cycle?
UAE banks experienced a significant deterioration in asset quality over the past two years –
the effect of a sharp decline in local real estate values, a dramatic slowdown in economic
growth and much tighter liquidity conditions. In our view, we are likely to see a further
increase in non-performing loans in 2011, although the pace of deterioration is likely to slow
considerably, which in turn could allow for risk costs to decline YoY.

Do the banks have sufficient capital and liquidity?

One of the key concerns for investors, and a key factor in the lowly rating of the UAE banking
shares, relates to the level of capital available to absorb asset write-downs. However, the
sector’s capital adequacy ratio actually increased from 19.2% to 20.8% in 2010, reflecting
the high structural profitability of the sector and limited risk-weighted asset growth. Liquidity
has improved slightly; the gross loans-deposits ratio declined from 108% to 105% in the
year, while three-month EIBOR has declined below 2.15% from a peak of 2.35% last
summer. However, we believe UAE banks should continue to make concerted efforts to
secure more stable funding.

Will the banks be able to deliver much credit growth?

System loan growth is currently running at 3% YoY. While strong oil prices and rising public
spending, combined with a recovery in tourism and trade are all supportive factors, we
believe banks should continue to deleverage, which suggests to us that system credit growth
will likely remain at single-digit levels. We believe Abu Dhabi-based banks will likely grow
faster than their Dubai-based peers.

What has changed?

FY10 results indicate that most banks were profitable in the year, despite experiencing higher
volumes of impaired loans (most notably due to their exposure to Dubai World) and taking
write-downs against real estate. Dubai is benefitting from rising trade flows, while tourism
levels are also improving. High oil prices should underpin fiscal spending, suggesting Abu
Dhabi will likely benefit from high levels of public infrastructure spending.

According to the UAE Central Bank data, total assets were up 10%, loans increased 3% and
the deposit base expanded 13% in the year up to February 2011.

Top picks
FGB is structurally one of the most profitable UAE banks, reflecting above average margins
and the lowest cost-income ratio in the system. Unlike many of its peers, the volume of NPLs
trended lower in the latter part of 2010 as the bank ramped up collection efforts. FGB’s CEO
recently commented that the bank may see double digit loan growth in 2011.

ENBD is the largest bank in the UAE and is 56%-owned by ICD, an investment vehicle of the
Dubai government; ENBD’s fortunes are closely linked to those of Dubai. In this context, the
sharp recovery in the trade and tourism industries is positive, although the overhang of an
oversupplied real estate market remains. Management has made positive progress in areas
under its control, namely operating costs (down 14% YoY) and liquidity (loans/deposits now
stand at 105%, versus a peak of 132% previously). Q1 results are likely to benefit from a
significant gain arising from the sale of a minority stake in Network International.

Page 6 Deutsche Bank AG/London

10 April 2011 Banking MENA Banks

Least preferred
Dubai Islamic Bank took control of mortgage lender, Tamweel, toward the end of 2010. As a
result, real estate-related lending now accounts for over half of the bank’s loan book. We
believe UAE real estate prices will likely remain depressed, which may put further pressure
on the bank’s asset quality.

Deutsche Bank AG/London Page 7

10 April 2011 Banking MENA Banks

Lebanon
Main investment themes
Heightened local and regional tensions
Political uncertainty in Lebanon increased following the ousting of Saad Hariri as Prime
Minister and the subsequent appointment of Najib Mikati to this role. However, these events
have subsequently been overshadowed by widespread protests that have taken place across
the MENA region, some of which have resulted in regime change and others which may yet
do so.

Resilience of deposit inflows

Banking system data for early 2011 has yet to be released, but money supply data is
consistent with YoY deposit growth of about 10%, suggesting that while there may have
been some pullback in deposit flows, overall growth trends have been broadly maintained.

Ability of the banks to continue growing their loan books

Bank Audi’s loan book grew by 27% and BLOM Bank’s grew by 29% in 2010. While the
relaxation of regulations governing local LBP lending is supportive, the ability (and
willingness) of the banks to grow their lending elsewhere in the MENA region may be
constrained by political and economic uncertainty.

What has changed?

Q4 10 results were in line with our expectations and showed continued strong (28% YoY)
credit growth at both Bank Audi and BLOM Bank. However, the political turmoil that has
engulfed the MENA region since the New Year is likely to have an impact on both banks’
international operations; Egypt, Jordan and Syria, in particular, are key to the banks’ regional
growth strategies. However, in terms of the Q1 11 results, we believe significant additional
provisioning should only be required against the banks’ Egyptian operations.

Top picks
BLOM Bank is our preferred Lebanese bank. The bank is one of the more profitable in the
Lebanese banking system, on account of disciplined spread management and tight cost
control, while growing strongly in higher margin retail lending. The bank is also investing in
products and services, such as brokerage and asset management, which, over time, should
boost fee income levels.

Following YTD price declines, we believe Bank Audi is also an attractive investment. The bank
has a strong track record of earnings growth, even during times of political turmoil and
economic weakness. Successful revenue diversification efforts, combined with strong risk
management, in our view, should allow this growth trend to persist. While the current turmoil
will affect the bank’s MENA operations in the near term, we believe management is
committed to its regional expansion strategy.

Page 8 Deutsche Bank AG/London

10 April 2011 Banking MENA Banks

Valuation
Saudi banks are the most highly rated in our MENA coverage universe on a forward PE basis
(UAE and Lebanon the least). In PB terms, Qatar is the most highly rated (UAE the least).
Qatar and Lebanon banks offer the highest likely dividend yields (Saudi and Egypt the least).

Figure 1: Valuation metrics and stock performance for MENA and regional banking sector
P/E (x) P/B (x) Dividend yield (%) ROE (%) US$ Stock Performance
(%)
2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 1M 3M LTM
Al Rajhi Bank 17.4 13.8 11.4 3.8 3.4 3.0 3.9 4.5 5.3 22.4 25.9 28.4 8.7 (7.4) (9.1)
Arab National Bank 11.7 10.2 7.9 1.4 1.3 1.2 2.9 3.3 4.0 12.9 13.6 15.9 23.9 20.3 (0.2)
Bank Albilad 96.4 22.8 11.0 1.9 1.8 1.5 na 0.8 1.5 2.0 8.1 14.9 9.2 0.8 (7.8)
Bank Aljazira 50.7 22.1 12.0 1.2 1.2 1.2 0.8 3.2 4.0 1.4 5.6 9.9 24.4 12.4 (2.9)
Banque Saudi Fransi 13.0 11.3 9.5 2.0 1.8 1.6 2.3 2.6 3.0 16.1 16.5 17.4 25.5 7.6 2.6
Riyad Bank 15.3 11.5 8.6 1.4 1.3 1.2 3.8 5.7 6.8 9.0 11.5 14.6 20.0 (1.1) (13.4)
Samba Financial Group 11.3 10.2 9.0 2.0 1.8 1.6 2.9 3.5 4.2 18.9 18.4 18.4 21.8 (7.7) (3.8)
Saudi British Bank 17.7 14.2 9.5 2.3 2.1 1.8 1.1 1.7 2.4 13.8 15.3 20.1 24.3 11.7 (6.6)
Saudi Hollandi Bank 14.7 11.4 7.2 1.6 1.4 1.3 1.4 2.4 3.7 11.3 13.3 18.6 11.3 - (11.4)
Saudi Investment Bank 28.4 13.4 7.9 1.2 1.1 1.0 2.6 1.7 2.7 4.2 8.5 13.2 22.8 11.9 30.6
Saudi Median 16.3 12.5 9.2 1.8 1.6 1.4 2.6 2.9 3.9 12.1 13.4 16.62 22.3 4.2 -5.2
National Bank of Abu Dhabi 6.7 5.9 5.1 1.2 1.0 0.8 2.1 3.1 4.1 20.3 19.5 19.0 4.8 (0.5) 1.2
Abu Dhabi Commercial Bank 52.3 10.8 5.1 0.8 0.7 0.6 na 4.0 6.0 2.5 8.0 15.5 6.7 1.3 3.7
First Gulf Bank 8.1 6.1 4.6 1.1 0.9 0.8 3.8 4.7 5.6 14.9 17.7 20.3 5.9 (7.7) (6.4)
Emirates NBD 8.9 4.6 3.5 0.6 0.6 0.5 6.0 6.0 7.6 8.1 13.0 15.4 9.6 19.9 11.1
Dubai Islamic Bank 13.4 8.6 5.8 0.9 0.9 0.8 2.3 4.5 6.8 6.6 10.5 14.1 6.7 1.8 (17.6)
UAE Median 8.9 6.1 5.1 0.9 0.9 0.8 3.0 4.5 6.0 8.1 13.0 15.5 6.7 1.3 1.2
Qatar National Bank 9.6 7.9 6.6 2.3 1.9 1.5 2.1 2.5 3.0 26.6 26.4 25.4 1.9 0.6 1.7
Commercial Bank of Qatar 9.7 8.3 6.9 1.6 1.4 1.3 7.7 7.8 7.2 16.4 17.8 19.3 12.8 (16.3) 4.2
Doha Bank 9.8 8.7 7.3 2.1 1.9 1.6 8.2 4.6 5.5 22.0 22.8 24.0 6.4 (3.6) 31.1
Qatar Islamic Bank 14.6 11.0 8.7 2.0 1.8 1.6 5.4 5.7 6.0 14.8 17.5 19.8 20.2 (9.7) 15.5
Masraf Al Rayan 13.9 12.7 10.7 2.3 2.1 1.8 4.7 5.6 na 18.3 17.5 18.0 2.3 16.7 65.2
Qatar Median 9.8 8.7 7.3 2.1 1.9 1.6 5.4 5.6 5.8 18.3 17.8 19.8 6.4 (3.6) 15.5
COMI 8.6 10.3 9.5 2.2 1.9 1.6 3.1 2.4 3.2 28.8 19.7 18.2 (11.5) (32.9) (8.0)
NSGB 11.5 9.2 8.7 2.1 1.7 1.5 3.0 2.7 2.9 19.2 20.3 18.0 (11.8) (25.7) 16.7
EFG Hermes 12.7 25.6 11.0 0.9 0.9 0.8 13.7 4.6 4.6 7.3 3.6 7.9 (18.0) (37.1) (31.9)
Egypt Median 11.5 10.3 9.5 2.1 1.7 1.5 3.1 2.7 3.2 19.2 19.7 18.0 -11.8 -32.9 -8.0
Bank Audi 8.4 7.0 5.8 1.2 1.1 1.0 5.1 6.2 7.5 15.8 17.1 18.5 4.6 (9.5) (15.7)
BLOM Bank 6.3 5.4 4.7 1.2 1.0 0.9 5.1 6.1 7.2 19.7 20.1 20.0 (1.0) (3.7) (7.2)
Lebanon Median 7.4 6.2 5.2 1.2 1.1 0.9 5.1 6.1 7.4 17.8 18.6 19.2 1.8 -6.6 -11.5

Latin America Median 13.6 11.2 9.8 2.6 2.3 2.0 3.0 3.5 3.8 22.3 22.2 22.0 6.1 (2.2) 21.9
EMEA Median 13.2 10.5 8.6 1.8 1.6 1.3 3.3 3.9 4.9 13.5 15.3 17.5 10.0 7.8 3.7
Emerging Asia Median 15.1 13.3 10.9 1.9 1.8 1.5 1.9 2.4 2.9 15.7 15.7 15.8 9.0 3.6 24.3
GEMS Median 14.6 11.5 9.5 1.9 1.7 1.5 2.3 3.1 3.7 14.9 16.1 17.5 9.0 1.0 17.0
Developed Asia Median 13.0 11.9 10.5 1.0 1.0 1.4 3.4 3.7 4.8 8.7 10.1 13.5 -4.3 -5.4 1.6
Developed Europe Median 12.1 10.6 8.1 0.8 0.8 0.7 3.9 4.3 5.0 7.8 7.7 10.7 -2.2 8.9 -12.7
United States Median 14.8 13.7 11.0 1.1 1.0 1.0 0.6 1.0 1.8 8.4 8.1 9.2 -0.1 0.2 2.1
Developed Market Median 13.0 11.7 9.8 1.0 0.9 0.9 2.8 3.4 4.3 8.4 8.6 10.6 -1.5 3.1 -3.0
Source: Deutsche Bank, Bloomberg Finance LP, prices updated as of April 4th 2011

Deutsche Bank AG/London Page 9

10 April 2011 Banking MENA Banks

All the MENA banking markets we cover are trading at a discount to their historical PB
averages; the discount is most pronounced in Egypt and the UAE. While consensus earnings
for the UAE and Qatar have proved resilient, expectations for the Saudi banking system have
been significantly curtailed over the past 12 months.

Figure 2: Current and historical PB ratios Figure 3: Consensus estimates for selected MENA
markets
3.5 115
3.1
3.0 2.7

2.5
2.1 2.1 100
2.0 1.8
1.6
x

1.4
1.5 1.2
1.1
0.9 85
1.0

0.5

0.0 70
Saudi Arabia Qatar UAE Egypt Lebanon M ar-10 Jun-10 Sep-10 Dec-10 M ar-11

Historical Average P/BV Current P/BV Saudi Arabia Qatar UAE

Source: Deutsche Bank Source: Deutsche Bank, Bloomberg Finance LP

MENA bank share price performance has lagged CEEMEA YTD

Figure 4: YTD share price performance of selected banking markets

25%

15%

5%

-5%

-15%

-25%

-35%
Russia

UAE

Egypt
Austria
Hungary

Turkey
South Africa
Saudi Arabia
Poland

Israel

Lebanon
Qatar
Czech

Source: Deutsche Bank, Bloomberg Finance LP

Page 10 Deutsche Bank AG/London

10 April 2011 Banking MENA Banks

Figure 5: YTD share price performance; selected Saudi and UAE shares have
performed strongly

20%

10%

0%

-10%

-20%

-30%

-40%
MARK

DIB

QNB

AUDI

CIB
CBQ
QIB
Albilad
Aljazira

Riyad
ADCB

SAIB

DHBK
BSF
ANB

SHB

FGB

NSGB

EFG
Al Rajhi

Samba
SABB
ENBD

NBAD

BLOM
Source: Deutsche Bank, Bloomberg Finance LP

Deutsche Bank AG/London Page 11

Page 12

10 April 2011
Figure 6: Saudi banks Q1 11 earnings preview (1)
S ARm Al Ra j hi ANB Alj a z ir a Albila d BS F
Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E
Net interest income 2,258 2,219 6% 8% 2,392 803 800 4% 5% 837 168 186 13% 2% 190 148 161 18% 9% 175 723 789 12% 2% 808
Total revenues 2,832 2,852 6% 5% 2,999 1,125 1,129 2% 2% 1,148 305 262 2% 18% 310 276 283 11% 8% 307 1,072 1,084 9% 7% 1,164
Gross operating profit 2,043 2,202 -2% -9% 1,995 728 700 -11% -8% 646 122 38 -29% 128% 86 96 98 -27% -29% 70 768 754 2% 3% 779

Banking MENA Banks

Impairment charges 359 547 10% -28% 394 97 339 63% -54% 158 110 65 -39% 4% 68 43 46 17% 9% 51 54 47 88% 118% 101
Net income 1,684 1,668 -5% -4% 1,601 634 364 -22% 35% 491 13 (27) 50% -170% 19 53 5 -64% 319% 19 714 709 -5% -4% 680

Loans 142,408 120,377 -13% 3% 123,408 65,444 66,203 3% 1% 67,152 16,339 18,704 19% 4% 19,403 11,190 12,290 14% 3% 12,717 79,578 80,977 4% 2% 82,732
Deposits 129,465 143,064 13% 3% 146,673 77,651 84,199 10% 1% 85,149 19,203 27,345 46% 3% 28,071 14,317 16,932 23% 4% 17,574 87,709 93,529 9% 2% 95,209
Total assets 172,424 184,841 10% 2% 189,256 110,057 116,035 7% 2% 118,026 27,791 33,018 22% 3% 33,889 18,978 19,175 15% 14% 21,775 121,246 123,218 4% 2% 125,914
Source: Deutsche Bank, Company data

Figure 7: Saudi Q1 11 earnings preview (2)

S ARm Riy a d S ABB S AMBA S HB S AIB
Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E
Net interest income 1,012 1,042 8% 5% 1,090 770 730 3% 9% 797 1,172 1,054 -2% 9% 1,150 309 318 8% 5% 333 312 324 10% 6% 345
Total revenues 1,469 1,483 7% 6% 1,576 1,205 1,116 2% 10% 1,233 1,841 1,559 -3% 15% 1,788 467 484 12% 8% 524 451 412 0% 9% 450
Gross operating profit 878 921 -3% -8% 849 793 621 -8% 17% 727 1,370 1,084 -14% 9% 1,179 275 287 4% 0% 287 314 264 -12% 4% 276
Impairment charges 279 160 -39% 6% 170 176 229 28% -2% 225 160 183 -18% -29% 131 43 69 87% 15% 80 293 50 -62% 120% 110
Net income 684 761 -1% -11% 679 621 397 -17% 29% 513 1,211 901 -13% 16% 1,048 230 225 -10% -8% 207 22 237 744% -23% 182

Loans 106,277 106,035 2% 2% 108,276 75,699 74,248 0% 2% 75,686 85,197 80,251 -4% 2% 81,688 36,378 35,039 -2% 2% 35,779 30,654 31,002 4% 2% 31,751
Deposits 128,105 126,945 1% 2% 129,584 90,016 94,673 7% 2% 96,630 137,247 133,463 -1% 1% 135,347 42,484 41,604 0% 2% 42,328 36,511 37,215 4% 2% 38,036
Total assets 174,288 173,556 2% 2% 177,042 126,838 125,373 1% 2% 127,780 185,885 187,416 3% 2% 190,562 59,740 53,882 -10% 0% 53,882 49,492 49,316 6% 7% 52,618
Source: Deutsche Bank, Company data

Figure 8: Lebanese banks Q1 11 preview

LBP bn AU DI BLO M Aggr ega t e
Q1 10A Q4 10A YoY QoQ Q1 11E Q1 10A Q4 10A YoY QoQ Q1 11E Q1 10A Q4 10A YoY QoQ Q1 11E
Net interest income 163 194 21% 2% 198 166 200 15% -4% 192 330 393 18% -1% 390
Total revenues 304 349 15% 0% 350 238 305 7% -16% 255 543 654 11% -8% 605
Gross operating profit 165 183 23% 11% 203 135 201 11% -25% 150 300 384 17% -8% 352
Impairment charges 15 3 68% 820% 26 1 24 706% -62% 9 16 27 113% 28% 35
Net income 115 143 13% -9% 130 107 115 -1% -7% 107 222 257 6% -8% 236

Loans 11,366 12,885 16% 2% 13,207 6,478 7,809 24% 3% 8,006 17,844 20,694 19% 3% 21,213
Deposits 35,007 37,458 9% 2% 38,311 27,625 29,476 7% 1% 29,689 62,632 66,934 9% 2% 68,000
Total assets 40,446 43,255 10% 3% 44,640 31,843 33,672 8% 2% 34,468 72,289 76,926 9% 3% 79,108
Deutsche Bank AG/London

Source: Deutsche Bank, Company data

Deutsche Bank AG/London

10 April 2011
Figure 9: UAE banks Q1 11 preview
AE Dm NBAD ADCB FG B E NBD DI B Aggr ega t e
Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E
Net interest income 1,239 1,385 11% -1% 1,378 872 1,034 20% 1% 1,042 1,037 1,105 11% 4% 1,153 1,729 1,620 2% 8% 1,756 510 568 17% 5% 598 5,387 5,712 10% 4% 5,926
Total revenues 1,772 1,818 8% 6% 1,919 1,270 1,470 15% -1% 1,461 1,659 1,326 -1% 24% 1,646 2,555 1,754 44% 109% 3,673 712 851 18% -1% 840 7,967 7,218 20% 32% 9,539
Gross operating profit 1,278 1,186 7% 15% 1,363 908 1,091 17% -2% 1,067 1,413 1,008 -3% 36% 1,373 1,665 984 72% 190% 2,860 376 880 29% -45% 487 5,640 5,149 27% 39% 7,150

Banking MENA Banks

Impairment charges 225 424 46% -23% 328 681 647 -19% -14% 555 492 329 -28% 8% 355 555 561 9% 7% 602 174 420 24% -49% 215 2,128 2,381 -3% -14% 2,056
Net income 1,031 732 -2% 38% 1,013 225 445 127% 15% 510 920 558 11% 82% 1,018 1,110 403 103% 460% 2,258 200 460 34% -42% 268 3,485 2,597 45% 95% 5,068

Loans 133,612 136,833 4% 2% 139,343 117,232 122,772 7% 2% 125,829 93,257 95,628 4% 1% 96,991 209,549 197,095 -5% 1% 199,072 51,016 57,171 13% 0% 57,457 604,666 609,500 2% 2% 618,691
Deposits 114,719 123,131 10% 2% 126,098 90,139 106,134 22% 3% 109,601 89,432 98,742 11% 0% 99,056 178,720 187,388 6% 1% 188,858 64,672 63,447 0% 2% 64,460 537,682 578,842 9% 2% 588,073
Total assets 200,837 211,427 7% 2% 215,820 163,701 178,271 12% 3% 183,078 132,772 140,758 8% 2% 143,819 289,723 286,216 -1% 1% 288,162 84,971 90,138 7% 1% 91,039 872,006 906,810 6% 2% 921,918
Source: Deutsche Bank, Company data

Figure 10: Qatari banks – Q1 11 preview

in m n CBQ Doha Q IB MAR
Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E Q1 10 A Q4 10A YoY QoQ Q1 11E
Net interest income 409 470 20% 5% 492 336 444 36% 3% 456 731 992 -17% -38% 611 257 316 108% 69% 534
Total revenues 618 630 19% 17% 738 495 558 26% 12% 625 816 1,073 -14% -35% 702 280 350 126% 81% 634
Gross operating profit 423 421 27% 28% 538 333 332 31% 32% 437 717 927 -22% -40% 557 211 308 154% 73% 535
Impairment charges 34 157 36% -71% 46 18 173 280% -61% 67 17 (76) 220% -172% 54 (91) 1 -111% nm 10
Net income 410 309 20% 59% 492 315 159 18% 133% 370 300 428 67% 17% 502 302 300 74% 75% 525

Loans 31,623 33,567 8% 2% 34,271 26,165 26,547 4% 2% 27,086 24,009 29,352 25% 3% 30,128 20,544 25,064 26% 4% 25,985
Deposits 28,808 33,281 19% 3% 34,278 27,223 30,822 15% 2% 31,301 25,306 30,258 37% 15% 34,653 21,558 27,017 36% 9% 29,367
Total assets 55,451 62,520 16% 3% 64,542 44,405 47,230 17% 10% 52,106 39,675 51,840 55% 19% 61,617 28,183 34,683 62% 31% 45,604

Source: Deutsche Bank , Company data

Page 13
10 April 2011 Banking MENA Banks

Appendix 1
Important Disclosures
Additional information available upon request
For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see
the most recently published company report or visit our global disclosure look-up page on our website at
http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.

Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject
issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any
compensation for providing a specific recommendation or view in this report. Nabil Ahmed/Rahul Shah

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-

holder return (TSR = percentage change in share price
600
from current price to projected target price plus pro-
jected dividend yield ) , we recommend that investors 500 58 %
buy the stock. 400
Sell: Based on a current 12-month view of total share- 36 %
holder return, we recommend that investors sell the 300
stock 200
Hold: We take a neutral view on the stock 12-months 14 % 6%
out and, based on this time horizon, do not recommend 100 10 % 10 %
either a Buy or Sell. 0
Notes:
Buy Hold Sell
1. Newly issued research recommendations and target
prices always supersede previously published research.
2. Ratings definitions prior to 27 January, 2007 were: CompaniesCovered Cos. w/ Banking Relationship
Buy: Expected total return (including dividends) of
10% or more over a 12-month period Global Universe
Hold: Expected total return (including dividends)
between -10% and 10% over a 12-month period
Sell: Expected total return (including dividends) of -
10% or worse over a 12-month period

Page 14 Deutsche Bank AG/London

10 April 2011 Banking MENA Banks

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