AlRajhiBank AR 2019

BANK OF THE

FUTURE

20
19 Annual
Report
IN THE NAME OF ALLAH
THE MOST MERCIFUL, THE MOST GRACIOUS

The Custodian of the Two Holy Mosques His Royal Highness Crown Prince
King Salman Bin Abdulaziz Al Saud Mohammad Bin Salman Bin
Abdulaziz Al Saud
Over the last six decades, Al Rajhi Bank earned its
BANK OF THE position as the most successful bank in the region
and leading Islamic Bank in the world.
FUTURE These achievements are a testament to the power of

a strong vision and purpose shared by all our partners
– from our nation’s leaders and its government, to
our Board, management and employees, to all our
valued strategic partners, customers, suppliers and
shareholders.
But we are not satisfied. We must capture the great

opportunity that lies before us, building on the
momentum created over the past years to confidently
deliver on our 2020 objectives and drive the
Kingdom’s Vision 2030.
So, we begin a new chapter in our ambitious journey,

once again seeking to harness the power of all our
stakeholders behind a new and ambitious idea: that
together we can transform Al Rajhi Bank into the
“Bank of the Future”.
Scan to view the online version of this Annual Report
The web and mobile HTML versions are published online

on the same date as the date of issue of this publication at
https://arb.sa/report2019
Table of Contents
01 Bank Profile
03 Corporate Governance
10 About the Bank 68 Governance

12 2019 At a Glance
02 Strategic Report
04 Financial Statements
16 Chairman’s Statement 96 Independent Auditors’ Report
18 CEO’s Message 102 Consolidated Statement of
20 Board of Directors Financial Position
24 Executive Management 103 Consolidated Statement of
Income
28 Market Overview & Vision 2030
104 Consolidated Statement of
30 Business Model
Comprehensive Income
32 Strategy Overview
34 Risk Management Changes in Equity
36 Business Review 106 Consolidated Statement of
38 • Retail Banking Group Cash Flows
40 • Corporate Banking Group 107 Notes to the Consolidated
42 • SME Business Financial Statements
44 • Treasury Group
46 • Subsidiaries and International Branches
48 • Digital Footprint & Transformation
50 • Sharia Group
52 CFO Review
57 Sustainability
01 Bank Profile
10 About the Bank
12 2019 At a Glance
About the Bank
History
Referred to as the “Bank” in this document, Al Rajhi Bank (ARB) received its current
name in 2006 but was originally established in 1957 as an exchange house and
converted to a bank under the name Al Rajhi Banking Corporation in 1987. The Bank
is a Saudi joint stock company that was formed and licensed in accordance with
Royal Decree No. M/59 and Article 6 of the Council of Ministers’ Resolution No. 245,
both of June 1987. With its headquarters in Riyadh, Kingdom of Saudi Arabia, the
Bank operates under Commercial Registration No. 1010000096 and is listed on the
Saudi Stock Exchange (Tadawul) with the Ticker No. RJHI.
Al Rajhi Bank Group Our Bank
Real Estate Retail banking
Brokerage Corporate banking
Insurance Treasury
Professional Services International business
Securities SMEs
10 | BANK OF THE FUTURE

Vision, Mission and Values
Our Vision
To be a trusted leader delivering innovative financial solutions to enhance the
quality of life of people everywhere.
Our Mission
To be the most successful bank admired for its innovative service, people,
technology, and Sharia compliant products, both locally and internationally.
Our Values
Everything the Bank does is built around its core values, which puts the customer at
the heart of all its activities.
A strong Defining,
commitment differentiating
to anticipate and reinforcing
and address Humility in excellence in
customer needs everything we do people
Passion to
Serve our Modesty Meritocracy
Customer
Integrity & Care for

Solution Innovativeness Society
Transparency Oriented
Openness and Helping our Nurturing Contributing

highest standards customers achieve imagination and towards a better
of corporate and their objectives fostering creativity tomorrow
personal ethics
Annual Report 2019 | 11

2019 At a Glance
Financial Customer deposits

(SAR Billion)
highlights
2019: SAR 312
2018: SAR 293
Increase: 6.3%
Total assets
(SAR Billion)
2019: SAR 384
2018: SAR 364
Increase: 5.5%
Operational Digital:
manual ratio
highlights
2019: SAR 67:33
2018: SAR 56:44

Earnings per share Total capital
(SAR) adequacy ratio (%)
2019: SAR 4.06 2019: 19.9%
2018: SAR 1.51 2018: 20.20%
Increase: 169%
Largest Islamic Bank worldwide

By assets and market capitalization
1
Net income
(after Zakat)
(SAR Billion)
2019: SAR 10,159
2018: SAR 3,768
No.
Increase: 170%
In retail bank in the Middle East

Staff strength In retail deposits and income
2019: 13,146 In Distribution network in the

Middle East By number of branches,
POS, ATMs and remittance centres
In banking transactions in KSA

4 of 10 transactions in KSA
Saudization rate
(%) As a Bank brand in KSA
Brand Power Score
2019: 96% In banking sector in NPS in KSA

02 Strategic Report
16 Chairman’s Statement
18 CEO’s Message
20 Board of Directors
24 Executive Management
28 Market Overview & Vision 2030
30 Business Model
32 Strategy Overview
34 Risk Management
36 Business Review
38 • Retail Banking Group
40 • Corporate Banking Group
42 • SME Business
44 • Treasury Group
46 • Subsidiaries and International Branches
48 • Digital Footprint & Transformation
50 • Sharia Group
52 CFO Review
57 Sustainability
Chairman’s Statement
In what has been yet another record year, Al Vision 2030, including participation in the
Net profit Rajhi Bank continued to deliver significant ARAMCO IPO, dramatically increasing
growth across its constituent business groups the number of Saudi homeowners via our
SAR 10.1 and branches. Despite the complex dynamics

at work in across our sector and markets, the
expanding mortgage program, supporting on
enhancing SMEs capabilities of growth and
million Bank’s net income for 2019 increased to SAR

10,159 million compared to SAR 3,768 million in
2018.
providing it with the best banking services
throughout the Kingdom, providing structured
finance for water, electricity and power
in 2019 from
companies – including in the renewables
Market Dynamics and the
SAR 3.7
segment – and supporting burgeoning new
Kingdom’s Vision 2030 industries such as tourism, entertainment and
As the Kingdom forges ahead with its bold both healthcare and education privatization,
million
in 2018
plans for socio-economic development and
diversification, encapsulated in the Saudi
as both considered essential pillars for human
development, progress and civilization at all
Vision 2030, Al Rajhi Bank has aligned its times and everywhere.
strategy with the needs and aspirations of our
kingdom. By targeting private sector growth I am also pleased to report that the Bank
and the continuous development of capital distributed a dividend of SAR 1.5 per share
market process, we seek to contribute to the for the first half of 2019 and proposed a final
revitalization and growth of the financial sector dividend of SAR 3 per share for 2019. Total
and assist the Kingdom in its transition to a dividends for the year amounted to SAR 7,500
global investment powerhouse. million, representing 74% of earnings.
Throughout 2019 we continued to achieve Dedicated and Loyal Staff

robust progress across all five of the strategic Al Rajhi Bank has invested heavily in our
pillars of our business– Accelerate Growth, sustainability as a business, as well as in
Become Employer of Choice, Customer Focus, our increasingly diverse workforce, and our
Digital Leadership and Excellence in Execution employees have made us proud by doubling
– in addition to expanding our international their volunteering hours in 2019. Furthermore,
footprint through our branches in Kuwait we received ISO Green Certification for our new
,Jordan and Malaysia and providing our head office building and are now the largest
stakeholders with increasing value year on year. employer of women in the Kingdom’s banking
sector.
Our activities during the year included a variety
of contributions to support the Kingdom’s

“ As the Kingdom forges ahead with
its bold plans for socio-economic
development and diversification,
Strategic Report
encapsulated in the Saudi Vision 2030,
Al Rajhi Bank has aligned its strategy
Corporate Governance
with the needs of the nation.
Financial Statements
We are keenly aware of our responsibilities and commitments We also strengthened the Bank’s retail and corporate credit
to serve our society and natural environment, therefore, we strategies and control processes; increased our IT security,
are applying stringent corporate governance standards to BCM and disaster recovery capabilities; and nurtured our
ensure adherence to these values across our rules, practices, strong teamwork ethic via relationships with our key business
systems and procedures. As we refine our extensive governance partners.
structures, we will continue to balance the interests of our
multiple stakeholder groups with our core objectives in terms of Acknowledgements
enhancing our business and services value. Both myself and the Board of Directors remain indebted to the
Custodian of the Two Holy Mosques and the Crown Prince for
To this end, annual reviews are undertaken of our Corporate their strategic vision and leadership. We also wish to convey our
Governance Manual, first published in 2014, to update its appreciation to the Ministries of Finance, and Commerce and
rules and items to ensure sustained effective application of Investment; SAMA; CMA; and their eminences the Chairman
procedures, laws and regulations by Board Committees and and members of the Bank’s Sharia Board for their invaluable
Management Committees in compliance with both the Corporate advice and guidance.
Governance Regulations issued by the Kingdom’s Capital Markets
Authority and the Saudi Arabian Monetary Agency’s (SAMA) We also seek to express our gratitude to our shareholders,
Corporate Governance Code for Banks, which are applied in all correspondent banks and customers, and our deep admiration
our operations within the Kingdom. for all of our employees, whose tireless dedication has been
instrumental in realizing our vision and mission. I also wish
Robust Risk Management and Control to thank my fellow Members of the Board for their invaluable
The Bank’s current Key Risk Profile reflects both the efficacy support and counsel.
of our comprehensive risk management activities and our
strong capital and liquidity position; also, our compliance and
governance standards have again served to deliver significantly Abdullah bin Sulaiman Al Rajhi
lower Credit Risk Losses, Operational Risk Losses and Market Chairman
Risks exposure over 2019.
In addition to accelerating growth, becoming the employer of

choice, focusing on customer, achieving digital leadership and
excellence in delivery, we have made significant improvements
to the Bank’s Risk Management frameworks and control
functions, focusing on accelerated business growth and
decreasing credit losses.

CEO’s Message
Al Rajhi Bank experienced another successful Our current accounts grew 6% over 2018, and
32.9%
record year, continuing on its transformative our distribution network remained the largest
journey whilst delivering superior returns and and most technically advanced in the nation,
value for our shareholders, customers and comprising 546 branches (including 157 ladies
Market share in 2019 staff – a journey that mirrors the changes being sections/branches), 231 Remittance Centers,
experienced across the Kingdom. 300 Affluent Lounges, 300 automated kiosks
27.9%
in 2018
This progress is also a testament to the success
of our ABCDE strategy that has guided our
and 5,215 ATM machines.
To further accelerate this growth and serve our

development in recent years and brought expanding customer base more effectively,
consistently strong financial and non-financial we introduced a number of ‘firsts’ during the
results, with operating income increasing by year, including extended working hours in our
41.75% between 2015 and 2019 and net profit dedicated Corporate Banking service centers
by 42.46% over the same period. during the Ramadan and Eid holidays; FX
flexible hedging solutions for our corporate
A Year of Accelerating Growth clients in partnership with Treasury group; and
The Bank once again outperformed its peers in a facility to add beneficiaries via their mobile
the Saudi market in 2019, gaining significant telephone numbers on our mobile banking
market share across its range of products and app.
services to deliver a 12% increase in profit and
a 13% rise in income year-on-year. In the present environment we remain focused
on effective balance sheet management,
Our mortgage portfolio grew by 63%, reflecting further improving our product mix and driving
our role in delivering the nation’s vision by higher average investment portfolio balances.
supporting more Saudi homeowners than ever As a result, we grew non-profit bearing
before. By centralizing our mortgage function, deposits to 93% of the Bank’s total deposits
implementing advances in automation and representing in excess of 25% market share.
achieving process improvements that increase This helped drive our net profit margin which
daily throughput and efficiency, we were improved by 47 basis points in 2019 to 5.22.
able to offer better services to our customers
and expand our market share to 32.9%, from We also played a key role in the successful
27.9% last year. We provided SAR 4.9 billion Aramco IPO in late 2019 and made strong
in financing to Small and Medium Sized progress in corporate structured finance,
Enterprises (SMEs). winning several high-profile deals while

“ The Bank once again outperformed
its peers in the Saudi market in 2019,
Strategic Report
gaining significant market share across
its range of products and services to
deliver a 12% increase in profit and a
”
13% rise in income year-on-year.
continuing to build our capabilities and reputation in the Employee benefits were also expanded with the addition of a
market. new employee savings scheme to help our people to save for
the future by matching their deposits, as well as providing a
Being an Employer of Choice variety of additional enhanced employee benefits.
With over 12,000 employees across our footprint, we are proud
to be one of the Kingdom’s largest and most significant job Aside from our responsibilities to our employees, the Bank
providers and have worked hard over the years to become an also continues to improve the nature of its interactions with
employer of choice driving performance and profitability by society, local communities and the environment. To this end,
attracting, developing and engaging top talent. we launched our first ever Sustainability Report in 2019, laying
the foundation for a long-term journey toward becoming a
In 2019 we achieved our highest ever employee engagement more sustainable organization and solidifying our position as
scores with overall engagement reaching 63%, representing a sector leader in the Kingdom. During 2019 we doubled the
a significant increase since 2015, when our engagement score number of volunteering hours as part of 75 social responsibility
stood at 27%. This extremely encouraging level of engagement programs in 22 cities.
translates into more effective customer service, delivered
by employees who are inspired to act in our customers’ best Customers at the Center of our Business
interests. We maintained our ongoing focus on delivering superior
customer experiences throughout 2019, initiating
One improving focus area is professional development, which improvements in services and systems, and becoming the
reflects our commitment to enhancing the knowledge, skills leading bank in the Kingdom in terms of Net Promotor Score
and career opportunities of everyone across the Bank. This (NPS) for the first time – a measure based on customers’
continued in 2019 with more than 71,000 days of training and willingness to recommend us to others. This leading rank
development, including leadership development for senior reflects our 2019 score of 39% – a significant jump from our 14%
executives and new programs in technology, security and score in 2018, when we ranked seventh. We also continued to
general management. lead in terms of our social media engagement, ranking first on
Twitter, YouTube and Instagram.
Meanwhile, the Saudization of our staff continued in support
of the goals of the Kingdom’s Vision 2030, reaching 96% in We launched our expanded Innovation Center during the
2019, and our female workforce increased by 14.8% this year year in our new building– a facility that is expanding the level
to account for 14.8% of the Bank’s employees – a 70% increase of customer input to both the design and prioritization of
since 2015. We also launched a dedicated female graduate new features and products. The invaluable feedback gained
development program in 2019. from this facility has already supported the process of our

conversion to digital banking channels and functionalities for Complementing our compliance infrastructure, we are also
a more seamless customer experience. Having delivered 13 one of the biggest users of robotics in the Middle East, with
new products during 2019 through an enhanced distribution state-of-the-art assets including 253 bots processing over 25
network. thousand transactions per day and vastly improving turnaround
times. This has led to a 126% increase in transactions per
I am pleased to report that the success of these efforts and month between 2015 and 2019, from 101 million to 228 million
initiatives has served to strengthen our reputation in the market transaction. We also completed the establishment of our new
and the trust placed in us by our customers, as embodied in head office and data center during 2019.
the awards presented to the Bank during 2019, including the
“Market Leader in Saudi Arabia” and “Best Service in Saudi Ideally Positioned for Sustainable Success
Arabia” in the area of Cash Management at the Euromoney In this final message as CEO of Al Rajhi Bank, I would like to
Awards for Excellence. express my sincere appreciation to the Board and our Chairman
for their support and guidance, as well as to our customers and
Driving Digital Transformation investors for their loyalty and commitment to our collective
Al Rajhi Bank achieved major progress in 2019 in our efforts to success.
meet the evolving needs of our customers, becoming the leader
in our market and the premier banking brand in the Kingdom, For six decades, the Bank has been propelled to ever greater
with over five million active digital customers. achievements by inspired leadership teams and dedicated
employees. More recently, our ABCDE strategy has served to
Much of our recent progress in this regard is the result of our capitalize on this impressive past and position the Bank for
ongoing digital transformation, which continued to deliver long-term success.
significant mobile and internet banking enhancements during
2019, further expanding our digital footprint. More than half In this regard, I am very proud of our staff and leadership
of account openings are now digital and majority of customer team who have contributed to building what is today a highly
transactions are carried out using our digital platforms. successful, customer focused market leader that we can all be
very proud of.
In the past year we captured 26.3% of nationwide point of sale
value (from 23.8% last year) via our 106,000+ POS terminals As I hand over the leadership of the Bank to Walid Al-Moqbel, a
across the Kingdom. We also added 292 self-service kiosks and very experienced leader, I am confident the Bank will continue
continued to harness a multitude of technological innovations to deliver strong results in 2020 and beyond.
such as blockchain, fingerprint identification technology
and electronic signatures to make banking safer and more
convenient for our customers. Steve Bertamini
Chief Executive Officer
Excellence in Execution
Al Rajhi Bank remains committed to ensuring the highest
standards across all its activities and functions through our
world-class compliance program. Having successfully applied
the latest technologies and best practices to optimize both our
human and technical capabilities.

Strategic Report Corporate Governance Financial Statements
21
Annual Report 2019 |
Board of Directors
Abdullah Bin Sulaiman Al Rajhi Alaa bin Shakib Al Jabri
Committees membership Committees membership

Executive Committee Executive Committee, Board Risk Management Committee
(BRMC), Nominations and Compensations Committee
Current positions
• Chairman of the Board and Chairman of Executive Current positions
Committee – Al Rajhi Bank • Vice Chairman, Board Member, Executive Committee
• Chairman of the Board – Al Rajhi Company for Member and Member of BRMC and Chairman of
Cooperative Insurance Nominations and Compensations Committee –
• Chairman of the Board – Farabi Petrochemicals Al Rajhi Bank
Company • Board Member and Chief Executive Officer – Medical
• Chairman of the Board – Al Rajhi Holding Group and Pharmaceutical Services Company
• Chairman of the Board – Al Rajhi Capital Company
Previous positions
Previous positions • Board Member – SIMAH
At Al Rajhi Bank since 1979: • Board Member – Higher Education Fund
• Board Member – Saudi Travellers Cheques Company
• Deputy General Manager of Financial Affairs • Board Member – Arab International Bank – Tunisia
• Deputy General Manager of Investment and Foreign • Board Member – Construction Products Holding
Relations Company
• Senior Deputy General Manager • Board Member – Rolaco Group
• General Manager
• Chief Executive Officer Qualifications
• Bachelor of BA – American University in Beirut
Qualifications • Master of BA – Enseed, France
• Bachelor of Business Administration – King Abdulaziz
University – 1979 Experience
Having professional experience of more than 30 years, in
Experience the banking and financial fields, during which he held many
Contributed to the conversion of Al Rajhi Exchange and leading positions in many local and international banks.
Trade Company into a public joint stock company and
held many leading positions in ARB for more than 35 years
until his current position as the Chairman of the Board of
Directors.

Salah bin Ali Abalkhail Abdulaziz bin Khaled Al Ghefaily Bader Bin Mohammed Al Rajhi
Strategic Report
Committees membership Current positions
Committees membership
Executive Committee, Governance
Executive Committee, Nominations and • Board Member – Al Rajhi Bank
Committee
Compensations Committee • Managing Director and Vice Chairman –
Mohammed Abdulaziz Al Rajhi & Sons
Current positions Investment Company (MARS)
Current positions
• • Board Member – Executive Committee • Chairman of Rajhi Steel Industries Co.
Board Member, Executive Committee
Member and Chairman of Governance
• Member – Member of Nominations and Ltd. (Rajhi Steel)
Committee – Al Rajhi Bank
Compensations Committee – Al Rajhi • Chairman of the Board – Global
Bank Beverage Company
• Board Member – Al Rajhi Capital
• Board Member – Al Rajhi Capital • Chairman of the Board – Al-Jazirah
Company
Company Home Appliance Co. Ltd.
• Partner and Chairman of the Board –
• Board Member – Savola Group •
Chairman of the Board – Falcon Plastic
•
National Veterinary Company
Chairman and Office Owner – Salah
• Board Member – Panda Retail Company Products Company
Abalkhail Consulting Engineers
• Chairman of the Board – Manafe
Previous positions Investment Company
Previous positions
• Worked from 1981 to 2013 at General
Organization for Social Insurance Previous positions
• Chairman of the Board – Salah
“GOSI” • Held several leading positions in areas
Abalkhail & Co. Information
Technology
• Acting General Manager- Financial of management, industry and real
investment “GOSI” estate investment. He has served as a
At Norconsult Telematics Company since
• Board Member – Industrialization & member of Boards of Directors of joint-
Energy Services Company stock companies.
1972:
• Board Member – Tabuk Agriculture
Development Company Qualifications
• Project Engineer Assistant
• Board Member – National Medical • High School
• Project Engineer
• Care Company
• Project Manager
• Board Member – Herfy Food Services Experience
• Associate Consultant for the
• Board Member – Panda Retail Having experience of 30 years, Mr Bader
Company’s projects has held several leading positions in areas
Company
• Member of Engineering Committee –
• Managing Director of local stocks – of management, industry and real estate in-
Ministry of Commerce vestment and served as a member of Boards
Hassana Investment Company
of Directors of many joint-stock companies.
Qualifications
Qualifications
• Bachelor of Electrical Engineering –
• Bachelor of Economics – King Saud
University of Arizona – 1972
University
Experience
• Master’s Degree in Economics from
Western Illinois University – USA – 1990
Working in the field of advisory and invest-
ment for more than 40 years. He assumed
Experience
the position of Board Member of Al Rajhi
Working in the field of financial investment
Bank, since the first tenure, and served as a
for more than 25 years.
member on many Board committees.

Khaled bin Abdulrahman Al Qwaiz Ibrahim bin Fahad Al Ghofaily Ameen bin Fahad Al Shiddi
Committees membership Committees membership Committees membership

Nominations and Compensations Governance Committee Audit and Compliance Committee
Committee, Board Risk Management
Committee (BRMC) Current positions Current positions
• Board Member and Member of • Board Member and Chairman of Audit
Current positions Governance Committee – Al Rajhi Bank and Compliance Committee – Al Rajhi
• Board Member – Member of • Board Member – Jiwar Real Estate Bank
Nominations and Compensations Management, Marketing and • Board Member – STC – Kuwait Telecom
Committee – Chairman of BRMC – Al Development Company Company
Rajhi Bank • Head of Arriyada Financial Consulting • Board Member – Deutsche Gulf Finance
• Chairman of the Board, Chairman of the Center • Board Member – Oger Telecom
Executive Committee and member of Company
Nomination Committee – Riyadh Cables Previous positions • CFO - Saudi Telecom Company (STC)
Group Company • Board Member – Alinma Bank
• Board Member – EMCOR Facilities • Deputy General Manager of Banking Previous positions
Services and Development – Al Rajhi Bank • Board Member – Solutions Company
• Board Member – National Cooperative • Associate Professor and Vice Dean of • Board Member – Advanced Sale
Insurance Company Faculty of Economics and Management, Limited Company
• Board Member – Tasnee Company King Abdulaziz University • Board Member – Arab Submarine
• Board Member – Bawan Company • Financial Consultant of King Abdulaziz Cables Company
• Board Member – Synergy Consultants Endowment for the two Holy Grand • Board Member – Aqalat Company
Mosques (Abraj Al Bait Complex in • Board Member – Viva Bahrain Company
Previous positions Makkah
• Managing Director – ACWA Holding Qualifications
Company Qualifications • Bachelor of Accounting, King Saud
• Manager of Financial and • Bachelor of Public Administration – University
Administrative Affairs Sector – National King Abdulaziz University • Master’s Degree in Accounting,
Cooperative Insurance Company • Master of Public Administration – University of Missouri, USA
• Board Member – Unique Solutions for California State University – 1978 • CMA, SOCPA, CPA
Chemical Industries (USIC) • PhD in Philosophy – Florida State
• Board Member, Audit Committee University – 1981 Experience
Member and Chairman of the Having more than 25 years of experience
Nominations and Compensations Experience in the fields of financial, investment, con-
Committee – Swicorp Company Having practised academic work for 10 sulting and supervisory, he has served as a
• Board Member and Chairman of years and with 10 years of experience in the
Islamic Banking Sector, he established Ar-
Board Member of many local and interna-
Nominations and Compensations tional companies in various sectors and
riyada Financial Consulting Center, in 2002, has membership in several professional,
Committee – Saudi Tabreed Company
and performed several studies and Islamic commercial, and consulting committees.
Financing Structuring for projects (the most
Qualifications
prominent being Abraj AlBait in Makkah).
• Bachelor of Urban Planning – University
He participated and presided over various
of Washington – USA
Islamic financing conferences within and
beyond the Kingdom’s borders.
Experience
Having more than 30 years of experience
in the banking, financial, and industrial
field, during which he held many leading
positions in many local banks, in the field of
retail, wholesale, risk and insurance.

Hamza bin Othman Khushaim Raed bin Abdullah Al Tamimi Abdullatif bin Ali Al Seif
Strategic Report
Committees membership Committees membership Committees membership
Executive Committee, Board Risk Governance Committee, Nominations and Audit and Compliance Committee
Management Committee (BRMC) Compensations Committee
Current positions
Current positions Current positions • Board Member – Member of Audit and
• Board Member – Member of Executive • Board Member – Member of Compliance Committee – Al Rajhi Bank
Committee and BRMC – Al Rajhi Bank Governance Committee – Member • Board Member – Arabian Cement
• Director of International Investment of Nominations and Compensations • CEO – Alra’idah Investment Company
Department – Hassana Investment Committee – Al Rajhi Bank • Board Member – Al Ra’idah Investment
Company • Board Member - Cooperative Insurance Company
• Member of the Saudi Investor Company • Board Member – Petrochem
Association • Board Member – SAPTCO • Board Member – Wisayah Investment
• Certified member of the Association of • Board Member - GASCO Company
Financial Analysts – USA
Previous positions Previous positions
Previous positions At Cooperative Insurance Company, since • Deputy Head and Head of Investment –
• Hedge Fund Portfolio Manager – KAUST 1996: King Abdullah Foundation
Endowment • Director of Portfolio Management –
• Hedge Fund Manager Portfolio – • Chief Executive Officer Masik
Investment Management – Treasury – • Senior Deputy CEO – Technical Affairs • Head of Portfolio Management,
Saudi Aramco Co. • Deputy CEO – Medical Insurance and Investment Management Division –
• Financial Analyst – Investment
•
Takaful Insurance Saudi Aramco Co.
Management – Treasury – Saudi
General Manager of Human Resources • Portfolio Manager – KAUST Investment
and Administration Affairs Management Company
Aramco Co.
• Board Member and Member of
• Board Member – Waseel Electronic • Financial Analyst – Saudi Aramco Co.
Remuneration and Compensations
Information Transfer • Board Member – HSBC Saudi Arabia
Committee – Dallah Healthcare Holding • Executive Director – Vision Combined
Qualifications Limited Company
Company • Bachelor of Medical Science, University
of Wales, UK Qualifications
Qualifications
• Bachelor of Finance, Michigan State
• Has many training courses from leading • Bachelor of Business Administration –
University
international institutes such as Enseed, • Boston University
• Master’s Degree in Business
IMD, LBS, etc. • Master’s Degree in Business
Administration University of Michigan Administration – Boston University
in Ann Arbor
Experience • Master’s of Economics – Boston
Having over 20 years of management,
• CFA with his last leading position being CEO •
University
CPA, CFA
of “Tawuniya” (the Largest Insurance
Experience Company in MENA area), he currently
Having 12 years of experience in investment Experience
serves as Board Member and Board Having more than 16 years of experience
Committee Member in many listed and in investment, he serves on several Boards
unlisted companies. and Committees in many companies.

Executive Management
Stefano Paolo Bertamini Waleed Abdullah Almogbel Abdulrahman Abdullah Alfadda
Current positions Current positions Current positions

• Chief Executive Officer • Deputy Chief Executive Officer • Chief Financial Officer
Previous positions Previous positions Previous positions

• Chief Executive officer (Standard • Chief Operating Officer (ARB) • General Manager – Treasury and
Chartered Bank) Financial Institutions (ARB)
Qualifications
Qualifications • PhD – Accounting and Auditing Qualifications
• Master’s Degree – Finance and • Bachelor’s Degree – Electrical
International Banking Business Experience Engineering
22 years
Experience Experience
33 years 23 years
Abdulaziz Saad Al Resais Ahmed Saleh Al Sudais Omar Mohammad Almudarra

• Chief Risk Officer • Chief Human Resources Officer • Chief Governance and Legal Officer
Previous positions Previous positions Previous positions

• AGM – Enterprise Risk Management; Al • ACWA Power International, KSA – VP • General Manager – Head of Legal –
Rajhi Bank Human Capital SAMBA Financial Group
Qualifications Qualifications Qualifications

• MBA • B Bachelor’s Degree in Accounting, • Master’s Degree – Law
King Abdulaziz University
Experience Experience
19 years Experience 20 years
17 years

Abdulaziz M Al-Shushan Saleh Abdullah Allheidan Saleh Abdullah Alzumaie
Strategic Report
• Chief Internal Audit • General Manager – Sharia • General Manager – Retail Banking
Group
Previous positions Previous positions
• Executive Director (Head of Internal • Associate Professor in the High institute Previous positions
Audit) ACWA Power of Judiciary – Al Imam Mohammed bin • GM RBG (Acting) (ARB)
Saud Islamic University
Qualifications Qualifications
• Executive Master’s Degree – Business Qualifications • Bachelor’s Degree – English Language
Administration • PhD – in Comparative Fiqh
(Islamic Law) Experience
Experience 29 years
19 years Experience
34 years
Majed Abdulrahman Alqwaiz Abdullah Sulaiman Alnami
Current positions Current positions

• General Manager – Corporate Banking • Chief Compliance Officer
Group
Previous positions
Previous positions • Deputy CORO (Riyad Bank)
• GM CBS (SABB)
Qualifications
Qualifications • Master’s Degree – Management and
• Bachelor’s Degree – Finance Business
Accounting
Experience
Experience 25 years
25 years

Market Overview and Saudi Vision 2030
Despite continued market turbulence in the Kingdom during 2019 – caused by a
combination of oil price volatility, changing national demographics leading to continued
deflation, and various geopolitical tensions in the surrounding region – significant steps
have been taken toward the realization of the goals of Saudi Vision 2030.
Raising USD 25.6 billion, Saudi Aramco’s sphere – driven by the huge opportunities
successful public listing in 2019 represented and intensity of competition in the sector.
‘Vision 2030’ goal is the biggest IPO in history and confirmed the Also reflecting the ideals of Saudi Vision 2030,
to increase home company’s unrivalled position in the global government programs to encourage Saudis to
ownership for Saudi oil and gas sector, whilst expansion and invest in purchasing their own homes has led
citizens from improvement was seen across the non-oil to rising demand for mortgages – the national
sectors of the Kingdom’s economy, spurred goal being to increase home ownership for
47% in 2018 to
by strategic government spending.
The Saudi banking sector continues to evolve

Saudi citizens from 47% in 2018 to 70% by
2030.
70% by 2030
to reflect these changing market conditions,
and to meet the demands of both the
Kingdom’s ambitious development path and
This has played a key role in the banking
sector in 2019, driving growth that may have
previously been generated by other aspects
its new generation of citizens. Increasingly, of the banking business, and has seen
the sector is being led by the demands major retail banks such as Al Rajhi Bank
of millennials, whose custom banks are cooperating very closely with the Ministry of
competing to secure as the new generation Housing and the real estate sector.
of young, wealthy, tech-savvy Saudis begin
to explore their options in a fairly busy Another growth area for the banking sector
marketplace. inspired by the national development vision
is structured finance, thanks to the increase
The demand for the latest banking in infrastructure for mega-projects being
technologies in the Kingdom is growing awarded and launched during the course of
in parallel with this increase in millennial 2019. Some of these developments target the
customers, as is national investment in highly anticipated evolution of the Kingdom’s
digitization and cybersecurity more generally. tourism and hospitality sector, born of Saudi
Therefore, banks are seeking to develop Arabian’s new openness to the world. They
and emphasize their digital leadership, also target the significant new potential for
cybersecurity and data privacy credentials in the expansion of the nation’s entertainment
order to remain in step with the Kingdom’s sector, given the target to become a top 4
Vision and attract new business. entertainment destination in Asia and join
the top 10 in the world.
Given that the Kingdom has one of the lowest
‘digital first’ scores in the world – referring As this broad socio-economic development
to the proportion of customers whose first gathers pace and the Kingdom’s banking
preference is to bank digitally and who sector evolves, and while the government
use online or mobile banking more than continues to advance its various programs to
50% of the time – there is extremely high achieve its broad development ambitions,
growth potential for banks in this area, and Al Rajhi Bank will remain fully committed
consequently significant market share on to supporting Saudi Vision 2030 by focusing
offer to those who are able to capitalize on on the three main objectives of its Financial
this opportunity. Sector Program: creating an advanced capital
market, supporting private sector growth,
A trend of consolidation in the nation’s and promoting and enabling financial
banking system has emerged, with the planning for our customers.
potential for new mergers in the coming
years – particularly in the Islamic banking
29
Business Model
Al Raji Bank’s business model is

Vision, Mission and Values
focused on the creation of value for
all its stakeholders. As illustrated Operating Environment Stakeholders and Materiality
in the figure below, a range of
inputs (on-balance sheet and off-
Strategy
balance sheet forms of capital)
are enhanced through the Bank’s Inputs Activities
activities, with the Bank’s vision,
mission, values, and strategy
defining its overall purpose and
Financial capital
direction. Strong book value of the Bank
reflecting profitability and
asset quality
Accelerate growth
The Bank’s value-enhancing Improve portfolios in key
Institutional capital customer segments
activities in turn generate outputs, Cutting edge knowledge-based
intangibles and tangibles owned and
which consist of the value controlled by the Bank
created both for the Bank and its
Investor capital Employer of choice
stakeholders in the short term.
Loyal investor base nurtured and Create a performance-driven culture
These outputs come together into rewarded through sound governance where the customer comes first
and ethical business practices
broader outcomes, representing the
value created in the medium term, Customer capital
Trust and loyalty earned by putting
and eventually into overall impact, the customer at the heart of all we do Customer focus
Provide greater convenience and
which is the long-term value created security in customer offering
Business partner capital
for all the Bank’s stakeholders. A bedrock of market confidence and
financial stability through exemplary
stewardship
All of these elements are Digital leadership
underpinned by strong governance, Employee capital Expand digital channels and migrate
An innovative team of achievers customers to self-service banking
compliance as described on driven by a passion to serve
pages 62 to 65. In terms of risk

Social and Environmental
management practices, as capital
A license to operate earned through Execution excellence
described in the Risk Management our contribution towards financial Explore and execute measures
inclusion aligned with Vision 2030 to improve operations
section of this report on pages 34 to
35.

Strategic Report
Stewardship
Monitoring and Evaluation
Outputs Outcomes Impact
Value delivered:
Sound financial intermediation
Grow mortgages, retail, Value derived:

SME and corporate banking Profitability, shareholder loyalty
and business portfolio growth
Value delivered:
Professional development and
a motivating work culture
Empower frontline
and embed NPS across Value derived:
the Bank A dedicated and empowered
workforce
Value delivered: Move the Bank towards

Sharia compliant products and becoming the leading
services via wide network Digital Bank in the region.
Improve customer
touchpoints, products Value derived: Be an integral player in the
and services Strong brand value, customer
development of a thriving
patronage, and market leadership
financial sector and a key
enabler of the Kingdom’s Vision
Value delivered: 2030 by offering services to
Sustainable, convenient banking support private sector growth.
options
Introduce new and improved
digital banking options Valued derived:
Brand value and market leadership
Value delivered:
Smoother systems that facilitate
Enhance IT infrastructure, better customer service
centralise and automate
operations, and strengthen Value derived:
risk infrastructure Cost savings and improved
stakeholder confidence

Strategy Overview
Launched in 2015, Al Rajhi Bank’s five-year corporate strategy aims to build new
capabilities and ensure sustainable growth amidst a rapidly changing environment, while
leveraging KSA’s Vision 2030 objectives of creating a thriving financial sector.
In order to navigate a rapidly evolving business environment The “ABCDE – Back to Basics” strategy, which is designed to
and transforming sector, Al Rajhi Bank’s strategy has a expand the Bank’s product and customer portfolio, diversify
relentless focus on business enabling and cost-efficient sources of funding, expand delivery channels, enhance
technological enhancements, as well as on the sustainability of customer and employee engagement, migrate customers
the Bank’s operations, in order to emerge as “The Bank of the to online channels and streamline internal processes, is
Future”. composed of five key pillars, as presented along with their
respective key objectives in the following table.
B Customer D
focus
Update value
A propositions E
Become Digital
employer of choice leadership
Empower
Engaged frontline
Smartly expand
workforce
channels
Accelerate Expand Align organisation and formats Execution
growth development and to customer excellence
training programmes advocacy
Grow mortgage, Digitise customer
private sector, Install and embed journeys World-class
affluent, ladies Strengthen NPS across the Bank
diversity compliance
and Tahweel
Migrate customers
Most recommended to self-service
Enhance SME Enhance employee channels Enhance
and corporate value proposition
capabilities IT infrastructure
Innovate in
Higher engagement payments
Enhance Centralise
International and automate
presence Best in class
operations
Improve yields Strengthen risk

infrastructure
Exceed industry Deliver

33
Risk Management
Operating in a highly competitive and dynamic environment, the Bank focused on
managing a range of risks during the year under review.
Credit Risk contracts, and derivatives are mitigated. The Group is not
The most common risk for the Bank and the Group is financial immune to market risks such as Profit Rate Risk, Foreign
loss due to a counterparty failing to meet the terms of an Currency Risk, Price Risk and Operational Risk.
obligation to a transaction. Key sources of Credit Risk include
credit facilities provided to customers, cash and deposits Operational Risk
held with other banks, and some off balance sheet financial Operational Risk scenarios are more or less idiosyncratic
instruments such as guarantees relating to purchase and sale in nature and generally attributed to inadequate or failed
of foreign currencies or letters of credit. Using quantitative and internal systems and processes, human actions and/or
qualitative aspects, we systematically evaluate a customer’s external events.
creditworthiness. This helps us to maintain a robust loan
portfolio. The Bank is also able to take remedial measures by During the year under review, the aggregated results of
conducting periodic loan reviews that are geared to detect any such stresses indicated manageable levels of risk. This
weaknesses in the quality of the portfolio. demonstrates the Bank’s overall resilience and the success of
its integrated approach to the identification, measurement
Liquidity Risk and monitoring of Operational Risk.
When the Bank is unable to meet its financial liabilities when
they fall due or replace withdrawn funds without incurring Concentration risk
unacceptable losses, this is termed liquidity Risk. Such a risk If the Bank’s area of business were limited to one location or
would invariably strike a serious blow to the Bank’s reputation its customers to a single type, it would be at greater risk from
and its ability to do business going forward. Since the ability to the slightest shocks to its operating environment. Instead,
accurately forecast cash flows and cash equivalents is crucial the Bank is geographically diversified and counts on the
to the Bank’s ability to manage such a risk, they are carried out loyalty and patronage of a varied customer base, which spans
based on practice and limits set by the Group and historical industries, countries, and wallet-size. Such diversity mitigates
deposit movement. concentration risk by providing greater stability in the face of
external impacts.
The Bank’s liquidity is also affected by market disruptions
and credit downgrades. For this reason, assets are managed Risk management practices
judiciously with a conservative balance of cash, cash The role of the Board Risk Management Committee (BRMC)
equivalents and other assets maintained at all times. To is to support the Board of Directors in their role of overseeing
further mitigate this risk the Bank focuses on diversifying its the Bank’s performance in line with the Bank’s risk appetite.
sources of funding. As a proactive management to address The risk management function operates within the regulatory
any future liquidity risk that may arise, the Bank conducts its framework set out by the Saudi Arabian Monetary Authority
Internal Liquidity Adequacy Assessment Plan (ILAAP) exercise (SAMA).
to estimate the available funding under stress situation and on
forecasted basis. The Bank’s Internal Capital Adequacy Assessment Process
(ICAAP) covers the Bank’s risk management framework,
Market Risk detailing its risk appetite, risk management approach, and
Risks related to currency, profit rate and price are classed as primary risk controls. Reviewed by the BRMC and approved by
Market Risk. They occur when the fair value or future cash the Board, the ICAAP is submitted to SAMA on an annual basis.
flows of a financial instrument fluctuate due to changes in Similarly, the BRMC reviews and provides recommendations
market prices. Profit rate products, foreign currency, and on the Internal Liquidity Adequacy Assessment Plan (ILAAP).
mutual fund products are all exposed to general and specific
market movements. As a result, changes in the level of
volatility of market rates or prices such as profit rates, foreign The aggregated results during
exchange rates, and quoted market prices, can impact the
performance of the Bank. 2019 of such stresses indicated
Being Sharia compliant means that risks resulting from
manageable level of risk
speculative operations such as hedging, options, forward

The Bank must manage risks with prudence combined with demand deposits, which in turn has a positive impact on the
pragmatism in order to remain profitable. To do so it has to Bank’s liquidity.
accurately identify potential risks and the impact of such
Strategic Report
risks on the Bank’s value creation process. This involves Supporting our long-term value creation plans, our risk
establishing risk thresholds, which are derived from the Bank’s management practices regulate the entire customer journey
risk appetite. The policies and procedures set up by the Bank from on boarding to issuing finances and providing reliable and
help identify and analyse relevant risks, manage its capital relevant products and services.
effectively and provide shareholders with sustainable returns.
In line with global standards, the Bank implemented credit
Crucial to the Bank’s management of risk across its operations provisioning framework IFRS 9 and Internal Liquidity Adequacy
is the role of the Credit and Risk Group headed by the Chief Assessment Plan (ILAAP) successfully. It also established Risk
Risk Officer. Covering Credit Risk Management, Operational Appetite Statements at business line level, foreign branch level
Risk Management and Enterprise Risk Management, this and subsidiary level. In 2020, the Bank will continue its Risk
team works within the risk frameworks and policies approved Strategies to maintain a strong Capital base and sound Funding
by the Board of Directors. The Group’s reports to the Board & Liquidity position and further improving the robustness of its
of Directors and related committees span credit risks and information security infrastructure.
portfolio asset quality, operational risks, liquidity risks, market
risks, reputational risks, and technology and cyber security Credit rating
risks among others.
Rating agency Long term Short term
The BRMC also reviews the Credit and Provisioning Policy,
Operational Risk Policies, Risk Appetite Statements, Market S&P BBB+ A-2
and Liquidity Risk Policies and Information Security Policy. Its
Fitch A- F1
recommendations are submitted for the Board’s approval.
Moody’s A1 P-1
The Bank’s Liquidity Risk is monitored by the Asset and
Liability Committee (ALCO). Their remit includes day-to-day Capital Intelligence A+ A1
management of funds to ensure that funds are available when
necessary to meet commitments; monitoring liquidity ratios Receiving positive credit ratings from international rating
against benchmarks and managing the concentration and agencies over consecutive years has been favourable for
profile of debt maturities. the Bank’s reputation. The year under review presents no
change in the ratings despite of the challenging economic &
Market risks are regularly monitored by Credit and Risk Group geopolitical environment.
with reports being sent to ALCO each month for assessment.
ALCO ensures that risks taken are appropriate but initiates Looking Ahead
mitigating action if they are not within the Bank’s risk appetite. Expanding its core customer segments of retail, corporate,
and SME in line with world-class risk management practices,
The diversity of the customer base fortifies and strengthens regulatory standards, international standards, and best
the Bank. Having a keen understanding of different customer practices continues to be a core focus for the Bank.
requirements, we segmented this stakeholder group into three
primary segments:
• Retail Banking
• Micro, Small and Medium
Enterprises (MSME)
• Corporate Banking
This type of segmentation also allows us to align our value

proposition in terms of products, services, and delivery
channels to better cater to customer needs. Our retail
customer-oriented business model provides a diverse risk
profile that is supplemented by our robust corporate banking
customer base. Our extensive branch network endears us to
our loyal customer base, generating for us a high level of stable

Business Review
Across Al Rajhi Bank’s constituent groups – from Corporate

Banking, Retail and Treasury to International Business and
Sharia – 2019 has seen significant enhancements to both our
products and services that allow us to serve our customers and
clients in more versatile ways and with greater efficiency than
ever before.
Complemented by the improvements achieved by Al Rajhi

Capital and our SME Business, Al Rajhi Bank has reasserted its
leading position as the world’s largest Islamic bank by capital
and the proud custodian of the largest banking customer base
in the Kingdom.
As we continue our transformative journey, we remain

singularly dedicated to improving the lives of our customers
through innovation and technological renewal, consistently
bringing improvements to our existing products and services
whilst expanding our offering to clients and customers across
our various business segments.
Retail Corporate Treasury International SMEs

banking banking business

37
Business Review (continued)
Retail Banking Group
Al Rajhi Bank serves over nine million retail customers throughout the Middle
East and continues to lead the sector in terms of its branch and ATM networks and
remittance centers across the Kingdom. This unrivalled network provides the Bank’s
customers with access to the entire range of financial products and services from the
Kingdom’s leader in current accounts, personal loans, auto loans and mortgages.
Mortgage loans provided to retail clients by for ‘about-to-retire’ clients, as well as those
the Bank in Saudi Arabia more than tripled with non-approved employers, and retired and
Mortgage portfolio year-on-year in 2019; and portfolio growth to 55 self-employed REDF customers covered under
growth to billion in 2019 from billion in December 2018. the Mortgage Guarantee Scheme (MGS). Also,
for retired customers, Step-Up was launched to
SAR 55 The Bank’s share of the market reached 33% in provide customers with existing loan liabilities
billion
2019, while total portfolio share of the market a more flexible mortgage payment plan, while
increased over the same period to reach 26%. the maximum age limit at loan maturity for
all real estate products was raised to 70 Years.
in 2019 from
A Year of Strong Financial Loan maturity tenor was also increased to 35
Performance years for off-plan/Al Modoum products, and
Retail Banking net income increased 11.1% Mortgage Guarantee Scheme (MGS) coverage
SAR 32 year-on-year to reach SAR 6.42 billion, reflecting

strong operating income performance; total
was extended to Self-Construction Murabha
and Off-Plan products.
billion operating income grew by 16.9% over the

same period, mainly as a result of an improved
product mix in the financing portfolio, whilst
The Group’s Private and Affluent Retail section
continued to cater to the needs and aspirations
in December 2018
assets and liabilities grew by 11.7% and 6.0%, of the Bank’s Private customers, with the
respectively, during 2019. opening of a new Private Center in Riyadh
(East Ring Road, bringing the total in the city to
Meanwhile, net financing and investment two), and the continued operation of Centers
income for the year rose by 16.5% to SAR 12.32 in Jeddah, Dammam, and Makah and at its
billion, whilst fee, exchange and other income dedicated Ladies Private Centre in Riyadh. We
jumped to SAR 1.26 billion, representing a also improved a number of Affluent lounges,
20.5% increase for the year. introducing contemporary design to meet
the expectations of our valued customers and
New Products for a Developing ensure the comfort and convenience of their
Market in 2019 experiences. The Bank’s Affluent lounges now
During 2019 the Retail Banking Group launched number 300 and span the entire Kingdom. For
an Off-Plan Finance program in alliance with the second year running, we also increased
National Housing Company, the Ministry of the number of relationship managers at our 60
Housing and the Real Estate Development dedicated Affluent Ladies Sections.
Fund (REDF) to capitalize on the improving
demand–supply gap being encouraged by In line with the bank’s strategy to become
cooperation between these partners and the the leader in the digital banking by offering
Kingdom’s banks and mortgage Financing contemporary digital banking products and
institutions. services to its customers, the Card Business of
the Bank was among the first wave of providers
Other new products launched during the to launch Apple Pay and mada Pay Services in
year to capitalize on changing dynamics and the beginning of 2019, allowing our customers
under-served customer segments include to pay in seconds using their Al Rajhi cards
step-up and step-down instalment features for through their mobile and smart devices.
self-construction and off-plan finance products;
co-borrower/joint loans for real estate Also in 2019, the bank piloted its much-
products; Murabha products to complement anticipated Multi-Currencies (Omlah) Prepaid
our existing Ijara products; and new segment Card, which offers nine currency wallets for

customers to load their travel budgets through the Bank’s digital digital channel to provide faster and easier customer experience.
channels. The mass launch is planned for the first quarter of Also, a new full system will be integrated that will assist the Real
2020, in anticipation of the upcoming summer travel season. Estate financing for the purpose of improving and enhancing
Strategic Report
the speed and efficiency of the procedures that will result in
In recognition of these and its other extensive increasing the growth pace for this essential sector.
achievements during 2019, Al Rajhi Bank’s
Retail Banking Group received the Best Real As the aim to fulfil customer needs with no exception, including
Estate Finance Award by the Ministry of those who have accounts not associated with their salaries or
Housing. fixed income, the Bank continue on reviewing recommendations
on providing financing options that are applicable with
Retail banking services in 2020 .. New customers needs such as direct debit facilities. At the same
products and more advances services time, the Bank support Group direct sales team through a
There will be more of improvements on retail new products and united structure that ensures the completion of all direct sales
financial services in 2020, this will include launching of new supervised by the Head of Real Estate Finance Operations.

Corporate Banking Group
Our Corporate Banking group delivered yet another year of robust performance in
2019, achieving notable improvements over 2018 results in a number of pertinent
metrics and achieving key milestones in our ongoing core banking transformation.
9.3% Over the course of the year, the group

significantly expanded its product and
service offering, allowing for greater breadth
monitoring – and Business-to-Business
banking, which establishes a direct
connection between clients and the Bank in
and depth in our client relationships and order to provide highly secure information
increase in total substantially reinforcing our market position. access for the purpose of transaction and
Corporate Banking We also further strengthened our control payment processing, and other services such
Group operating income functions and implemented more stringent as straight-thru processing (STP). In addition,
over 2018 governance standards to enhance our existing our Corporate Liquidity Management
compliance culture. solutions provide centralized and automated
cash management for clients to optimize cash
We continued our efforts to benefit and flows.
enhance our human capital through the
implementation of various functional and We also added SWIFT for our corporate
leadership programs, complementing further clients, as part of our ongoing digitization
investment in technology, systems and efforts, providing an integrated solution for
process during the year to drive improvements trade finance, and enhanced our eCorp and
in terms of efficiency and service standards. eTrade offering by undertaking a number of
improvements whilst incorporating value
Sustained Growth and added services. Other efforts to improve the
Performance in 2019 client experience included extended working
Strong top-line performance combined with hours in our dedicated corporate service
improved operating efficiency and lower centers for the first time for Corporate Banking
impairment charges in 2019 saw the Corporate during the Ramadan and Eid Holidays.
Banking group achieve a cumulative 28.0%
year-on-year growth in net income to reach 2019 saw the establishment of a dedicated
SAR 2.15 billion. Real Estate Structured Finance team to
expand the Bank’s Real Estate offering under
Total Corporate Banking group operating a new focus on Ministry of Housing developer
income increased by 9.3% over 2018 to SAR financing, with a view to diversify our portfolio
2.53 billion, financing income grew by 6.8%, and capitalize on extensive current and
and fees and other income by 22.6% year-on- potential opportunities. Also launched in
year, while impairment charges dropped by 2019, our new Escrow Accounts for real estate
79.7%. developers are specifically tailored for the
collection of off-plan sales in adherence with
Unrivalled Options for Corporate the WAFI Program requirements stipulated
Customers by the Ministry of Housing. In addition, we
In order to further improve our client now offer a complementary, cutting-edge
value proposition, the past year has seen a dashboard and reporting tool as a value-
significant expansion in the service offering of added service to aid both developers and the
the Corporate Banking group, with the launch Ministry to monitor sales.
of a range of new products and services
designed to enhance utility, efficiency and Other improvements were implemented in
client experience. service standard measurements; transaction
banking – resulting in improved revenue mix
These include products for corporate clients and enhanced current account floats; credit
such as our new Virtual Accounts – providing process automation; and structured finance,
a reliable mechanism for collecting payments with the addition of key talent to increase our
whilst also aiding in reconciliation and exposure to quality Green Field projects.

We also structured a hybrid receivable securitization and for providing the “Best Service in Saudi Arabia” at the
transaction for a leading electronics and home appliance Euromoney Awards for Excellence.
retailer – the first of its kind in the Kingdom – and for the
Corporate Banking Fit for 2020
Strategic Report
first time began offering FX flexible hedging solutions to our
corporate clients in partnership with Treasury group. Within the sphere of our overarching aim to improve customer
experience and serve our
The Corporate Banking group conducted annual business clients better, the initiatives
events across key regions to outline our product and service undertaken in 2019 have
offerings as part of our cross-sell initiatives in 2019. These resulted in a noticeable
included hosted Trade Workshops across major regions to improvement in our relative
engage with our clients to create awareness of our trade position in the market, laying
offerings. a strong foundation for
growth in the coming year.
A Market Leader in the Kingdom
The awards and accolades received by the group during the As part of our 2020 plans, we will launch a variety of
year testify to our ongoing efforts to improve the efficiency of complementary initiatives to further enhance this growing
our services and the breadth of our offering to clients. In a first and diverse client offering, as well as to improve our service
for Al Rajhi Bank, we were recognized both as the “Market standards as part of our core strategy to establish Al Rajhi Bank
Leader in Saudi Arabia” in the area of Cash Management, as the Bank of choice for corporate clients in the Kingdom.

SME Business
Following a difficult year for our SME business in 2018, owing both to challenging
market conditions and the merger of our SME business with Retail Banking, we have
achieved encouraging organic growth during 2019, expanding our client base within
these selective industries by extending our product range to gain increasing market
share.
Now with a renewed focus on widening our Delivering on the Saudi Vision in
share of the SME market, particularly in the 2020
SAR 2.6 healthcare, education, tourism, services,
transportation and communication sectors,
In 2020 our SME business aims to mirror
broader national SME growth and reflect the
billion
we have captured more business throughout progressive objectives of Saudi Vision 2030
the year, while also improving credit quality by continuing to widen its share of the SME
outstanding through active portfolio management and market by maintaining its selective industry
implementing efficient clean-up processes to focus. We will intend to concentrate more
finance to SMEs improve non-performing loan (NPL) dynamics. on structured facilities, digital products and
cash management services for SMEs in order
Powering the Nation’s Small to more effectively fulfill their business needs,
Businesses in 2019 whilst also launching specific and targeted
In line of the Kingdom’s 2030 vision and lending products.
realizing the importance role of SMEs in
SAR 338 driving growth we reached SAR 2.6 billion in

financing for SMEs whilst also successfully
increasing SME profitability and delivering
Greater emphasis will also be given to process
automation and channels in the coming year
to enhance the customer experience and
million better quality assets to achieve a bottom
line of SAR 338 million, which represents a
ensure the provision of seamless banking
services. This will include the introduction of a
increase in SME significant increase of SAR -2.2 million, in new digital platform through which customers
business profits comparison with 2018. will be able to interact with and fulfill their
banking needs as the nation continues
SME continued to enhance the sale of its transition toward the cashless society
structured products especially POS Financing. foreseen by the Saudi Vision 2030.
This coupled with low non –performing loans
(NPLs) helped in boost the overall profitability
of SME.
Creating A One-stop-shop for

SMEs
The key achievements of the SME business
during 2019 include the enhancement of
our ‘one-stop-shop’ concept through the
development of comprehensive credit
programs for different business segments.
This has been supported by a greater focus on
structured facilities, and the launch of POS
financing, fleet financing and e-SME (online)
services to complement our offering.

43
Treasury Group
As the market outlook continues to evolve in the Kingdom, optimizing the Bank’s
treasury portfolio through product and geographical diversification will be the focus
in 2020. With the upcoming launch of a new treasury management system, the Bank
will be well positioned to support clients, particularly as more investors incorporate
environmental, social and governance (ESG) criteria to screen investments.
The core objectives of our investments and money market In our FX activities, we aim to meet challenging new technologies
activities have remained to improve the net yield of our portfolio as we further entrench our dominant market position, whilst
through optimization and the introduction of higher yielding also introducing new products to Corporate Banking Group, SME
assets, whilst also achieving and maintaining the right customer Banking and Private Banking to provide profit rate hedging and
and interbank deposit mix. We have also sought to retain and optimization. Meanwhile, through Tahweel, we will continue
enhance our leading position in the foreign exchange remittance to protect our leading position despite a declining remittance
business; strengthen cross-selling with the corporate, retail and market by adopting disruptive models to further enhance the
SME segments; expand our correspondent network for all major customer experience and optimize network costs.
currencies; and diversify our international portfolio to include
new markets. The Treasury Group will also continue to diversity our FI
book by moving into new regions, whilst also maintaining a
Sustained Profit Growth in 2019 portfolio of quality, tier-1 institutions. We will also expand our
The Treasury Group achieved significant growth in 2019, driven correspondent network, leverage the Bank’s international
by product diversification and portfolio optimization. Net income relationship and focus on de-risking our banking relationships.
rose 6.7% year-on-year, on the back of a 1.9% growth in total Finally, we anticipate further growth in FI fees as a consequence
operating income. of trade deals and in relation to growth in the Hajj business, in
line with the Hajj and Umrah Vision Realization Program.
Total Treasury assets grew by 0.8%, in line with the bank’s
overall asset expansion, leading to net financing and investment
income growth of 2.3% over the same period, whilst total
liabilities fell 38.9% from SAR 13.71 billion to SAR 8.37 billion
during the year.
Our financial institutions (FI) assets book increased to SAR 3

6.7%
billion in 2019, representing its highest total value to date. net profit growth
Tahweel, the Bank’s remittances arm, achieved a market share
of 30.6% in 2019, despite declining volumes. This growth is a
direct result of our efforts to deliver an enhanced customer
experience, which have led to a net promoter score of 47%, a
complaints rate of only 1.8%, maximum waiting times of 20
minutes, and accelerated digitization at 58%.
Steadfast in the Face of 2020 Challenges

Rising political risk continues to represent our most significant
challenge, with investors expressing concern about factors
such as US–China trade dynamics and Brexit, while political
uncertainty in the Middle East region will remain a key hurdle in
terms of market perception. We expect growth to remain muted
as the world adjusts to the consequent political realities.
Based on the market outlook for 2020, we will continue to

optimize our customer and interbank deposit mix; improve
portfolio net yield by adding higher yielding assets and
supporting the Bank’s diversification strategy; and offset
profitability declines through better spreads.

45
Subsidiaries and International Branches
Al Rajhi Capital Following the inclusion of Tadawul in the MSCI and FTSE
Al Rajhi Capital is a Saudi Closed Joint Stock Company authorised emerging markets indices, the Research team worked closely
by the Capital Market Authority to carry on securities business in with the new Institutional Sales Desk in helping to attract new
the activities of Dealing/brokerage, Managing assets, Advising, clients, including qualified foreign investors. A road show, which
Arranging and Custody.The Company made excellent progress hosted 10 companies from Saudi Arabia, was conducted in New
in implementing its five-year strategy and growth vision for York with the Company’s US partner.
2020. Key strategic developments in 2019 included an increase
in stable, recurring revenue sources; an expansion of Al Rajhi Also during 2019, Al Rajhi Capital continued to make significant
Capital’s institutional client base; and a number of major digital progress in implementing its Digital Transformation Plan,
transformation initiatives including a complete upgrade of including the launch of the Company’s new website, which
existing online platforms and the introduction of new e-services features a sophisticated design based on SiteCore content
and delivery channels. management and digital marketing technology, providing an
enhanced user experience.
Notably, Al Rajhi Capital was appointed as Joint Bookrunner
and Underwriter for Saudi Aramco’s listing on the Saudi stock Other key digital developments include the launch of an end-
exchange, Tadawul, representing the biggest IPO in the world to-end automated Murabaha financing solution and major
to date and making Saudi Aramco the world’s largest listed enhancements to the eTadawul online brokerage trading
company, with a valuation of over US$ 1.7 trillion. platform such as biometric authentication. Also, new risk
profiling and goal-based investment tools were added to Al
The Company also received extensive recognition during 2019, Rajhi’s ARC Invest asset management portal.
having been named Saudi Arabia Broker of the Year 2019, Sharia
Fund Manager of the Year 2019 and Research Provider of the Year Al Rajhi Development Company
2019 at the Global Investor Group MENA Awards 2019. A limited liability company registered in the Kingdom of Saudi
Arabia to support the mortgage programs of the Bank through
Strong performance and an expanding product transferring and holding the title deeds of real estate properties
mix in 2019 under its name on behalf of the Bank, collection of revenue
Al Rajhi Capital maintained its position as the leading broker of certain properties sold by the Bank , provide real estate
on Tadawul – with a market share of 12.5% – and on the Nomu and engineering consulting services, provide documentation
Parallel Market, with a market share of 19.8%. service to register the real estate properties and overseeing the
evaluation of real estate properties.
The Company’s local and regional mutual funds, which have
been consistently ranked in the top quartile relative to their Al Rajhi Takaful Agency Company
peers, continued to perform strongly during 2019. As a result, A limited liability company registered in the Kingdom of Saudi
total assets under management (AUM), including the listed Al Arabia to act as an agent for insurance brokerage activities per
Rajhi REIT, grew by 27% year-on-year to SAR 46 billion compared the agency agreement with Al Rajhi Cooperative Insurance
to a growth rate of 12% during the period from the beginning Company.
until the end of 2019.
Al Rajhi Company for management services
Two new funds were launched during the year. The Al Rajhi MSCI A limited liability company registered in the Kingdom of Saudi
Multi-Factor Index Fund, which is the first passive fund of its kind Arabia to provide recruitment services.
in the Kingdom, is designed to meet growing investor demand
for a low-cost and efficient way of accessing the Saudi equity Emkan Finance Company
market with a long-term perspective. Meanwhile, the Al Rajhi A Closed joint stock company registered in the Kingdom of
Diversified Income Fund was offered to selected investors on a Saudi Arabia providing micro consumer financing, finance lease
private placement basis; this fully flexible income-generating and small and medium business financing. As of 31 December,
multi-asset fund aims to provide an attractive long-term risk- the company is under licensing process with Saudi Arabian
adjusted return with moderate volatility. Monetary Authority (SAMA).
The Al Rajhi Real Estate Investment Traded Fund (Al Rajhi REIT), Al Rajhi Bank – Malaysia
which is listed on Tadawul, enjoyed a successful and active first An Islamic bank has been granted full banking license to
year of operation, providing investors with an annualized yield operate as the first foreigner bank in Malaysia under the
of 6.3%. The total asset value of the Fund was increased from Islamic Financial Services Act 2013, established and operates
SAR 1.7 billion to SAR 2.4 billion through the acquisition of new in Malaysia. Malaysia is the first step in the direction towards
real estate assets. These comprise new assets on Education and entering the banking market in Southeast Asia, as the essential
healthcare sectors, bringing the total number of assets under banking products were entered to the Asian market and
management by the Fund to 18 at the end of 2019. provided a new complete experience from Islamic Banking.

Ownership of the Country of Country of
Name of Subsidiary Capital Company % Operations Establishment
Al Rajhi Limited Company - Malaysia 1,051,714,300 100 Malaysia Malaysia
Strategic Report
Al Rajhi Capital 500,000,000 100 KSA KSA
Al Rajhi Takaful Agency Company 2,000,000 99 KSA KSA
Al Rajhi Development Company 1,000,000 100 KSA KSA
Al Rajhi Company for management services 500,000 100 KSA KSA
Emkan Finance Company 160,000,000 100 KSA KSA
Al Rajhi Bank – Kuwait and provides all financial, banking, investment services, import
Foreign registered branch at the Central Bank of Kuwait. and trade of precious metals and stones in accordance with
the provisions of Islamic Sharia and in accordance with the
Al Rajhi Bank – Jordan applicable banking law.
Foreign branch operating in the Hashemite Kingdom of Jordan
Ownership of the Country of Country of
Name of International Branch Capital Company % Operations Establishment
Al Rajhi Bank - Kuwait 389,888,426 100 Kuwait Kuwait
Al Rajhi Bank - Jordan 264,842,950 100 Jordan Jordan
Reinforcing our International Presence in 2019 economic uncertainty, while the Bank maintained positive jaws
In Kuwait Al Rajhi Bank generated SAR 75,601 thousand revenue owing to better operating revenue, and successfully leveraged
in 2019. Having concluded the year with expenses of SAR 57,696 our digital platform to grow our current a savings accounts
thousand, annual net profit for the Bank’s Kuwait operations (CASA) and generate a positive fee trajectory.
was SAR 101,679 thousand. High-level priorities in Kuwait
included the ongoing expansion of our network to enhance Expansion and Enhancements to our
client reachability, whilst also improving and broadening International Network in 2020
our core banking system in the Kuwait and establishing the Major strategic targets for Al Rajhi Bank’s Kuwait operations
foundations of a leading digital banking platform for our include growing our customer current account and deposit base
customers. to reduce our dependency on government deposits. We will
also deliver major enhancements to our bank digital offerings
In Jordan, the Bank’s operations produced SAR 133,039 thousand in the country (Web-2, Mobile app, SMS enhancements, etc.)
in revenue, equating to a net profit of SAR 34,879 thousand with as well as core banking upgrades (CTF & RBS release). The Bank
SAR 74,411 thousand in expenses. The contribution of home also intends to integrate the Kuwait National Payment System
financing to our overall retail portfolio increased during 2019, (KNPS), the GCC Real-Time Gross Settlement System (GCC-RTGS)
as did the contribution of mid-corporate and SME business to and the SINNAD card network into our core banking.
the Bank’s corporate portfolio. The Bank also booked additional
facilities for the Government of Jordan with a value of JOD 27 In Jordan, the Bank intends to gradually replace its Tawarruq
million. products with a new product line beginning in 2020.
The Bank’s activities in Malaysia generated SAR 195,085 Al Rajhi Bank will seek to build a digital proposition around our
thousand in revenue, with expenses of SAR 170,860 thousand niche market in Malaysia in 2020, leveraging our existing digital
to achieve a net profit of SAR 23,888 thousand. Moderate asset banking platform and strategic collaborations, complemented
growth was seen across the business, reflecting the current by more robust deposit campaigns.
International Business Group Highlights 2019
Country Revenue (2019) Expenses (2019) Net profit (2019)

Kuwait SAR 75,601 SAR 57,696 SAR 101,679
Jordan SAR 133,039 SAR 74,411 SAR 34,879
Malaysia SAR 195,085 SAR 170,860 SAR 23,888

Digital Footprint & Transformation
During 2019 Al Rajhi Bank continued its enhancements were also made to our mobile
comprehensive digital transformation apps in Kuwait and Jordan.
initiative, launched in 2018 to deliver
products and services to clients through Improvements to our network of ATMs and
digital channels based on a “mobile first” kiosks included new Hyosung and remittance
SME Online approach. This transformation is built around kiosks, as well as draft cheque printing
the four core themes of our digital strategy: to facilities. Meanwhile, phases 1 and 2 of
Banking Services expand smart channels and formats; enhance our Keyboard App for Android and for iOS
customer journeys; migrate customers to self- were completed, we added new features to
service channels; and deliver innovations in our Online Banking Desktop and eFinance
terms of payments. facilities, and launched Phase 1 of our new
online account opening service.
Delivering improvements in every area of
our offering, 2019 saw encouraging progress Delivering Cutting-edge Digital
towards these strategic goals. We enhanced Improvements in 2020
our SME Online Banking Services with The coming year will see major enhancements
Mobile App additional capabilities for cheque book to our digital offering, both to SMEs and for
management, direct debits, soft tokens, and individuals, with a focus on financial product
point-of-sale management, invoicing (Esal), digitization via our mobile banking channel,
and Aramco payment management. ensuring this remains the preferred – and
most advanced – means through which to
Improvements to our Mobile App included bank with us, and offering an unparalleled
facilities to apply for pre-paid credit mobile banking experience for our customers.
cards, increase online banking limits, add
international beneficiaries and request More generally, we will continue to digitize
Tahweel App additional keys, as well as launching customer journeys across our different
Personal Financing Watani via the app. Other service areas, improving operational
enhancements included Apple Pay support, processes to achieve maximum speed and
and tools to renew vehicle registrations, client satisfaction as we migrate more of
request refunds and transaction claims and our customers to our evolving self-service
set up advance payments. For the first time in channels. These include continued measures
the market, we also added the facility to add to enhance kiosks and ATMs, as well as
beneficiaries via their mobile. innovations in the payments sphere to
encourage customer on-boarding – including
ATMs and kiosks Meanwhile, enhancements to our Tahweel in collaboration with the SAMA Sandbox
App included support for six additional initiative – as well as in the realm of point-of-
languages, as well as facilities to update ID sale solutions to support the achievement of
details, track remittances, add international the 2030 Vision.
beneficiaries and request MOI refunds. Other
Online Banking
Desktop and
eFinance facilities

49
Sharia Group
Since its foundation, Al Rajhi Bank has meticulously ensured The Sharia Board holds periodic meetings in which it examines
that all Sharia precepts are adhered to in all of its transactions all the Bank’s products, contracts, investments, financing
and services. In order to maintain this significant commitment, agreements, and all other propositions and transactions.
the Bank assigns such responsibility to an independent The Sharia Board met 43 times during 2019, during which it
Shariah body, whose members are distinguished scholars. examined more than 290 topics including banking products,
agreements, contracts, questions and inquiries, and issued
The composition of this body and its regulations are approved necessary decisions for each case (1,198 decisions) as well as
by the General Assembly; its decisions are binding on all of the guidance to be adopted and acted upon.
Bank’s departments, thereby ensuring our commitment to the
provisions of Islamic Sharia in all our business and activities –
both inside and outside the Kingdom of Saudi Arabia.
Structure of the Sharia Group

In order for the Sharia Board to achieve its objectives, the Sharia Group was formed within the Bank and consists of two departments:
1. Sharia Board Secretariat Department: 2. Sharia Audit Department:

This is staffed by a number of advisors who study It supervises all the Bank’s activities in relation
banking products, agreements and contracts received to applying and adhering to the decisions and
from various groups and departments in the Bank, and recommendations of the Sharia Board, in order to
prepare relevant reports to be presented to the Sharia ensure that there are no unauthorized products,
Board. Thereafter, the Department communicates with contracts or models and that employees understand the
groups and other Bank departments to inform them Sharia Board’s decisions through an integrated team of
of the recommendations and decisions of the Sharia Sharia monitors, it performs Sharia audits of the Bank’s
Board. In addition, the Department participates in the business through automated systems and field visits,
Bank’s development of Sharia products and provides and is responsible for developing and reviewing auditing
Sharia counseling to other Groups and departments standards issued by the Sharia Board, which totaled
in accordance with the decisions of the Sharia Board. 1,184 by end-2019.
During 2019, the Department prepared materials on
(250) various topics.
Activities and Oversight in 2019 The Group represented the Bank at the meetings of the
During 2019, the Sharia Group sought to expand the prevailing banking committee of the Saudi Arabian Monetary Authority
awareness level of the Bank’s employees, customers and those (SAMA) and assumed the Chairmanship of the committee
who are interested in Islamic banking, through a variety of during 2019. The Group representatives also participated in
initiatives and events that included (39) separate specialized specialized seminars such as those held by the Research Center
Sharia banking courses for employees including marketing of Excellence of Imam Muhammad bin Saud Islamic University
staff, branch managers, area managers, operations managers in addition to NCB seminar on banking services and activities.
and leaders of excellence, along with special courses for
Cards Department employees. The Group also held (25) joint It also provided scientific support to a number of Islamic
workshops, in which they discussed Sharia principals and scholars in the field of Islamic banking services and trained
aspects of all banking transactions and activities, with various 12 researchers from Imam Muhammad bin Saud Islamic
different bank departments, various banks and related University, including both graduates and undergraduates.
governmental authorities.
Shariah Group Achievements in 2019
Further, the Sharia Group answered (730) inquiries including
(540) telephone inquiries and (190) postal inquiries during the • 29 training courses for employees
year; sent (12) awareness messages to the Bank’s employees; • 25 joint workshops
and printed and distributed a number of books on Islamic • Answering 730 questions and inquiries
banking and financial transactions.

51
CFO Review
Income statement
Al Rajhi Bank reported net income of 10,159 Million for the full year 2019, reflecting strong momentum in the delivery of the strategy,
and resulting in improved financial metrics.
FY 2019 FY 2018 YoY

SAR Mn. SAR Mn. %
Net financing and investment income 16,428 14,487 13.4%
Fees and other income 3,057 2,833 7.9%
Total operating income 19,484 17,320 12.5%
Operating expenses -6,386 -5,653 12.9%
Net impairment charge -1,772 -1,531 15.8%
Zakat -1,168 -6,368 -81.7%
Net income for the period 10,159 3,768 169.6%
Earnings per share (SAR) 4.06 1.51* 168.8%
Dividends per share (SAR) 3.00 2.76* 8.6%
Return on equity (%) 20.49 7.01 192.2%
Return on assets (%) 2.76 1.04 165.4%
Net financing and investment margin (%) 5.22 4.75 9.9%
Cost to income ratio (%) 32.8 33.4 -1.7%
Cost of risk (%) 0.71 0.64 10.9%
* Earning per share and Dividends per share for 2018 have been calculated based on 2,500 million shares to give a retrospective effect of the change
in the number of shares increased as a result of the bonus shares issued.

Operating income funding mix at the lowest industry cost. Fees and other income
Total operating income for 2019 reached SAR 19,484 Million, grew 7.9% to SAR 3,057 Million as a result of more competitive
12.5% higher than in 2018, reflecting strength across the board fee environment in the Retail and Corporate segments.
Strategic Report
in main businesses.
Exchange income was SAR 774 Million, increased from SAR
Net financing and investment income totalled SAR 16,428 755 Million in 2018, reflecting management initiatives despite
Million, up 13.4% year-on-year. This was driven by a widening challenging market environment, and other income was SAR
of the financing and investment margin, which reached 5.22% 295 Million, increased from SAR 210 Million last year.
as our funding platform continued to deliver a world-class
Financial results comparison
2019 2018 2017 2016 2015
SAR Mn. SAR Mn. SAR Mn. SAR Mn. SAR Mn.
Total operating income 19,484 17,320 15,905 15,341 13,746
Operating expenses 8,158 7,183 5,237 5,007 4,658
Net income for the period 10,159 3,768 9,121 8,126 7,130
Operating expenses Balance sheet
Total operating expenses for the year increased by 13% to reach Total assets grew by 5.5% year-on-year as the Bank was
SAR 6,386 Million, largely reflecting the ongoing investment in supported by solid financing landscape led by mortgage
our digital capabilities, as well as the introduction of VAT. financing a long with further optimization of returns on
The cost-to-income ratio of 32.8% for the year represents a treasury portfolio.
60-basis point decrease against 2018.
Impairment charge
Net impairment charge for the year was 15.8% higher than in
2018, at SAR 1,772 Million. The cost of risk was 0.71% against
0.64% last year.
FY 2019 FY 2018 YoY

SAR Mn. SAR Mn. %
Cash and balances with SAMA and other central banks 39,294 43,246 -9.1%
Due from banks and other financial Institutions 32,058 32,387 4.1%
Investments, net 46,843 43,063 8.8%
Financing, net 249,683 231,758 7.7%
Total assets 384,087 364,031 5.4%
Due to banks and other financial institutions 2,219 7,290 -69.6%
Customers’ deposits 312,406 293,909 6.3%
Total liabilities 332,895 315,725 5.4%
Total shareholders’ equity 51,192 48,306 6.0%
Risk weighted assets 272,321 254,506 7.0%
Tier 1 capital ratio (%) 18.8 18.98 -0.9%
Total capital adequacy ratio (%) 19.87 20.07 -1.0%
Liquidity coverage ratio (LCR) (%) 175 196 -10.7%
Basel III leverage ratio (%) 12.9 12.9 0%
Financing to customer deposits ratio (%) 79.2 80.8 -2.0%

Assets and liabilities comparison
2019 2018 2017 2016 2015

SAR Mn. SAR Mn. SAR Mn. SAR Mn. SAR Mn.
Cash in SAMA and other central banks 39,294,099 43,246,043 48,282,471 42,149,905 27,053,716
Dues from banks and other financial institutions 32,058,182 32,387,760 10,709,795 26,578,525 26,911,056
Investments, net 46,842,630 43,062,565 36,401,092 34,032,879 39,876,864
Financing, net 249,682,805 231,758,206 233,535,573 224,994,124 210,217,868
Property and equipment, net 10,407,247 8,649,435 7,858,127 6,485,162 5,578,931
Investment properties, net 1,383,849 1,297,590 1,314,006 1,330,868 1,350,000
Other assets, net 4,417,764 3,629,245 5,015,464 4,140,354 4,631,213
Total assets 384,086,576 364,030,844 343,116,528 339,711,817 315,619,648
Dues to banks and other financial institutions 2,219,604 7,289,624 5,522,567 8,916,970 4,558,224
Customers’ deposits 312,405,823 293,909,125 273,056,445 272,593,136 257,821,641
Other liabilities 18,269,492 14,526,229 8,786,598 6,254,839 6,600,729
Total liabilities 332,894,919 315,724,978 287,365,610 287,764,945 268,980,594
Key performance indicators

Analysis of income by operating segment
Invesment
services and
Retail Corporate Treasury brokerage Total
Total operating income (SAR ‘000) 13,590,815 2,531,922 2,898,349 463,378 19,484,464
Total operating expenses (SAR ‘000) -7,164,408 -381,499 -459,718 -152,481 -8,158,106
Net income before zakat (SAR ‘000) 6,426,407 2,150,423 2,438,631 310,897 11,326,358
Investments Credit quality

Net investments increased by 8.8% in 2019, to SAR 46,843 The non-performing financing ratio remains low at 0.90%, a
Million, mainly driven by the increase in T-bills placement and decrease from 0.96% last year, this reflect the health of the
government Sukuk. overall financing portfolio especially retail. 2019 coverage ratio
remains high at 303%.
Financing and advances
Net financing was increased by 7.7%, at 249,683 Million, as Capital
continued growth in Retail financing offset limited Corporate Al Rajhi Bank continued to maintain a strong capitalization
financing opportunities and some loan repayments. The overall profile with core equity Tier 1 and total capital adequacy ratios
financing mix remains predominantly Retail, with 75% of net of 18.8% and 19.9%, for 2018 and 2019 respectfully. These ratios
exposure. reflect a 7% increase in risk-weighted assets resulting from
growth in financing. Additionally, the Bank’s dividends pay-out
Customers’ deposits ratio for 2019 expected to be 74%.
Customer deposits increased by 6.3% in 2019 to SAR 312,406
Million as the Bank continued to grow non-profit bearing Liquidity
deposits, which represented 91% of total deposits at year-end The Bank’s liquidity position remained healthy with a liquidity
2019. coverage ratio of 175%.

Subsidiaries Financial Results Review
Strategic Report
Activity Type Revenue (SAR)
Al Rajhi Capital is a Saudi Closed Joint Stock Company authorised by the
Capital Market Authority to carry on securities business in the activities
Al Rajhi Capital - KSA 463,377,393
of Dealing/brokerage, Managing assets, Advising, Arranging and
Custody.
A limited liability company registered in the Kingdom of Saudi Arabia
to support the mortgage programs of the Bank through transferring
and holding the title deeds of real estate properties under its name
Al Rajhi Development
on behalf of the Bank, collection of revenue of certain properties sold 63,719,346
Company - KSA
by the Bank , provide real estate and engineering consulting services,
provide documentation service to register the real estate properties and
overseeing the evaluation of real estate properties.
A limited liability company registered in the Kingdom of Saudi Arabia
Al Rajhi Takaful Agency
to act as an agent for insurance brokerage activities per the agency 10,593,339
Company - KSA
agreement with Al Rajhi Cooperative Insurance Company.
Al Rajhi Company for A limited liability company registered in the Kingdom of Saudi Arabia to
259,724,982
Management Services - KSA provide recruitment services.
A Closed joint stock company registered in the Kingdom of Saudi Arabia
providing micro consumer financing, finance lease and small and
Emkan Finance Company - KSA -
medium business financing. As of 31 December, the company is under
licensing process with Saudi Arabian Monetary Authority (SAMA).
Foreign branch operating in the Hashemite Kingdom of Jordan and
provides all financial, banking, investment services, import and trade of
Al Rajhi Bank - Jordan 133,039,798
precious metals and stones in accordance with the provisions of Islamic
Sharia and in accordance with the applicable banking law.
Al Rajhi Bank - Kuwait Foreign registered branch at the Central Bank of Kuwait 74,231,977
An Islamic bank has been granted full banking license to operate as the
Al Rajhi Limited
first foreign bank in Malaysia under the Islamic Financial Services since 195,085,437
Company - Malysia
2013. It was established and operating in Malaysia
Geographical analysis of the total income of the bank and its subsidiaries
Year KSA East Asia Total

2019 19,289,378,563 195,085,437 19,484,464,000

Sustainability
Al Rajhi Bank is committed to operating as a responsible business and
generating positive value for our stakeholders – including customers,
employees, shareholders and communities. This commitment is reflected
Strategic Report
not only in our governance practices and financial performance, but also
in the innovative approaches we are taking to contribute to sustained
economic, social and human prosperity, in line with national and
international agendas including Saudi Vision 2030 and the UN Sustainable
Development Goals.
Our ESG Approach

ESG Management and Disclosure
Banking is a business of responsibility. Financial responsibility
While a range of ESG matters have always been integrated
and broader social responsibility. At Al Rajhi Bank we take both
in our decision-making, including how we evaluate risks and
these obligations seriously. We work diligently to be a well-
opportunities, we must rise up to the evolving standards
managed, well-disciplined institution that protects people’s
expected of us. That means constantly working on new and
money from a fiduciary perspective and enables customers
existing initiatives to ensure we are addressing the most
and businesses to achieve their financial goals. At the same
relevant issues concerning our stakeholders and our business.
time, we strive to live up to our societal duties so that we foster
It also means we need to do a better job of communicating our
economic and community prosperity.
management approaches, targets, performance and progress
These responsibilities dictate our commitment to around material ESG issues.
environmental, social and governance (ESG) practices. We have
initiatives and programs in place across these pillars, to deliver
on our ESG ambitions, which are underpinned by the strong We aim to improve ESG disclosure by:
foundation of our core values and standards.
• Increasing transparency on how the Bank manages its ESG
Our Core Values are the heart and soul of Al Rajhi Bank, giving issues
us a platform on which to achieve current and long-term • Disclosing the most relevant KPIs while embracing non-
ESG goals. Complementing these values, our Policy on Social financial reporting standards such as GRI and SASB
Responsibility, established in 2014 and last updated in 2018, • Setting relevant targets and priorities to help create value
outlines how we contribute to sustainable development and demonstrating, through this ESG Report and our
and the well-being of employees and their families, local Annual Report, how the Bank plans to fulfil them
communities and the broader society in which we operate.
Specifically, the policy articulates our commitment towards: We have started to develop targets and benchmarks in several
areas to drive and evaluate our progress.
1. Our internal environment (workplace)
2. Employees There is a dedicated team overseeing the Bank’s ESG agenda.
3. Customers and shareholders This team acts as a central resource and works with colleagues
4. Communities and society across the organization to help identify and prioritize ESG
issues, explore opportunities for improvement, and validate
data for reporting.
The ESG issues that matter most to our Bank

Environmental and stakeholders
There are numerous ESG issues, risks and opportunities that
demand our attention. We focus on those that matter most
to our stakeholders, directly relate to our business and are
areas where we feel we can make a positive impact. These are
Go
ver
considered our most material topics.

ial
na
Soc
nc
e

Through our regular materiality assessments, we have Prior to granting credit facilities, we conduct a credit risk
identified the following 15 key areas, our current priority ESG assessment that incorporates statistical risk models and other
issues, which are the focus of our forward-looking strategy and evaluation tools. Employees involved in lending engage with
program, as well as this summary of our sustainability report. clients in our loan portfolio and oversee their compliance with
They are: requirements stipulated in our agreements and transactions.
Given the growing importance of ESG issues, going forward we
• Managing Our Environmental Impacts will work to integrate broader ESG evaluations into our lending
• Sustainable Finance processes.
• Responsible Customer Relations
• Digital Leadership In addition, the Bank renegotiates loans to customers facing
• Financial Inclusion financial difficulties. Under the Bank’s forbearance policy,
• Employee Engagement and Wellbeing loan forbearance is granted on a selective basis if the debtor
• Talent Development is currently in default or if there is a high risk of default, there
• Diversity and Inclusion is evidence that the debtor made all reasonable efforts to pay
• Compensation and Benefits under the original contractual terms and the debtor is expected
• Community Investment to be able to meet the revised terms.
• Responsible Procurement
• Corporate Governance Responsible Customer Relations
• Managing Risk With the ambition to be recognized as the most recommended
• Integrity and Transparency bank in the Kingdom of Saudi Arabia, we place a strong
• Data Protection and Cyber Security focus on being a customer-centric organization, so that we
deliver what is best for our stakeholders. We strive to create
Managing Our Environmental Impacts an environment where customers not only benefit from our
Rajhi Bank is committed to addressing environmental products and services, but function as loyal ambassadors who
challenges and meeting the sustainability goals outlined in advocate Al Rajhi Bank to others. By empowering customers,
Vision 2030. We aim to better understand, manage and reduce we can build healthier customer relationships, earn new
our operational impact on the environment, consequently clientele and maintain the Bank’s growth.
protecting the planet for future generations.
To help build the right culture of advocacy within Al Rajhi
As a responsible financial institution, we are mindful of the Bank, we educate employees on elements of the customer
impact of our decisions and operations and recognize our experience. We have an Employee Code of Conduct, Client
role in the transformation towards a sustainable community. Charter and Banking Consumer Protection Principles, which
We aim to reduce the Bank’s carbon footprint and provide together articulate our commitment to responsible business
transparency in our performance. and safeguarding customer interests. The principles include
our commitment to professionalism, fair and equitable dealing
Another important way we demonstrate a balanced, (with extra attention extended to those with low income, little
responsible approach to banking is through our lending education and special needs), disclosure and transparency,
and investment activities. As the world’s leading Islamic privacy protection, and financial education and awareness.
banking institution, we provide ethical screening and are now
incorporating broader ESG factors into consideration through We have programs and appropriate mechanisms in place
our lending and investing activities. We have procedures in that help both existing and future customers to develop their
place which assess environmental risks and ensure products knowledge, skills and awareness to appropriately understand
we fund do not have a negative impact on the environment. basic risks, and assist them in making informed and effective
decisions. We also have a process in place that directs them to
Sustainable Finance obtain appropriate assistance when required.
As a world-leading Islamic bank, responsible finance is
embedded in our decision-making. Our financial solutions are Listening to our customers and improving our service based
designed to be Sharia-compliant, so we apply strict standards on their feedback is crucial to our success. We listen to
pertaining to credit evaluation and financing and we look to our customers and monitor our progress through multiple
avoid funding projects that may pose negative environmental channels, including Net Promoter Score (NPS), Voice of
or social risks for the Bank. Customer program and customer complaints.

Strategic Report
Our Customer Experience Council is responsible for reviewing Digital Leadership
issues affecting the customer experience and prioritizing The banking sector is transforming into a digital industry,
bank-wide improvement initiatives, in line with Al Rajhi Bank’s and Al Rajhi Bank is at the forefront of this change. We are
“Customer Focus” strategy. Chaired by the CEO. committed to pioneering digital banking by leveraging the
latest technologies to provide customers with the highest
Supporting the Council is our Customer Experience quality services and value.
Department. Its responsibilities include: contributions to
the Bank’s customer focus strategy; designing and driving a Digital leadership is one of the five pillars of the Bank’s “Back to
culture of advocacy including customer awareness programs; Basics” strategic plan, and we remain focused on strategically
monitoring and reporting on experiential and operational expanding channels, digitizing customer journeys, migrating
service metrics; monitoring complaints trends and resolution customers to self-service channels, and exploring innovations
performance; and action planning and implementing service in payment methods. Each year we introduce new solutions to
improvement changes. grow our digital footprint and enhance customer experience,
and we see consumer engagement continue to grow. Today,
The Bank has a dedicated Service Improvement team 67% of customer transactions are performed digitally.
responsible for improving customer experience. The team
harnesses wide ranging insights to identify potential
improvement opportunities in collaboration with internal
stakeholders and facilitates launching and tracking service
improvement initiatives as part of an annual plan.

Among our offerings: benefit from significant growth opportunities in the SME sector.
To better support the SME sector, the Bank created the Micro,
• The innovative Al Mubasher app features a host of services Small and Medium Enterprises Committee to support SAMA
such as bill payments and the ability to apply for products, requirements and provide an overall boost to the market. Al
as well as the latest advancements in security technology. Rajhi Bank has a number of offerings targeting SMEs and we
We continually enhance the app with performance are committed to helping them access much-needed capital
upgrades to improve user experience. and other services to launch and/or expand their operations.
• The ASRAA self-service machine is a one-of-a-kind “smart As part of our contribution towards Saudi Vision 2030, we are
booth” with innovative solutions for customers’ banking increasing the Bank’s support for SME growth by facilitating
operations and transactions. Through the machine, various lending programs and providing more funding for the
customers can renew their banking cards, print check sector.
books and six-month account statements, make transfers
and perform other activities. It is the largest self-service Engagement and Wellbeing
network in the Middle East in terms of availability and As the largest banking employer in the Kingdom, we recognize
diversity of services. the importance of having employees with a high level of
• Al Rajhi Bank has the largest ATM network in the Kingdom, wellbeing and enthusiasm for the work they do. Staff who are
with more than 5,125 ATMs located throughout the emotionally committed to the Bank and our ongoing success
country.. ultimately stay longer, bring our brand values to life and give
our customers a better banking experience.
As part of our retail expansion strategy, we have adopted a
new layout for each branch designed to enhance the customer We strive to nurture an engaged workforce through a range
experience and entice them to try out and experience digital of initiatives. These include recognition awards, promotions,
banking. We are also establishing an innovation center in and volunteering opportunities to make a difference in the
our new facility and will be expanding the level of customer community. We also promote a culture of open communication
input in both the design and prioritization of new features and with all employees to assess engagement levels and identify
products. The feedback and suggestions from customers have areas that require further attention. Communication
enhanced our ability to increase conversion to digital channels channels include “pulse” surveys (held annually), focus
and functionality. group discussions, an HR newsletter, our online employee
communication portal (TAWASUL), and annual roadshows and
Financial Inclusion town halls.
We are dedicated to driving greater financial inclusion and
pushing the boundaries of financial accessibility. We believe To create a fair work environment, we have adopted easy-
that affordable, accessible and relevant financial products to-use procedures for employees located anywhere to raise
and services are important to ensuring that diverse people and concerns about their workplace. This is supported by a
businesses benefit from the financial system. We offer products formal Grievance Policy detailing our commitment to hearing
and services that deliver specific social and economic benefits each and every grievance raised by employees, through a
for consumers, including underserved and disadvantaged transparent process to protect their rights and to achieve fair
populations. For example, the Bank is the leading issuer of solutions.
payroll cards in the Kingdom. This product aims predominantly
to assist lower-paid workers. Our growing number of Over the past five years, we have designed and implemented
digital banking solutions are providing such workers with a large-scale transformation program, consisting of more
unprecedented opportunities to access and benefit from the than 20 projects aimed at enhancing employee engagement
financial system. and human resource management, so that we become the
preferred destination for candidates.
70% of households in the Kingdom are protected from
impactful reforms, primarily due to the support of Citizen To foster the physical and mental well-being of our team
Accounts. The program will support Saudi household spending members, we work diligently to provide a positive health and
through to 2020, which is predicted to maintain positive growth safety culture. Various policies and procedures are in place
across higher expenditure thresholds. We are also focused on to mitigate safety risks in our branches and offices, and we
becoming a more gender-inclusive bank, by improving our encourage general employee wellness by organizing informal
outreach to women, opening value opportunities for them and team-building events, Ramadan family activities, childcare
removing barriers they may face in doing business with us, support, gym discounts, a best-in-class fitness center at Al
whether as customers or as suppliers. Rajhi Bank head office and operations center, among other
SMEs can sometimes have difficulty accessing financing to initiatives.
support their operations. The Saudi banking industry stands to

Talent Development Diversity and Inclusion
As the blue-chip Islamic bank, it is critical for us to ensure a Strengthening diversity is a heightened priority for Al Rajhi
pipeline of world-class talent and provide our people with Bank. An important factor in being an employer of choice is
Strategic Report
professional development opportunities that will inspire them that we strive to have a gender balance that reflects today’s
to build a long-term career with us. global marketplace. Our commitment to diversity and inclusion
is integral to fostering successful relationships with customers
Once on board, new recruits are nurtured by Al Rajhi Bank’s and other stakeholders.
Talent Council to ensure that they have the best possible
experience with us, and that we offer an environment that We believe all our employees should be valued for who they are
brings out their abilities. The Talent Council – which is chaired as individuals and have equal opportunity to excel. To create an
by our CEO – reflects our commitment to developing strong inclusive culture and diverse workforce, we are prioritizing the
Saudi leadership. The Council plays a critical role in identifying, following areas:
developing, nurturing and mobilizing the Bank’s Saudi talent,
including for leadership roles. • Running communications campaigns to reinforce our
commitment to an inclusive work environment.
We invest heavily in employee education and offer a wide • Growing the number of female employees in our workforce,
range of professional development opportunities, including while providing them with opportunities to advance
through our newly established Al Rajhi Bank Academy, an in- towards management positions. We have implemented
house, state-of-the-art training facility. We also partner with 20 structured career paths, learning and development
different educational and training institutions, such as Harvard initiatives, and special benefits to support our female
and London Business Schools, in order to support external skill employees in building their career with the Bank. There
development and joint training programs for staff. is more we need to do to gender balance our organization
and cultivate a pipeline of future female leaders, and plans
The HR Pipeline are in place to achieve these ambitions.
• Having strong programs, policies and training initiatives
Recruit the best in place to support our diversity goals and values. For
example, our Employee Code of Conduct outlines expected
Develop talent behaviors, including staff interactions and respect for
others, and we have a grievance handling system to
address any incidents of workplace discrimination or
Cater to graduates harassment. We offer a parental leave policy: female
employees are entitled to 70 days maternity leave and male
Plan for succession employees receive three days paternity leave.
• Measuring our progress to find areas for improvement.
Strengthen leadership
Beyond our operations, we are supporting a more inclusive
society. Our community investment programs ensure diversity
Drive performance in groups that benefit from these programs, including the
differently-abled, orphans, the unfortunate and those with
special needs.
Our Performance Management System helps guide and
monitor each employee’s progress toward individual, Compensation and Benefits
department and Bank goals. All staff have an opportunity Providing competitive compensation and meaningful benefits
to discuss their growth during the mid-year and end-of-year are essential to attracting, retaining and equitably rewarding
performance review and career development discussion. top talent.
Dedicated career development paths exist for each job family,
enabling discussion around careers. To ensure consistency and comparability, we have developed
an Employee Value Proposition and compensation policies
A dedicated Governance Unit has been established within HR and practices on a differentiated, pay-for-performance-and-
covering audit, risk, compliance and SAMA-related matters. potential model that is linked to the Bank’s and the individual’s
With one of the largest banking workforces in the Kingdom, performance and market pay position.
it is of critical importance that HR maintains strict control
and adherence to all policies, procedures and regulatory
guidelines. Standardized Control and Risk Governance KPIs are
included in all relevant employees’ scorecards.

The key pillars of our compensation framework are: Responsible Procurement
As a large organization with operations across the Kingdom
1. Governance – Board of Directors oversight and in several international locations, Al Rajhi Bank relies
2. Policies and procedures on hundreds of suppliers to support its operations. Each year
3. Compensation structure and incentive schemes we spend considerable sums on purchases ranging from IT
equipment to office supplies.
Our compensation package is built towards rewarding
performance while encouraging behaviors that support Bank Supporting local suppliers is a priority: more than 70% of
values, our risk management framework and compliance with our procurement spend is on Saudi businesses. We are also
regulatory requirements. Our total compensation approach committed to supplier diversity, including female-owned
comprises fixed and variable components. enterprises and SMEs.
In line with the SAMA Rules on compensation practices, Starting in 2017, we began formally tracking supplier data. Prior
both the incentive plans and the bonus plans (including the to this time, it was not carried out via systematic methods. We
deferred bonus) are approved by both the Chief Risk Officer will continue to expand this tracking to including additional
and the Board of Directors. Risk factors are an integral part of information and performance indicators.
the balanced scorecard for performance management of senior
executives. We endeavor to work with suppliers that share Al Rajhi Bank’s
values and commitment to responsible business. Our major
We offer all employees a full spectrum of benefits, such as vendor agreements require basic minimum standards and
education allowances, travel allowances and best-in-class stipulations for doing business with us. Currently, we do
medical insurance. The Bank grants free shares to its senior not evaluate specific ESG risks in the Bank’s procurement
employees who are seen as valuable human assets. This helps decision-making or formally measure the environmental and
to ensure the long-term commitment of these employees. social impacts of our procurement practices. We recognize the
Granting of shares is based on the approval of the Board of positive influence we have as a major purchaser of goods and
Directors following their recommendation by the Nomination services, and we will therefore explore and implement ways to
and Remuneration Committee. drive enhanced ESG performance throughout our supply chain.
Community Investment Our Business Operations and Support department is

We contribute to a range of programs geared to providing relief responsible for managing all suppliers and service providers for
and support for marginalised or disadvantaged segments of the Bank in terms of contracts, purchase orders and invoices.
society. We also partner with the public sector to help improve
the services it delivers. Corporate Governance
Note: This section provides a brief overview of our corporate
Employee volunteering is a growing part of our community governance practices. For further detail, see the ‘Corporate
work. Volunteering embodies Saudi society and culture, Governance’ chapter of this Annual Report (pages 68-92).
which encourage cooperation and solidarity for the sake of
public interest. Since 2016, we have significantly increased the Our market leadership, continued profitability and long-term
interest and engagement of employees in community service stability depend on the foundation of robust and effective
and have set a goal of achieving 50,000 volunteer hours by corporate governance. We are committed to promoting high
2020. The volunteer efforts of the Banks’ employees align with standards and evolving best practices in corporate governance
Saudi Vision 2030, which pays special attention to volunteer and have sound policies and procedures in place that reflect
work and aims to reach a million volunteers by 2030. this commitment, while helping us live up to our corporate
values.
Towards the end of each year, we develop a Corporate
Social Responsibility (CSR) plan that details our community Our Corporate Governance Framework is based on five
investment goals and activities for the year ahead, including Board committees – the Executive Committee, Nomination
employee volunteering work. The plan is reviewed and and Remuneration Committee, Governance Committee,
approved by the Head of Corporate Communications, Chief Risk Committee and Audit and Compliance Committee. The
of Marketing and the CEO. We measure the effectiveness framework is supported by Level 1 and Level 2 Management
of our community investments through various methods, Committees. This structure is underpinned by a series of
including feedback we receive from customers, employees governance enablers that are vital to ensuring that prudent
and community organizations and positive coverage in local and effective controls are in place for clarity and discipline of
newspapers. good corporate governance: corporate values, organization
design, policies and procedures, the Bank’s authority matrix
and effective communication.

AL RAJHI BANK’S GOVERNANCE PRACTICES AT A GLANCE
Strategic Report
Corporate Code of Independent Director
Governance Conduct Directors Orientation
Manual and and Continuing
Supplement Education
Annual Board Executive Nomination Policy on
Performance Compensation and Related Party
Evaluation and Remuneration Membership Transactions
Standards Policy and Conflicts
of Interest
Whistleblower Succession Stakeholder Oversight of

Policy Planning Communication ESG-Related
and Feedback Risks and
Channels Issues
Al Rajhi Bank has a comprehensive Board self-assessment risk management policies and systems on an ongoing basis
process that evaluates three levels of performance: Board of to reflect changes in markets, products and emerging best
Directors performance; Board committees’ performance; and practices.
Board members’ performance.
The Bank has undertaken a range of projects and actions for
Al Rajhi Bank’s commitment to providing Sharia-compliant improvement in all key risk areas, to reduce residual risk and
banking services has been robust for the past 30 years. We have mitigate potential impacts, including ESG-related issues, even
an independent Sharia Board, comprising notable scholars when such issues have not been historically classified as ESG.
who are specialists in this field. Through their expertise and Being Sharia-compliant means that the Bank is immune from
guidance, we are able to ensure Sharia compliance both within risks resulting from speculative operations such as hedging,
the Kingdom and beyond. The responsibility for constituting options, forward contracts and derivatives.
the Sharia Board and approving its regulation lies with the
General Assembly. In addition, it is compulsory for all Bank Integrity and Transparency
departments to comply with the Sharia Board’s resolutions. Integrity and transparency are core values at Al Rajhi Bank
and are fundamental to forging relationships of trust. This
Managing Risk means being open and honest while maintaining the highest
Operating in a highly competitive and dynamic environment, standards of corporate and personal ethics, wherever we
we are exposed to a variety of operational risks – including operate.
financial, liquidity, market, credit, security and environmental
risks. Taking risk is a key factor in any banking business, and Our Code of Conduct applies to all employees, from the CEO to
these risks are an inevitable consequence of participating in front-line staff across all operations, sets out guiding principles
financial markets. The Bank’s aim is to achieve an appropriate for our people and outlines our expectations on integrity,
balance between risk and return and minimize potentially respecting the rules, laws and regulations relevant to the
adverse effects on the Bank’s financial performance. Bank’s activities, compliance with Sharia laws, protecting
confidential information, handling potential conflicts of
We focus on accurately identifying potential risks and the interest, and professionalism in the work environment.
impact of such risks on the Bank’s value creation process. This All employees are expected to review and acknowledge
involves establishing risk thresholds based on the Bank’s risk understanding of the Code of Conduct on an annual basis, and
appetite. We have established detailed policies and procedures testing is done to confirm their understanding. Any instances
to help identify and analyze relevant risks, manage capital of misconduct can lead to termination of employment or other
effectively and apply sustainable processes. We review our disciplinary action.

Wherever the Bank operates geographically, we support for communicating with our investors in a consistent,
fundamental human rights and aim to treat all employees, comprehensive and precise manner, taking this responsibility
customers, suppliers and community members with respect far beyond the minimum regulatory requirements. We
and dignity. provide information to our investors by various disclosures
through the investor relations section of our website, investor
Al Rajhi Bank is committed to leadership in complying with all presentations, quarterly disclosures and earning releases,
rules and regulations applicable within the Kingdom, as well as earning calls and annual reports.
with by global standards and best practices. The Bank’s Board
of Directors and Executive Management have set a vision for Al Data Protection and Cyber Security
Rajhi Bank to build a “world-class compliance framework”, a The financial systems and networks supporting the Bank’s
goal that is an integral part of the Bank’s strategy. We continue business operations have grown in scope and complexity. Such
to invest in state-of-the-art compliance systems, technology- growth is not without challenges. We endeavor to maintain
enabled processes and people, and take a zero-tolerance pace with the needs of our customers, especially concerning
approach to non-compliance with regulatory requirements. cyber risk. The Bank fully understands the magnitude of risks
posed to online transactions and is committed to the safety
Financial Crime is a specialized department within our of our customers’ online transactions. We have established a
Compliance Group. It is responsible for combating: robust IT Risk Policy to ensure security.
• Money laundering From financial records to personal identification, we handle a

• Terrorism financing considerable amount of information. Our banking operations
• Financing weapons of mass destruction depend on maintaining a secure, confidential environment,
• Bribery and corruption which is why we take our responsibility for protecting customer
• Sanction and name screening data very seriously. Remaining vigilant against potential threats
is imperative for maintaining the trust of our stakeholders.
As one of the biggest Saudi financial institutions and the
world’s largest Islamic bank, we have developed robust Anti- We have robust privacy and security practices in place, which
Money Laundering (AML), Counter-Terrorist Financing (CTF) and include:
Sanctions frameworks. Read our Policy Statement on Anti-
Money Laundering and Combating Terrorist Financing. • Policies, standards and procedures to guide employees.
These include our Banking Consumer Protection Principles,
Our dedicated Compliance Group oversees compliance controls Employee Code of Conduct, Information Security Policy and
and supports the Bank in interpreting and implementing Privacy Policy. Our Information Security Policy applies to all
regulatory requirements. The Group Chief Compliance Officer employees, contractors, third parties and others entrusted
(GCCO) leads the compliance function and assists management with the Bank’s information.
in identifying and assessing compliance issues and in guiding • An Information Security Committee that oversees the
and educating staff on related matters. The GCCO has direct overall information security posture at the bank and
contact with the Board of Directors and Chairman of the supports ARB’s information security initiatives, compliance
Board. In addition, he directly reports to the Board Audit and and implementation.
Compliance Committee, and to the CEO administratively. The • Annual training and awareness campaigns to educate
GCCO has oversight of the compliance programs of the Bank’s staff and customers on their security and privacy
overseas branches (Jordan and Kuwait) and banking subsidiary responsibilities.
(Malaysia). • A strong security architecture consisting of firewalls,
employee access controls, advanced day-to-day monitoring
To create and sustain an open and enabling culture within of our networks and physical facilities, and other controls.
the Bank – and help us deliver on our commitment to • We follow external security standards and best practices.
build a world-class compliance framework – we have a These include ISO 27001, a globally recognized standard for
Whistleblowing Policy. It encourages employees to speak up information security, and we run test procedures to ensure
and report improper behaviour or any activity that violates compliance with it. We also adhere to the PCI-Data Security
the Code of Conduct or any of the Bank’s policies, procedures Standard published by the Payment Card Industry Council.
and instructions. All employees can access whistleblowing • Ongoing testing and assessment of our security and privacy
channels through which they can voice concerns anonymously practices. We use tools and methods to identify and report
without fear of repercussions. on security and privacy vulnerabilities. For example, we
conduct “penetration testing” periodically on our security
We focus on providing timely and accurate performance results systems and infrastructure, along with other types of
and strategic updates. We are proud of our sound reputation assessment.

With the rise of the digital economy, cyber threats pose an Beyond our organization, we take steps to educate consumers
increasing risk for all businesses. We continue to heighten about steps they can take to protect themselves. For example,
our risk posture in this area while building the Bank’s cyber on our website we offer security tips to consumers as part of our
Strategic Report
security defences on multiple fronts. We also collaborate with ongoing commitment to safer banking. These include tips for
governments, law enforcement and industry peers to share online banking and shopping, ways to protect credit and debit
security intelligence and best practices in an effort to reduce cards, guidance on overseas transactions, and more.
cyber-crime in society.
How we contribute to the UN SDGs
We seek to create a sustainable future and in turn contribute to the UN’s Sustainable Development Goals.
ESG Pillar Sustainable Development Goal How Al Rajhi Bank Contributes
Environment
• Managing Our Environmental Impact
• Sustainable Finance
• Customer Experience
Social • Responsible Customer Relations
• Digital Leadership
• Financial Inclusion
• Corporate Governance
Governance
• Managing Risk
• Integrity and Transparency
• Data Protection and Cyber Security

03
70 Governance
Governance
The governance framework at Al Rajhi Bank is based on without discrimination, inclusive of banking information
five Board Committees and a group of supporting executive required to be disclosed by SAMA and CMA regulations.
committees of the first and second levels. This governance
structure relies on several key pillars that ensure the clarity of The Bank gives sufficient attention to the training and
good governance – those pillars include: The Bank’s values, qualification of Board members and Executive Management
organizational structure design, policies and procedures, the and has developed executive programs to ensure such training.
authority delegation matrix and the effective communication To that end, the Bank has developed an Introduction Pack
among various internal and external stakeholders. to assist new Board members, which contains information
pertaining to the Bank’s strategy and the financial and
Policies relating to the Governance Manual operating aspects, as well as the obligations and duties of
The Bank applies Saudi Arabian Monetary Authority’s (SAMA) Board members.
Corporate Governance Principles for Banks operating in
the Kingdom of Saudi Arabia, as updated in March 2014, in The Bank has procedures in place to settle customer and
addition to Capital Market’s Authority’s Corporate Governance shareholder complaints, which are monitored by the
Regulations (CMA), as updated in May 2019. The Bank has SAMA and CMA. It has also implemented a corporate social
developed its Governance Manual and the guidelines that responsibility policy that aims to strengthen the social role of
regulate the Board Committees and management committees, the Bank.
with all those documents being regularly reviewed by the
Board and its committees. Corporate Governance Regulations of CMA
The Bank has given due cognizance to the currently applicable
The Bank adopts a set of policies, practices and procedures that corporate governance regulations as enumerated by the CMA
enhances the governance framework considering the Board of of the KSA. Given below is a report on corporate governance
Directors approved Delegation of Authorities (DOA) matrix, to practices at the Bank and the extent of compliance with the
adequately reflect internal practices. Most remarkably, the said relevant CMA regulations.
policies include one relating to Management of Related Parties
Transactions and conflicts of interest, in order to provide Implementation and non-implementation of provisions
effective tools that address cases of conflict of interest to of the CMA Regulations
achieve integrity and transparency, while complying with the The Bank applies all provisions of Corporate Governance
regulatory requirements set forth in the Companies Law, CMA Regulations issued by the CMA, except the following guiding
Governance Manual and SAMA’s principles and guidelines. provisions:
The Bank also adopts a set of comprehensive disclosure

policies that enable shareholders and stakeholders to get all
material information and developments in a timely manner
Article / Clause Requirements Reasons for not applying

The Board shall carry out the necessary arrangements
to obtain an assessment of its performance from a The assessment is conducted internally on
Article (41) – Clause “E”
competent third party every three years. (Guiding an annual basis.
paragraph)
A Non-Executive Board member chairs the
Audit and Compliance Committee at ARB
The Chairman of the Audit Committee shall be an
Article (54) – Clause “B” and he has been selected based on his
Independent Director. (Guiding paragraph)
qualifications which are found appropriate
for the position.
The Ordinary General Assembly, based on the Board

recommendation, shall establish a policy that
guarantees a balance between its objectives and ARB has a Social responsibility Policy
Article (87)
those of the community for purposes of developing the approved by the Board of Directors.
social and economic conditions of the community.
(Guiding article)

69
Board structure
The Board of Directors of the Bank comprises 11 members elected by the Ordinary General Assembly every three years. Any member
may stand for re-election after completing his or her term in accordance with the Bank’s regulations.
Names of the companies inside and outside the Kingdom in which a Board member is a manager
or a member of their current or previous Board
Names of companies where the Board Inside/ Legal entity (listed joint stock
member is a member of its current Boards or outside the company/ unlisted joint stock
Member name one of its Directors Kingdom company/ limited liability)
Al Rajhi Bank Listed joint stock company
Al Rajhi Company for Cooperative Insurance Listed joint stock company
Farabi Petrochemicals Company Unlisted company
Al Rajhi Holding Group Unlisted company
Al Rajhi Capital Unlisted company
Fursan Travel & Tourism Company Unlisted company

Abdullah bin Inside the
Al Farabi Investment Company Limited liability company
Sulaiman Al Rajhi Kingdom
Farabi Yanbu Petrochemicals Company Unlisted company
Farabi Transformation Industries Company Unlisted company
Saudi Carpet Supplies Manufacturing Company Unlisted company
Jubail Saudi Company for flooring fabric solutions Limited liability company
Green Vision for Artificial Grass Company Limited liability company
Al Ajial Holding Company Unlisted company
Salah bin Ali Al Rajhi Capital Inside the Unlisted company

Abalkhail National Veterinary Kingdom Unlisted company
Salah Ablkhail Engineering Consultants Limited liability company
Abdulaziz Al Rajhi Capital Unlisted company

Inside the
bin Khaled Al
Kingdom
Ghefaily
SAVOLA Group - Savola Food Company Listed joint stock company

Strategic Report
Names of companies, in which the Board Inside/
member is a member of its previous Boards or outside Legal entity (listed joint stock company/ unlisted
one of its previous Directors the Kingdom joint stock company/ limited liability)
Inside the
Al Rajhi Bank (CEO) Listed joint stock company
Kingdom
Industrialization & Energy Services Company (TAQA) Unlisted company
Dur Hospitality Unlisted company
Saudi Industries Development Company Unlisted company

Inside the
Tabuk Agriculture Development Company Listed joint stock company
Kingdom
National Medical Care Company Listed joint stock company
Herfy Food Company Unlisted company
Panda Retail Company Unlisted company

Inside/ Legal entity (listed joint stock
Names of companies where the Board member is a outside the company/ unlisted joint stock
Member name member of its current Boards or one of its Directors Kingdom company/ limited liability)
Mohammed Abdulaziz Al-Rajhi & Sons investment Co Limited liability company
Rajhi Steel Limited liability company
Bader bin Global Beverage Co Limited liability company

Inside the
Mohammed Al
Al Jazirah Co Kingdom Limited liability company
Rajhi
Falcon Plastic Limited liability company
Manafe Investment Company Limited liability company
Al Badr Al Zaher Investment Company Limited liability company
Riyadh Cables Group Company Unlisted company
Emcor Facilities Management Co Unlisted company

Khaled bin
Unique Solutions for Chemical Industries (USIC) Inside the Unlisted company
Abdulrahman Al
Kingdom
Qoaiz Bawan Company Listed joint stock company
Saudi Pharmaceutical Industries & Medical Appliances

Listed joint stock company
Corporation (SPIMACO)
Synergy Management Consulting Co. Limited liability company

Alaa bin Shakib
Inside the
Al Jabiri
Kingdom
Medical and Pharmaceutical Services Company Limited Liability Company
Ibrahim Fahad Al Rajhi Bank Listed joint stock company

Inside the
Al-Ghofaily
Jiwar Real Estate Management, Marketing and Kingdom
Unlisted company
Development Company
STC – Kuwait Telecom Company Unlisted company
Ameen Fahad Deutsche Gulf Finance Inside and Unlisted company

Al Shiddi outside the
Oger Telecom Company Kingdom Unlisted company
STC Towers Co Ltd Limited liability company
STC Listed joint stock company

Strategic Report
ACWA Holding Company Unlisted company
ASTRA Industrial Group Listed joint stock company
Samba Financial Group Listed joint stock company
Arab National Bank Inside the Listed joint stock company

Kingdom
Swicorp Company Unlisted company
Unique Solutions for Chemical Industries (USIC) Unlisted company
SABB Listed joint stock company
Gulf International Bank Inside and Unlisted company

outside the
Construction Products Holding Company Kingdom Unlisted company
Rolaco Group Unlisted company
Alinma Bank Inside the Kingdom

Inside the
Kingdom
Al Rajhi Bank Inside the Kingdom
STC Solutions Advanced Unlisted company
Sale Unlisted company
Arab Submarine Cables Company Ltd. Inside and Unlisted company

outside the
Aqalat Company LLC. Kingdom Unlisted company
Viva Bahrain Company Unlisted company

Inside/ Legal entity (listed joint stock
Names of companies where the Board member is a outside the company/ unlisted joint stock
Member name member of its current Boards or one of its Directors Kingdom company/ limited liability)
Hamza bin Al Rajhi Bank Listed joint stock company

Inside the
Othman
Hassana Investment Company Kingdom Unlisted company
Khushaim
Cooperative Insurance Company Listed joint stock company

Raed Abdullah Inside the
Saudi Public Transport Co.(SAPTCO) Listed joint stock company
Al-Tamimi Kingdom
National Gas and Industrialization Co. (GASCO) Listed joint stock company
Arabian Cement Company Listed joint stock company

Abdullatif Ali Inside the
Alseif Al Ra’idah Investment Company Kingdom Unlisted company
National Petrochemical Company PETROCHEM) Listed joint stock company
Wisayah Al Khaleej Investment Company Limited liability company

Strategic Report
Inside the
Dallah Healthcare Holding Company Listed joint stock company
Kingdom
Waseel ASP Ltd Unlisted company
Cooperative Insurance Company Listed joint stock company
Inside the
Cooperative Real Estate Company Unlisted company
Kingdom
Najm for Insurance Services Unlisted company
National Medical Care Company Listed joint stock company
HSBC Saudi Unlisted company
Inside and
outside the
Kingdom
Shared Vision Company Ltd Limited liability company

Composition of the Board and classification of its members, as Executive Directors, Non-
Executive Directors, or Independent Directors
Membership classification (Executive/Non-Executive/

Member name Independent)
Abdullah bin Sulaiman Al Rajhi Non-Executive
Alaa bin Shakib Al Jabiri Independent
Salah bin Ali Abalkhail Non-Executive
Abdulaziz bin Khaled Al Ghefaily Non-Executive
Bader bin Mohamed Al Rajhi Non-Executive
Khaled bin Abdulrahman Al Qoaiz Non-Executive
Ibrahim Fahad Al Ghofaily Independent
Ameen Fahad Al Shiddi Non-Executive
Hamza bin Othman Khushaim Non-Executive
Raed bin Abdullah Al-Tamimi Independent
Abdullatif Ali Al Seif Independent
Committees of the Board of Directors A. Executive Committee

The functions and responsibilities of the Committees are laid The main purpose of the Executive Committee (ExCom) is to
down in internal guidelines and regulatory requirements. The assume the responsibility for all businesses of ARB, taking quick
membership term is three years which ends with the term of decisions with respect to urgent matters and issues related to
the Board. The Board of Directors has the authority to appoint, the business of the Bank. Also, The Executive Committee will be
reappoint or terminate any member of the Committees. The responsible for the review, follow up and approval of financial
Committees submit their recommendations and the minutes of and non-financial, commercial, investment and operational
meetings to the Board of Directors. matters related to the Bank, within powers determined by the
Board of Directors.
A brief description of ARB Committees’ competences and
functions is given below: The Committee held 13 meetings during 2019 as follows:
Member name
Abdulaziz Hamza
Abdullah bin Salah bin Ali bin Khaled Al Alaa bin Shakib Othman
Sulaiman Al Rajhi AbalKhail Ghefaily Al Jabiri Khushaim
Meeting Date Chairman member member member member
1 24 January 2019 √ √ √ X √
2 6 February 2019 √ √ √ √ √
3 19 March 2019 √ √ √ √ √
4 3 April 2019 √ √ √ √ √
5 24 April 2019 √ √ X √ X
6 25 June 2019 √ √ √ √ √
7 1 July 2019 √ √ √ √ √
8 8 September 2019 √ √ √ X √
9 18 September 2019 √ √ √ √ √
10 20 October 2019 √ √ √ √ √
11 26 November 2019 √ √ √ √ √
12 5 December 2019 √ √ √ √ √
13 16 December 2019 √ √ √ √ √

B. Nominations and Compensations Committee assessing the effectiveness and efficiency of Board of Directors
The main purpose of the Nominations and Compensations and Senior Management, ensuring compliance of the Bank with
Committee includes recommending the nomination of Board the internal incentive schemes, and rules of incentive practices
Strategic Report
members, Committee members, and Senior Executives to the issued by SAMA, principles and criteria of compensations,
Board of Directors, preparing a description of abilities and in a manner that best achieves the interests of depositors,
qualifications required for Board of Directors membership, shareholders and Bank’s strategic objectives.
The Committee held four meetings during 2019 as follows:
Member name
Khaled bin
Abdulaziz bin Abdulrahman Alaa bin Raed bin Abdullah
Khaled Al Ghefaily Al Qoaiz Shakib Al Jabiri Al-Tamimi
Meeting Date member member member member
1 5 December 2019 √ X √ √
2 11 November 2019 √ √ √ √
3 2 April 2019 √ √ √ √
4 15 January 2019 √ √ √ √
C. Governance Committee harmonized for all ARB activities. The Committees’ tasks also
The main purpose of Governance Committee is to support include increasing awareness of the importance of governance
and maintain the implementation of the highest corporate and its activities in the bank among all employees, shareholders
governance standards. This is achieved through several and external stakeholders, conducting an annual review of
activities conducted by the Committee, on behalf of the Board Board of Directors’ performance and the performance of all
of Directors, to ensure good governance practices are followed Board members, Committees and Management Committees.
through the Bank’s activities. This includes the annual review It is also responsible for the review and update of policies
of the Bank’s governance and monitoring cases that present related to the Board of Directors and its members, the Bank’s
a conflict of interests, ensuring the continuous update of the governance and the conflict of interests, in addition to following
conflict of interests record, in addition to reviewing exemption up on the application of the Governance Manual and its
requests from the applicable governance requirements at the appendices and the Bank’s matrix of authorities.
Bank, and coordinating with the Bank’s subsidiaries to support
good corporate governance standards that are consistent and
The Committee held three meetings during 2019 as follows:

Member name
Salah bin Ali Ibrahim Fahad Al Raed bin Abdullah
AbalKhail Ghefaily Al-Tamimi
Meeting Date member member member
1 22 January 2019 √ √ √
2 18 April 2019 √ √ √
3 19 December 2019 √ √ √
D. Audit and Compliance Committee corrective measures in a timely manner to address weak
Main responsibilities assigned to the Audit and Compliance controls or incompliance with policies, laws or regulations,
Committee include supervising the process of submitting or any other issues identified by the Auditors. The Audit and
the Bank’s Financial Statements, supervising the activities of Compliance Committee held nine meetings during 2019,
internal and external Auditors, submitting recommendations during which it discussed the topics listed in its annual agenda
to the Board of Directors and shareholders to approve, appoint, approved by the Board, in addition to other relevant topics.
decide the remuneration or terminate external Auditors. The Audit and Compliance Committee comprises five members
In addition to reviewing and approving the scope of Audit – two members from the Bank’s Board of Directors and three
processes and their implementation, receiving key Audit reports Non-Executive members.
and ensuring that the Senior Management takes the needed

The below table shows meeting dates and member attendance during the year:
Member name
Ameen Fahad Farraj bin Walid bin
Al Shiddi Abdul Latif Abdullah bin Mansour Abdullah
Meeting Date Chairman bin Ali Alseif Ali Al-Muneef Abuthnein Tamairik
1 27 January 2019 √ √ √ √ √
2 14 February 2019 √ √ √ √ √
3 14 March 2019 √ √ √ √ √
4 18 April 2019 √ √ √ √ √
5 23 June 2019 √ √ √ √ √
6 25 July 2017 √ √ √ √ √
7 26 September 2019 √ √ √ √ √
8 23 October 2019 √ √ √ √ √
9 22 December 2019 √ √ √ √ √
Audit and Compliance Committee members (other than Board of Directors members)
Committee Current Previous

No. Name memberships positions positions Qualifications Experience
1 Abdullah bin Audit and • Member of • Chief Executive Officer – Al • Bachelor of Accounting Held many academic,
Ali Al-Muneef Compliance Audit and Muneef Financial and – King Saud University leading and advisory
Committee Compliance Management Consultancy • Master Degree in positions in financial
Committee – Al Office Accounting – University and management fields
Rajhi Bank • Advisor – Saudi Arabian of Southern California,
• Member of National Guard USA
Shura Council • Director General • PhD in Accounting –
• Member of Finance and University of South
of the Arab Administration Affairs Carolina, USA
Parliament –Saudi Arabian National
Guard
• Head of Accounting
Department, King Saud
University
• Associate Professor of
Accounting Department,
King Saud University
• Executive Director
of Financial and
Administrative Affairs
– King Faisal Specialist
Hospital & Research
Centre
• Head of Accounting
Association, King Saud
University
• Assistant Professor of
Accounting Department,
King Saud University
• Lecturer at Accounting
Department, King Saud
University

Committee Current Previous
No. Name memberships positions positions Qualifications Experience
2 Farraj Bin Audit and • Member of • Director of Loan • Bachelor of Industrial Held many leading
Mansour Compliance Audit and Department – Industrial Management – positions in the Saudi
Strategic Report
Abuthnein Committee Industrial Development
Compliance Development Fund University of Wisconsin
Fund and National
Committee – Al • Member of the Project – Milwaukee Industrialisation
Rajhi Bank Loan Committee – Company
• Board Member Industrial Development (Tasnee)
– Astra Fund
Industrial • Member of the Industrial
Group Projects Performance
• Board Member Audit Committee –
- Al Moammar Industrial Development
Information Fund
Systems • Senior Vice President of
Company Finance and Investment
• Board and Region Council
Member – member – National
Aljazira Capital Industrialisation
Company Company (Tasnee) Riyadh
• Board Member - National
Petrochemical Company
(PETROCHEM)
• Member of Audit
Committee – Almarai
Company
3 Walid bin Audit and • Member of • Arthur Andersen & Co • Bachelor of Accounting More than 25 years
Abdullah Compliance Audit and • Ernst & Young – King Abdulaziz of experience in
Tmairak Committee
Compliance • Member of Advisory University
accounting, auditing
and economics
Committee –Al Committee at the • Fellowship of Saudi
Rajhi Bank College of Management Organizationfor
• Member and Economics – King Certified Public
of Audit Abdulaziz University Accountants (SOCPA
Committee
- Real Estate
Development
Fund
• Board member
– Takamul
International
Group
• Member
of Audit
Committee
– Taajeer
Leasing
Company
• Tmairak
Chartered
Accountants

E. Board Risk Management Committee implementation of that strategy. This includes the management
The purpose of the Board Risk Management Committee of capital and liquidity strategies and credit, market,
is to advice the Board of Directors with respect to the risk operational, compliance and reputational risks, as well as any
appetite and risk strategy, and to supervise the Management’s other potential risks the Bank may face.
The Committee held four meetings in 2019, as follows:
Member name
Khaled bin
Abdulrahman Al Qoaiz Alaa bin Shakib Al Jabiri Hamza Othman Khushaim
Meeting Date Chairman member member
1 10 February 2019 √ √ √
2 2 April 2019 √ √ √
3 22 October 2019 √ √ √
4 15 December 2019 X √ √
Procedure taken by the Board to inform its members of the Remuneration of the Board members and
shareholders’ suggestions and remarks on the Bank and its Executive Management
performance
a) Summary of significant items of policy for
ARB registers shareholders’ suggestions provided through remunerations of the Board of Directors, Board
the General Assembly and notifies the Chairman of any Committees and Executive Management members
other suggestions related to the Bank to be presented at the
next Board meeting. In addition, there is an e-mail address 1. Board of Directors’ remuneration and compensations:
dedicated to shareholders’ comments and suggestions, that is
published on the Bank’s and Tadawul websites. The e-mail is • ARB’s Board members will receive a fixed annual
directly linked to the Board Secretariat so that the Board could remuneration of SAR 400,000 for their membership in ARB’s
receive shareholders’ comments and suggestions. Board of Directors and their participation in its activities.
• Board member will receive an attendance fee of SAR 5,000
The methods used to evaluate the Board, Board Committees for his attendance of each Board meeting either personally
and members’ performance: or through electronic remote channels.
• ARB shall compensate Board members for their actual
The Governance Committee evaluates performance of the expenses paid to attend the Board meetings including
Board, Board Committees and Board members via specific travelling and accommodation expenses.
surveys on three different levels. Evaluation is based on Board
of Directors terms of reference specified in ARB’s Governance 2. Remuneration and compensations of the Board members for
Manual, while evaluation of Board Committees and the Audit their membership in Board Committees:
and Compliance Committee is conducted based on their
approved charters. Evaluation of Board and Board Committee • ARB’s Board members will not receive an additional
members is conducted by the respective members themselves, remuneration for their membership in ARB’s Board
after which the Governance Committee prepares and submits Committees as the annual remuneration covers any other
the annual assessment report to the Board of Directors for remuneration paid to the Director for his/her participation
approval. Finally, a copy of the final report is provided to the in any Board Committee.
Nominations and Compensations Committee. • Board member will receive an attendance fee of SAR
5,000 for his attendance of each Board Committee either
personally or through electronic remote channels.
• ARB shall compensate Board members for their actual
expenses paid to attend the Committees’ meetings
including travelling

3. Remuneration and compensations of Audit and Compliance remuneration system and shall not delegate this
Committee members: responsibility to management.
• Despite the establishment of the Board Nomination and
•
Strategic Report
ARB’s Audit and Compliance Committee members, either Compensation Committee, the Board of Directors shall be
from inside or outside the Board, will receive a fixed annual ultimately responsible for promoting effective governance
remuneration of SAR 150,000 for their membership in the and sound remuneration practices.
Committee and their participation in its activities, provided • The Board of Directors shall review and, if satisfied, approve
that annual remuneration for Audit and Compliance the Remuneration Policy and any of its subsequent revision/
Committee member from inside the Board shall not updates, on the recommendation of the Nomination and
exceed the annual limits of annual remunerations and Compensation Committee, taking into account, inter-alia,
compensations granted to the Board member. the Rules on Compensation Practices of May 2010 and
• Audit and Compliance Committee members will receive any future updates or revisions issued by Saudi Arabian
an attendance fee of SAR 5,000 for his attendance of each Monetary Agency (SAMA).
Committee meeting either personally or through electronic • The Board of Directors shall review and, if satisfied,
remote channels. approve the recommendations of the Nomination
• ARB shall compensate Committee members for their actual and Compensation Committee regarding the level of
expenses paid to attend the Board meetings including remuneration of the key executives. The key executives for
travelling and accommodation expenses. this purpose will include senior managers and all those
executives whose appointments are subject to no objection
4. Granting shares: by SAMA or other regulators.
• The Board of Directors shall ensure that the Management
• ARB does not grant shares as remuneration for any has put in place elaborate systems and procedures and an
Board member, Board Committee and Audit Compliance effective oversight mechanism to ensure compliance of the
Committee members. SAMA Rules on Compensation Practices and the Financial
Stability Board Principles and Standards.
5. Allocation and payment mechanisms for remuneration and
compensation: 7. Structure of remuneration and compensation granted to
Senior Executives:
• Remuneration and compensation for Board members and
Non-Board members will be allocated annually based on • The Remuneration structures for various levels of employees
recommendation from Nomination and Compensation should be designed to promote effective risk management
Committee and approval of Board, amounts will then and achieve remuneration and compensation objectives.
be presented to the next General Assembly meeting for • The mix of forms of remuneration should vary depending
ratification. on the employee’s position and role, and may include cash,
• Remuneration can vary to reflect the Director’s experience, equity and other forms of compensation.
independence and number of attended meetings among • The proportion of fixed and variable components
other criteria. of remuneration for different business lines may be
• Attendance fees are paid annually to Directors based on determined taking into account the nature and level of
their attendance sheets for Board, Board Committees, and responsibilities of an employee, business area in which
Audit and Compliance Committee meetings. he/she is working and the overall philosophy of the
• Payments are done through bank transfers, cheques, or Remuneration Policy of the Bank. The Bank should ensure
any other methods, and Directors are informed of details that the total variable remuneration does not limit its ability
through relevant departments. to strengthen the capital base.
• Remuneration and Compensations paid to directors • The remuneration structure of employees working in control
should not exceed SAR 500,000 annually, payment of any functions such as risk management, compliance, internal
additional due amounts will be stopped. Total amounts paid control, etc. Should be designed to ensure objectivity and
to Directors should not exceed 5% of total net profits. independence of these functions. In this regard, it should be
ensured that performance management and determination
6. Remuneration and compensation of Senior Executives: of remuneration of such employees are not dealt with by
any person working in/associated with the business areas
The role of the Board of Directors includes, but is not limited to, monitored by them.
the following: • The determination of the bonus pool should consider the
overall performance of the Bank whereas its distribution to
• The Board of Directors is responsible for approving individual employees should be based on performance of
the overall design and oversight of all aspects of the the employees as well as that of the business unit or division

in which he/she is working. There should, however, be no • Joining bonuses are not permitted, unless clearly aligned
guaranteed minimum bonuses and similar other payments, with long-term value creation and prudent risk taking.
other than an employee’s salary, that are not based on Any such payments should be related to performance
performance. achieved over time and designed in a way that does not
• The Bank may as part of the Remuneration Policy, provide reward failure. Joining bonuses should be at least linked
deferment of a reasonable proportion of performance to successful completion of probation period and where
bonus with a minimum vesting period of not less than three possible, deferring the joining bonuses, on terms similar to
years. The proportion of the bonus to be deferred and the the deferred bonuses foregone from the previous company.
vesting period should be determined based on the nature • The Bank should demand from their employees that they
of the business, its risks and the activities of the concerned commit themselves not to use personal hedging strategies
employee. or remunerations and liability-related insurance to
• Where the Remuneration Policy provides for payment of undermine the risk alignment effects embedded in their
a part of the compensation in shares, it should also lay remuneration and compensation arrangements.
down the criteria to be used for determining the value for
allocation of shares. Furthermore, the payouts in shares The Bank confirms that there are no major deviations between
should be subject to an appropriate share retention policy. granted remunerations and applicable remunerations policy.
B) Remuneration and compensation paid to the Board members, Board Committees, Audit and Compliance
Committee in 2019
Board BACC ExCom NCC

meetings meetings Meetings meetings
No. Name No amount No amount No amount No amount
1 Abdullah bin Sulaiman Al Rajhi 6 30.000 - - 13 65.000 - -
2 Salah bin Ali AbalKhail 6 30.000 - - 13 65.000 - -
3 Abdulaziz bin Khaled A Al Ghefaily 6 30.000 - - 12 60.000 4 20.000
4 Khaled bin Abdulrahman Al Qoaiz 6 30.000 - - - - 3 15.000
5 Bader bin Mohammed Al Rajhi 6 30.000 - - - - - -
6 Alaa bin Shakib Al Jabiri 6 30.000 - - 11 55.000 4 20.000
7 Ibrahim Fahad Al-Ghofaily 6 30.000 - - - - - -
8 Raed Abdullah Al-Tamimi 6 30.000 - - - - 4 20.000
9 Hamza bin Othman Khushaim 6 30.000 - - 12 60.000 - -
10 Ameen bin Fahad Al Shiddi 6 30.000 9 45.000 - - - -
11 Abdullatif Ali Alseif 6 30.000 9 45.000 - - - -
12 Abdullah bin Ali Al-Muneef - - 9 45.000 - - - -
13 Walid bin Abdullah Tmairak - - 9 45.000 - - - -
14 Farraj BinMansour Abuthnein - - 9 45.000 - - - -
TOTAL 66 330.000 45 225.000 61 305.000 15 75.000

Strategic Report
Total paid to the member
Governance BRMC Special Annual Total as per the Policy
Committee meetings meetings Committees Bonus (Saudi Riyal) (Saudi Riyal)
No amount No amount No amount
- - - - - - 400,000 495.000 495.000
3 15.000 - - - - 400,000 510.000 500.000
- - - - - - 400,000 510.000 500.000
- - 3 15.000 - - 400,000 460.000 460.000
- - - - 1 5.000 400,000 435.000 435.000
- - 4 20.000 - - 400,000 525.000 500.000
3 15.000 - - - - 400,000 445.000 445.000
3 15.000 - - - - 400,000 465.000 465.000
- - 4 20.000 1 5.000 400,000 510.000 500.000
- - - - - - 550,000 625.000 625.000
- - - - 1 5.000 550,000 630.000 630.000
- - - - - - 150,000 195.000 195.000
- - - - - - 150,000 195.000 195.000
- - - - - - 150,000 195.000 195.000
9 45.000 11 55.000 3 15.000 5.150.000 6.195.000 6.140.000

C) Remunerations and compensations paid to five Senior Executives who have received highest remunerations from
the Company including CEO and CFO in 2019
Five Senior Executives

Description (CEO and CFO Included)
Salaries and compensations 9,982,742
Allowances 5,128,018
Periodic and annual rewards 45,570,573
Incentives schemes –
Any other in-kind compensations or benefits paid annually or monthly –
Total 60,681,333
Employee Benefits and Plans the long-term relationship with those employees. Granting of
The Bank provides its employees with several benefits which shares is subject to the approval of the Board of Directors upon
are paid during or at the end of their service according to Saudi the recommendation of the Nomination and Remuneration
Labor Law and Bank policies. The provision for employees’ end Committee.
of service benefits is accrued using accrual valuation according
to Saudi Labor Law and local regulatory requirements. The Any penalty, precautionary measure or legal binding imposed
provision for end of service benefits stood at SAR 980 million. on the Bank by CMA or any other supervisory, regulatory,
judicial authority
The Bank also grants free shares to its senior employees and
those of its subsidiary companies who are seen as valuable There are no official fines imposed by CMA
human assets that need to be retained, which helps ensure
Fines imposed by SAMA:
Fiscal Year 2018 Fiscal Year 2019

Total amount Total amount
Number of of fines in Number of of fines in
Violation of resolutions Saudi Riyal resolutions Saudi Riyal
SAMA supervisory instructions 34 2,315,000 41 30,403,500
SAMA instructions related to customer protection – – 14 170,000
SAMA instructions related to due-diligence – – 3 262,500
SAMA instructions related to service level of ATMs and POSs – – – –
SAMA instructions related to due diligence in AML and TF 3 450,000 – –
Fines imposed by Ministry of Municipal and Rural Affairs:
Fiscal Year Fiscal Year

2018 2019
Total amount Total amount
of fines in of fines in
Violation of Saudi Riyal Saudi Riyal
Increase of building area percentage for ATMs, lack of setbacks,visible advertising posters on
1,588,000 1,717,000
branches facades and ATMs, and non-existence of licenses for some bank’s locations.

Outcomes of the annual review of internal control procedures • Existence of an effective Audit and Compliance Committee
at the Bank, in addition to the Audit and Compliance supervising internal and external Auditors activities in
Committee’s opinion on the adequacy of the Bank’s internal order to support and promote their independence. This
Strategic Report
control system. Committee receives regular and periodic reports on audits
The Bank’s Executive Management is responsible for designing carried out on different functions within the Bank.
an appropriate internal control system with the Board of • Regular reviews on the efficiency and adequacy of the
directors’ direct supervision. The system has been designed internal control system is carried out by Internal Audit
to directly mitigate risks that could impair the realization of based on an annual plan approved by the Audit and
the Bank’s strategic and operational objectives. The Bank’s Compliance Committee, in addition to reviews of the
Executive Management has adopted a comprehensive internal effectiveness of internal control by the external Auditors
control system aligned with SAMA’s regulatory requirements. and supervisory reviews conducted by the Saudi Arabian
The following are some of the key components of the Bank’s Monetary Authority (SAMA).
internal control system:
Annual review of internal control procedures
• The Bank has completed and approved ongoing During 2019, the Bank explored all possible efforts to ensure
development of the governance framework, which is the the appropriateness and effectiveness of internal control in
mandate for preparing and updating proper control tools order to be in line with the requirements of internal control
on the Bank level, and defining roles and responsibilities at issued by SAMA. Furthermore, the Bank’s activities carried
the Bank’s different levels including the Board of Directors, out during the year 2019, which included a review of the
Board committees and other committees. effectiveness of internal controls systems contributed to
• The Bank has a set of policies and procedures that govern providing reasonable confirmation of the appropriateness
its business activities, which are subject to a periodic of applied internal controls, in addition to confirming the
review to ensure its completeness, efficiency and alignment existence of necessary tools, systems and procedures to
with the Bank’s activities. identify, assess and mitigate potential high risks the Bank
• Most of the Bank’s operations are carried out automatically may face, and how to address them. As a result, no material
through different core systems, which minimizes manual weaknesses have been identified that could negatively impact
errors and fraud opportunities. the appropriateness of the internal control system. Based
• Oversight of the Bank’s activities and taking important on the outcomes of assessing the Bank’s internal controls
decisions through committees formed to ensure that the effectiveness, the Bank has an adequate internal control
Bank’s activities are carried out appropriately in order to system that operates appropriately and is being reviewed
safeguard the Bank’s assets. on a continues basis. It should be noted that despite having
• The Bank has dedicated specialized functions on an internal control system, regardless of its design and
evaluating the effectiveness of the its internal control effectiveness, no absolute assurance can be provided on the
systems, which include internal audit, compliance, anti- effectiveness of internal controls.
fraud and other risks management functions.

General Assembly Extraordinary General Assemblies. All regulatory provisions are
The Bank always adheres to the concerned Government accompanied by sufficient information to enable shareholders
regulations in all matters relating to Ordinary and to make their decisions.
Historical information of General Assembly meetings during the fiscal year:
Attendance record
Ordinary GM no. 13
no Name on 3 April 2019
1. Abdullah bin Sulaiman Al Rajhi √
2. Salah bin Ali AbalKhail √
3. Alaa bin Shakib Al Jabiri √
4. Khaled bin Abdulrahman Al Qoaiz √
5. Ameen bin Fahad Al Shiddi √
Bader bin Mohammed Al Rajhi (Representative of Mohammed
6. √
Abdulaziz Al Rajhi & Sons Investment Co.)
7. Abdullatif Ali Alseif (Representative of Public Pension Agency) √
8. Hamza bin Othman Khushaim (Representative of GOSI) √
9. Abdulaziz bin Khaled Al Ghefaily √
10. Raed bin Abdullah Al-Tamimi √
11. Ibrahim bin Fahad Al-Ghofaily √
Bank’s significant plans, decisions and future b. The Bank transfers no less than 25% of the remaining net
expectations profits to the following year after deducting the Zakat of
ARB maintains its leading position in retail as its market the statutory reserve to ensure that the mentioned reserve
share represents 37.6% of total retail loans granted in Q3 becomes equal–at least–to the paid capital.
2019. The Bank intends to enhance its leadership in this c. Of the remaining profits, no less than 5% of the paid capital
sector by increasing its finance portfolio in general and real after deducting the statutory reserves and Zakat to be
estate finance in particular. The Bank also intends to initiate distributed to shareholders according to recommendations
investment in the latest technologies to ensure providing of the Board of Directors and decisions of the General
the best banking services and products as well as expanding Assembly. If the percentage left from the profits due to
customer base by expanding branch network and electronic shareholders is insufficient to pay the above-mentioned
banking channels. percentage, the shareholders may not claim to pay it
during the next year(s) and the General Assembly may not
Bank’s dividend distribution policy decide to distribute a percentage of profit greater than the
The Bank distributes the specified annual net profits, after one proposed by the Board of Directors.
deduction of all general expenses and other costs and d. After allocating the amounts mentioned in items (a), (b)
arranging the necessary provisions to confront doubtful debts, and (c); the remaining amount will be used according to the
investment losses and urgent commitments for which the recommendation of the Board of Directors and the decision
Board of Directors evaluates the risk level under the Banking of the General Assembly
Control Law and Saudi Arabian Monetary Authority (SAMA)
directions as follows:
a. The due Zakat amounts scheduled to be paid by

shareholders are calculated and the Bank pays such
amounts to competent authorities.

Percentage of profits
to be distributed at
Profits distributed during the year 21 July 2019 the end of the year Total profits
Strategic Report
Percentage 15% 15% 30%
Total 3,750,000 3,750,000 7,500,000
Description of any interest of Board members, Senior Executives, their spouses and minor children in the Bank’s securities or those
of its subsidiaries:
A) Major shareholders
Number of shares * Number of

Holder of interest, contractual at the beginning of shares at the end Net Change Ownership
No. papers and subscription rights year 2019 of year 2019 change % %
General Organization of Social
1. 165,667,525 146,623,115 (19,044,410) -11.50 5.86
Insurances
*17 shares have been granted against every 13 owned shares to reflect the increase of the Bank’s capital, based on the approval of the 13th
Extraordinary General Assembly held on 3 April 2019
B) Board of Directors’ members
Holder of interest, contractual Number of shares at the * Number of shares at Net Change
No. papers and subscription rights beginning of year 2019 the end of year 2019 change %
1. Abdullah bin Sulaiman Al Rajhi 35,221,483 54,186,896 18,965,413 53.85
2. Salah bin Ali AbalKhail 1,470,000 2,300,000 830,000 56.46
3. Abdulaziz bin Khaled Al Ghefaily 25,000 34,460 9,460 37.84
4. Bader bin Mohammed Al Rajhi 5,207 175,233 170,026 3,265.34
5. Khaled bin Abdulrahman Al Qoaiz 1,000 14,615 13,615 1,361.50
6. Alaa bin Shakib Al Jabiri 6,000 3,846 (2,154) -35.90
7. Ibrahim Fahad Al-Ghofaily 459,981 725,842 265,861 57.80
8. Raed Abdullah Al-Tamimi 1,000 1,538 538 53.80
9. Abdullatif Ali Alseif 40,000 61,538 21,538 53.85
10. Hamza Othman Khushaim – – – 0.00
11. Ameen Fahad Al Shiddi – – – 0.00

C) Senior Executives
Holder of interest, contractual Number of shares at the * Number of shares at Net Change
No. papers and subscription rights beginning of year 2019 the end of year 2019 change %
1. Abdulrahman Abdullah Al Fadda 2,938 3,000 62 2.11
2. Saleh Abdullah Allhehedan 7,577 25,000 17,423 229.95
3. Abdullah Sulaiman Al Nami 1,293 100,000 98,707 7633.95
4. Majid Abdulrahman Algwaiz 3,322 0 (3,322) -100.00
5. Christopher Mark Macleen 9,204 32,923 23,719 257.70
6. Abdulaziz Sa'ad Al Resais Appointed on 18 August 2019 10,000 - -
7. Abdullah Ali Alkhalifa 10,228 Left on 5 December 2019 - -
8. Khaled Fahad Alhozaim 7,579 Left on 30 April 2019 - -
Board of Directors’ sessions
Number of meetings: six (6)

First Second Third Fourth Fifth Sixth
meeting 6 meeting meeting meeting meeting meeting
February 3 April 25 June 20 October 21 October 16 December
No. Director name 2019 2019 2019 2019 2019 2019
1. Abdullah bin Sulaiman Al Rajhi √ √ √ √ √ √
2. Salah bin Ali AbalKhail √ √ √ √ √ √
3. Abdulaziz bin Khaled Al Ghefaily √ √ √ √ √ √
4. Bader bin Mohammed Al Rajhi √ √ √ √ √ √
5. Khaled bin Abdulrahman Al Qoaiz √ √ √ √ √ √
6. Alaa bin Shakib Al Jabiri √ √ √ √ √ √
7. Ibrahim Fahad Al-Ghofaily √ √ √ √ √ √
8. Ameen Fahad Al Shiddi √ √ √ √ √ √
9. Hamza Othman Khushaim √ √ √ √ √ √
10. Raed Abdullah Al-Tamimi √ √ √ √ √ √
11. Abdullatif Ali Alseif √ √ √ √ √ √

Bank requests for shareholders’ register
No. Request date Request reasons
Strategic Report
1 1 January 2019 Updating shareholders records
4 28 February 2019 Updating shareholders records
5 30 April 2019 Updating shareholders records
6 9 June 2019 Updating shareholders records
7 23 July 2019 Updating shareholders records
8 25 July 2019 Dividends distribution for H1 2019
9 4 August 2019 Updating shareholders records
10 2 September 2019 Updating shareholders records
11 1 October 2019 Updating shareholders records
12 31 October 2019 Updating shareholders records
13 1 December 2019 Updating shareholders records
14 11 December 2019 Updating shareholders records
Related party transactions

In the ordinary course of business, the Bank transacts business with related parties. The related party transactions are governed by
the regulations issued by the regulators in the Kingdom of Saudi Arabia. The Bank has disclosed such transactions in Note (30) of
its closing Financial Statements for the year 2019. The nature and balances resulting from such transactions for the year ended 31
December 2019 are as follows (all amounts are in thousand Saudi Riyals):
Balances resulting
Type of Transaction from the transaction
Loans and advance payments 7,311,890
Potential obligations 877,178
Current accounts 320,580
Contribution receivables 142,152
Debtors against liabilities 194,312
Banks' balances 332,713
Income from financing and other income 135,422
Speculation (Mudaraba) fees 79,316
Employees’ salaries and benefits (airlines tickets) 4,297
Building rentals and expenses 5,521
Contributions – policies written 861,880
Incurred and reported claims during the year 662,212
Paid claims 615,901
Board members remunerations 6,140
Short-term benefits 99,533
End of service provision 10,669

Information of 2019 transactions and contracts in which the Bank is a party and any of Board members or senior executives, or any
of their related parties has an interest:
1. Commercial and services contracts (Figures in Saudi Riyal)
Party with Transactions/

direct Type of Contracts
Related indirect Position relation with Relation amount
No. Party interest in ARB related party type Period Conditions for 2019
Abdullah bin Airlines tickets Price

Fursan Travel Board Owned by Board Standard conditions
1. Sulaiman Al for Employees’ contract for 4,471,559
& Tourism Co member Member without preferences
Rajhi contract four years
Strategic
agreement to Price
Ameen Fahad Board Standard conditions
2. STC Senior executive provide integrated contract for 56,855,966
Al Shiddi member without preferences
smart ICT services five years
and solutions
Contract and
Price
Ameen Fahad Board services for Standard conditions
3. STC in the company contract for 421,491
Al Shiddi member connecting PoS without preferences
six years
devices to network
Communication Two years
Ameen Fahad Board Standard conditions
4. STC Senior executive services provision and nine 998,920
Al Shiddi member without preferences
agreement months
Integrated
Price
Ameen Fahad Board communications Standard conditions
5. STC in the company contract for 163,873,018
Al Shiddi member services and without preferences
three years
solutions contract
Provision
of general
Ameen Fahad Board services such as Standard conditions
6. STC Senior executive One year 32,560,532
Al Shiddi member (communication, without preferences
mobiles, call
center)
Arabian He has an influence
Internet and on company’s
Ameen Fahad Board Internet services Standard conditions
7. Telecom decisions as he is a Two years 1,960,857
Al Shiddi member contract without preferences
Services (STC senior executive in the
Solutions) parent company (STC)
He has an influence
Arabian Supply,
on company’s
Internet and installation and
Ameen Fahad Board decisions as he is a Standard conditions
8. Telecom maintenance of Three years 21,613,740
Al Shiddi member senior executive in the without preferences
Services (STC devices Dell-EMC
parent company
Solutions) contract
(STC)
Global Annual
Bader bin
Beverage Board Bottled water contract (as Standard conditions
9. Mohammed Al Board Chairman 557,761
Holding member supply services per the best without preferences
Rajhi
Company quotation)
Thiqah
Abdulaziz bin Senior executive and Trade register Price
Business Senior Standard conditions
10. Mohammad Al member of the Audit inquiry services contract for 1,248,017
Services executive without preferences
Shoshan Committee (Watheq) four years
Company

2. Rental contracts (Figures are in Saudi Riyal)
Party with Transactions/

direct Type of Contracts
Strategic Report
Related indirect Position relation with Relation amount
No. Party interest in ARB related party type Period Conditions for 2019
Mohammed
Southern region
Abdulaziz Al Bader bin Seven years – automatically
Board Company's Board management Rent
1. Rajhi & Sons Mohammed Al renewable for similar 260,444
member Chairman building rent contract
Investment Rajhi period
contract
Co.
Mohammed
Contract for
Abdulaziz Al Bader bin Seven years – automatically
Board Company's Board renting direct Rent
member Chairman sales office in contract
Abha
Co.
Mohammed
Abdulaziz Al Bader bin Five years – automatically
Board Company's Board ATM site rent Rent
member Chairman contract contract
Co.
Albatha’a
Abdullah bin exchange & One year – automatically
Bank Board Rent
4. Sulaiman Al - - remittance renewable for similar 577,500
member contract
Rajhi center rent period
contract
Two years – automatically
Ameen Fahad Board A senior executive ATM site rent Rent
5. STC renewable for similar 34,650
Al Shiddi member in the company contract contract
period
Three years – automatically

Ameen Fahad Board A senior executive ATM site rent Rent
6. STC renewable for similar 34,650
Al Shiddi member in the company contract contract
period
Al Khaldiyya
Mohammed
District Five years – automatically
Ibraheem Ahmad Saleh Senior Board member Rent
7. remittance renewable for similar 207,900
Alsubeaei Al Sudais executive in the company contract
center rent period
Company
contract
3. Insurance contracts
Transactions/
Type of Contracts
Related Party with direct Position relation with Relation amount
No. Party indirect interest in ARB related party type Period Conditions for 2019
Abdullah bin Board Company's Board

Sulaiman Al Rajhi member Chairman Comprehensive
Standard
Al Rajhi Co. for insurance for banks,
Annual conditions
1. Cooperative Saleh bin Abdullah Senior Board Chairman properties, work 81,284,000
contracts without
Insurance Alzumaie executive at the company disruption, managers
preferences
and executives
Saleh Abdullah Senior Board Chairman
Allehedan executive at the company
Abdullah bin Board Company's Board
Sulaiman Al Rajhi member Chairman
Standard
Al Rajhi Co. for
Saleh bin Abdullah Senior Board Chairman Comprehensive Annual conditions
2. Cooperative 780,596,000
Alzumaie executive at the company insurance for cars contracts without
Insurance
preferences
Saleh Abdullah Senior Member of the
Allehedan executive Sharia Board

Statutory payments
The Bank’s regulatory payments during the year consisted of Zakat due by shareholders, taxes, amounts paid to the General
Organization for Social Insurance (GOSI), Visa and Passport costs etc.
Details of payments made during the year are given below:
2019
Payable until the
end of the financial Brief
Description Paid period (not paid) description Reasons
Zakat 1,808,232,526 – Paid –
Taxes 47,787,615.58 – Paid –
Value added tax (VAT) 142,273,287.23 – Paid –
General Organization for Social Insurance (GOSI) 251,157,100.00 – Paid –
Labor license & employee levy 2,471,875.73 – Paid –
Visas Payment 173,800 – Paid –
Passport Payment 280,150 – Paid –
Books of Accounts • Accounting records have been prepared properly.

The Bank prepares the Consolidated Financial Statements • The Internal control system has been based on proper
in accordance with the Accounting Standards for Financial fundamentals and executed effectively.
Institutions published by SAMA and the International • There is no doubt about the Bank’s ability to continue its
Financial Reporting Standards (IFRS). The Bank also prepares business.
its Consolidated Financial Statements to comply with the
requirements of Banking Control Law and the Companies Law Conclusion
in the Kingdom of Saudi Arabia, as well as the Bank’s Articles of The Board of Directors is pleased to express their pride in
Association. the positive results achieved by the Bank in 2019. On this
occasion, the Board would like to convey its appreciation to
Basel 3 the Custodian of the Two Holy Mosques, Crown Prince, and our
Certain qualitative and quantitative disclosures are published wise Government.
by ARB. These disclosures are available in the Annual Basel
Report and are available on the Bank’s website (www. The Board would also like to express its sincere appreciation to
alrajhibank.com.sa). the Ministry of Finance, Ministry of Commerce and Investment,
Saudi Arabian Monetary Authority (SAMA) and the Capital
Auditors Market Authority (CMA) for their consistent cooperation and
During the Ordinary General Assembly of shareholders, ongoing support in developing the banking sector, which plays
PricewaterhouseCoopers and KPMG Al Fozan and Partners a great role in the reinforcement and growth of the national
were designated as Auditors of the Bank’s accounts for the economy.
fiscal year 2019. The next General Assembly will designate
the External Auditors for the fiscal year 2020, based on a The Board would also like to seize this opportunity to express
recommendation from the Audit and Compliance Committee in its gratitude and appreciation to the honorable shareholders,
this regard. customers and correspondents for their support, trust and
cooperation, which has led to the achievement of further
The Board of Directors has not recommended replacing the advancement and prosperity for the Bank. Last but not least,
External Auditors before the end of their contract. the Board would like to present its sincere appreciation to all
the Bank employees for their dedicated efforts and devotion
Board of Directors’ Acknowledgments in accomplishing their obligations and tasks. In addition, the
According to the available information, Auditor’s report, and Bank extends its appreciation to Sharia Board members for
current market data, the Board of Directors acknowledge the their loyal efforts and effective contributions to the Bank’s
following: business.

93
04 Financial Statements
96 Independent Auditors’ Report
Financial Position
Income
Comprehensive Income
Changes in Equity
Cash Flows
107 Notes to the Consolidated
Independent Auditors’ Report

97
99
101
Consolidated Statement of Financial Position
As at 31 December 2019 and 2018
2018
2019 (Restated note 37)
Notes (SAR‘000) (SAR‘000)
ASSETS
Cash and balances with Saudi Arabian Monetary Authority (“SAMA”)
4 39,294,099 43,246,043
and other central banks
Due from banks and other financial institutions, net 5 32,058,182 32,387,760
Investments, net 6 46,842,630 43,062,565
Financing, net 7 249,682,805 231,758,206
Property and equipment, net 8 10,407,247 8,649,435
Investment properties, net 9 1,383,849 1,297,590
Other assets, net 10 4,417,764 3,629,245
TOTAL ASSETS 384,086,576 364,030,844
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Due to banks and other financial institutions 11 2,219,604 7,289,624
Customers’ deposits 12 312,405,823 293,909,125
Other liabilities 13 18,269,492 14,526,229
Total liabilities 332,894,919 315,724,978
Shareholders’ equity
Share capital 14 25,000,000 16,250,000
Statutory reserve 15 21,789,632 16,250,000
Other reserves 15 (216,041) (349,555)
Retained earnings 868,066 12,499,171
Proposed gross dividends 23 3,750,000 3,656,250
Total shareholders’ equity 51,191,657 48,305,866
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 384,086,576 364,030,844
The accompanying notes from 1 to 38 form an integral part of these consolidated financial statements.
Chairman Chief Executive Officer Chief Financial Officer

Consolidated Statement of Income
For the years ended 31 December 2019 and 2018
2018
2019 (Restated note 37)
Strategic Report
INCOME
Gross financing and investment income 17 16,962,583 14,993,709
Return on customers’, banks’ and financial institutions’ time investments 17 (534,860) (506,724)
Net financing and investment income 17 16,427,723 14,486,985
Fee from banking services, net 18 1,987,367 1,867,034
Exchange income, net 774,096 755,804
Other operating income, net 19 295,278 209,695
Total operating income 19,484,464 17,319,518
EXPENSES
Salaries and employees’ related benefits 20 2,794,046 2,809,449
Rent and premises related expenses - 314,567
Depreciation and amortization 8 1,059,582 603,136
Other general and administrative expenses 21 2,532,213 1,925,518
Total operating expenses before impairment charge 6,385,841 5,652,670
Impairment charge for financing and other financial assets, net 7 1,772,265 1,530,946
Total operating expenses 8,158,106 7,183,616
Income before Zakat 11,326,358 10,135,902
Zakat for the year 2 & 37 (1,167,831) (6,367,949)
NET INCOME FOR THE YEAR 10,158,527 3,767,953
Basic and diluted earnings per share (in SAR) 22 & 37 4.06 1.51

Consolidated Statement of Comprehensive Income
2018
2019 (Restated Note 37)
Net income for the year 10,158,527 3,767,953
Other comprehensive income
Items that cannot be reclassified to consolidated
statement of income in subsequent periods
Net change in fair value of investments held at fair value through other
15 178,773 (49,798)
comprehensive income (“FVOCI Investments”)
Re-measurement of employees’ end of service benefits liabilities (“ESOB”) 15 & 25 (51,630) -
Items that can be reclassified to consolidated
statement of income in subsequent periods
Exchange difference on translation of foreign operations 15 6,371 (52,637)
Total comprehensive income for the year 10,292,041 3,665,518

Consolidated Statement of Changes in
Shareholders’ Equity
Proposed
Statutory Other Retained gross
Strategic Report
Share capital reserve reserves earnings dividends Total
Notes (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Restated balance at
37 16,250,000 16,250,000 (349,555) 12,499,171 3,656,250 48,305,866
31 December 2018
Net income for the year - - - 10,158,527 - 10,158,527
Net change in fair value
15 - - 178,773 - - 178,773
of FVOCI investments
Net movement in foreign
15 - - 6,371 - - 6,371
currency translation reserve
Re-measurement of
15 & 25 - - (51,630) - - (51,630)
employee EOSB liabilities
Net other comprehensive
income recognized directly in
- - 133,514 - - 133,514
shareholders’ equity
Total comprehensive
- - 133,514 10,158,527 - 10,292,041
income for the year
Transfer to statutory reserve - 5,539,632 - (5,539,632) - -
Bonus shares issued 14 8,750,000 - - (8,750,000) - -
Dividend for the second half 2018 23 - - - - (3,656,250) (3,656,250)
Interim dividends for the
23 - - - (3,750,000) - (3,750,000)
first half of 2019
Proposed final dividends for 2019 23 & 36 - - - (3,750,000) 3,750,000 -
Balance at 31 December 2019 25,000,000 21,789,632 (216,041) 868,066 3,750,000 51,191,657
Balance at 31 December 2017 16,250,000 16,250,000 5,281,682 13,906,736 4,062,500 55,750,918
Impact of adopting IFRS 9 15 - - (129,789) (2,752,899) - (2,882,688)
Impact of depreciation
37 - - - (87,187) - (87,187)
of property and equipment
Other adjustment 37 - - - (799,356) - (799,356)
Restated balance at 1 January 2018 23 16,250,000 16,250,000 5,151,893 10,267,294 4,062,500 51,981,687
Restated net income for the year 37 - - - 3,767,953 - 3,767,953
Net change in fair
15 - - (49,798) - - (49,798)
value of FVOCI investments
Net movement in foreign currency
15 - - (52,637) - - (52,637)
translation reserve
Net other comprehensive
income recognized directly in
- - (102,435) - - (102,435)
Total comprehensive
- - (102,435) 3,767,953 - 3,665,518
income for the year
Final dividend for the second half 2017 - - - - (4,062,500) (4,062,500)
Interim dividends for the
23 - - - (3,250,000) - (3,250,000)
first half of 2018
Proposed final dividends for 2018 23 & 36 - - - (3,656,250) 3,656,250 -
Zakat adjustment and other transfers 37 - - (5,399,013) 5,370,174 - (28,839)
Restated balance at
37 16,250,000 16,250,000 (349,555) 12,499,171 3,656,250 48,305,866
31 December 2018

Consolidated Statement of Cash Flows
2018
2019 (Restated Note 37)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before Zakat 11,326,358 10,135,902
Adjustments to reconcile net income to net cash from/ (used in) operating activities:
Gain on investments held at fair value through statement of income (FVSI) 19 (21,617) (14,600)
Depreciation and amortization 8 1,059,582 603,136
Depreciation on investment properties 9 17,221 16,416
(Gain) / loss on sale of property and equipment, net 19 (568) 115
Impairment charge for financing and other financial assets, net 7 1,772,265 1,530,946
Share in profit of an associate 19 (23,481) (47,928)
(Increase) / decrease in operating assets
Statutory deposit with SAMA and other central banks (1,219,309) (1,491,942)
Due from banks and other financial institutions (3,174,273) (16,585,287)
Financing (19,696,863) (2,636,268)
FVSI investments 25,685 151,904
Other assets, net (804,605) 1,333,582
Increase/ (decrease) in operating liabilities
Due to banks and other financial institutions (5,070,020) 1,767,057
Customers’ deposits 18,496,698 20,852,681
Other liabilities 4,388,757 (1,245,223)
Net cash from operating activities 7,075,830 14,370,491
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 8 (1,527,133) (1,481,746)
Purchase of investment property (103,480) -
Purchase of FVOCI / FVSI investments (1,638,587) (1,389,489)
Proceeds from disposal of FVOCI / FVSI investments 1,148,963 1,203,936
Proceeds from maturities of investments held at amortized cost 91,458,865 96,748,563
Purchase of investments held at amortized cost (94,524,237) (103,363,657)
Net cash used in investing activities (5,185,609) (8,282,393)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 23 (7,406,250) (7,312,500)
Zakat paid (2,889,286) (211,290)
Payment against lease obligation (269,789) -
Net cash used in financing activities (10,565,325) (7,523,790)
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,675,104) (1,435,692)
Cash and cash equivalents at the beginning of the year 29,786,503 31,222,195
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 24 21,111,399 29,786,503
Gross financing and investment income received during the year 16,693,465 13,391,901
Return on customers’, banks’ and financial institutions’ time investments
(282,046) (728,956)
paid during the year
16,411,419 12,662,945
Non-cash transactions:
Other real estate 60,226 72,106
Net change in fair value of FVOCI equity investments 178,773 (49,798)

Notes to Consolidated Financial Statements
1. GENERAL The objectives of the Bank are to carry out banking and
Strategic Report
investment activities in accordance with its Articles of
a) Incorporation and operation Association and By-Laws, the Banking Control Law and the
Al Rajhi Banking and Investment Corporation, a Saudi Joint Council of Ministers’ Resolution referred to above. The Bank
Stock Company, (the “Bank”), was formed and licensed is engaged in banking and investment activities inside and
pursuant to Royal Decree No. M/59 dated 3 Dhul Qadah 1407H outside the Kingdom of Saudi Arabia through 572 branches
(corresponding to 29 June 1987) and in accordance with Article (2018: 581) including the branches outside the Kingdom and
6 of the Council of Ministers’ Resolution No. 245, dated 26 13,439 employees (2018: 13,532 employees). The Bank has
Shawal 1407H (corresponding to 23 June 1987). established certain subsidiary companies (together with the
Bank hereinafter referred to as “the Group”) in which it owns
The Bank operates under Commercial Registration No. all or majority of their shares as set out below
1010000096 and its Head Office is located at the following (Also see note 3(b)):
address:
Al Rajhi Bank
8467 King Fahd Road - Al Muruj Dist.
Unit No 1
Riyadh 12263 - 2743
Kingdom of Saudi Arabia
Shareholding %
Name of subsidiaries 2019 2018
A limited liability company registered in the Kingdom of Saudi
Arabia to support the mortgage programs of the Bank through
transferring and holding the title deeds of real estate properties
under its name on behalf of the Bank, collection of revenue
Al Rajhi Development Company - KSA 100% 100%
of certain properties sold by the Bank, provide real estate
and engineering consulting services, provide documentation
service to register the real estate properties and overseeing the
evaluation of real estate properties.
A licensed Islamic Bank under the Islamic Financial Services Act
Al Rajhi Corporation Limited – Malaysia 100% 100%
2013, incorporated and domiciled in Malaysia.
Arabia to act as principal agent and/or to provide brokerage,
Al Rajhi Capital Company – KSA 100% 100%
underwriting, managing, advisory, arranging and custodial
services.
Al Rajhi Bank – Kuwait 100% 100% A foreign branch registered with the Central Bank of Kuwait.
A foreign branch operating in Hashemite Kingdom of Jordan,
providing all financial, banking, and investments services
Al Rajhi Bank – Jordan 100% 100% and importing and trading in precious metals and stones in
accordance with Islamic Sharia’a rules and under the applicable
banking law.
Arabia to act as an agent for insurance brokerage activities per
Al Rajhi Takaful Agency Company – KSA 99% 99%
the agency agreement with Al Rajhi Cooperative Insurance
Company.
Al Rajhi Company for management A limited liability company registered in the Kingdom of Saudi
100% 100%
services – KSA Arabia to provide recruitment services.
A closed joint stock company registered in the Kingdom of
Saudi Arabia providing micro consumer financing, finance lease
Emkan Finance Company – KSA 100% - and small and medium business financing. As of 31 December,
the company is under licensing proscess with Saudi Arabian
Monetary Authority (SAMA).

Since the subsidiaries are wholly or substantially owned by the b) Basis of measurement and preparation
Bank, the non-controlling interest is insignificant and therefore The consolidated financial statements are prepared under
not disclosed. All of the above-mentioned subsidiaries have the historical cost convention except for the measurement at
been consolidated. fair value of investments held as fair value through income
statement (“FVSI”) and investments held at fair value through
b) Shari’a Authority other comprehensive income (“FVOCI”).
As a commitment from the Bank for its activities to be
in compliance with Islamic Shari’a legislations, since its The Group presents its consolidated statement of financial
inception, the Bank has established a Shari’a Authority to position in order of liquidity. An analysis regarding recovery or
ascertain that the Bank’s activities are subject to its approval settlement within 12 months after the reporting date (current)
and control. The Shari’a Authority had reviewed several of the and more than 12 months after the reporting date (non–
Bank’s activities and issued the required decisions thereon. current) is presented in note 27-2.
2. BASIS OF PREPARATION c) Functional and presentation currency

The consolidated financial statements are presented in Saudi
a) Statement of compliance Arabian Riyals (“SAR”), which is the Bank’s functional currency,
The consolidated financial statements of the Group have been and are rounded off to the nearest thousand except where
prepared: otherwise indicated.
• in accordance with International Financial Reporting d) Critical accounting judgments, estimates and
Standards (IFRS) as endorsed in the Kingdom of Saudi assumptions
Arabia and other standards and pronouncements issued The preparation of the consolidated financial statements in
by the Saudi Organization for Certified Public Accountants conformity with IFRS as endorsed in KSA and other standards
(‘SOCPA’); and and pronouncements issued by SOCPA, requires the use of
• in compliance with the provisions of Banking Control Law, certain critical accounting estimates and assumptions that
the Regulations for Companies in the Kingdom of Saudi affect the reported amounts of assets and liabilities. It also
Arabia and By-laws of the Bank. requires management to exercise its judgments in the process
of applying the Group’s accounting policies. Such estimates,
The consolidated financial statements of the Group as at assumptions and judgments are continually evaluated and
and for the year ended 31 December 2018 were prepared are based on historical experience and other factors, including
in compliance with International Financial Reporting obtaining professional advice and expectations of future events
Standards (“IFRS”) as modified by Saudi Arabian Monetary that are believed to be reasonable under the circumstances.
Authority (“SAMA”) for the accounting of zakat (relating to the Revisions to accounting estimates are recognised in the period
application of IAS 12 – “Income Taxes” and IFRIC 21 – “Levies” in in which the estimate is revised, if the revision affects only that
so far as these relate to zakat) and the Banking Control Law and period, or in the period of revision and in future periods if the
the Regulations for Companies in the Kingdom of Saudi Arabia. revision affects both current and future periods.
On 17 July 2019, SAMA instructed the banks in the Kingdom The key assumptions concerning the future and other key
of Saudi Arabia to account for zakat charges in the statement sources of estimation uncertainty at the reporting date, that
of income. This aligns with the IFRS and its interpretations have a significant risk of causing a material adjustment to
as issued by the International Accounting Standards Board the carrying amounts of assets and liabilities within the next
(“IASB”) as endorsed in the Kingdom of Saudi Arabia, and other financial year, are described below. The Group based its
standards and pronouncements that are issued by SOCPA assumptions and estimates on parameters available when
(collectively referred to as “IFRS as endorsed in KSA”). the consolidated financial statements were prepared. Existing
circumstances and assumptions about future developments,
Accordingly, the Group changed its accounting treatment however, may change due to market changes or circumstances
for zakat by retrospectively adjusting the impact in line with beyond the control of the Group. Such changes are reflected
International Accounting Standard 8: Accounting Policies, in the assumptions when they occur. Significant areas where
Changes in Accounting Estimates and Errors (as disclosed management has used estimates, assumptions or exercised
in note 3 and effect of change in note 37 to the consolidated judgments is as follows:
financial statements. The Group has further adopted IFRS 16:
leases effective from 1 January 2019. The change in accounting
policy due to this new standard is disclosed in note 3.

i) Impairment losses on financial assets A fair value measurement of a non-financial asset takes into
Strategic Report
The measurement of impairment losses under IFRS 9 across all account a market participant’s ability to generate economic
categories of financial assets requires judgement, in particular, benefits by using the asset in its highest and best use or by
the estimation of the amount and timing of future cash flows selling it to another market participant that would use the
and collateral values when determining impairment losses and asset in its highest and best use.
the assessment of a significant increase in credit risk. These
estimates are driven by a number of factors, changes in which The Group uses valuation techniques that are appropriate in
can result in different levels of allowances. the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
The Group’s ECL calculations are outputs of complex models inputs and minimising the use of unobservable inputs.
with a number of underlying assumptions regarding the choice
of variable inputs and their interdependencies. Elements of the All assets and liabilities for which fair value is measured or
ECL models that are considered accounting judgements and disclosed in the financial statements are categorized within the
estimates include: fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as
• The Group’s internal credit grading model, which assigns a whole:
PDs to the individual grades
• •
The Group’s criteria for assessing if there has been a Level 1 - Quoted (unadjusted) market prices in active
significant increase in credit risk and so allowances for markets for identical assets or liabilities
financial assets should be measured on a Lifetime ECL basis • Level 2 - Inputs other than quoted prices included within
and the qualitative assessment Level 1 that are observable either directly (i.e. as prices) or
• The segmentation of financial assets when their ECL is indirectly (i.e. derived from prices). This category includes
assessed on a collective basis instruments valued using: quoted market prices in active
• Development of ECL models, including the various formulas markets for similar instruments; quoted prices for identical
and the choice of inputs or similar instruments in markets that are considered less
• Determination of associations between macroeconomic than active; or other valuation techniques in which all
scenarios and, economic inputs and collateral values, and significant inputs are directly or indirectly observable from
the effect on PDs, EADs and LGDs market data.
• Selection of forward-looking macroeconomic scenarios and • Level 3 - Valuation techniques for which the lowest level
their probability weightings, to derive the economic inputs input that is significant to the fair value measurement is
into the ECL models unobservable.
ii) Fair value of financial instruments The control indicators are subject to management’s
The Group measures certain financial instruments at fair value judgements, and can have a significant effect in the case of the
at each consolidated balance sheet date. Bank’s interests in investments funds.
Fair value is the price that would be received to sell an asset iii) Determination of control over investees
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value Investment funds
measurement is based on the presumption that the transaction The Group acts as Fund Manager to a number of investment
to sell the asset or transfer the liability takes place either: funds. Determining whether the Group controls such an
investment fund usually focuses on the assessment of the
• In the principal market for the asset or liability, or aggregate economic interests of the Group in the Fund
• In the absence of a principal market, in the most (comprising any carried profits and expected management
advantageous market for the asset or liability fees) and the investor’s rights to remove the Fund Manager the
Group has concluded that it acts as an agent for the investors in
The principal or the most advantageous market must be all cases, and therefore has not consolidated these funds.
accessible to the Group.
The fair value of an asset or a liability is measured using the

assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in
their economic best interest.

iv) Provisions for liabilities and charges operating leases are charged to the consolidated statement of
The Group receives legal claims against it in the normal course income on a straight-line basis over the period of the lease.
of business. Management has made judgments as to the
likelihood of any claim succeeding in making provisions. The The Group as a lessor
time of concluding legal claims is uncertain, as is the amounts When assets are transferred under Islamic lease arrangements
of possible outflow of economic benefits. Timing and cost (e.g. Ijara Muntahia Bittamleek or Ijara with ownership
ultimately depends on the due process being followed as per promise), the present value of the lease payments is recognised
the Law. as a receivable and disclosed under “Financing”. The difference
between the gross receivable and the present value of the
v) Going concern receivable is recognised as unearned finance income. Lease
The consolidated financial statements have been prepared on income is recognised over the term of the lease using the net
a going concern basis. The Group’s management has made investment method, which reflects a constant periodic rate of
an assessment of the Group’s ability to continue as a going return.
concern and is satisfied that the Group has the resources to
continue in business for the foreseeable future. Furthermore, The Group has adopted IFRS 16 ‘Leases’. The standard replaces
the management is not aware of any material uncertainties the existing guidance on leases, including IAS 17 ‘Leases”, IFRIC
that may cast significant doubt upon the Group’s ability to 4 ‘Determining whether an Arrangement contains a Lease”, SIC
continue as a going concern. 15 “Operating Leases – Incentives” and SIC 27 “Evaluating the
Substance of Transactions in the Legal Form of a Lease”.
3. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES IFRS 16 was issued in January 2016 and is effective for annual
The significant accounting policies adopted in the preparation periods commencing on or after 1 January 2019. IFRS 16
of these consolidated financial statements are set out below. stipulates that all leases and the associated contractual rights
and obligations should generally be recognized in the Group’s
a) Change in accounting policies Statement of Financial Position, unless the term is 12 months or
The accounting policies used in the preparation of these less or the lease is for a low value asset. Thus, the classification
consolidated financial statements are consistent with those required under IAS 17 “Leases” into operating or finance leases
used in the preparation of the annual consolidated financial is eliminated for lessees.
statements for the year ended 31 December 2018 except
for the adoption of the following new standard and other For each lease, the lessee recognizes a liability for the lease
amendments to the accounting treatment of Zakat mentioned obligations incurred in the future. Correspondingly, a right
below. to use the leased asset is capitalized, which is generally
equivalent to the present value of the future lease payments
Adoption of New Standards plus directly attributable costs, which are amortized over the
Effective from 1 January 2019, the Group has adopted one new estimated useful life.
accounting standard and an amendment to the accounting
treatment for Zakat. The impact of the adoption of these The Group has opted for the modified retrospective application
standards is explained below. permitted by IFRS 16 upon adoption of the new standard.
During the first time application of IFRS 16 to operating leases,
Except for the adoption of the below new accounting standard the right to use the leased assets was generally measured at
(IFRS 16), several other amendments and interpretations apply the amount of lease liability, using the incremental financing
for the first time in 2019, but do not have significant an impact rate that is applicable to the Group at 1 January 2019 (the time
on the consolidated financial statements of the Group. of initial application), which was approximately 4.6%. IFRS 16
transition disclosures also require the Group to present the
Adoption of IFRS 16 – Leases reconciliation of the off-balance sheet lease obligations as of 31
The Group adopted IFRS 16 ‘Leases’. Before 1 January 2019, the December 2018 to the recognized lease liabilities as of 1 January
Group accounted for leases as follows: 2019. The right of use assets are classified under property and
equipment. On the other hand, the lease liability is classified
The Group as a lessee under other liabilities.
Leases that do not transfer to the Group substantially all of
the risk and benefits of ownership of the asset are classified
as operating leases. Consequently, all of the leases entered
into by the Group are operating leases. Payments made under

RECONCILIATION OF LEASE LIABILITIES AS OF 1 JANUARY 2019
Strategic Report
SAR’000
Off-balance sheet lease obligations as of 31 December 2018 1,256,100
Lease liability of reasonably certain extensions or termination options 203,605
Discounting of lease liability using the Bank’s incremental financing rate (51,946)
Non-lease payments (55,398)
Total lease liability recognized as of 1 January 2019 1,352,361
Right of Use (RoU) Assets / Lease Liabilities Right of use assets are classified under property and
On initial recognition, at inception of the contract, the Group equipment, while lease liabilities are classified under other
shall assess whether the contract is, or contains, a lease. A liabilities in the consolidated statement of financial position.
contract is, or contains, a lease if the contract conveys the right
to control the use of an identified asset for a period of time in Short-term leases and leases of low-value assets:
exchange for consideration. Control is identified if most of the The Group has elected not to recognize right-of-use assets and
benefits are flowing to the Bank and the Bank can direct the lease liabilities for short-term leases that have a lease term
usage of such assets. of 12 months or less and leases of low-value assets, including
IT equipment. The Group recognizes the lease payments
Right of Use Assets associated with these leases as an expense on a straight-line
The Group applies the cost model, and measures right of use basis over the lease term.
assets at cost:
Right of use assets are classified under property and
a) less any accumulated depreciation and any accumulated equipment, while lease liabilities are classified under other
impairment losses; and liabilities in the consolidated statement of financial position.
b) adjusted for any re-measurement of the lease liability for
lease modifications. Short-term leases and leases of low-value assets:
The Group has elected not to recognize right-of-use assets and
Generally, a RoU asset would be equal to the lease liability. lease liabilities for short-term leases that have a lease term
However, if there are additional costs such as site preparation, of 12 months or less and leases of low-value assets, including
non-refundable deposits, application money, other expenses IT equipment. The Group recognizes the lease payments
related to the transaction, etc., these need to be added to the associated with these leases as an expense on a straight-line
RoU asset value. basis over the lease term.
The right-of-use asset is subsequently depreciated using the Accounting for Zakat
straight-line method from the commencement date to the As mentioned in note 2(a) above, the basis of preparation has
earlier of the end of the useful life of the right-of-use asset, or been changed for the year ended 31 December 2019 as a result
the end of the lease term. The estimated useful lives of right- of the issuance of latest instructions from SAMA dated 17 July
of-use assets are determined on the same basis as those of 2019. Previously, zakat charge was recognized in the statement
property and equipment. of changes in equity as per the SAMA circular no 381000074519
dated 11 April 2017. With the latest instructions issued by
Lease Liability SAMA dated 17 July 2019, the zakat shall be recognized in the
On initial recognition, the lease liability is the present value of statement of income. The Group has accounted for this change
all remaining payments to the lessor.After the commencement in the accounting for zakat retrospectively, and the effects of
date, the Group measures the lease liability by: the above change are disclosed in note 37 to the consolidated
financial statements. The change has resulted in a reduction of
a) Increasing the carrying amount to reflect the incremental reported income of the Group for the year ended 31 December
financing rate on the lease liability; 2018 by SAR 6,368 million. The change has had no impact on
b) Reducing the carrying amount to reflect the lease payments the consolidated statement of cash flows for the year ended 31
made; and December 2018.
c) Re-measuring the carrying amount to reflect any re-
assessment or lease modification.

b) Basis of consolidation • Recognises the fair value of the consideration received
These consolidated financial statements comprise the • Recognises the fair value of any investment retained
financial statements of the Group. The financial statements of • Recognises any surplus or deficit in profit or loss
subsidiaries are prepared for the same reporting year as that of • Reclassifies the parent’s share of components previously
the Bank, using consistent accounting policies. recognised in OCI to profit or loss or retained earnings, as
appropriate as would be required if the Bank had directly
Subsidiaries are investees controlled by the Group. The Group disposed of the related assets or liabilities.
controls an investee if it is exposed to, or has rights to, variable
returns from its involvement with the investee and has the Intra group balances and any income and expenses arising
ability to affect those returns through its power over the from intra-group transactions, are eliminated in preparing
investee. The financial statements of subsidiaries are included these consolidated financial statements.
in the consolidated financial statements from the date on
which control commences until the date when control ceases. c) Investment in an associate
An associate is an entity over which the Group exercises
The consolidated financial statements have been prepared significant influence (but not control), over financial and
using uniform accounting policies and valuation methods for operating policies and which is neither a subsidiary nor a joint
like transactions and other events in similar circumstances. arrangement.
Specifically, the Group controls an investee if and only if the
Group has: Investments in associates are carried in the consolidated
statement of financial position at cost, plus post-acquisition
• Power over the investee (i.e. existing rights that give it changes in the Group’s share of net assets of the associate,
the current ability to direct the relevant activities of the less any impairment in the value of individual investments.
investee); The Group’s share of its associates’ post-acquisition profits
• Exposure, or rights, to variable returns from its involvement or losses are recognized in the consolidated statement of
with the investee; and income, and its share of post-acquisition movements in
• The ability to use its power over the investee to affect other comprehensive income is recognized in reserves. The
amount of its returns. cumulative post-acquisition movements are adjusted against
the carrying amount of the investment.
When the Group has less than majority of the voting or similar
rights of an investee entity, the Bank considers all relevant The previously recognized impairment loss in respect
facts and circumstances in assessing whether it has power over of investment in associate can be reversed through the
the entity, including: consolidated statement of income, such that the carrying
amount of the investment in the consolidated statement of
• The contractual arrangement with the other vote holders of financial position remains at the lower of the equity-accounted
the investee (before provision for impairment) or the recoverable amount.
• Rights arising from other contractual arrangements On derecognition the difference between the carrying
• The Bank’s voting rights and potential voting rights granted amount of investment in the associate and the fair value of
by equity instruments such as shares the consideration received is recognized in the consolidated
statement of income.
The Group re-assesses whether or not it controls an investee
if facts and circumstances indicate that there are changes Unrealised gains on transactions are eliminated to the extent
to one or more of the three elements of control. Assets, of the Group’s interest in the investee. Unrealised losses are
liabilities, income and expenses of a subsidiary acquired or also eliminated unless the transaction provides evidence of
disposed of during the year are included in the statement of impairment in the asset transferred. The financial statements
comprehensive income from the date the Group gains control of the associate are prepared for the same reporting period as
until the date the Group ceases to control the subsidiary. A the Group. When necessary, adjustments are made to bring the
change in the ownership interest of a subsidiary, without a loss accounting policies in line with those of the Group.
of control, is accounted for as an equity transaction. If the Bank
loses control over a subsidiary, it:
• Derecognises the assets and liabilities of the subsidiary

• Derecognises the cumulative translation differences
recorded in shareholder’s equity

d) Financial instruments best reflects the way the business is managed and information
Strategic Report
is provided to management. The information considered
1) Classification of financial assets includes:
On initial recognition, a financial asset is classified and
measured at: amortized cost, FVOCI or FVSI. This classification • the stated policies and objectives for the portfolio and
is generally based on the business model in which a financial the operation of those policies in practice. In particular,
asset is managed and its contractual cash flows. whether management’s strategy focuses on earning
contractual profit revenue, maintaining a particular profit
Financial assets at amortised cost rate profile, matching the duration of the financial assets to
A financial asset is measured at amortized cost if it meets both the duration of the liabilities that are funding those assets
of the following conditions and is not designated as at FVSI: or realizing cash flows through the sale of the assets;
• how the performance of the portfolio is evaluated and
• the asset is held within a business model whose objective is reported to the Bank’s management;
to hold assets to collect contractual cash flows; and • the risks that affect the performance of the business model
• the contractual terms of the financial asset give rise on (and the financial assets held within that business model)
specified dates to cash flows that are solely payments and how those risks are managed;
of principal and interest on the principal amount • how managers of the business are compensated- e.g.
outstanding. whether compensation is based on the fair value of the
assets managed or the contractual cash flows collected;
Financial Asset at FVOCI and
A debt instrument is measured at FVOCI only if it meets both of • the frequency, volume and timing of sales in prior periods,
the following conditions and is not designated as at FVSI: the reasons for such sales and its expectations about
future sales activity. However, information about sales
• the asset is held within a business model whose objective activity is not considered in isolation, but as part of an
is achieved by both collecting contractual cash flows and overall assessment of how the Bank’s stated objective for
selling financial assets; and managing the financial assets is achieved and how cash
• the contractual terms of the financial asset give rise on flows are realized.
specified dates to cash flows that are solely payments
of principal and interest on the principal amount The business model assessment is based on reasonably
outstanding. expected scenarios without taking ‘worst case’ or ‘stress case’
scenarios into account. If cash flows after initial recognition
Equity Instruments: On initial recognition, for an equity are realised in a way that is different from the Group’s original
investment that is not held for trading, the Group may expectations, the Group does not change the classification of
irrevocably elect to present subsequent changes in fair value in the remaining financial assets held in that business model,
OCI. This election is made on an instrument-by-instrument (i.e. but incorporates such information when assessing newly
share-by-share) basis. originated or newly purchased financial assets going forward.
Financial Asset at FVSI Financial assets that are held for trading and whose
All other financial assets are classified as measured at FVSI. performance is evaluated on a fair value basis are measured at
FVSI because they are neither held to collect contractual cash
In addition, on initial recognition, the Group may irrevocably flows nor held both to collect contractual cash flows and to sell
designate a financial asset that otherwise meets the financial assets.
requirements to be measured at amortized cost or at FVOCI
as at FVSI if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
Financial assets are not reclassified subsequent to their initial

recognition, except in the period after the Bank changes its
business model for managing financial assets.
Business model assessment

The Group makes an assessment of the objective of a business
model in which an asset is held at a portfolio level because this

Assessments whether contractual cash flows are solely Investments (Murabaha with SAMA) : These investments
payments of principal and interest consists of placements with Saudi Arabian Monetary Agency
For the purposes of this assessment, ‘principal’ is the fair (SAMA). The Bank classifies these investments at amortised
value of the financial asset on initial recognition. ‘Interest’ is cost as they are held to collect contractual cash flows and pass
the consideration for the time value of money, the credit and SPPI criterion.
other basic lending risk associated with the principal amount
outstanding during a particular period and other basic lending Investments (Sukuk) : These investments consists of Investment
costs (e.g. liquidity risk and administrative costs), along with in various Sukuk. The Group classifies these investments
profit margin. at amortised cost except for those Sukuk which fails SPPI
criterion, which are classified at FVSI.
In assessing whether the contractual cash flows are solely
payments of principal and interest, the Bank considers the Equity Investments : These are the strategic equity investments
contractual terms of the instrument. This includes assessing which the Bank does not expect to sell, for which Group has
whether the financial asset contains a contractual term that made an irrevocable election on the date of initial recognition
could change the timing or amount of contractual cash flows to present the fair value changes in other comprehensive
such that it would not meet this condition. In making the income.
assessment, the Group considers:
Investments (Mutual Funds) : The investments consist of
• contingent events that would change the amount and Investments in various Mutual Funds. The Group classifies
timing of cash flows; these investment at FVSI as these investments fail SPPI
• leverage features; criterion.
• prepayment and extension terms;
• terms that limit the Group’s claim to cash flows from 2) Classification of financial liabilities
specified assets (e.g. non-recourse asset arrangements); The Group classifies its financial liabilities, other than financial
and guarantees and loan commitments, as measured at amortized
• features that modify consideration of the time value of cost.
money- e.g. periodical reset of interest rates.
All amounts due to banks and other financial institutions and
Reclassification customer deposits are initially recognized at fair value less
The Group reclassifies the financial assets between FVSI, FVOCI transaction costs.
and amortized cost if and only if under rare circumstances and
if its business model objective for its financial assets changes so Subsequently, financial liabilities are measured at amortized
its previous business model assessment would no longer apply. cost, unless they are required to be measured at fair value
through profit or loss.
The Group offers profit based products including Mutajara,
installment sales, Murabaha and Istisnaa to its customers in 3) Derecognition
compliance with Shari’a rules.
Financial assets
The Group classifies its Principal financing and Investment as The Group derecognizes a financial asset when the contractual
follows: rights to the cash flows from the financial asset expire, or it
transfers the rights to receive the contractual cash flows in a
Financing: These financings represent loans granted to transaction in which substantially all of the risks and rewards
customers. These financings mainly constitute four broad of ownership of the financial asset are transferred or in which
categories i.e. Mutajara, Installment sales, Murabaha and the Group neither transfers nor retains substantially all of the
credit cards. The Group classifies these financings at amortised risks and rewards of ownership and it does not retain control of
cost. the financial asset.
Due from banks and other financial institutions : These consists On derecognition of a financial asset (debt instrument), the
of placements with financial Institutions (FIs). The Bank difference between the carrying amount of the asset (or
classifies these balances due from banks and other financial the carrying amount allocated to the portion of the asset
institutions at amortised cost as they are held to collect derecognized) and the sum of (i) the consideration received
contractual cash flows and pass SPPI criterion. (including any new asset obtained less any new liability
assumed) and (ii) any cumulative gain or loss that had been
recognized in OCI is recognized in profit or loss.

In transactions in which the Group neither retains nor transfers 5) Impairment
Strategic Report
substantially all of the risks and rewards of ownership of a
financial asset and it retains control over the asset, the Group Impairment of financial assets
continues to recognize the asset to the extent of its continuing The loss allowance is based on the ECLs associated with the
involvement, determined by the extent to which it is exposed to probability of default in the next twelve months unless there
changes in the value of the transferred asset. has been a significant increase in credit risk since origination.
If the financial asset meets the definition of purchased or
Any cumulative gain/loss recognized in OCI in respect of equity originated credit impaired (POCI), the allowance is based on
investment securities designated as at FVOCI is not recognized the change in the ECLs over the life of the asset. POCI assets are
in profit or loss on derecognition of such securities. Any interest financial assets that are credit impaired on initial recognition.
in transferred financial assets that qualify for derecognition POCI assets are recorded at fair value at original recognition
that is created or retained by the Bank is recognized as a and financing income is subsequently recognised based on a
separate asset or liability. credit-adjusted EIR. ECLs are only recognised or released to the
extent that there is a subsequent change in the expected credit
Financial liabilities losses.
The Group derecognizes a financial liability when its
contractual obligations are discharged or cancelled or expired. The Group recognizes loss allowances for ECL on the following
financial instruments that are not measured at FVSI:
4) Modifications of financial assets and financial
liabilities • financial assets that are debt instruments;
• lease receivables;
Financial assets • financial guarantee contracts issued; and
If the terms of a financial asset are modified, the Group • loan commitments issued.
evaluates whether the cash flows of the modified asset are
substantially different. If the cash flows are substantially No impairment loss is recognized on equity investments.
different, then the contractual rights to cash flows from the
original financial asset are deemed to have expired. In this The Group measures loss allowances at an amount equal
case, the original financial asset is derecognized and a new to lifetime ECL, except for the following, for which they are
financial asset is recognized at fair value. measured as 12-month ECL:
If the cash flows of the modified asset carried at amortized cost • debt investment securities that are determined to have low
are not substantially different, then the modification does not credit risk at the reporting date; and
result in derecognition of the financial asset. In this case, the • other financial instruments on which credit risk has not
Group recalculates the gross carrying amount of the financial increased significantly since their initial recognition
asset and recognizes the amount arising from adjusting the
gross carrying amount as a modification gain or loss in the The Group considers a debt security to have low credit risk
consolidated statement of income. If such a modification is when their credit risk rating is equivalent to the globally
carried out because of financial difficulties of the borrower, understood definition of ‘investment grade’.
then the gain or loss is presented together with impairment
losses. In other cases, it is presented as financing income. 12-month ECL are the portion of ECL that result from default
events on a financial instrument that are possible within the 12
Financial liabilities months after the reporting date.
The Group derecognizes a financial liability when its terms
are modified and the cash flows of the modified liability are
substantially different. In this case, a new financial liability
based on the modified terms is recognized at fair value. The
difference between the carrying amount of the financial
liability extinguished and the new financial liability with
modified terms is recognized in consolidated statement of
income.

Measurement of ECL • significant financial difficulty of the borrower or issuer;
ECL are a probability-weighted estimate of credit losses. It is • a breach of contract such as a default or past due event;
measured as follows: • the restructuring of a loan or advance by the Group on
terms that the Group would not consider otherwise;
• financial assets that are not credit-impaired at the • it is becoming probable that the borrower will enter
reporting date: as the present value of all cash shortfalls bankruptcy or other financial reorganization; or
(i.e. the difference between the cash flows due to the entity • the disappearance of an active market for a security
in accordance with the contract and the cash flows that the because of financial difficulties.
Group expects to receive);
• financial assets that are credit-impaired at the reporting Financing that has been renegotiated due to deterioration in
date: as the difference between the gross carrying amount the borrower’s condition is usually considered to be credit-
and the present value of estimated future cash flows; impaired unless there is evidence that the risk of not receiving
• undrawn loan commitments: as the present value of the contractual cash flows has reduced significantly and there
difference between the contractual cash flows that are due are no other indicators of impairment. In addition, a retail
to the Group if the commitment is drawn down and the financing that is overdue for 90 days or more is considered
cash flows that the Group expects to receive; and impaired.
• financial guarantee contracts: the expected payments to
reimburse the holder less any amounts that the Group In making an assessment of whether an investment in
expects to recover. sovereign debt is credit-impaired, the Group considers the
following factors.
Restructured financial assets
If the terms of a financial asset are renegotiated or modified • The market’s assessment of creditworthiness as reflected in
or an existing financial asset is replaced with a new one due the yields.
to financial difficulties of the borrower, then an assessment is • The rating agencies’ assessments of creditworthiness.
made of whether the financial asset should be derecognized • The country’s ability to access the capital markets for new
and ECL are measured as follows: debt issuance.
• The probability of debt being restructured, resulting in
• If the expected restructuring will not result in derecognition holders suffering losses through voluntary or mandatory
of the existing asset, then the expected cash flows debt forgiveness.
arising from the modified financial asset are included in • The international support mechanisms in place to provide
calculating the cash shortfalls from the existing asset. the necessary support as ‘lender of last resort’ to that
• If the expected restructuring will result in derecognition country, as well as the intention, reflected in public
of the existing asset, then the expected fair value of the statements, of governments and agencies to use those
new asset is treated as the final cash flow from the existing mechanisms. This includes an assessment of the depth of
financial asset at the time of its derecognition. This those mechanisms and, irrespective of the political intent,
amount is included in calculating the cash shortfalls from whether there is the capacity to fulfil the required criteria.
the existing financial asset that are discounted from the
expected date of derecognition to the reporting date using Presentation of allowance for ECL in the consolidated
the original effective profit rate of the existing financial statement of financial position
asset. Loss allowances for ECL are presented in the consolidated
statement of financial position as follows:
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial • financial assets measured at amortized cost: as a deduction
assets carried at amortized cost are credit-impaired. A financial from the gross carrying amount of the assets;
asset is ‘credit-impaired’ when one or more events that have • where a financial instrument includes both a drawn and an
detrimental impact on the estimated future cash flows of the undrawn component, and the Group cannot identify the
financial asset have occurred. ECL on the financing commitment component separately
from those on the drawn component: the Bank presents
Evidence that a financial asset is credit-impaired includes the a combined loss allowance for both components. The
following observable data: combined amount is presented as a deduction from the
gross carrying amount of the drawn component. Any excess
of the loss allowance over the gross amount of the drawn
component is presented as a provision.

• financing commitments and financial guarantee contracts: Financial guarantees issued or commitments to provide a
Strategic Report
generally, as a provision; financing at a below-market profit rate are initially measured
at fair value and the initial fair value is amortized over the
Write-off life of the guarantee or the commitment. Subsequently, they
Financing are written off (either partially or in full) when are measured at the higher of this amortized amount and the
there is no realistic prospect of recovery. However, financial amount of loss allowance; and
assets that are written off could still be subject to enforcement
activities in order to comply with the Bank’s procedures for The Group has issued no financing commitments that are
recovery of amounts due. If the amount to be written off is measured at FVSI. For other loan commitments the Group
greater than the accumulated loss allowance, the difference recognizes loss allowance;
is first treated as an addition to the allowance that is then
applied against the gross carrying amount. Any subsequent 7) Foreign Currencies
recoveries are credited to credit loss expense. The foreign currency gain or loss on monetary items is the
difference between amortised cost in the functional currency
Collateral valuation at the beginning of the year adjusted for the effective profits
To mitigate its credit risks on financial assets, the Group rate and payments during the year and the amortized cost in
seeks to use collateral, where possible. The collateral comes foreign currency translated at the exchange rate at the end of
in various forms, such as cash, securities, letters of credit/ the year.
guarantees, real estate, receivables, inventories, other non-
financial assets and credit enhancements such as netting Realized and unrealized gains or losses on exchange are
agreements. Collateral, unless repossessed, is not recorded on credited or charged to the consolidated statement of
the Group’s statement of financial position. However, the fair comprehensive income.
value of collateral affects the calculation of ECL. It is generally
assessed, at a minimum, at inception and re-assessed on a Foreign currency differences arising on translation are
periodic basis. However, some collateral, for example, cash or generally recognised in profit or loss. However, foreign currency
market securities relating to margining requirements, is valued differences arising from the translation of equity investments
daily. in respect of which an election has been made to present
subsequent changes in fair value in OCI are recognised in OCI.
To the extent possible, the Group uses active market data
for valuing financial assets held as collateral. Non-financial The monetary assets and liabilities of foreign subsidiaries
collateral, such as real estate, is valued based on data provided are translated into SAR at rates of exchange prevailing at the
by third parties such as mortgage brokers, or based on housing date of the consolidated statement of financial position. The
price indices. statements of income of foreign subsidiaries are translated at
the weighted average exchange rates for the year.
Collateral repossessed
The Group’s policy is to determine whether a repossessed asset e) Trade date
can be best used for its internal operations or should be sold. All regular way purchases and sales of financial assets are
Assets determined to be useful for the internal operations recognized and derecognized on the trade date (i.e. the date
are transferred to their relevant asset category at the lower of on which the Group commits to purchase or sell the assets).
their repossessed value or the carrying value of the original Regular way purchases or sales of financial assets require
secured asset. Assets for which selling is determined to be a delivery of those assets within the time frame generally
better option are transferred to assets held for sale at their established by regulation or convention in the market place.
fair value (if financial assets) and fair value less cost to sell for All other financial assets and financial liabilities (including
non-financial assets at the repossession date in, line with the assets and liabilities designated at fair value through statement
Group’s policy. of income) are initially recognised on the trade date at which
the Group becomes a party to the contractual provisions of the
6) Financial guarantees and financing commitments instrument.
‘Financial guarantees’ are contracts that require the Group
to make specified payments to reimburse the holder for a
loss that it incurs because a specified debtor fails to make
payment when it is due in accordance with the terms of a debt
instrument. ‘financing commitments’ are firm commitments to
provide credit under pre-specified terms and conditions.

f) Offsetting financial instruments Dividend income is recognised when the right to receive income
Financial assets and financial liabilities are offset and are is established which is generally when the shareholders approve
reported net in the consolidated statement of financial position the dividend. Dividends are reflected as a component of net
when there is a legally enforceable right to set off the recognized trading income, net income from FVSI financial instruments or
amounts, and when the Group intends to settle on a net basis, or other operating income based on the underlying classification of
to realize the asset and settle the liability simultaneously. Income the equity instrument.
and expenses are not offset in the consolidated statement of
income unless required or permitted by any accounting standard Foreign currency exchange income / loss is recognized when
or interpretation, and as specifically disclosed in the accounting earned / incurred.
policies of the Group.
Net trading income results from trading activities and include
g) Revenue recognition all realised and unrealised gains and losses from changes in fair
The following specific recognition criteria must be met before value and related gross investment income or expense, dividends
revenue is recognized. for financial assets and financial liabilities held for trading and
foreign exchange differences.
Income from Mutajara, Murabaha, investments held at
amortized cost, installment sale, Istisna’a financing and credit Net income from FVSI financial instruments relates to financial
cards services is recognized based on the effective yield basis assets and liabilities designated as FVSI and includes all realised
on the outstanding balances. The effective yield is the rate that and unrealised fair value changes, investment income, dividends
exactly discounts the estimated future cash receipts through and foreign exchange differences.
the expected life of the financial asset (or, where appropriate,
a shorter period) to the carrying amount of the financial asset Rendering of services
. When calculating the effective yield, the Group estimates The Group provides various services to its customer. These
future cash flows considering all contractual terms of the services are either rendered separately or bundled together with
financial instrument but excluding future credit losses. Fees and rendering of other services.
commissions are recognized when the service has been provided.
The Group has concluded that revenue from rendering of
Financing commitment fees that are likely to be drawn down and various services related to payment service system, share
other credit related fees are deferred (above certain threshold) trading services, remittance business, SADAD and Mudaraba
and, together with the related direct cost, are recognized as (i.e. subscription, management and performance fees), should
an adjustment to the effective yield on the financing. When a be recognized at the point when services are rendered i.e. when
financing commitment is not expected to result in the draw-down performance obligation is satisfied.
of a financing, financing commitment fees are recognised on a
straight-line basis over the commitment period. h) Other real estate
The Group, in the ordinary course of business, acquires certain
Fee and commission income that are integral to the effective real estate against settlement of due financing. Such real estate
rate on a financial asset or financial liability are included in the are considered as assets held for sale and are initially stated
effective. at the lower of net realisable value of due financing and the
current fair value of the related properties, less any costs to sell (if
Portfolio and other management advisory and service fees material). Rental income from other real estate is recognised in
are recognized based on the applicable service contracts, the consolidated statement of income.
over the period when the service is being provided i.e. related
performance obligation is satisfied. i) Investment properties
Investment properties are held for long-term rental yield and
Fees received for asset management, wealth Management, are not occupied by the Group. They are carried at cost, and
financial planning, custody services and other similar services depreciation is charged to the consolidated statement of income.
that are provided over an extended period of time, are recognized
over the period when the service is being provided i.e. related The cost of investment properties is depreciated using the
performance obligation is satisfied. Asset management fees straight-line method over the estimated useful life of the assets.
related to investment funds are recognized over the period the
service is being provided. The same principle applies to Wealth j) Property and equipment
management and Custody Services that are continuously Property and equipment is stated at cost less accumulated
recognized over a period of time. depreciation and accumulated impairment loss. Land is not

depreciated. The cost of other property and equipment is o) Special commission excluded from the
Strategic Report
depreciated using the straight-line method over the estimated consolidated statement of income
useful life of the assets, as follows: In accordance with the Shari’a Authority’s resolutions, special
commission income (non-Shari’a compliant income) received
Leasehold land improvements over the lesser of the period of the by the Bank is excluded from the determination of financing
lease or the useful life and investment income of the Bank, and is transferred to other
liabilities in the consolidated statement of financial position and
Buildings – 33 years is subsequently paid-off to charities institution.
Leasehold building improvements – over the lease period or 3
years, whichever is shorter p) Provisions for employees’ end of service benefits
Equipment and furniture – 3 to 10 years The provision for employees’ end of service benefits is accrued
Right of use assets – over the lease period using actuarial valuation according to the regulations of Saudi
labor law and local regulatory requirements.
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at the date of each statement of financial q) Share-based payments
position. The Bank’s founders had established a share-based
compensation plan under which the entity receives services from
Gains and losses on disposals are determined by comparing the eligible employees as consideration for equity instruments of
proceeds with carrying amount. These are included in the Bank which are granted to the employees.
consolidated statement of income.
r) Mudaraba funds
All assets are reviewed for impairment at each reporting date and The Group carries out Mudaraba transactions on behalf of its
whenever events or changes in circumstances indicate that the customers, and are treated by the Group as being restricted
carrying amount may not be recoverable. Any carrying amount investments. These are included as off balance sheet items. The
is written down immediately to its recoverable amount if the Group’s share of profits from managing such funds is included in
asset’s carrying amount is greater than its estimated recoverable the Group’s consolidated statement of income.
amount.
s) Investment management services
k) Customers’ deposits The Bank provides investment management services to its
Customer deposits are financial liabilities that are initially customers, through its subsidiary which include management
recognized at fair value less transaction cost, being the fair value of certain mutual funds. Assets held in trust or in a fiduciary
of the consideration received, and are subsequently measured at capacity are not treated as assets of the Group and, accordingly,
amortized cost. are not included in the Group’s consolidated financial
statements. The Group’s share of these funds is included under
l) Provisions FVSI investments. Fees earned are disclosed in the consolidated
Provisions are recognized when the Group has present legal or statement of income.
constructive obligation as a result of past events, it is probable
that an outflow of resources embodying economic benefits will t) Bank’s products definition
be required to settle the obligation, and a reliable estimate of the The Bank provides its customers with banking products based
amount of the obligation can be made. on interest avoidance concept and in accordance with Shari’a
regulations. The following is a description of some of the
m) Cash and cash equivalents financing products:
For the purposes of the consolidated statement of cash flows,
‘cash and cash equivalents’ include notes and coins on hand, Mutajara financing:
balances with SAMA (excluding statutory deposits) and due from It is a financing agreement whereby the Bank purchases a
banks and other financial institutions with original maturity of commodity or an asset and sells it to the client based on a
90 days or less from the date of acquisition which are subject to purchase promise from the client with a deferred price higher
insignificant risk of changes in their fair value. than the cash price, accordingly the client becomes debtor to
the Bank with the sale amount and for the period agreed in the
n) Short-term employee benefits contract.
Short-term employee benefits are measured on an undiscounted
basis and are expensed as the related service is provided.

Installment sales financing: becomes a debtor to the Bank for the manufacturing price, which
It is a financing agreement whereby the Bank purchases a includes cost plus profit.
commodity or an asset and sells it to the client based on a
purchase promise from the client with a deferred price higher Murabaha financing:
than the cash price. It is a financing agreement whereby the Bank purchases
a commodity or asset and sells it to the client with a price
Accordingly the client becomes a debtor to the Bank with the representing the purchase price plus a profit known and agreed
sale amount to be paid through installments as agreed in the by the client which means that the client is aware of the cost and
contract. profit separately.
Istisnaa financing:
It is a financing agreement whereby the Bank contracts to
manufacture a commodity with certain known and accurate
specifications according to the client’s request. The client
4. CASH AND BALANCES WITH SAMA AND OTHER CENTRAL BANKS

Cash and balances with SAMA and other central banks as of 31 December comprise of the following:
2019 2018
(SAR‘000) (SAR‘000)
Cash in hand 7,404,276 8,133,635
Statutory deposits 20,663,503 19,444,194
Current account with SAMA 371,320 293,214
Mutajara with SAMA 10,855,000 15,375,000
Total 39,294,099 43,246,043
In accordance with the Banking Control Law and regulations The above statutory deposits are not available to finance the
issued by SAMA, the Bank is required to maintain a statutory Bank’s day-to-day operations and therefore are not considered as
deposit with SAMA and other central banks at stipulated part of cash and cash equivalents (note 24) when preparing the
percentages of its customers’ demand deposits, customers’ time consolidated statement of cash flows.
investment and other customers’ accounts calculated at the end
of each Gregorian month.
5. DUE FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

Due from banks and other financial institutions as of 31 December comprise the following:
2019 2018
(SAR‘000) (SAR‘000)
Current accounts 798,168 778,769
Mutajara 31,260,014 31,608,991
Total 32,058,182 32,387,760

The tables below depict the quality of due from banks and other financial institutions as at 31 December:
Strategic Report
2019 2018
(SAR‘000) (SAR‘000)
Investment grade (credit rating AAA to BBB) 31,601,630 31,381,339
Non-investment grade (credit rating BB+ to B-) 241,353 750,591
Unrated 215,199 255,830
Total 32,058,182 32,387,760
The credit quality of due from banks and other financial institutions is managed using external credit rating agencies. The above due
from banks and other financial institutions balances are neither past due nor impaired.
6. INVESTMENTS, NET
a) Investments comprise the following as of 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Investment in an associate 196,235 172,753
Investments held at amortized cost
Murabaha with Saudi Government and SAMA 24,991,978 22,477,145
Sukuk 17,973,379 17,395,957
Less: Impairment (Stage 1) (22,270) (28,337)
Total investments held at amortized cost 42,943,087 39,844,765
Investments held as FVSI
Mutual funds 1,230,711 1,141,584
Sukuk 800,000 800,000
Total investments held as FVSI 2,030,711 1,941,584
FVOCI investments
Equity investments 1,672,597 1,103,463
Total FVOCI investments 1,672,597 1,103,463
Investments 46,842,630 43,062,565
The designated FVSI investments included above are because the investments are expected to be held for the long-
designated upon initial recognition as FVSI and are in term for strategic purposes.
accordance with the documented risk management strategy of
the Bank. None of the strategic investments were disposed of during
2019, and there were no transfers of any cumulative gain or loss
All investments held at amortized cost are neither past due nor within equity relating to these investments.
impaired as of 31 December 2019 & 2018.
Investment in an associate
Equity investment securities designated as at FVOCI The Bank owns 22.5% (31 December 2018: 22.5%) shares of Al
At 1 January 2018, the Bank designated equity securities Rajhi Company for Cooperative Insurance, a Saudi Joint Stock
designated as at FVOCI. The FVOCI designation was made Company.

b) The analysis of the composition of investments as of 31 December is as follows:
Quoted Unquoted Total

2019 (SAR‘000) (SAR‘000) (SAR‘000)
Murabaha with Saudi Government and SAMA - 24,991,978 24,991,978
Sukuk 13,248,750 5,502,359 18,751,109
Equities 1,844,477 24,355 1,868,832
Mutual funds - 1,230,711 1,230,711
Total 15,093,227 31,749,403 46,842,630
Quoted Unquoted Total

2018 (SAR‘000) (SAR‘000) (SAR‘000)
Murabaha with Saudi Government and SAMA - 22,477,145 22,477,145
Sukuk 12,799,000 5,368,620 18,167,620
Equities 1,251,854 24,362 1,276,216
Mutual funds - 1,141,584 1,141,584
Total 14,050,854 29,011,711 43,062,565
c) The analysis of unrecognized gains and losses and fair values of investments as of 31 December are as follows:
Gross Gross
Gross unrecognized unrecognized
carrying value gains losses Fair value
2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Murabaha with Saudi Government and SAMA 24,991,978 276,199 - 25,268,177
Sukuk 18,773,379 384,209 - 19,157,588
Equities 1,868,832 42,954 - 1,911,786
Mutual funds 1,230,711 6,494 - 1,237,205
Total 46,864,900 709,856 - 47,574,756
Gross Gross
Gross unrecognized unrecognized
carrying value gains losses Fair value
2018 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Murabaha with Saudi Government and SAMA 22,477,145 198,467 - 22,675,612
Sukuk 18,195,957 9,011 - 18,204,968
Equities 1,276,216 - (126,599) 1,149,617
Mutual funds 1,141,584 - (2,173) 1,139,411
Total 43,090,902 207,478 (128,772) 43,169,608

d) Credit quality of investments
Strategic Report
2019 2018
(SAR‘000) (SAR‘000)
Sukuk - Investment grade 18,565,484 18,167,620
Sukuk - BB+ (Fitch) 185,625 -
Total 43,743,087 40,644,765
Investment Grade includes those investments having credit exposure equivalent to Standard and Poor’s rating of AAA to BBB. The
unrated category only comprise of unquoted sukuk. Fitch has assigned A rating to KSA as a country as at 31 December 2019 (31 December
2018 : A-).
e) The following is an analysis of foreign investments according to investment categories as at 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Sukuk 1,128,857 1,539,271
Investments held as FVSI
Equity investments 21,274 21,282
Mutual funds 13,409 23,543
Total 1,163,540 1,584,096
f) The following is an analysis of investments according to counterparties as at 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Government and quasi government 41,780,947 39,874,318
Banks and other financial institutions 800,000 800,000
Companies 3,053,242 1,275,000
Mutual funds 1,230,711 1,141,584
Less: Impairment (Stage 1) (22,270) (28,337)
Net investments 46,842,630 43,062,565

7. FINANCING, NET
7–1 Financing
a. Net financing as of 31 December comprises the following:
Allowance for
Performing Non-performing impairment Net financing
2019 (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000)
Mutajara 42,932,499 1,687,074 (3,042,329) 41,577,244
Installment sale 190,952,220 581,977 (3,810,196) 187,724,001
Murabaha 17,372,860 - (144,794) 17,228,066
Credit cards 3,128,029 47,742 (22,277) 3,153,494
Total 254,385,608 2,316,793 (7,019,596) 249,682,805
Allowance for
Performing Non-performing impairment Net financing
2018 (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000)
Mutajara 45,257,143 1,024,320 (2,562,159) 43,719,304
Installment sale 174,683,066 591,541 (4,024,656) 171,249,951
Murabaha 15,386,777 662,570 (1,219,747) 14,829,600
Credit cards 1,973,379 11,881 (25,909) 1,959,351
Total 237,300,365 2,290,312 (7,832,471) 231,758,206
b. The net financing by location, inside and outside the Kingdom of Saudi Arabia, as of 31 December is as follows:
2019
Installment
Mutajara sale Murabaha Credit cards Total
Description (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000)
Inside the Kingdom of Saudi Arabia 44,619,573 187,029,236 11,580,210 3,168,653 246,397,672
Outside the Kingdom of Saudi Arabia - 4,504,961 5,792,650 7,118 10,304,729
Gross financing 44,619,573 191,534,197 17,372,860 3,175,771 256,702,401
Allowance for impairment (3,042,329) (3,810,196) (144,794) (22,277) (7,019,596)
Net financing 41,577,244 187,724,001 17,228,066 3,153,494 249,682,805
2018
Installment
Mutajara sale Murabaha Credit cards Total
Description (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000)
Inside the Kingdom of Saudi Arabia 46,281,463 170,890,940 11,824,165 1,978,461 230,975,029
Outside the Kingdom of Saudi Arabia - 4,383,667 4,225,182 6,799 8,615,648
Gross financing 46,281,463 175,274,607 16,049,347 1,985,260 239,590,677
Allowance for impairment (2,562,159) (4,024,656) (1,219,747) (25,909) (7,832,471)
Net financing 43,719,304 171,249,951 14,829,600 1,959,351 231,758,206

The table below depicts the categories of financing as per main business segments at 31 December:
Strategic Report
Retail Corporate Total
2019 (SAR’000) (SAR’000) (SAR’000)
Mutajara 811,429 43,808,144 44,619,573
Installment sale 185,766,580 5,767,617 191,534,197
Murabaha 801,720 16,571,140 17,372,860
Credit cards 3,175,771 - 3,175,771
Financing, gross 190,555,500 66,146,901 256,702,401
Less: Allowance for impairment (3,832,473) (3,187,123) (7,019,596)
Financing, net 186,723,027 62,959,778 249,682,805

2018 (SAR’000) (SAR’000) (SAR’000)
Mutajara 320,987 45,960,476 46,281,463
Installment sale 168,453,798 6,820,809 175,274,607
Murabaha 373,612 15,675,735 16,049,347
Credit cards 1,985,260 - 1,985,260
Financing, gross 171,133,657 68,457,020 239,590,677
Less: Allowance for impairment (4,050,565) (3,781,906) (7,832,471)
Financing, net 167,083,092 64,675,114 231,758,206
The table below summarizes financing balances at 31 December that are neither past due nor impaired, past due but not impaired and
impaired, as per the main business segments of the Group:
Neither past due Past due but Allowance for

nor impaired not impaired Impaired Total impairment Net financing
2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Retail 189,591,885 333,896 629,719 190,555,500 (3,832,473) 186,723,027
Corporate 60,203,638 4,256,189 1,687,074 66,146,901 (3,187,123) 62,959,778
Total 249,795,523 4,590,085 2,316,793 256,702,401 (7,019,596) 249,682,805
Neither past due Past due but Allowance for

nor impaired not impaired Impaired Total impairment Net financing
Retail 169,473,152 276,300 603,457 170,352,909 (4,050,565) 166,302,344
Corporate 61,283,584 6,267,329 1,686,855 69,237,768 (3,781,906) 65,455,862
Total 230,756,736 6,543,629 2,290,312 239,590,677 (7,832,471) 231,758,206
Financing past due for less than 90 days is not treated as impaired, unless other available information proves otherwise. ‘Neither past
due nor impaired’ and ‘past due but not impaired’ comprise total performing financing.

7-2 Allowance for impairment of financing:
a. The movement in the allowance for impairment of financing for the years ended 31 December is as follows (included
in is the write-off amount of SAR 260 million which was written off against other financial assets).

2019 (SAR’000) (SAR’000) (SAR’000)
Balance at beginning of the year 4,050,565 3,781,906 7,832,471
Gross charge for the year 1,828,948 1,011,379 2,840,327
Bad debts written off against provision (2,047,040) (1,606,162) (3,653,202)
Balance at the end of the year 3,832,473 3,187,123 7,019,596

2018 (SAR’000) (SAR’000) (SAR’000)
Closing allowance as at 31 December 2017 (calculated under IAS 39) 2,023,434 3,531,776 5,555,210
Amounts restated through opening retained earnings 1,863,397 1,019,291 2,882,688
Opening impairment allowance as at 1 January 2018
3,886,831 4,551,067 8,437,898
(calculated under IFRS 9)
Gross charge for the year 1,563,491 1,193,705 2,757,196
Bad debts written off against provision (1,399,757) (1,962,866) (3,362,623)
Balance at the end of the year 4,050,565 3,781,906 7,832,471
b. The following table shows reconciliations from the opening to the closing balance of the impairment allowance for
financings to customers at amortized cost
Lifetime ECL not Lifetime ECL

12 month ECL credit impaired credit impaired Total
2019 (SAR ‘000’) (SAR ‘000’) (SAR ‘000’) (SAR ‘000’)
Financings to customers at amortized cost
Balance at 1 January 2019 2,649,346 3,360,889 2,033,418 8,043,653
Transfer to 12 month ECL 721,178 (721,178) - -
Transfer to Lifetime ECL not credit impaired (41,307) 95,244 (53,937) -
Transfer to Lifetime ECL credit impaired (9,290) (273,097) 282,387 -
Charge for the year (334,105) 639,699 2,691,920 2,997,514
Write-offs (469,302) (354,013) (2,569,887) (3,393,202)
Balance as at 31 December 2019 2,516,520 2,747,544 2,383,901 7,647,965
Lifetime ECL not Lifetime ECL

2018 (SAR ‘000’) (SAR ‘000’) (SAR ‘000’) (SAR ‘000’)
Financings to customers at amortized cost
Balance at 1 January 2018 2,643,679 4,094,076 1,700,143 8,437,898
Transfer to 12 month ECL 411,893 (411,893) - -
Transfer to Lifetime ECL not credit impaired (38,177) 112,134 (73,957) -
Transfer to Lifetime ECL credit impaired (8,766) (329,629) 338,395 -
Charge for the period 138,418 361,338 2,468,622 2,968,378
Write-offs (497,701) (465,137) (2,399,785) (3,362,623)
Balance as at 31 December 2018 2,649,346 3,360,889 2,033,418 8,043,653

Closing balance as at 31 December 2019, includes impairment 7-3 Impairment charge movement
Strategic Report
allowance related to off balance sheet items amounting to SAR The details of the impairment charge on financing for the year
368 million (2018: SAR 211 million) which is accounted for in other recorded in the consolidated statement of income is as follows:
liabilities. Closing balance of Lifetime ECL credit impaired differs
from total reported Non Performing financing (NPL) due to IFRS 9
implementation.
2019 2018
(SAR‘000) (SAR‘000)
Provided for the year for on balance sheet 2,840,327 2,757,196
Provided for the year for off balance sheet 157,187 211,182
Recovery of written off financing, net (1,225,249) (1,437,432)
Allowance for financing impairment, net 1,772,265 1,530,946
7-4 Installment sale under financing includes finance lease receivables, which are as follows:
2019 2018
(SAR‘000) (SAR‘000)
Gross receivables from finance leases 25,261,591 30,551,173
Less than 1 year 367,707 4,485
1 to 5 years 17,072,183 22,201,101
Over 5 years 7,821,701 8,345,587
25,261,591 30,551,173
Unearned future finance income on finance leases (3,690,399) (4,593,105)
Net receivables from finance leases 21,571,192 25,958,068

8. PROPERTY AND EQUIPMENT, NET
Property and equipment, net comprises the following as of 31 December:
Leasehold land Equipment

& buildings and
Land Buildings improvements furniture Total
COST
At 1 January 2018 2,320,596 3,827,002 941,671 5,379,504 12,468,773
Additions 23,229 502,482 34,242 959,949 1,519,902
Disposals - - (26,159) (35,391) (61,550)
At 31 December 2018 2,343,825 4,329,484 949,754 6,304,062 13,927,125
Additions 156 1,884,315 383,707 562,168 2,830,346
Disposals (6,096) - - (32,190) (38,286)
At 31 December 2019 2,337,885 6,213,799 1,333,461 6,834,040 16,719,185
ACCUMULATED DEPRECIATION
At 1 January 2018, as reported previously - 410,441 903,036 3,297,169 4,610,646
Restatement (note 37) - 2,982 441 83,764 87,187
Restated balance at 1 January 2018 (note 37) - 413,423 903,477 3,380,933 4,697,833
Restated charge for the year (note 37) - 70,818 15,745 516,573 603,136
Disposals - - - (23,279) (23,279)
At 31 December 2018 - 484,241 919,222 3,874,227 5,277,690
Charge for the year - 373,782 77,624 608,176 1,059,582
Disposals - - - (25,334) (25,334)
At 31 December 2019 - 858,023 996,846 4,457,069 6,311,938
NET BOOK VALUE
At 31 December 2019 2,337,885 5,355,776 336,615 2,376,971 10,407,247
At 31 December 2018 (Note 37) 2,343,825 3,845,243 30,532 2,429,835 8,649,435
At 1 January 2018 2,320,596 3,413,579 38,194 1,998,571 7,770,940
Buildings include work-in-progress amounting to SAR 159 million Equipment and furniture includes information technology-
as at 31 December 2019 (2018: SAR 1,595 million), and technology- related assets having net book value of SAR 2,053 million as at
related assets include work-in-progress amounting to SAR 608 31 December 2019 (2018: SAR 1,372 million).
million as of December 2019 (2018: SAR 419 million)
Included in the above line items are right-of-use assets as of
31 December 2019 of SAR 1,290 million. (2018: SAR nil).
Movement in right-of-use-assets for the year ended 31 December 2019
Building
(SAR‘000)
Right of use asset recognised as of 1 January 2019 1,352,361
Additions 177,738
Amortization (239,837)
Balance at the end of the year 1,290,262

9. INVESTMENT PROPERTIES, NET
Strategic Report
The net book value of the investment properties approximates the fair value.
Investment properties, net comprises the following as of 31 December:
Land Buildings Total

(SAR‘000) (SAR‘000) (SAR‘000)
COST
Balance at 1 January 2018 811,670 538,329 1,349,999
Additions - 447 447
At 31 December 2018 811,670 538,776 1,350,446
Additions 82,753 20,727 103,480
At 31 December 2019 894,423 559,503 1,453,926
ACCUMULATED DEPRECIATION
Balance at 1 January 2018 - (35,994) (35,994)
Charge for the year - (16,862) (16,862)
At 31 December 2018 - (52,856) (52,856)
Charge for the year - (17,221) (17,221)
At 31 December 2019 - (70,077) (70,077)
NET BOOK VALUE
At 31 December 2019 894,423 489,426 1,383,849
At 31 December 2018 811,670 485,920 1,297,590
At 1 January 2018 811,670 502,335 1,314,005
10. OTHER ASSETS, NET

Other assets, net comprise the following as of 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Receivables, net 1,125,228 879,916
Prepaid expenses 498,690 393,317
Assets in transit subject to financing 1,289,212 574,905
Accrued income 294,421 273,846
Cheques under collection 392,958 324,636
Advance payments 386,032 266,634
Other real estate 60,420 72,106
Others, net 370,803 843,885
Total 4,417,764 3,629,245

11. DUE TO BANKS AND OTHER FINANCIAL INSTITUTIONS
Due to banks and other financial institutions comprise the following as of 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Banks’ time investments 1,674,032 6,363,679
Total 2,219,604 7,289,624
12. CUSTOMERS’ DEPOSITS

Customers’ deposits by type comprise the following as of 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Demand deposits 284,299,851 268,416,842
Customers’ time investments 22,126,226 18,689,225
Other customer accounts 5,979,746 6,803,058
Total 312,405,823 293,909,125
The balance of the other customers’ accounts includes margins on letters of credit and guarantees, cheques under clearance and
transfers.
Customers’ deposits by currency comprise the following as of 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Saudi Arabian Riyals 298,569,853 282,460,829
Foreign currencies 13,835,970 11,448,296
Total 312,405,823 293,909,125
13. OTHER LIABILITIES

Other liabilities comprise the following as of 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Accounts payable 4,225,376 2,877,770
Employees’ end of service benefits liabilities (note 25) 980,304 901,970
Accrued expenses 1,243,720 974,599
Charities (note 32) 10,994 56,350
Zakat payable 4,627,204 6,338,103
Lease liability 1,294,689 -
Other 5,887,205 3,377,437
Total 18,269,492 14,526,229

14. SHARE CAPITAL 15. STATUTORY AND OTHER RESERVES
Strategic Report
The authorized, issued and fully paid share capital of the Bank The Banking Control Law in Saudi Arabia and the By-Laws of
consists of 2,500 million shares of SAR 10 each (2018: 1,625 the Bank require a transfer to statutory reserve at a minimum
million shares of SAR 10 each). of 25% of the annual net income for the year. Such transfers
continue until the reserve equals the paid up share capital. This
On the 4th of April 2019, the Bank’s extraordinary general reserve is presently not available for distribution.
assembly approved to increase the share capital from SAR
16,250 million to SAR 25,000 million through issuance of stock Other reserves includes FVOCI investments reserve, foreign
dividends (7 shares for every 13 shares held). The amount of the currency translation reserve and employee share plan reserve.
capital increase was transferred from retained earnings.
The movements in FVOCI investments, foreign currency
Basic and diluted earnings per share for the year ended reserves, and employee share plan reserve are summarized as
31 December 2019 and 2018 is calculated by dividing the follows:
net income for the year by 2,500 million shares to give a
retrospective effect of the change in the number of shares
increased as a result of the bonus shares issued. The diluted
earnings per share is the same as the basic earnings per share.
Foreign Employee Re-measurement
FVOCI currency share of employees’ end
investments translation Plan reserve of service benefits Total
2019 (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000)
Balance at beginning of the year (259,717) (126,948) 37,110 - (349,555)
Net change in fair value 178,773 - - - 178,773
Exchange difference on translation of
- 6,371 - - 6,371
foreign operations
Re-measurement of employees’ end of
- - - (51,630)
service benefits (note 25) (51,630)
Balance at the end of the year (80,944) (120,577) 37,110 (51,630) (216,041)
Foreign Employee Re-measurement

FVOCI currency share of employees’ end
investments translation Plan reserve of service benefits Total
Balance at beginning of the year (80,130) (74,311) 37,110 - (117,331)
Impact of adopting IFRS 9 (129,789) - - - (129,789)
Net change in fair value (49,798) - - - (49,798)
Exchange difference on translation of
- (52,637) - - (52,637)
foreign operations
Balance at the end of the year (259,717) (126,948) 37,110 - (349,555)

16. COMMITMENTS AND CONTINGENCIES Letters of credit, which are written undertakings by the Bank
on behalf of a customer authorizing a third party to draw drafts
a) Legal proceedings on the Bank up to a stipulated amount under specific terms
As at 31 December 2019, there were certain legal proceedings and conditions, are collateralized by the underlying shipments
outstanding against the Group in the normal course of business of goods to which they relate, and therefore, carry less risk.
including those relating to the extension of credit facilities. Acceptances comprise undertakings by the Bank to pay bills
Such proceedings are being reviewed by the concerned parties. of exchange drawn on customers. The Bank expects most
acceptances to be presented before being reimbursed by the
Provisions have been made for some of these legal cases based customers.
on the assessment of the Bank’s legal advisors.
Cash requirements under guarantees and letters of credit are
b) Capital commitments considerably less than the amount of the commitment because
As at 31 December 2019, the Group had capital commitments the Bank does not expect the third party to necessarily draw
of SAR 290 million (2018: SAR 170 million) relating to contracts funds under the agreement.
for computer software update and development, and SAR
145 million (2018: SAR 65 million) relating to building new Commitments to extend credit represent unused portions of
workstations, and development and improvement of new and authorization to extended credit, principally in the form of
existing branches. financing, guarantees and letters of credit. With respect to
credit risk relating to commitments to extend unused credit,
c) Credit related commitments and contingencies the Bank is potentially exposed to a loss in an amount which
The primary purpose of these instruments is to ensure that is equal to the total unused commitments. The likely amount
funds are available to customers as required. Credit related of loss, which cannot be reasonably estimated, is expected
commitments and contingencies mainly comprise letters of to be considerably less than the total unused commitments,
guarantee, standby letters of credit, acceptances and unused since most commitments to extend credit are contingent upon
commitments to extend credit. Guarantees and standby letters customers maintaining specific credit standards.
of credit, which represent irrevocable assurances that the Bank
will make payments in the event that a customer cannot meet The total outstanding commitments to extend credit do not
his obligations to third parties, carry the same credit risk as necessarily represent future cash requirements, as many of
financing. these commitments could expire without being funded.
1. The contractual maturities of the Bank’s commitments and contingent liabilities are as follows:
Less than 3 From 3 to 12 From 1 to 5

months months years Over 5 years Total
Letters of credit 474,436 327,843 88,663 - 890,942
Acceptances 219,370 105,592 - - 324,962
Letters of guarantee 1,178,236 2,985,474 765,867 43,623 4,973,200
Irrevocable commitments to extend credit 4,148,570 7,339,501 103,595 44,428 11,636,094
Total 6,020,612 10,758,410 958,125 88,051 17,825,198
Less than 3 From 3 to 12 From 1 to 5

months months years Over 5 years Total
Letters of credit 562,899 417,925 1,945 - 982,769
Acceptances 261,183 208,706 - - 469,889
Letters of guarantee 1,270,202 2,405,041 1,159,962 41,956 4,877,161
Irrevocable commitments to extend credit 2,459,684 2,901,726 855,965 265,061 6,482,436
Total 4,553,968 5,933,398 2,017,872 307,017 12,812,255

2. The analysis of commitments and contingencies by counter-party is as follows:
Strategic Report
2019 2018
(SAR‘000) (SAR‘000)
Corporates 16,322,590 11,704,696
Banks and other financial institutions 1,502,608 1,107,559
Total 17,825,198 12,812,255
17. NET FINANCING AND INVESTMENT INCOME
Net financing and investment income for the years ended 31 December comprises the following:
2019 2018
(SAR‘000) (SAR‘000)
Financing
Corporate Mutajara 2,531,823 2,379,009
Installment sale 11,154,919 9,990,021
Murabaha 859,641 781,737
Investments and other
Murabaha with SAMA 1,210,789 1,092,878
Mutajara with banks 1,007,516 563,249
Income from sukuk 197,895 186,815
Gross financing and investment income 16,962,583 14,993,709
Return on customers’ time investments (418,891) (346,796)
Return on due to banks and financial institutions’ time investments (115,969) (159,928)
Return on customers’, banks’ and financial institutions’ time investments (534,860) (506,724)
Net financing and investment income 16,427,723 14,486,985
18. FEE FROM BANKING SERVICES, NET

Fee from banking services, net for the years ended 31 December comprise the following:
2019 2018
(SAR‘000) (SAR‘000)
Fee income:
Drafts and remittances 354,981 397,142
Credit cards 441,705 499,020
Other electronic channel related 1,068,318 920,795
Brokerage and asset management, net 281,151 398,725
Others 711,525 462,263
Total fee income 2,857,680 2,677,945
Fee expenses:
ATM Interchange related (870,313) (810,911)
Fee from banking services, net 1,987,367 1,867,034

19. OTHER OPERATING INCOME, NET
Other operating income for the years ended 31 December comprises the following:
2019 2018
(SAR‘000) (SAR‘000)
Dividend income 58,625 39,852
Gain / (loss) on sale of property and equipment, net 568 (115)
Rental income from investment properties 117,718 115,280
Share in profit of an associate 23,481 47,928
Gain on investments held as FVSI 21,617 14,600
Loss on sale of other real estate (2,490) (32,000)
Other income, net 75,759 24,150
Total 295,278 209,695
20. SALARIES AND EMPLOYEES’ RELATED BENEFITS

The following tables provide an analysis of the salaries and employees’ related benefits for the years ended 31 December:
Variable compensations
Number of Fixed
employees compensation paid Cash Shares
2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Executives 17 35,204 18,196 46,133
Employees engaged in risk taking activities 1,626 512,278 64,282 24,537
Employees engaged in control functions 386 161,583 25,532 19,773
Other employees 11,410 1,703,026 168,397 25,866
Total 13,439 2,412,091 276,407 116,309
Accrued fixed compensations in 2019 - 168,138 - -
Other employees’ costs - 213,817 - -
Gross total 13,439 2,794,046 276,407 116,309
Variable compensations
Number of Fixed
employees compensation paid Cash Shares
2018 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Executives 17 31,515 18,352 35,712
Employees engaged in risk taking activities 1,460 391,876 57,459 15,818
Employees engaged in control functions 463 146,484 32,964 15,534
Other employees 11,592 1,876,868 197,110 18,360
Total 13,532 2,446,743 305,885 85,424
Accrued fixed compensations in 2018 - 148,136 - -
Other employees’ costs - 214,570 - -
Gross total 13,532 2,809,449 305,885 85,424

Salaries and employees’ related benefits include end of includes all official employees, permanent and temporary
Strategic Report
services, General Organization for Social Insurance, business contracted employees and service providers (contribution in
trips, training and other benefits. risk position if SAMA allows the use of external resources).
As the Kingdom of Saudi Arabia is part of the G-20, instructions For consistency with other banking institutions in the Kingdom
were given to all financial institutions in the Kingdom to of Saudi Arabia, the Bank has used a combination of fixed and
comply with the standards and principles of Basel II and the variable compensation to attract and maintain talent. The fixed
Financial Stability Board. compensation is assessed on a yearly basis by comparing it to
other local banks in the Kingdom of Saudi Arabia including the
SAMA, as the regulator for financial institutions in Saudi basic salaries, allowances and benefits which is related to the
Arabia, issued regulations on compensations and bonus in employees’ ranks. The variable compensation is related to the
accordance with the standards and principles of Basel II and employees’ performance and their compatibility to achieve
the Financial Stability Board. the agreed-on objectives. It includes incentives, performance
bonus and other benefits. Incentives are mainly paid to
In light of the above SAMA’s regulations, the Bank issued branches’ employees whereby the performance bonuses are
compensation and bonuses policy which was implemented paid to head office employees and others who do not qualify
after the Board of Directors approval. for incentives.
The scope of this policy is extended to include the Bank These bonuses and compensation are approved by the Board of
and its subsidiary companies (local and international) that Directors as a percentage of the Bank’s net income.
are operating in the financial services sector. Accordingly it
21. OTHER GENERAL AND ADMINISTRATIVE EXPENSES

Other general and administrative expenses for the years ended 31 December comprises the following:
2019 2018
(SAR‘000) (SAR‘000)
Communications and utilities expenses 481,424 356,061
Maintenance and security expenses 460,550 415,660
Cash feeding and transfer expenses 355,245 327,112
Software and IT support expenses 277,520 178,317
Other operational expenses 957,474 648,368
Total 2,532,213 1,925,518
22. EARNINGS PER SHARE 23. PAID AND PROPOSED DIVIDENDS

Earnings per share for the years ended 31 December 2019 and On 1 August 2019, the Bank has paid an interim dividends
2018 have been calculated by dividing the net income for the amounting to SAR 3,750 million (SAR 1.5 per share) for the first
period by 2,500 million shares to give a retrospective effect half of 2019. (2018: SAR 3,250 million (i.e. SAR 2 per share) based
(in the case of 2018) of the change in the number of shares on 1,625 million shares).
increased as a result of the bonus shares issued. The diluted
earnings per share is the same as the basic earnings per share. Also on 2 February 2020, the Board of Directors proposed final
dividends for the year 2019 amounting to SAR 3,750 million (i.e.
SAR 1.5 per share) (2018: SAR 3,656 million, (i.e. SAR 2.25 per
share) based on 1,625 million shares).

24. CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the consolidated statement of cash flows comprise the following:
2019 2018
(SAR‘000) (SAR‘000)
Cash in hand 7,404,276 8,133,635
Due from banks and other financial institutions maturing within 90 days from the date of
2,480,803 5,984,654
purchased
Balances with SAMA and other central banks (current accounts) 371,320 293,214
Mutajara with SAMA 10,855,000 15,375,000
Total 21,111,399 29,786,503
25. EMPLOYEES’ END OF SERVICE are made in accordance with the actuarial valuation under
BENEFITS LIABILITIES the projected unit credit method, while the benefit payments
liabilities are discharged as and when they fall due.
25.1 General description
The Bank operates an End of Service Benefit Plan for its
employees based on the prevailing Saudi Labor Laws. Accruals
25.2 The amounts recognized in the consolidated statement of financial position and movement in the
liabilities during the year based on its present value are as follows:
2019 2018
(SAR‘000) (SAR‘000)
Employees’ end of service benefits liabilities at the beginning of the year 901,970 848,422
Current service cost 98,541 107,685
Financing cost 39,845 85,995
Benefits paid (111,682) (140,132)
Remeasurement loss 51,630 -
Employees’ end of service benefits liabilities at the end of the year 980,304 901,970
25.3 Charge for the year
2019 2018
(SAR‘000) (SAR‘000)
Current service cost 98,541 106,152
Past service cost - 1,533
98,541 107,685

25.4 Re-measurement recognised in other comprehensive income
Strategic Report
2019 2018
(SAR‘000) (SAR‘000)
Gain from change in experience assumptions (5,940) -
Loss from change in financial assumptions 57,570 -
51,630 -
25.5 Principal actuarial assumptions (in respect of the employee benefit scheme)
2019 2018
Discount rate 4.20% 5.00%
Expected rate of salary increase 3.00% 3.00%
60 years for male employees 60 years for male employees
Normal retirement age
and 55 for female employees and 55 for female employees
Assumptions regarding future mortality are set based on 25.6 Sensitivity of actuarial assumptions
actuarial advice in accordance with the published statistics The table below illustrates the sensitivity of the employees’
and experience in the region. end of service benefits liabilities valuation as at 31 December,
2019 to the discount rate (4.20%), salary increase rate (3.00%),
withdrawal assumptions and mortality rates.
2019 Impact on defined benefit obligation – Increase / (Decrease)

Change in Increase in Decrease in
assumption assumption assumption
Base Scenario SAR 000’ SAR 000’ SAR 000’
Discount rate +/- 100 basis points (109,828) 131,671
Expected rate of salary increase +/- 100 basis points 131,949 (111,989)
Normal retirement age Increase or decrease by 20% 3,204 (4,098)
2018 Impact on defined benefit obligation – Increase / (Decrease)

Change in Increase in Decrease in
assumption assumption assumption
Base Scenario SAR 000’ SAR 000’ SAR 000’
Discount rate +/- 100 basis points (96,511) 115,452
Expected rate of salary increase +/- 100 basis points 117,256 (99,217)
Normal retirement age Increase or decrease by 20% 9,020 (10,824)
The above sensitivity analyses are based on a change in an assumption holding all other assumptions constant.

25.7 Expected maturity
Expected maturity analysis of undiscounted employees’ end of service benefits liabilities is as follows:
As at 31 Discounted Less than a

December liability year 1-2 years 2-5 years Over 5 years Total
2019 980,304 66,110 72,742 256,803 3,638,241 4,033,896
2018 901,970 61,300 71,836 244,884 3,519,680 3,897,700
The weighted average duration of the employees’ end of service benefits liabilities is 14.4 years (2018: 15 years).
26. OPERATING SEGMENTS reviewed by the chief operating decision maker, principally
The Bank identifies operating segments on the basis of internal the Chief Executive Officer, in order to allocate resources to the
reports about the activities of the Bank that are regularly segments and to assess its performance.
For management purposes, the Bank is organized into the following four main businesses segments:
Includes individual customer deposits, credit facilities, customer debit current accounts (overdrafts)
Retail segment:
and fees from banking services.
Corporate segment: Incorporates deposits of corporate customers, credit facilities, and debit current accounts (overdrafts).
Includes treasury services, Murabaha with SAMA and international Mutajara portfolio and
Treasury segment:
remittance business.
Investment services
Includes investments of individuals and corporates in mutual funds, local and international share
and brokerage
trading services and investment portfolios.
segments:
Transactions between the above segments are on normal commercial terms and conditions. Assets and liabilities for the segments
comprise operating assets and liabilities, which represents the majority of the Bank’s assets and liabilities.

a) The Bank’s total assets and liabilities, together with its total operating income and expenses, and net income, as of
Strategic Report
and for the years ended 31 December for each segment are as follows:
Investment
services and
Retail Corporate Treasury brokerage
segment segment segment segment Total
2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Total assets 208,945,668 59,406,741 112,968,906 2,765,261 384,086,576
Total liabilities 289,628,309 34,753,212 8,376,081 137,317 332,894,919
Gross financing and investment income from
11,115,534 3,329,362 2,493,337 24,350 16,962,583
external customers
Inter-segment operating income/ (expense) 1,432,229 (1,117,680) (314,549) - -
Gross financing and investment income 12,547,763 2,211,682 2,178,788 24,350 16,962,583
Return on customers’, banks’ and financial
(221,657) (127,114) (186,089) - (534,860)
institutions’ time investments
Net financing and investment income 12,326,106 2,084,568 1,992,699 24,350 16,427,723
Fees from banking services, net 971,089 366,932 252,103 397,243 1,987,367
Exchange income, net 159,805 67,405 546,886 - 774,096
Other operating income, net 133,815 13,017 106,661 41,785 295,278
Total operating income 13,590,815 2,531,922 2,898,349 463,378 19,484,464
Depreciation and amortization (983,974) (14,234) (54,958) (6,416) (1,059,582)
Impairment charge for financing and other
(1,713,370) (61,373) 2,478 - (1,772,265)
financial assets, net
Other operating expenses (4,467,064) (305,892) (407,238) (146,065) (5,326,259)
Total operating expenses (7,164,408) (381,499) (459,718) (152,481) (8,158,106)
Income before zakat 6,426,407 2,150,423 2,438,631 310,897 11,326,358
Investment
services and
Total assets 186,924,991 62,102,306 111,970,385 3,033,162 364,030,844
Total liabilities 273,115,320 28,763,133 13,716,156 130,369 315,724,978
Gross financing and investments income from
9,923,875 3,062,944 1,982,370 24,520 14,993,709
external customers
Inter-segment operating income/ (expense) 774,845 (898,876) 124,031 - -
Gross financing and investment income 10,698,720 2,164,068 2,106,401 24,520 14,993,709
Return on customers’, banks’ and financial
(124,676) (213,870) (159,928) (8,250) (506,724)
institutions’ time investments
Net financing & investment income 10,574,044 1,950,198 1,946,473 16,270 14,486,985
Fees from banking services, net 867,121 323,890 277,298 398,725 1,867,034
Exchange income, net 157,251 40,892 557,661 - 755,804
Other operating income, net 25,019 - 62,699 121,977 209,695
Total operating income 11,623,435 2,314,980 2,844,131 536,972 17,319,518
Depreciation and amortization (517,955) (9,948) (69,464) (5,769) (603,136)
Impairment charge for financing and other
(1,177,409) (302,895) (50,642) - (1,530,946)
financial assets, net
Other operating expenses (4,145,108) (322,513) (440,005) (141,908) (5,049,534)
Total operating expenses (5,840,472) (635,356) (560,111) (147,677) (7,183,616)
Income before zakat 5,782,963 1,679,624 2,284,020 389,295 10,135,902

b) The Group’s credit exposure by business segments as of 31 December is as follows:
Investment
services and
Consolidated balance sheet assets 166,049,907 55,905,791 100,797,864 2,730,512 325,484,074
Commitments and contingencies excluding
- 6,092,269 - - 6,092,269
irrevocable commitments to extend credit
Investment
services and
Consolidated balance sheet assets 155,728,107 52,268,997 94,240,742 2,552,885 304,790,731
Commitments and contingencies excluding
- 6,329,819 - - 6,329,819
irrevocable commitments to extend credit
27. FINANCIAL RISK MANAGEMENT financing (credit facilities provided to customers) and from cash
The Bank’s activities expose it to a variety of financial risks and and deposits held with other banks. Further, there is credit risk
those activities involve the analysis, evaluation, acceptance in certain off-balance sheet financial instruments, including
and management of some degree of risk or combination of guarantees relating to purchase and sale of foreign currencies,
risks. Taking risk is core to the banking business, and these letters of credit, acceptances and commitments to extend
risks are an inevitable consequence of participating in financial credit. Credit risk monitoring and control is performed by the
markets. The Bank’s aim is therefore to achieve an appropriate CRMG, which sets parameters and thresholds for the Bank’s
balance between risk and return and minimize potential financing activities.
adverse effects on the Bank’s financial performance.
a) Credit risk measurement
The Bank’s risk management policies, procedures and systems
are designed to identify and analyze these risks and to set i) Financing
appropriate risk mitigants and controls. The Bank reviews its The Bank has structured a number of financial products
risk management policies and systems on an ongoing basis which are in accordance with Sharia law in order to meet
to reflect changes in markets, products and emerging best the customers demand. These products are all classified as
practices. financing assets in the Bank’s consolidated statement of
financial position. In measuring credit risk of financing at
Risk management is performed by the Credit and Risk a counterparty level, the Bank considers the overall credit
Management Group (“CRMG”) under policies approved by the worthiness of the customer based on a proprietary risk
Board of Directors. The CRMG identifies and evaluates financial methodology.
risks in close co-operation with the Bank’s operating units.
The most important types of risks identified by the Bank are This risk rating methodology utilizes a 10 point scale based on
credit risk, liquidity risk and market risk. Market risk includes quantitative and qualitative factors with seven performing
currency risk, profit rate risk, operational risk and price risk. categories (rated 1 to 7) and three non-performing categories
(rated 8-10). The risk rating process is intended to advise the
27-1 Credit risk various independent approval authorities of the inherent risks
Credit risk is considered to be the most significant and associated with the counterparty and assist in determining
pervasive risk for the Bank. The Bank takes on exposure to suitable pricing commensurate with the associated risk.
credit risk, which is the risk that the counter-party to a financial
transaction will fail to discharge an obligation causing the
Bank to incur a financial loss. Credit risk arises principally from

ii) Credit risk grades Based on consideration of a variety of external actual and
Strategic Report
For corporate exposures, the Bank allocates each exposure to forecast information from published sources, the Bank
a credit risk grade based on a variety of data that is determined formulates a forward looking adjustment to PD term structures
to be predictive of the risk of default and applying experienced to arrive at forward looking PD estimates across the lifetime
credit judgment. Credit risk grades are defined using qualitative using macroeconomic models.
and quantitative factors that are indicative of risk of default.
These factors vary depending on the nature of the exposure and Risk Rating 1
the type of borrower. Exceptional - Obligors of unquestioned credit standing at the
pinnacle of credit quality.
Credit risk grades are defined and calibrated such that the risk
of default occurring increases exponentially as the credit risk Risk Rating 2
deteriorates so, for example, the difference in risk of default Excellent - Obligors of the highest quality, presently and
between credit risk grades 1 and 2 is smaller than the difference prospectively. Virtually no risk in lending to this class, Cash
between credit risk grades 2 and 3. flows reflect exceptionally large and stable margins of
protection. Projected cash flows including anticipated credit
Each corporate exposure is allocated to a credit risk grade at extensions indicate strong liquidity levels and debt service
initial recognition based on available information about the coverage. Balance Sheet parameters are strong, with excellent
borrower. Exposures are subject to ongoing monitoring, which asset quality in terms of value and liquidity.
may result in an exposure being moved to a different credit risk
grade. The monitoring of corporate exposure involves use of the Risk Rating 3
following data. Superior - Typically obligors at the lower end of the high quality
range with excellent prospects. Very good asset quality and
• Information obtained during periodic review of customer liquidity. Consistently strong debt capacity and coverage. There
files – e.g. audited financial statements, management could however be some elements, which with a low likelihood
accounts, budgets and projections. might impair performance in the future.
• Data from credit reference agencies, press articles, changes
in external credit ratings Risk Rating 4
• Actual and expected significant changes in the political, Good - Typically obligors in the high end of the medium range
regulatory and technological environment of the borrower who are definitely sound with minor risk characteristics.
or in its business activities Elements of strength are present in such areas as liquidity,
stability of margins, cash flows, diversity of assets, and lack of
Credit risk grades are a primary input into the determination dependence on one type of business.
of the term structure of PD for exposures. The Bank collects
performance and default information about its customers Risk Rating 5
analyzed by segment as well as by credit risk grading. Satisfactory - These are obligors with smaller margins of debt
service coverage and with some elements of reduced strength.
iii) Generating the term structure of PD Satisfactory asset quality, liquidity, and good debt capacity and
The Bank employs analytical techniques incorporating internal coverage. A loss year or declining earnings trend may occur, but
default estimates backed by transition matrices published by the borrowers have sufficient strength and financial flexibility
external agencies to construct PD term structures that can be to offset these issues.
applied to each exposure based on the its remaining lifetime.
These PD term structures are then adjusted to incorporate the Risk Rating 6
impact of macroeconomic outlook to arrive at a forward looking Adequate - Obligors with declining earnings, strained cash flow,
estimate of PD across the lifetime. increasing leverage and/ or weakening market fundamentals
that indicate above average risk, such borrowers have limited
For retail exposure, borrower and loan specific information additional debt capacity, modest coverage, average or below
collected at the time of application, repayment behavior etc. average asset quality and market share. Present borrower
are used to construct risk based segmentation using Chi- performance is satisfactory, but could be adversely affected by
square Automatic Interaction Detection (CHAID) (or Decision developing collateral quality/ adequacy etc.
Tree) technique. Risk segments are constructed to identify and
aggregate customers with similar risk characteristics. For each
risk segment thus formed, PD term structures are constructed
using historical data that can be applied to each exposure
based on its remaining lifetime.

Risk Rating 7 watch-list accounts, whereby the Bank’s assessment is based
Very high risk - Generally undesirable business constituting on counterparty. Significant increase in credit risk assessment
an undue and unwarranted credit risk but not to the point for retail loans is carried out at customer level within same
of justifying a substandard classification. No loss of principal product family. All the exposures which are considered to have
or profit has taken place. Potential weakness might include significantly increased in credit risk are subject to lifetime ECL.
a weakening financial condition, an unrealistic repayment
program, inadequate sources of funds, or a lack of adequate The Bank considers all investment grade debt securities
collateral, credit information or documentation. The entity is issued by sovereigns including Gulf Corporation Council (GCC)
undistinguished and mediocre. No new or incremental credits countries to have low credit risk.
will generally be considered for this category.
v) Determining whether credit risk has increased
Risk Rating 8 significantly
Substandard - Obligors in default and 90 Days Past Due on In determining whether credit risk has increased significantly
repayment of their obligations. Unacceptable business credit. since initial recognition, the Bank uses its internal credit risk
Normal repayment is in jeopardy, and there exists well defined grading system, external risk ratings, quantitative changes in
weakness in support of the same. The asset is inadequately PDs , delinquency status of accounts, expert credit judgement
protected by the current net worth and paying capacity of the and, where possible, relevant historical experience.
obligor or pledged collateral. Specific provision raised as an
estimate of potential loss. The credit risk of a particular exposure is deemed to have
increased significantly since initial recognition based on
Risk Rating 9 quantitative assessment and / or using its expert credit
Doubtful - Obligors in default and 180 Days Past Due (DPD) judgment and, where possible, relevant historical experience,
on their contracted obligations, however in the opinion of the Bank may determine that an exposure has undergone a
the management recovery/ salvage value against corporate significant increase in credit risk based on particular qualitative
and real estate obligors is a possibility, and hence write-off indicators that it considers are indicative of such and whose
should be deferred. Full repayment questionable. Serious effect may not otherwise be fully reflected in its quantitative
problems exist to the point where a partial loss of principle analysis on a timely basis.
is likely. Weaknesses are so pronounced that on the basis of
current information, conditions and values, collection in full As a backstop, the Bank considers that a significant increase in
is highly improbable. Specific provision raised as an estimate credit risk occurs no later than when an asset is more than 30
of potential loss. However, for retail obligors (except real days past due. Days past due are determined by counting the
estate) and credit cards, total loss is expected. A 100% Specific number of days since the earliest elapsed due date in respect
Provisioning must be triggered followed by the write-off process of which full payment has not been received. Due dates are
should be effected as per Al Rajhi Bank write-off policy. determined without considering any grace period that might be
available to the borrower.
Risk Rating 10
Loss - Obligors in default and 360 Days Past Due (DPD) on their The Bank monitors the effectiveness of the criteria used to
obligations. Total loss is expected. An uncollectible assets identify significant increases in credit risk by regular reviews to
which does not warrant classification as an active asset. A 100% confirm that:
Specific Provisioning must be triggered followed by the write-off
process should be effected as per Al Rajhi Bank write-off policy. • the criteria are capable of identifying significant increases
in credit risk before an exposure is in default;
iv) ECL - Significant increase in credit risk • the criteria do not align with the point in time when an
When determining whether the risk of default on a financial asset becomes 30 days past due; and
instrument has increased significantly since initial recognition, • there is no unwarranted volatility in loss allowance from
the Bank considers reasonable and supportable information transfers between 12-month PD (stage 1) and lifetime PD
that is relevant and available without undue cost or effort. This (stage 2).
includes both quantitative and qualitative information and
analysis, based on the Bank’s historical experience and expert The Bank classifies its financial instruments into stage 1, stage 2
credit assessment and including forward-looking information. and stage 3, based on the applied impairment methodology, as
described below: -
For Corporate portfolio, the Bank’s assessment of significant
increase in credit risk is based on facility level except for

Stage 1: for financial instruments where there has not been • the borrower is past due more than 90 days on any material
Strategic Report
a significant increase in credit risk since initial recognition credit obligation to the Bank.
and that are not credit-impaired on origination, the Bank
recognises an allowance based on the 12-month ECL. All Overdrafts are considered as being past due once the customer
accounts at origination would be classified as Stage 1. has breached an advised limit or been advised of a limit smaller
than the current amount outstanding.
Stage 2: for financial instruments where there has been a
significant increase in credit risk since initial recognition but In assessing whether a borrower is in default. the Bank
they are not credit-impaired, the Bank recognises an allowance considers indicators that are:
for the lifetime ECL for all financings categorized in this stage
based on the actual / expected behavioral maturity profile • qualitative- e.g. breaches of covenant;
including restructuring or rescheduling of facilities. • quantitative- e.g. overdue status and non-payment on
another obligation of the same issuer to the Bank; and
Stage 3: for credit-impaired financial instruments, the Bank • based on data developed internally and obtained from
recognises the lifetime ECL. Default identification process i.e. external sources.
DPD of 90 or more is assumed to be stage 3.
Inputs into the assessment of whether a financial instrument
vi) Modified financial assets
is in default and their significance may vary over time to reflect
The contractual terms of a loan may be modified for a number changes in circumstances.
of reasons, including changing market conditions, customer
retention and other factors not related to a current or potential The definition of default largely aligns with that applied for the
credit deterioration of the customer. An existing loan whose bank for regulatory purposes.
terms have been modified may be derecognized and the
renegotiated loan recognized as a new loan at fair value in viii) Incorporation of forward looking information
accordance with the accounting policy. The Bank incorporates forward-looking information into both
its assessment of whether the credit risk of an instrument
The Bank renegotiates loans to customers in financial has increased significantly since its initial recognition and
difficulties (referred to as ‘forbearance activities’ to maximize its measurement of ECL. Based on consideration of a variety
collection opportunities and minimize the risk of default. Under of external actual and forecast information from published
the Bank’s forbearance policy, loan forbearance is granted on sources, the Bank formulates a forward looking adjustment to
a selective basis if the debtor is currently in default on its debt PD term structures to arrive at forward looking PD estimates
or if there is a high risk of default, there is evidence that the across the lifetime using macroeconomic models.
debtor made all reasonable efforts to pay under the original
contractual terms and the debtor is expected to be able to meet The Bank considers scenarios in range of 3-5 years horizon
the revised terms. (consistent with forecasts available from public sources),
beyond which the long term average macroeconomic
The revised terms usually include extending the maturity, conditions prevail. Externally available macroeconomic
changing the timing of profit payments and amending the forecasts from International Monetary Fund (IMF) and Saudi
terms of loan covenants. Both retail and corporate loans are Arabian Monetary Authority (SAMA) are used for making the
subject to the forbearance policy. base case forecast. For other scenarios, adjustments are made
to base case forecasts based on expert judgement.
Forbearance is a qualitative indicator of a significant increase
in credit risk, and an expectation of forbearance may constitute
evidence that an exposure is credit-impaired/in default. A
customer needs to demonstrate consistently good payment
behavior over a period of 12 months before the exposure is no
longer considered to be credit-impaired/ in default.
vii) Definition of ‘Default’

The Bank considers a financial asset to be in default when:
• the borrower is unlikely to pay its credit obligations to the

Bank in full, without recourse by the Bank to actions such
as realizing security (if any is held); or

The base case represents a most-likely outcome as published by external sources. The other scenarios represent more optimistic and
more pessimistic outcomes.
Weightage
Economic Indicators 2019 2018
GDP growth rate 55.44% 56.29%
Government expenditure to GDP 44.56% 43.71%
Predicted relationships between the key indicators and default are based on internally compiled data comprising both
and loss rates on various portfolios of financial assets have been quantitative and qualitative factors. If a counterparty or
developed based on analyzing historical data. exposure migrates between ratings classes, then this will
lead to a change in the estimate of the associated PD. PDs are
ix) Measurement of ECL estimated considering the contractual maturities of exposures
The Bank measures an ECL at an individual instrument level and estimated prepayment rates.
taking into account the projected cash flows, PD, LGD, CCF and
discount rate. For Retail portfolio, bank uses internal LGD models to arrive
at the LGD estimates. For Corporate portfolio, bank used
The key inputs into the measurement of ECL are the term supervisory estimates of LGD.
structure of the following variables:
EAD represents the expected exposure in the event of a default.
1. probability of default (PD); The Bank derives the EAD from the current exposure to the
2. loss given default (LGD); counterparty and potential changes to the current amount
3. exposure at default (EAD). allowed under the contract including amortization. The EAD
of a financial asset is its gross carrying amount. For lending
These parameters are generally derived from internally commitments and financial guarantees, the EAD includes
developed statistical models and other historical data. They are the amount drawn, as well as potential future amounts that
adjusted to reflect forward-looking information as described may be drawn under the contract, which are estimated based
above. on historical observations and forward-looking forecasts.
The period of exposure limits the period over which possible
PD estimates are estimates at a certain date, which are defaults are considered and thus affects the determination of
calculated based on statistical rating models, and assessed PDs and measurement of ECLs (especially for Stage 2 accounts
using rating tools tailored to the various categories of with lifetime ECL).
counterparties and exposures. These statistical models
x) Credit quality analysis

a) The following table sets out information about the credit quality of financings measured at amortized cost as at 31 December :
Life time ECL not Lifetime ECL

2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Carrying amount distribution by Grades
Grade 1-3 / (Aaa - A3) 13,547,133 - - 13,547,133
Grade (4-6) / (Baa1 - B3) 44,673,584 3,134,911 - 47,808,495
Grade 7- Watch list / (Caa1 – C) - 3,104,199 - 3,104,199
Non-performing - - 1,687,074 1,687,074
Total Corporate performing and non-performing 58,220,717 6,239,110 1,687,074 66,146,901
Total Retail (un-rated) 187,409,069 2,516,712 629,719 190,555,500
Total Carrying amount 245,629,786 8,755,822 2,316,793 256,702,401

Life time ECL not Lifetime ECL
Strategic Report
2018 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Carrying amount distribution by Grades
Grade 1-3 / (Aaa - A3) 8,322,229 - - 8,322,229
Grade (4-6) / (Baa1 - B3) 44,092,511 12,217,422 - 56,309,933
Grade 7- Watch list / (Caa1 – C) - 2,918,751 - 2,918,751
Non-performing - - 1,686,855 1,686,855
Total Corporate performing and non-performing 52,414,740 15,136,173 1,686,855 69,237,768
Total Retail (un-rated) 166,676,629 3,072,823 603,457 170,352,909
Total Carrying amount 219,091,369 18,208,996 2,290,312 239,590,677
xi) Financings
a) The net financing concentration risks and the related provision, by major economic sectors at 31 December are as follows:
Non- Allowance for
2019 Performing Performing impairment Net financing
Description (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Commercial 19,661,771 590,056 (424,883) 19,826,944
Industrial 26,775,778 375,395 (283,941) 26,867,232
Building and construction 2,031,147 573,757 (401,434) 2,203,470
Consumer 192,926,177 674,114 (532,585) 193,067,706
Services 12,336,880 103,471 (70,882) 12,369,469
Agriculture and fishing 340,974 - - 340,974
Others 312,881 - - 312,881
Total 254,385,608 2,316,793 (1,713,725) 254,988,676
12 month and life time ECL not credit impaired - - (5,305,871) (5,305,871)
Balance 254,385,608 2,316,793 (7,019,596) 249,682,805
Non- Allowance for

2018 Performing Performing impairment Net financing
Description (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Commercial 17,365,910 746,180 (618,139) 17,493,951
Industrial 28,007,663 774,347 (696,112) 28,085,898
Building and construction 3,442,028 71,682 (82,411) 3,431,299
Consumer 171,255,069 603,423 (470,400) 171,388,092
Services 16,295,853 80,751 (75,584) 16,301,020
Agriculture and fishing 467,960 - - 467,960
Others 465,882 13,929 (6) 479,805
Total 237,300,365 2,290,312 (1,942,652) 237,648,025
12 month and life time ECL not credit impaired - - (5,889,819) (5,889,819)
Balance 237,300,365 2,290,312 (7,832,471) 231,758,206

b) The tables below set out the aging of financing past due but not impaired as at 31 December:
Mutajara Installment sale Credit cards Total

2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Age
up to 30 days 2,825,036 191,728 - 3,016,764
31-60 days 781,204 58,130 22,802 862,136
61-90 days 649,949 36,366 24,870 711,185
Total 4,256,189 286,224 47,672 4,590,085
Fair value of collateral 2,737,767 114,208 - 2,851,975
Mutajara Installment sale Credit cards Total

2018 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Age
up to 30 days 5,640,509 180,122 - 5,820,631
31-60 days 338,418 40,829 12,700 391,947
61-90 days 288,367 26,209 16,475 331,051
Total 6,267,294 247,160 29,175 6,543,629
Fair value of collateral 1,835,781 81,014 - 1,916,795
The Group in the ordinary course of lending activities hold The collaterals are held mainly against commercial and
collaterals as security to mitigate credit risk in financings. consumer loans and are managed against relevant exposures
These collaterals mostly include time, demand, and other cash at their net realizable values. For financial assets that are credit
deposits, financial guarantees, local and international equities, impaired at the reporting period, quantitative information
real estate and other fixed assets. Real estate collaterals against about the collateral held as security is needed to the extent that
financing are considered as held for sale and included in other such collateral mitigates credit risk.
assets.
c) The table below sets out gross balances of individually impaired financing, together with the fair value of related collateral held
by the Group as at 31 December:

2019 (SAR’000) (SAR’000) (SAR’000)
Individually impaired financing 629,719 1,687,074 2,316,793
Fair value of collateral 214,921 522,084 737,005

2018 (SAR’000) (SAR’000) (SAR’000)
Individually impaired financing 603,457 1,686,855 2,290,312
Fair value of collateral 176,992 1,971,724 2,148,716

d) The table below stratifies credit exposures from corporate or the amount committed for loan commitments to the value
Strategic Report
financing by ranges of loan-to-value (LTV) ratio. LTV is of the collateral. The gross amounts exclude any impairment
calculated as the ratio of the gross amount of the financing allowance.
2019 2018
(SAR’000) (SAR’000)
Less than 50% 61,167,858 65,100,456
51-70% 480,738 835,193
71-90% 428,167 1,382,614
91-100% - -
More than 100% 4,070,138 1,919,505
Total exposure 66,146,901 69,237,768
b) Settlement risk obligations to be similarly affected by changes in economic,
The Bank is also exposed to settlement risk in its dealings with political or other conditions. Concentrations of credit risks
other financial institutions. This risk arises when the Bank pays indicate the relative sensitivity of the Bank’s performance to
its side of the transaction to the other bank or counterparty developments affecting a particular industry or geographical
before receiving payment from the third party. The risk is location. The Bank seeks to manage its credit risk exposure
that the third party may not pay its obligation. While these through diversification of its financing to ensure there is no
exposures are short in duration, they can be significant. The undue concentration of risks with to individuals or groups
risk is mitigated by dealing with highly rated counterparties, of customers in specific geographical locations or economic
holding collateral and limiting the size of the exposures sectors.
according to the risk rating of the counterparty.
The Bank manages credit risk by placing limits on the amount
c) Risk limit control and mitigation policies of risk accepted in relation to individual customers and groups,
The responsibility for credit risk management is enterprise- and to geographic and economic segments. Such risks are
wide in scope. Strong risk management is integrated into monitored on a regular basis and are subject to an annual
daily processes, decision making and strategy setting, thereby or more frequent review, when considered necessary. Limits
making the understanding and management of credit risk the on the level of credit risk by product, economic sector and
responsibility of every business segment. by country are reviewed at least annually by the executive
committee.
The following business units within the Bank assist in the credit
control process: Exposure to credit risk is also managed through regular analysis
on the ability of customers and potential customers to meet
• Corporate Credit Unit. financial and contractual repayment obligations and by
• Credit Administration, Monitoring and Control Unit. revising credit limits where appropriate.
• Remedial Unit.
• Credit Policy Unit. Some other specific control and mitigation measures are
• Retail Credit Unit. outlined below:
The monitoring and management of credit risk associated with i) Collateral

these financing are made by setting approved credit limits. The Bank implements guidelines on the level and quality of
The Bank manages limits and controls concentrations of credit specific classes of collateral. The principal collateral types are:
risk wherever they are identified - in particular, to individual
customers and groups, and to industries and countries. • Mortgages over residential and commercial properties.
• Cash, shares, and general assets for customer.
Concentrations of credit risks arise when a number of • Shares for Murabaha (collateralized share trading)
customers are engaged in similar business activities, activities transactions.
in the same geographic region, or have similar economic
features that would cause their ability to meet contractual

The primary purpose of these instruments is to ensure that products, guarantees or letters of credit. With respect to credit
funds are available to a customer as required. Guarantees and risk on commitments to extend credit, the Bank is potentially
standby letters of credit carry the same credit risk as traditional exposed to loss in an amount equal to the total unused
banking products of the Bank. commitments. However, the likely amount of loss is less than
the total unused commitments, as most commitments to
Documentary and commercial letters of credit - which are extend credit are contingent upon customers maintaining
written undertakings by the Bank on behalf of a customer specific credit standards
authorizing a third party to draw drafts on the Bank up to a
stipulated amount under specific terms and conditions, are d) Impairment and provisioning policies
collateralized by the underlying goods to which they relate, and The table below sets out the maximum exposure to credit risk at
therefore, risk is partially mitigated. the reporting date without considering collateral or other credit
enhancements and includes the off-balance sheet financial
Commitments to extend credit represent unused portions of instruments involving credit risks as at 31 December:
authorizations to extend credit in the form of further financing
2019 2018
On-balance sheet items (SAR‘000) (SAR‘000)
Investments, net:
Sukuk 18,751,109 18,167,620
Due from banks and other financial institutions 32,058,182 32,387,760
Financing, net
Corporate 62,959,778 65,455,862
Retail 186,723,027 166,302,344
Total on-balance sheet items 325,484,074 304,790,731
Off-balance sheet items:
Letters of credit and acceptances 1,118,090 1,452,658
Letters of guarantee 4,974,179 4,877,161
Irrevocable commitments to extend credit 11,636,094 6,482,436
Total off-balance sheet items 17,728,363 12,812,255
Maximum exposure to credit risk 343,212,437 317,602,986
The exposures set out above are based on net carrying Liquidity risk management process
amounts as reported in the consolidated statement of The Bank’s liquidity management process is as monitored
financial position. by the Bank’s Asset and Liabilities Committee (ALCO), and
includes:
27-2 Liquidity risks
Liquidity risk is the risk that the Bank will be unable to • Day-to-day funding, managed by Treasury to ensure
meet its payment obligations associated with its financial that requirements can be met, and this includes
liabilities when they fall due and to replace funds when replenishment of funds as they mature or are invested;
they are withdrawn. The consequence may be the failure to • Monitoring balance sheet liquidity ratios against internal
meet obligations to repay deposits and financing parties and and regulatory requirements;
fulfill financing commitments. Liquidity risk can be caused • Managing the concentration and profile of debt
by market disruptions or by credit downgrades, which may maturities;
cause certain sources of funding to become unavailable • Maintaining diversified funding sources; and
immediately. Diverse funding sources available to the Bank • Liquidity management and asset and liability
help mitigate this risk. Assets are managed with liquidity in mismatching.
mind, maintaining a conservative balance of cash and cash
equivalents.

Monitoring and reporting take the form of analyzing cash flows addition to the statutory deposit, the Bank maintains a liquid
Strategic Report
of items with both contractual and non-contractual maturities. reserve of not less than 20% of the deposit liabilities, in the
The net cash flows are measured to ensure that they are within form of cash, gold or assets which can be converted into cash
acceptable ranges. The Treasury / ALCO also monitors the level within a period not exceeding 30 days. Also, the Bank has the
and type of undrawn lending commitments, usage of overdraft ability to raise additional funds through special financing
facilities and the potential impact of contingent liabilities such arrangements with SAMA including deferred sales transactions.
as standby letters of credit and guarantees may have on the
Bank’s liquidity position. The contractual maturities of financial assets and liabilities as
of 31 December based on discounted cash flows are as follows.
The tables below summarize the maturity profile of the Bank’s The table below reflects the expected cash flows indicated
assets and liabilities, on the basis of the remaining maturity as by the deposit retention history of the Group. Management
of the consolidated statement of financial position date to the monitors a rolling forecast of the Group’s liquidity position and
contractual maturity date. cash and cash equivalents on the basis of expected cash flows.
This is carried out in accordance with practice and limits set
Management monitors the maturity profile to ensure that by the Group and based on the pattern of historical deposit
adequate liquidity is maintained. Assets available to meet movements. In addition, the Group’s liquidity management
liabilities and to cover outstanding financing commitments policy involves projecting cash flows in major currencies and
include cash, balances with SAMA and due from banks. considering the level of liquid assets necessary to meet these,
Further, in accordance with the Banking Control Law and monitoring balance sheet liquidity ratios against internal
Regulations issued by SAMA, the Bank maintains a statutory and external regulatory requirements and maintaining debt
deposit equal to a sum not less than 7% of total customers’ financing plans.
deposits, and 4% of total other customers’ accounts. In
Less than 3 3 to 12 Over 5 No Fixed

months months 1 to 5 years years Maturity Total
Assets
Cash and balance with SAMA and other central banks 10,855,000 - - - 28,439,099 39,294,099
Due from banks and other financial institutions 11,494,160 6,575,839 13,988,183 - - 32,058,182
Financing, net
Mutajara 13,875,181 11,750,437 12,908,065 3,043,561 - 41,577,244
Installment sale 12,151,486 29,194,865 97,755,730 48,621,920 - 187,724,001
Murabaha 3,771,541 4,221,613 3,878,893 5,356,019 - 17,228,066
Credit cards 1,447,050 731,273 975,171 - - 3,153,494
Investments, net
Investment in an associate - - - - 196,235 196,235
Investments held at amortized cost 2,566,987 - 16,089,945 24,286,155 - 42,943,087
FVSI investments - - 800,000 - 1,230,711 2,030,711
FVOCI investments - - - - 1,672,597 1,672,597
Other assets, net - - - - 16,208,860 16,208,860
Total Liabilities 56,161,405 52,474,027 146,395,987 81,307,655 47,747,502 384,086,576
Due to banks and other financial institutions 1,885,035 - - - 334,569 2,219,604
Demand deposits - - - - 284,299,851 284,299,851
Customers' time investments 17,095,711 4,578,411 450,331 1,773 - 22,126,226
Other customer accounts 1,569,561 2,072,232 2,337,953 - - 5,979,746
Other liabilities - - - - 18,269,492 18,269,492
Total Liabilities 20,550,307 6,650,643 2,788,284 1,773 302,903,912 332,894,919
Gap 35,611,098 45,823,384 143,607,703 81,305,882 (255,156,410) 51,191,657

Assets
Cash and balance with SAMA and other central banks 15,375,000 - - - 27,871,043 43,246,043
Due from banks and other financial institutions 10,569,683 8,273,620 12,488,206 - 1,056,251 32,387,760
Financing, net
Mutajara 14,480,073 15,127,724 11,655,333 2,456,174 - 43,719,304
Installment sale 10,769,129 30,019,044 101,070,050 29,391,728 - 171,249,951
Murabaha 1,193,548 4,462,625 6,381,359 2,792,068 - 14,829,600
Credit cards 1,959,351 - - - - 1,959,351
Investments, net
Investment in an associate - - - - 172,753 172,753
Investments held at amortized cost 370,449 213,900 14,118,036 25,142,380 - 39,844,765
FVSI investments - 1,941,584 - - - 1,941,584
FVOCI investments - - - 1,103,463 - 1,103,463
Other assets, net - - - - 13,576,270 13,576,270
Total Liabilities 54,717,233 60,038,497 145,712,984 60,885,813 42,676,317 364,030,844
Due to banks and other financial institutions 3,951,361 2,583,028 - - 755,235 7,289,624
Demand deposits - - - - 268,416,842 268,416,842
Customers' time investments 17,027,753 1,661,472 - - - 18,689,225
Other customer accounts 1,662,667 1,359,251 3,781,140 - - 6,803,058
Total 22,641,781 5,603,751 3,781,140 - 283,698,306 315,724,978
Gap 32,075,452 54,434,746 141,931,844 60,885,813 (241,021,989) 48,305,866
The following tables disclose the maturity of contractual financial liabilities on undiscounted cash flows as at 31 December:

Due to banks and other financial institutions 2,342,000 - - - 334,569 2,676,569
Customer deposits 19,293,271 6,891,825 2,821,521 1,773 284,299,851 313,308,241
Total 21,635,271 6,891,825 2,821,521 1,773 302,903,912 334,254,302

Due to banks and other financial institutions 3,951,361 2,583,028 - - 755,235 7,289,624
Customer deposits 18,690,420 3,020,723 3,781,140 - 268,416,842 293,909,125
Total 22,641,781 5,603,751 3,781,140 - 283,698,306 315,724,978
The cumulative maturities of commitments and contingencies are given in note 16-c-1 of the consolidated financial statements.

27-3 Market risks to the effects of fluctuations in prevailing level of market profit
Strategic Report
The Bank is exposed to market risks, which is the risk that the rates on its future cash flows as a significant portion of profit
fair value or future cash flows of a financial instrument will earning financial assets and profit bearing liabilities are at fixed
fluctuate due to changes in market prices. Market risks arise rates and are carried in the financial statements at amortized
on profit rate products, foreign currency and mutual fund cost. In addition to this, a substantial portion of the Bank’s
products, all of which are exposed to general and specific financial liabilities are non-profit bearing.
market movements and changes in the level of volatility of
market rates or prices such as profit rates, foreign exchange Commission rate risk arises from the possibility that the
rates and quoted market prices. changes in profit rates will affect either the fair values or the
future cash flows of the financial instruments. The Board has
Market risk exposures are monitored by Treasury / Credit & established commission rate gap limits for stipulated periods.
Risk department and reported to ALCO on a monthly basis. The Bank monitors positions daily and uses gap management
ALCO deliberates on the risks taken and ensures that they are strategies to ensure maintenance of positions within the
appropriate. established gap limits.
a. Market risks - speculative operations The following table depicts the sensitivity to a reasonably
The Bank is not exposed to market risks from speculative possible change in profit rates, with other variables held
operations. The Bank is committed to Sharia guidelines constant, on the Bank’s consolidated statement of income or
which do not permit it to enter into contracts or speculative shareholders’ equity. The sensitivity of the income is the effect
instruments such as hedging, options, forward contracts and of the assumed changes in profit rates on the net income for
derivatives. one year, based on the floating rate non-trading financial assets
and financial liabilities held as at 31 December 2019 and 2018.
b. Market risks - banking operations The sensitivity of consolidated shareholders’ equity is the same
as sensitivity of consolidated income since the Bank does not
• Profit rate risk have fixed rate FVOCI financial assets as at 31 December 2019
Cash flow profit rate risk is the risk that the future cash flows of and 2018. All the banking book exposures are monitored and
a financial instrument will fluctuate due to changes in market analyzed in currency concentrations, and relevant sensitivities
profit rates. The Bank does not have any significant exposure are disclosed in SAR million.
2019 SAR in Million

Currency Increase in basis points Sensitivity of gross financing and investment income
As at 31 December Average Maximum Minimum
SAR +25 241 244 344 227
Decrease in basis points
SAR -25 (241) (244) (344) (227)
2018 SAR in Million

Currency Increase in basis points Sensitivity of gross financing and investment income
As at 31 December Average Maximum Minimum
SAR +25 201 204 216 193
Decrease in basis points
SAR -25 (201) (204) (216) (193)
Profit rate movements affect reported consolidated shareholders’equity through retained earnings, i.e. increases or decreases in
financing and investment income.

Commission sensitivity of assets, liabilities and off balance The table below summarizes the Bank’s exposure to profit rate
sheet items: risks. Included in the table are the Bank’s financial instruments
The Bank manages exposure to the effects of various risks at carrying amounts, categorized by the earlier of contractual
associated with fluctuations in the prevailing levels of market re-pricing or maturity dates.
profit rates on its financial position and cash flows.
The Bank is exposed to profit rate risk as a result of mismatches
The Board sets limits on the level of mismatch of commission or gaps in the amounts of assets and liabilities and off balance
rate repricing that may be undertaken, which is monitored sheet instruments that mature or re-price in a given period. The
daily by Bank Treasury. Bank manages this risk by matching the re-pricing of assets and
liabilities through risk management strategies.
Non
Less than 3 3 to 6 6 to 12 Commission
months months months 1 to 5 years Over 5 years Sensitive Total
31 December 2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Assets
Cash and balance with SAMA and
10,854,472 - - - - 28,439,627 39,294,099
other central banks
Due from banks and other
10,479,978 357,348 6,543,435 14,677,421 - - 32,058,182
financial institutions
Investments, net
Investment in an associate - - - - - 196,235 196,235
Investments held at amortized
26,001,235 1,252,000 - - 13,956,318 1,733,534 42,943,087
cost
FVSI investments - 800,000 - - - 1,230,711 2,030,711
FVOCI investments - - - - - 1,672,597 1,672,597
Financing, net
Mutajara 16,244,991 14,699,701 4,218,431 4,609,125 1,804,996 - 41,577,244
Installment sale 18,271,988 16,132,170 20,059,435 93,604,177 39,656,231 - 187,724,001
Murabaha 7,598,931 5,290,277 23,372 3,217,328 1,098,158 - 17,228,066
Credit cards 1,447,050 243,758 487,515 975,171 - - 3,153,494
Other assets - - - - - 16,208,860 16,208,860
Total Assets 90,898,645 38,775,254 31,332,188 117,083,222 56,515,703 49,481,564 384,086,576
Liabilities
Due to banks and other financial
1,677,579 - - - - 542,025 2,219,604
institutions
Customer deposits - - - - - 284,299,851 284,299,851
Customers' time investments 17,102,278 3,001,418 1,577,663 444,867 - - 22,126,226
Other customer accounts - - - - - 5,979,746 5,979,746
Other liabilities - - - - - 18,269,492 18,269,492
Total liabilities 18,779,857 3,001,418 1,577,663 444,867 - 309,091,114 332,894,919
Gap 72,118,788 35,773,836 29,754,525 116,638,355 56,515,703 (259,609,550) 51,191,657
Profit Rate Sensitivity – On
consolidated statement of 72,118,788 35,773,836 29,754,525 116,638,355 56,515,703 (259,609,550) 51,191,657
financial position
Profit Rate Sensitivity - Off
consolidated statement of 167,512 24,528 70,934 66,574 5,697 - 335,245
financial Position
Total Profit Rate Sensitivity
71,951,276 35,749,308 29,683,591 116,571,781 56,510,006 (259,609,550) 50,856,412
Gap
Cumulative Profit Rate
71,951,276 107,700,584 137,384,175 253,955,956 310,465,962 50,856,412 101,712,823
Sensitivity Gap

Non
Less than 3 3 to 6 6 to 12 Commission
Strategic Report
months months months 1 to 5 years Over 5 years Sensitive Total
31 December 2018 (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Assets
Cash and balance with SAMA and
35,112,408 - - - - 8,133,635 43,246,043
other central banks
Due from banks and other
11,306,178 987,681 7,810,067 11,227,583 - 1,056,251 32,387,760
Investments, net
Investment in an associate - - - - - 172,753 172,753
Investments held at amortized
23,952,560 - - 13,318,036 2,574,169 - 39,844,765
cost
Investments held as FVSI - - - - 1,941,584 1,941,584
FVOCI investments - - - - 1,103,463 - 1,103,463
Financing, net
Mutajara 17,239,834 19,924,825 3,958,429 2,596,216 - - 43,719,304
Installment sale 13,409,580 13,669,220 21,812,332 98,684,882 23,673,937 - 171,249,951
Murabaha 4,064,638 4,406,381 182 5,499,608 858,791 - 14,829,600
Credit cards 1,959,351 - - - - - 1,959,351
Other assets - - - - - 13,576,270 13,576,270
Total Assets 107,044,549 38,988,107 33,581,010 131,326,325 30,151,944 22,938,909 364,030,844
Liabilities
Due to banks and other financial
6,534,389 - - - - 755,235 7,289,624
institutions
Customer deposits - - - - - 268,416,843 268,416,843
Customers' time investments 17,027,753 213,057 1,448,415 - - - 18,689,225
Other customer accounts 1,362,776 311,575 589,356 4,539,350 - - 6,803,057
Other liabilities - - - - - 14,526,229 14,526,229
Total liabilities 24,924,918 524,632 2,037,771 4,539,350 - 283,698,307 315,724,978
Gap 82,119,631 38,463,475 31,543,239 126,786,975 30,151,944 (260,759,398) 48,305,866
Profit Rate Sensitivity - On
82,119,631 38,463,475 31,543,239 126,786,975 30,151,944 (260,759,398) 48,305,866
Statement of Financial Positions
Profit Rate Sensitivity - Off
439,043 - - - - - 439,043
Statement of Financial Positions
Total Profit Rate Sensitivity
81,680,588 38,463,475 31,543,239 126,786,975 30,151,944 (260,759,398) 47,866,823
Gap
Cumulative Profit Rate
81,680,588 120,144,063 151,687,302 278,474,277 308,626,221 47,866,823 95,733,646
Sensitivity Gap

• Foreign currency risks and the concentration of currency risks, Included in the table
The tables below summarize the Bank’s exposure to foreign are the Bank’s financial instruments at carrying amounts,
currency exchange rate risk at 31 December 2019 and 2018 categorized by currency:
UAE Japanese Malaysian Pound

Dirham Yen Euro Ringgit US Dollar Sterling Other Total
2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000)
ASSETS
Cash and cash
34,104 - 31,868 153,650 335,903 21,963 608,879 1,186,367
equivalents
Due from banks
and other financial 63,357 7,508 197,512 518,468 3,120,698 24,183 102,570 4,034,296
institutions
Financing, net - - - 4,846,668 5,531,037 - 4,504,063 14,881,768
Investments, net - - 367 894,904 2,007,106 - 255,369 3,157,746
Fixed assets 2,229 - 9,528 65,199 392,337 1,024 54,232 524,549
Other assets, net - - 1,889 171,338 74,963 831 21,534 270,555
Total Assets 99,690 7,508 241,164 6,650,227 11,462,044 48,001 5,546,647 24,055,281
LIABILITIES
Due to banks and
other financial 193 - 61,892 129,399 375,153 17 (622,790) (56,136)
institutions
Customers’
8,861 5,013 114,609 5,429,591 3,153,602 40,639 5,083,655 13,835,970
deposits
Other liabilities 4,369 707 110,713 103,126 740,687 9,023 237,542 1,206,167
Total Liabilities 13,423 5,720 287,214 5,662,116 4,269,442 49,679 4,698,407 14,986,001
Net 86,267 1,788 (46,050) 988,111 7,192,602 (1,678) 848,240 9,069,280
UAE Japanese Malaysian Pound

Dirham Yen Euro Ringgit US Dollar Sterling Other Total
2018 (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000) (SAR’000)
ASSETS
Cash and cash
25,946 - 29,291 193,088 568,393 15,538 504,016 1,336,272
equivalents
Due from banks
and other financial 117,748 5,302 145,528 520,081 1,979,909 30,803 721,623 3,520,994
institutions
Financing, net - - - 4,564,609 5,077,371 - 3,778,869 13,420,849
Investments, net - - 375 1,305,296 1,132,989 - 255,390 2,694,050
Fixed assets 1,226 - 6,578 41,423 269,965 993 36,782 356,967
Other assets, net - - 1,258 174,711 63,244 332 17,209 256,754
Total Assets 144,920 5,302 183,030 6,799,208 9,091,871 47,666 5,313,889 21,585,886
LIABILITIES
Due to banks and
other financial 71 - 5,169 569,557 3,304,930 17 (564,139) 3,315,605
institutions
Customers’
9,629 2,284 109,079 5,146,634 1,268,627 48,735 4,863,308 11,448,296
deposits
Other liabilities 17,305 699 97,032 117,000 695,523 8,882 196,799 1,133,241
Total Liabilities 27,005 2,983 211,280 5,833,191 5,269,080 57,634 4,495,968 15,897,142
Net 117,915 2,319 (28,250) 966,017 3,822,791 (9,968) 817,921 5,688,744

Currency risk represents the risk of change in the value of possible movements of the currency rate against SAR, with all
Strategic Report
financial instruments due to changes in foreign exchange other variables held constant, on the consolidated statement
rates. The Bank management has set limits on positions by of income (due to the fair value of the currency sensitive non-
currencies, which are regularly monitored to ensure that trading monetary assets and liabilities) and equity. A positive
positions are maintained within the limits. effect shows a potential increase in the consolidated statement
of income or consolidated shareholders’ equity, whereas
The table below shows the currencies to which the Bank has a negative effect shows a potential net reduction in the
a significant exposure as at 31 December 2019 and 2018, on its consolidated statement of income or consolidated statement of
non-trading monetary assets and liabilities and forecasted changes in shareholders’ equity.
cash flows. The analysis calculates the effect of reasonably
(SAR in million)
Currency Exposures Change in Currency Effect on Effect on
As at 31 December 2019 Rate in % Net Income Equity
AED +/-2 1,899 1,899
USD +/-2 140,917 140,917
EUR +/-5 (153) (153)
INR +/-5 (227) (227)
PKR +/-5 249 249
(SAR in million)
Currency Exposures Change in Currency Effect on Effect on
As at 31 December 2018 Rate in % Net Income Equity
AED +/-2 2,358 2,358
USD +/-2 76,146 76,146
EUR +/-5 (768) (768)
INR +/-5 1,813 1,813
PKR +/-5 547 547
Currency position the level of exposure by currency and in total for both overnight
The Bank manages exposure to the effects of fluctuations in and intra-day positions, which are monitored daily. At the
prevailing foreign currency exchange rates on its financial end of the year, the Bank had the following significant net
position and cash flows. The Board of Directors sets limits on exposures denominated in foreign currencies:
2019 2018
SAR ‘000 SAR ‘000
On-balance sheet items Long/(short) Long/(short)
US Dollar 7,192,602 3,822,791
Japanese Yen 1,788 2,319
Euro (46,050) (28,250)
Pound Sterling (1,678) (9,969)
UAE Dirham 86,267 117,914
Malaysian Ringgit 988,111 966,017
Others 848,240 817,921
Total 9,069,280 5,688,743

c. Price risk • Equity Price Risk
The Bank has certain investments which are carried at fair Equity risk refers to the risk of decrease in fair values of equities
value through the income statement (FVSI) and fair value in the Bank’s non-trading investment portfolio as a result of
through other comprehensive income (FVOCI). Price risk arises reasonably possible changes in levels of equity indices and the
due to changes in these investments. value of individual stocks.
As these investments are in a limited number of funds and The effect on the Bank’s equity investments held as FVOCI due
are not significant to the total investment portfolio, the Bank to reasonably possible changes in equity indices, with all other
monitors them periodically and determines the risk of holding variables held constant, as at 31 December is as follows:
them based on changes in market prices.
Other investments have little or no risks as these are bought for

immediate sales. Investments are made only with a confirmed
sale order, and therefore involve minimal risk.
2019 2018
Change in Effect Change in Effect
Local Market Indices Equity price % in SAR Million Equity price % in SAR Million
Local Share Equities + /- 10 +/- 164,824 + /- 10 +/- 107,910
d. Operational risk Risk by setting policies, developing systems, tools and

Operational risk is the risk of loss resulting from inadequate or methodologies, overseeing their implementation and use
failed internal processes, people, systems, and external events. within the business units and providing ongoing monitoring
and guidance across the Bank.
Operational risk is inherent in most of the Bank’s activities.
This necessitates an integrated approach to the identification, The three primary operational risk management processes in
measurement and monitoring of operational risk. the Bank are Risk Control Self Assessment, Operational Loss
Database and eventual implementation of Key Risk Indicators
An Operational Risk Management Unit (ORMU) has been which are designed to function in a mutually reinforcing
established within the Credit and Risk Management Group, manner.
which facilitates the management of Operational Risk within
the Bank. ORMU facilitates the management of Operational

28. GEOGRAPHICAL CONCENTRATION
Strategic Report
a) The distribution by the geographical region of the major categories of assets, liabilities, commitments,
contingencies and credit exposure accounts as of 31 December is as follows:
Kingdom of Other GCC and North South East Other

Saudi Arabia Middle East Europe America Asia Countries Total
2019 (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000)
Assets
Cash and balances with
SAMA and other central 39,206,336 69,209 - - 18,554 - 39,294,099
banks
Due from banks
and other financial 8,801,478 19,134,342 2,358,919 151,310 845,040 767,093 32,058,182
institutions
Financing, net
Mutajara 39,952,031 1,104,910 520,303 - - - 41,577,244
Installment sale 183,365,159 3,035,239 - - 1,323,603 - 187,724,001
Murabaha 11,574,137 2,131,177 - - 3,522,752 - 17,228,066
Credit cards 3,146,433 7,061 - - - - 3,153,494
Investments, net
Investment in an
196,235 - - - - - 196,235
associate
Investments held at
40,980,924 1,008,885 - - 953,278 - 42,943,087
amortized cost
FVSI Investments 1,406,111 624,233 367 - - - 2,030,711
FVOCI investments 1,651,690 20,907 - - - - 1,672,597
Total assets 330,280,534 27,135,963 2,879,589 151,310 6,663,227 767,093 367,877,716
Liabilities
Due to banks and other
1,338,054 470,707 - 384,922 25,921 - 2,219,604
Customer deposits 302,177,992 5,061,753 17,726 4,544 5,125,688 18,120 312,405,823
Total liabilities 303,516,046 5,532,460 17,726 389,466 5,151,609 18,120 314,625,427
Commitments and
16,455,181 633,737 99,182 94,220 421,820 121,058 17,825,198
contingencies
Credit exposure
(stated at credit 9,727,912 - - - 1,908,182 - 11,636,094
equivalent value)

Kingdom of Other GCC and North South East Other
Saudi Arabia Middle East Europe America Asia Countries Total
2018 (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000) (SAR‘000)
Assets
Cash and balances with
SAMA and other central 43,169,276 56,311 - - 20,456 - 43,246,043
banks
Due from banks
and other financial 10,803,907 19,835,928 755,337 61,154 919,489 11,945 32,387,760
institutions
Financing, net
Mutajara 40,595,689 1,023,541 2,100,074 - - - 43,719,304
Installment sale 166,866,283 2,885,814 - - 1,497,854 - 171,249,951
Murabaha 9,734,211 1,932,928 - - 3,162,461 - 14,829,600
Credit cards 1,952,552 5,575 - - 1,224 - 1,959,351
Investments, net
Investment in an
172,753 - - - - - 172,753
associate
Investments held at
38,132,001 349,095 - - 1,363,669 - 39,844,765
amortized cost
FVSI Investments 1,896,758 33,234 375 - 11,217 - 1,941,584
FVOCI investments 1,103,463 - - - - - 1,103,463
Total assets 314,426,893 26,122,426 2,855,786 61,154 6,976,370 11,945 350,454,574
Liabilities
Due to banks and other
6,401,763 44,133 - 329,267 514,461 - 7,289,624
Customer deposits 284,200,248 4,847,634 - - 4,860,064 1,179 293,909,125
Total liabilities 290,602,011 4,891,767 - 329,267 5,374,525 1,179 301,198,749
Commitments and
12,623,480 98,315 2,262 - 88,198 - 12,812,255
contingencies
Credit exposure
(stated at credit 4,401,104 - - - 2,081,332 - 6,482,436
equivalent value)

b) The distributions by geographical concentration of non-performing financing and allowance for impairment of
Strategic Report
financing are as follows:
Kingdom
of Saudi GCC and South East
Arabia Middle East of Asia Total
2019 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Non-performing
Mutajara 1,642,684 5,420 38,970 1,687,074
Installment sale 538,829 24,736 18,412 581,977
Murabaha - - - -
Credit cards 47,742 - - 47,742
Allowance for impairment of financing
Mutajara (1,285,340) (1,088) (19,427) (1,305,855)
Installment sale (522,160) (7,734) (497) (530,391)
Murabaha (144,794) - (10,751) (155,545)
Credit cards (9,083) - (287) (9,370)
Kingdom
of Saudi GCC and South East
Arabia Middle East of Asia Total
2018 (SAR’000) (SAR’000) (SAR’000) (SAR’000)
Non-performing
Mutajara 991,751 5,959 26,610 1,024,320
Installment sale 559,630 14,942 16,969 591,541
Murabaha 536,865 108,621 17,084 662,570
Credit cards 11,874 - 7 11,881
Allowance for impairment of financing
Mutajara (837,349) (2,066) (2,958) (842,373)
Installment sale (453,000) (10,185) (4,244) (467,429)
Murabaha (504,296) (108,500) (17,084) (629,880)
Credit cards (2,970) - - (2,970)
Refer to Note 7-1b for performing financing.

29. FAIR VALUE OF FINANCIAL ASSETS AND market participants at the measurement date. The fair value
LIABILITIES measurement is based on the presumption that the transaction
takes place either:
Determination of fair value and fair value hierarchy
The Group uses the following hierarchy for determining and • In the accessible principal market for the asset or liability,
disclosing the fair value of financial instruments: or
• In the absence of a principal market, in the most
• Level 1: quoted prices in active markets for the same advantageous accessible market for the asset or liability.
instrument (i.e. without modification or additions).
• Level 2: quoted prices in active markets for similar assets Carrying amounts and fair value:
and liabilities or other valuation techniques for which all The following table shows the carrying amounts and fair values
significant inputs are based on observable market data. of financial assets and financial liabilities as at 31 December,
• Level 3: valuation techniques for which any significant including their levels in the fair value hierarchy (refer note
input is not based on observable market data. 2d (ii)). It does not include fair value information for financial
assets and financial liabilities not measured at fair value if the
Fair value is the price that would be received to sell an asset carrying amount is a reasonable approximation of fair value.
or paid to transfer a liability in an orderly transaction between
Carrying
2019 value Level 1 Level 2 Level 3 Total
Financial assets
Financial assets measured at fair value
FVSI Investments – Mutual funds 1,230,711 - 1,230,711 - 1,230,711
FVOCI equity investments 1,672,597 1,648,243 - 24,355 1,672,598
FVSI Sukuk 800,000 800,000 800,000
Financial assets not measured at fair value
Due from banks and other financial institutions 32,058,182 - - 32,300,842 32,300,842
- Murabaha with Saudi Government and SAMA 24,991,978 - - 25,268,177 25,268,177
- Sukuk 17,973,379 - - 18,357,588 18,357,588
Gross Financing 256,702,401 275,942,492 275,942,492
Total 335,429,248 1,648,243 1,230,711 352,693,454 355,572,408
Financial liabilities
Financial liabilities not measured at fair value
Due to banks and other financial institutions 2,219,604 - - 2,219,642 2,219,642
Customers’ deposits 312,405,823 - - 312,405,823 312,405,823
Total 314,625,427 - - 314,625,465 314,625,465

Carrying
2018 value Level 1 Level 2 Level 3 Total
Strategic Report
Financial assets
Financial assets measured at fair value
FVSI Investments – Mutual funds 1,141,584 - 1,141,584 - 1,141,584
FVOCI equity investments 1,103,463 1,079,101 - 24,362 1,103,463
FVSI Sukuk 800,000 - - 800,000 800,000
Financial assets not measured at fair value
Due from banks and other financial institutions 32,387,760 - - 32,495,110 32,495,110
- Murabaha with Saudi Government and SAMA 22,477,145 - - 22,675,612 22,675,612
- Sukuk 17,395,957 - - 17,404,968 17,404,968
Gross Financing 239,590,677 - - 242,364,635 242,364,635
Total 314,896,586 1,079,101 1,141,584 315,764,687 317,985,372
Financial liabilities
Financial liabilities not measured at fair value
Due to banks and other financial institutions 7,289,624 - - 7,287,557 7,287,557
Customers’ deposits 293,909,125 - - 293,909,125 293,909,125
Total 301,198,749 - - 301,196,682 301,196,682
FVSI investments classified as level 2 include mutual funds, The value obtained from the relevant valuation model may
the fair value of which is determined based on the latest differ from the transaction price of a financial instrument.
reported net assets value (NAV) as at the date of statement of The difference between the transaction price and the model
consolidated financial position. value, commonly referred to as ‘day one profit and loss’, is
either amortized over the life of the transaction, deferred until
The level 3 financial assets measured at fair value represent the instrument’s fair value can be determined using market
investments recorded at cost. The carrying value of these observable data, or realized through disposal. Subsequent
investments approximates fair value. changes in fair value are recognized immediately in the
consolidated statement of income without reversal of deferred
Gross financing classified as level 3 has been valued using day one profits and losses.
expected cash flows discounted at relevant SIBOR as at 31
December 2019 and 2018. Investments held at amortized cost, During the current year, no financial assets / liabilities have
due to / from banks and other financial institutions have been been transferred between level 1 and/ or level 2 of the fair value
valued using the actual cash flows discounted at relevant hierarchy.
SIBOR/ SAMA murabaha rates as at 31 December 2019 and 2018.

30. RELATED PARTY TRANSACTIONS the regulations issued by SAMA. The nature and balances
In the ordinary course of business, the Bank transacts resulting from such transactions as at and for the year ended 31
business with related parties. The related party transactions December are as follows:
are governed by limits set by the Banking Control Law and
2019 2018
Related parties (SAR‘000) (SAR‘000)
Members of the Board of Directors
Mutajara 67,680 76,404
Contingent liabilities (*) 20 46,258
Companies and establishments guaranteed by members of the Board of Directors
Mutajara 7,244,210 8,040,701
Contingent liabilities (*) 877,158 952,343
Associate
Contributions receivable 142,152 252,706
Payable against claims 194,312 144,640
Bank balances 332,713 274,705
(*) = off balance sheet items.
Income and expenses pertaining to transactions with related parties included in the consolidated financial statements for the years
ended 31 December are as follows:
2019 2018
(SAR‘000) (SAR‘000)
Income from financing and other financial assets 135,422 139,496
Mudaraba Fees 79,316 68,272
Employees’ salaries and benefits (air tickets) 4,297 4,142
Rent and premises related expenses 5,521 2,238
Contribution – policies written 861,880 1,059,392
Claims incurred and notified during the period 662,212 900,207
Claims paid 615,901 905,840
Board of Directors’ remunerations 6,140 5,945
The amounts of compensations recorded in favor of or paid to the Board of Directors and the executive management personnel
during the years ended 31 December are as follows:
2019 2018
(SAR‘000) (SAR‘000)
Short-term benefits 99,533 85,579
Provision for employees’ end of service benefits 10,669 11,536
The executive management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Bank, directly or indirectly.

31. MUDARABA FUNDS
Strategic Report
Mudaraba funds comprise the following as at 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Customers’ Mudaraba and investments 23,255,708 21,070,580
Total 23,255,708 21,070,580
Mudaraba and investments accounts represents customers’ 32. SPECIAL COMMISSIONS EXCLUDED
investment portfolio managed by Al Rajhi Capital Company FROM THE CONSOLIDATED STATEMENT OF
and are considered as off balance sheet. Consistent with INCOME
the accounting policies of the Group, such balances are not The following represents the movements in charities account,
included in the consolidated financial statements as these are which is included in other liabilities (see note 13) for the year
held by the Group in a fiduciary capacity. ended 31 December:
2019 2018
(SAR‘000) (SAR‘000)
Balance at beginning of the year 56,350 16,854
Additions during the year 52,691 40,520
Payments made during the year (98,047) (1,024)
Balance at end of the year 10,994 56,350
33. INVESTMENT MANAGEMENT SERVICES 34. CAPITAL ADEQUACY

The Group offers investment services to its customers. The The Bank’s objectives when managing capital are to comply
Group has established a number of Mudaraba funds in with the capital requirements set by SAMA to safeguard the
different investment aspects. These funds are managed by the Bank’s ability to continue as a going concern; and to maintain a
Group’s Investment Department, and a portion of the funds strong capital base.
is also invested in participation with the Group. The Group
also offers investment management services to its customers Capital adequacy and the use of regulatory capital are
through its subsidiary, which include management of funds monitored daily by the Bank’s management. SAMA requires the
with total assets under management of SAR 42,084 million banks to hold the minimum level of the regulatory capital and
(2018: SAR 41,294 million). The mutual funds are not controlled also to maintain a ratio of total regulatory capital to the risk-
by the Group and neither are under significant influence to be weighted assets at or above 8%.
considered as associates / subsidiaries. Mutual funds’ financial
statements are not included in the consolidated financial The Bank monitors the adequacy of its capital using
statements of the Group. The Group’s share of investments in ratios established by SAMA. These ratios measure capital
these funds is included under investments, and is disclosed adequacy by comparing the Bank’s eligible capital with its
under related party transactions. Funds invested by the Group consolidated statement of financial position, commitments and
in those investment funds amounted to SAR 981 million at 31 contingencies, to reflect their relative risk as of 31 December:
December 2019 (2018: SAR 1,142 million).
2019 2018
(SAR‘000) (SAR‘000)
Credit risk weighted assets 234,299,968 222,309,112
Operational risk weighted assets 30,784,119 28,094,351
Market risk weighted assets 7,236,637 4,102,847
Total Pillar I - risk weighted assets 272,320,724 254,506,310

2019 2018
(SAR‘000) (SAR‘000)
Tier I – capital 51,191,657 48,305,866
Tier II capital 2,928,750 2,778,864
Total tier I & II capital 54,120,407 51,084,730
Capital Adequacy Ratio %
Tier I ratio 18.80% 18.98%
Tier I and II ratio 19.87% 20.07%
35. STANDARDS ISSUED BUT NOT YET 9 and IFRS 15 on or before the date it first applies IFRS 17. This
EFFECTIVE standard is not expected to have a significant impact on the
The new and amended standards and interpretations that are Group’s consolidated financial statements.
issued as listed below, but not yet effective, up to the date of
issuance of the Group’s consolidated financial statements are Amendments to IFRS 3: Definition of a Business
disclosed below. The Group is currently assessing the impact of In October 2018, the IASB issued amendments to the definition
these standards on the future financial statements and intends of a business in IFRS 3 Business Combinations to help entities
to adopt these new and amended standards, if applicable, determine whether an acquired set of activities and assets
when they become effective. is a business or not. They clarify the minimum requirements
for a business, remove the assessment of whether market
• IFRS 17 Insurance Contracts participants are capable of replacing any missing elements,
• Amendments to IFRS 3: Definition of a Business add guidance to help entities assess whether an acquired
• Amendments to IAS 1 and IAS 8: Definition of Material process is substantive, narrow the definitions of a business and
of outputs, and introduce an optional fair value concentration
IFRS 17 Insurance Contracts test. New illustrative examples were provided along with the
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS amendments.
17), a comprehensive new accounting standard for insurance
contracts covering recognition and measurement, presentation Since the amendments apply prospectively to transactions or
and disclosure. Once effective, IFRS 17 will replace IFRS 4 other events that occur on or after the date of first application,
Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 the Group will not be affected by these amendments on the
applies to all types of insurance contracts (i.e. life, non-life, date of transition.
direct insurance and re-insurance), regardless of the type of
entities that issue them, as well as to certain guarantees and Amendments to IAS 1 and IAS 8: Definition of
financial instruments with discretionary participation features. Material
In October 2018, the IASB issued amendments to IAS 1
A few scope exceptions will apply. The overall objective of IFRS Presentation of Financial Statements and IAS 8 Accounting
17 is to provide an accounting model for insurance contracts Policies, Changes in Accounting Estimates and Errors to align
that is more useful and consistent for insurers. In contrast the definition of ‘material’ across the standards and to clarify
to the requirements in IFRS 4, which are largely based on certain aspects of the definition. The new definition states that,
grandfathering previous local accounting policies, IFRS 17 information is material if omitting, misstating or obscuring it
provides a comprehensive model for insurance contracts, could reasonably be expected to influence decisions that the
covering all relevant accounting aspects. The core of IFRS 17 is primary users of general purpose financial statements make on
the general model, supplemented by: the basis of those financial statements, which provide financial
information about a specific reporting entity.’
• A specific adaptation for contracts with direct participation
features (the variable fee approach) The amendments to the definition of material is not expected to
• A simplified approach (the premium allocation approach) have a significant impact on the Group’s financial statements.
mainly for short-duration contracts
36. SUBSEQUENT EVENTS
IFRS 17 is effective for reporting periods beginning on or The Board of Directors proposed, on 2nd of February 2020, a
after 1 January 2022, with comparative figures required. Early distribution of final dividends to the shareholders for the year
application is permitted, provided the entity also applies IFRS amounting to SAR 3,750 million, of SAR 1.5 per share.

37. RESTATEMENT AND RECLASSIFICATION The change in the accounting treatment for zakat (as explained
OF PRIOR YEAR FIGURES
Strategic Report
in note 2) has the following impact on the line items of the
consolidated statement of income, consolidated statement of
a. Zakat financial position and consolidated statement of changes in
The Group is subject to Zakat in accordance with the shareholders’ equity.
regulations of the General Authority of Zakat and Income
Tax (“GAZT”). Zakat expense is charged to the consolidated As at and for the year ended 31 December 2018:
statement of income. Zakat is not accounted for as income tax,
and as such no deferred tax is calculated relating to zakat.
As previously
stated as at 31 December 2018
(given the retrospective effect Effect of As restated as at 31
Financial statement of bonus share issued) restatement December 2018
impacted Account SAR’000 SAR’000 SAR’000
Consolidated
Provision for zakat
statement of changes in 6,367,949 (6,367,949) -
(retained earnings)
Consolidated statement
Zakat - 6,367,949 6,367,949
of income
Consolidated statement
Earnings per share 4.12 (2.55) 1.57
of income
There has been no impact on the Group’s retained earnings and b. Capitalization of property and equipment
total shareholders’ equity balances as at 1 January 2018 as a The Bank has performed an analysis of capital work in progress
result of this change in accounting for Zakat. reported under property and equipment in the consolidated
statement of financial position. As a result of that analysis, the
As a major event during 2018, the Bank reached a settlement management identified certain assets amounting to SAR 1,902
agreement with the General Authority for Zakat and Income million that were not capitalized on a timely basis which has
Tax (GAZT), to settle the Zakat liability amounting to SAR resulted in an understatement of depreciation expenses in the
5,405,270,925 for the years up to 31 December 2017. The previous years.
settlement agreement required the Bank to settle 20% of
the agreed zakat liability in 2018, and the remaining will be The correction of the above error has resulted in the following
divided equally over the period of five years. Accordingly, the impact on the line items of the consolidated statement of
aforementioned zakat liability was re-classified from other income, consolidated statement of financial position and
reserves to other liabilities and was charged to the consolidated consolidated statement of changes in shareholders’ equity as
statement of income. detailed below:
As at 1 January 2018:
As previously stated Effect of As restated as at

as at 1 January 2018 Restatement 1 January 2018
Financial statement impacted Account SAR’000 SAR’000 SAR’000
Consolidated statement of financial Property and
7,858,127 (87,187) 7,770,940
position equipment
Consolidated statement of changes in
Retained earnings 13,906,736 (87,187) 13,819,549

As at and for the year ended 31 December 2018:
As previously stated as at and for As restated as at and

the year ended 31 December 2018 for year ended 31
Financial statement (given the retrospective effect of Effect ofRestatement December 2018
impacted Account bonus share issued)SAR’000 SAR’000 SAR’000
Consolidated
Property and
statement of financial 8,897,587 (248,152) 8,649,435
equipment
position
Consolidated
Retained
statement of changes 12,747,323 (248,152) 12,499,171
earnings
in shareholders’ equity
Consolidated
Depreciation 442,171 160,965 603,136
statement of income
Consolidated Earnings per
4.12 (0.06) 4.06
statement of income share
c. Reclassifications 38. APPROVAL OF THE BOARD OF

Financing related fee amortization, which had previously been DIRECTORS
included in fees from banking services, is now included in gross The consolidated financial statements were approved by the
financing and investment income. The change was made to Board of Directors on 23 Jumada Al Thani 1441H (corresponding
reflect financing related fee amortization as a yield adjustment to 17 February 2020).
to gross financing income. Accordingly, the previously
reported amounts in the consolidated financial statements
for the year ended 31 December 2018 have been reclassified to
conform to the current year presentation and therefore, this
change increases the previously reported gross financing and
investment income by SAR 1,234 million and reduces the fee
from banking services accordingly. In addition, an amount of
SAR 1,580 million has been reclassified from financing to due
from banks and other financial institutions as at 31 December
2018.
d. Other adjustment
The Bank has conducted a review of the timing of the
recognition of up-front fees and financing income relating to
retail credit products. As a result of the review, the method
of the application of the accounting policy on timing of the
recognition of up-front fees and financing income has been
amended to appropriately reflect the systematic deferral
of the recognition of such income. Based on materiality
considerations, an adjustment of SAR 799.4 million was only
made to the opening retained earnings as at 1 January 2018,
with a corresponding adjustment to deferred income as at that
date.

Notes

Al Rajhi Banking & Investment Corp.
Olaya Street
PO Box: 28 - Riyadh 11411,
Kingdom of Saudi Arabia
Tel: +966920003344 (KSA)
+966114603333 (International)
Fax: +966114603351, +966114600705
Web: www.alrajhibank.com.sa
E-mail: [email protected]
BANK OF THE FUTURE Annual Report 2019

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BANK OF THE

FUTURE These achievements are a testament to the power of

But we are not satisfied. We must capture the great

So, we begin a new chapter in our ambitious journey,

The web and mobile HTML versions are published online

10 About the Bank 68 Governance

Al Rajhi Bank Group Our Bank

Real Estate Retail banking

Brokerage Corporate banking

Professional Services International business

10 | BANK OF THE FUTURE

Integrity & Care for

Openness and Helping our Nurturing Contributing

Annual Report 2019 | 11

Financial Customer deposits

12 | BANK OF THE FUTURE

Largest Islamic Bank worldwide

In retail bank in the Middle East

2019: 13,146 In Distribution network in the

In banking transactions in KSA

2019: 96% In banking sector in NPS in KSA

Annual Report 2019 | 13

SAR 10.1 and branches. Despite the complex dynamics

million Bank’s net income for 2019 increased to SAR

Throughout 2019 we continued to achieve Dedicated and Loyal Staff

16 | BANK OF THE FUTURE

In addition to accelerating growth, becoming the employer of

Annual Report 2019 | 17

To further accelerate this growth and serve our

18 | BANK OF THE FUTURE

Annual Report 2019 | 19

20 | BANK OF THE FUTURE

Committees membership Committees membership

22 | BANK OF THE FUTURE

Annual Report 2019 | 23

Committees membership Committees membership Committees membership

24 | BANK OF THE FUTURE

Annual Report 2019 | 25

Current positions Current positions Current positions

Previous positions Previous positions Previous positions

Abdulaziz Saad Al Resais Ahmed Saleh Al Sudais Omar Mohammad Almudarra

Current positions Current positions Current positions

Previous positions Previous positions Previous positions

Qualifications Qualifications Qualifications

26 | BANK OF THE FUTURE

Majed Abdulrahman Alqwaiz Abdullah Sulaiman Alnami

Current positions Current positions

Annual Report 2019 | 27

The Saudi banking sector continues to evolve

Al Raji Bank’s business model is

pages 62 to 65. In terms of risk

30 | BANK OF THE FUTURE

Outputs Outcomes Impact

Grow mortgages, retail, Value derived:

Value delivered: Move the Bank towards

Annual Report 2019 | 31

Improve yields Strengthen risk

Exceed industry Deliver

32 | BANK OF THE FUTURE

34 | BANK OF THE FUTURE