Welcome to the Saudi Awwal Bank Q2 results 2026 webcast. With us today, we have the CEO and Managing Director, Tony Cripps, Chief Financial Officer, Lama Ghazzaoui, and the Head of Investor Relations, Sirish Patel. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone, and then you will hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I will now hand over to Sirish.
Thank you. Hello, and welcome to the results call for the Q2 and H1 of 2026. As mentioned by the phone operator, we have our CEO and Managing Director, Tony Cripps, and our CFO, Lama Ghazzaoui, with us on the call today. We will keep the presentation fairly brief so we can move straight onto the Q&A. Without further ado, I will hand you now over to Tony to start the presentation.
Great. Thanks, Sirish, and welcome everybody to the half-year call. It is fair to say that the Q2 started with considerable uncertainties, given regional activity and the ongoing conflict. But the kingdom has been very resilient. It is in our results. It is in the industry's results. Yes, there has been a slowdown. That wasn't unexpected in any case. So we are still seeing strong signs of opportunities, even though there has been a slowdown in trade, in exports, et cetera. And property also has seen some slowdown in mortgage lending. But we continue to be delivering our plans as we expected up till the half- year, and we are confident that we will in the H2 of the year as well, despite some uncertainties. When we came into the year with a prudent mindset, and it wasn't because of the conflict that erupted in the Q2.
It was a view that the interest rate outlook was uncertain. Were tariffs going to cause inflation? As it turns out, not much, but they were questions and what it meant for us, and some of the changes in the outlook for the residential property market and perhaps even the commercial property market. We adopted a prudent liquidity position. We had excess liquidity for a reason. And we increased our loan loss coverage through an overlay, which we have previously communicated. And again, this was prudent, and if things work out as we expect they will in the H2, then some of those, or the overlays can be reversed to some extent, and also the liquidity position can be reduced. As always, I will let Lama go through the financials.
The highlights from my point of view is we've seen strong loan growth in the Q2 continuing with 13% year-over-year, and this is fairly balanced between Corporate and Retail, with Corporate driven by our leadership in the large Corporate and Institutional Banking space as always, and Retail, which is driven predominantly by mortgages. Trade has performed well even with the backdrop. In fact, our fee income related to trade, our guarantees and letters of credit business has grown quarter-on-quarter by 6%, which is a testament to our extremely strong leadership position, where we continue to hold a market share of 24%-25%. Growth in this revenue stream comes, as I said, despite the overall softening in the market.
NIM and margins were stable during the quarter, and given the loan growth we saw in the quarter, this has led to a 3% quarter-on-quarter increase in NSCI. Overall fees rebounded in the Q2 by 40%. I'm sure you'll ask in the Q&A around that. Given the expectations on long-term rates, we decided to pause on some of the planned disposals. We took some capital gains in Q1 and also hedged a fairly large proportion of the book. We have about half the risk in the book with anticipating higher rates. Depending on where rates get to, it gives us an opportunity to reinvest at better yields later in the year, perhaps. Costs have grown at a very moderate 3% year-over-year, which was about plan. We have invested more in resilience, in tech especially, and AI.
Without overblowing the impact in the short term, we know that these investments in the medium to long term will produce significant productivity gains, which is predominantly where we've made the investments as tools for people in risk and compliance and audit, credit papers. All of these use cases which we've started will produce productivity gains, which will help in the future. Asset quality remains robust and cost of risk remains well below guidance. No need to increase the overlay that we took in the Q1, of course. In fact, we have already reversed SAR 100 million of that during the Q2.
Finally, returns remain in line with expectations at around 14.3% RoTE for the first six months of the year. Obviously, that figure would be higher if it wasn't for the conservative overlay. Lama will give you an update on that later. We delivered SAR 4.4 billion of profit for the first six months, which is a 4% increase on the prior year, which was in line with guidance. Despite the challenging backdrop, the bank has delivered a strong set of results, which I'm pleased with. Over to Lama for more details on the financials. Thank you.
Thank you, Tony. Welcome, everyone. I'll start on slide five. We generated SAR 4.4 billion of net income for the H1, which was up 4% year-on-year. Net special commission income was up 1% year-on-year, together with higher gains from the investment portfolio. Overall, revenues were down as the increases earlier were more than offset by the impact in the first and Q2 of lower fees, in part from changes to consumer regulations and also costs relating to some of our credit card programs. Impairments were significantly lower from a handful of recoveries and lower overall charges, and a small release to the overall overlay we took last quarter. In addition, the profit increase was also supported by essentially an income tax rebate relating to prior periods. The bottom left chart shows the key year-on-year movements.
On a quarter-to-date sequential basis, we delivered SAR 2.3 billion of net income or profit, which was up 12%. It was pleasing to see 3% growth in net special commission income quarter-on-quarter with a stabilization in NIMs. Equally pleasing to see a strong rebound in fee income in the Q2 as some of our initiatives that we mentioned in the last call started to bear fruit. Operating profits were also up 2% quarter-on-quarter. With the added benefit of low cost of risk and the income tax rebate we mentioned earlier, total profits were up 12% sequentially. Key ratios are at the top right-hand side of the slide. As mentioned, NIMs remained stable at 2.53% during 2026 so far, but are down on last year following the rate cuts we had in 2025.
RoTE is down year-on-year, largely affected by lower NIMs and the impact we felt in our fee income line over the past few quarters. However, RoTE still remains in our 14%-15% guidance range for this year. Cost efficiency ratio was 30.4%, which is slightly higher than our original plan for the year. This is also exacerbated by the challenges we've seen on fee income this year. Cost of risk of 11 basis points is ahead of guidance. We finished the half with a CET1 ratio of 14.2%. Onto balance sheet. Gross loans grew 4% during the quarter, 7% year-to-date, 13% year-over-year. So far, sentiment amongst our corporate customer base remains strong and perhaps even stronger than when we last spoke on our Q1 earnings call.
We're clearly growing faster than the market. Much of this is the pipeline in action from the deals we've been working on for the last 6-12 months. Customer deposits have grown in step with loans, with 6% year-to-date growth. Our non-interest-bearing deposits have also grown at a healthy 3%. Onto slide six, we delivered SAR 3.7 billion of revenue in the quarter. We saw good net special commission income expansion from stable NIMs and loan growth. We also saw a good rebound in fee income. These factors were partly offset by a fall in trading income in the Q2 as we elected to hold onto certain investments for their ongoing income, as market conditions were not appropriate for further disposal.
On slide seven, we've had stability in our quarterly Net Special Commission Income for a number of quarters now, where largely falling NIMs have broadly been offset by volume growth. Particularly pleasing is the stability in NIM quarter-over-quarter, which hopefully marks the floor of our expected NIM in the short term. We are mindful of the stickiness of the cost of funding. Where opportunities exist, we are managing to uplift customer margins. As we previously said, this is likely to have more of an impact in the H2 of this year. The efforts of our RMs in supporting the stability we've seen in our yields is happening. Non-funds income sequentially has essentially three themes. We've seen a good rebound in fee income, as I said, from growth, and this was in trade-related fees despite the current backdrop.
As we mentioned last quarter, we looked for efficiencies in some of the costs related to our credit card programs, these dropped in the Q2. FX income remains stable. Volumes are likely to be affected by the current uncertain backdrop, but the fact that they have remained at these levels is a testament to the strength we have in this business. On other income, which is largely trading related, investment income was down sequentially as the Q1 had significant capital gains. As I mentioned, we elected to retain some of these investments given the current outlook for benchmark rates. Onto slide nine, costs. Costs are fairly stable, 3% growth year-over-year and a 1% increase quarter-over-quarter. We expect cost growth for the year to be low single digits.
We continue to invest in tech and AI, as Tony mentioned, much of which will result in longer term productivity gains. Cost efficiency remains slightly higher than we originally envisaged, this is reflective of the tougher revenue environment we've experienced so far, particularly following the changes to fee income capture. Expected Credit Losses, slide 10. They were low in the Q2. This was supported by a number of recoveries, handful of recoveries, together with a small reversal from our overlay we took in Q1. As a reminder, we had elected to take an overlay for certain sectors and customers, which we felt might be more acutely impacted by the challenging environment and if this backdrop continued for a protracted time period. So far, the signs from our portfolio remain positive, as each month goes by, we will revisit the overlay and whether it is required.
We do remain, of course, watchful on other key names that are under stress, although not really conflict related. Slide 11, lending growth. Be quick here. We have continued to grow the book, have seen 4% quarter-over-quarter growth, which was balanced throughout the quarter across corporate and retail. Slide 12, corporate loan growth 4% in the quarter, as you can see, originations are healthy. Slide 13, retail faster than market growth, although the overall sector is slowing. Mortgage originations also remain strong, clear that the market continues to slow. Onto funding and liquidity, as mentioned earlier, at the start of the year, we felt as a management team that it would be prudent to ensure that our liquidity levels remain high. We have ensured that our LDR ratios also remain stable together with the non-interest-bearing balances. Onto capital and returns.
We have generated a RoTE of 14.3% post AT1 coupon for the H1 of 2026. Excluding the overlay, this would have been greater than 15%. This, as you can imagine, includes the effect of the significant overlay in ECL, headwinds on fee income, and additional cost of liquidity. We are pleased that we are very close to the guidance range given these factors. CET1 fell to 14.2%, reflecting RWA growth in line with the growth we saw in both customer lending and also off-balance sheet performance. Volatility in CET1 from the OCI mark to market was limited because of the effect from rising longer-term rates was offset by narrowing Saudi spreads and from the disposal of part of the portfolio in the Q1. We expect further optimization of the capital base in the H2 of the year.
Onto guidance. H1 performance has been largely in line with plans at the start of the year, although the factors we've mentioned earlier will have had some impact on our H1 financials, notably the impact from consumer regulatory changes on fees, prudently building up liquidity, low cost of risk despite taking an overlay, and the income tax rebate. The outlook remains uncertain, but sentiment within our customer base actually feels better than it did three months ago, which is really promising to see. Loan growth guidance was originally planned to be greater than 10% on the basis that the market grew high single digits. Clearly, the market overall is slowing, and we will be taking decisions in the H2 on growth, dependent on the returns that these opportunities can bring. If the right opportunities present themselves at the right returns, then our growth trajectory could continue.
At the same time, we can flex it to be slower if the economics do not look attractive. We maintain loan growth guidance for now. NIM is likely to remain stable in the H2 of the year, dependent on an unchanged Fed. If we see rate hikes potentially in the H2, this might have a near-term cost of fund effect, but longer term, this will be a benefit to the bank given our three to four basis points sensitivity. We also expect support from NIM in the H2 from our customer repricing efforts. Cost efficiency is tracking higher than we originally planned at 30.4% compared with our less than 29.5% guidance. We will maintain guidance here, but are cognizant of downside risks here which could be offset by better than expected upside from customer repricing, together with further rebounds in fees.
We continue to optimize our cost base, but also continue to invest where necessary, especially given the fact that we are developing our new strategy currently. As mentioned earlier, cost of risk includes our overlay but still remains low. We maintain our cost of risk guidance for the time being, given that the uncertainty remains, but it's clear that upside risk exists here. CET1 guidance remains as is, given the above, currently, we do not see any changes to the full-year RoTE guidance, but again, noting that upside and downside risks do exist. Thank you, and over to the phone operator for Q&A.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by as we compile a Q&A roster. Our first question comes from the line of Tryfonas Spyrou of Roemer Capital. Please go ahead. Your line is open.
Oh, hi. Thank you for taking my questions. I have three, if I may. The first one is on the loan growth. I just want to get a little bit more of your thoughts on the outlook for H2 and maybe next year as well. I was wondering whether the growth we're seeing now is more a function of the work you're putting in the last 12 months, and whether the recent slowdown in GDP growth in Saudi Arabia is more of a leading indicator of what's to come. I was curious to hear your thoughts on the outlook for growth and opportunities there. The second one is on liquidity. I think you mentioned in your comments that you potentially could unwind some of the liquidity build-up later in the year. I was wondering what you need to see-
Sorry, we lost you on Can you start over for the second question? We lost you here.
Yes. Sorry. I'll do that again. Some of your comments during the opening remarks around liquidity and potentially that could unwind some of the build-up we saw in the year. I guess what conditions you need to see for you to do that? I was wondering whether you would see higher interest rates that could push the cost of funds even higher, that could be a trigger for you to start releasing some liquidity. The last question is on the credit card, sorry, the fee income, and particularly on the credit card charges. To what extent have those in mind, and how much increase can we see in the run rate for fee income going forward? Thank you.
On the first question around margins, I guess, you were asking whether there is the capacity to see in the H2 margins expand a bit. What we are starting to see in the market overall is there has been some repricing adjustment, which is I think a risk assessment of the future outlook. Yeah, we have started to see it. Our own book and our own customer base, there have been some significant examples, alongside other banks where deals have been repriced. I think it is fair to say subject to the interest rate outlook being as it is, then there could be an opportunity to see some widening in the H2 and into 2027. It is what we guided at the start of the year as well.
We said that we probably would not see much repricing flowing through the book in the H1, but if it happens, it will come through in the H2. On the liquidity question, the buildup in liquidity we had at the start of the year, which was a conservative position, a fairly low loan-to-deposit ratio. It gave us some comfort that if there were challenging issues, we had those buffers. I think we are reasonably confident that the buffers do not need to increase, and then perhaps given resolution of some of the uncertainties in outlook, both on the economic side and on the regional issues, that those buffers could be brought down a bit, but it is subject to conditions.
Third question on fees, and the outlook for the fees, I believe the question was. We did have a good rebound in the Q2, around 40% increase quarter-on-quarter. A large part of this was coming from finding more efficiencies and savings in our credit card programs. Our trade fees were also up 6% quarter-on-quarter, despite the muted volumes, which is the effect, of course, the higher pricing offsetting muted volumes. For fees, we expect to continue growing them quarterly, although more moderated compared with the growth that we have seen in the Q2. We expect a gradual improvement so that as we head into 2027, we would make up for the lower fees that we have experienced. We are at the quarterly levels where we will be delivering.
I think on your first question also commented on loans. We are currently at 13% year-on-year and growing ahead of guidance. This leaves us in a position where we have got options for the H2. If the right opportunities present themselves with the right returns, then we can continue on a growth trajectory. Although in the H2 of the year, we generally tend to experience a bit of slowdown, just seasonality. The H1 is normally a bit faster, H2 can be a bit slower. We have got options there. Based on the right level of returns, we will choose to grow, and we can flex appropriately.
Brilliant. Thank you.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Rahul Bajaj of Citi. Please go ahead. Your line is open.
Hi, thanks. Rahul Bajaj from Citi. Thanks for taking my question. I have two quick ones, actually. Lama, you mentioned that SAR 100 million was reversed from the overlays you took in Q1. Could you remind us what was the overlay taken originally in Q1, of which SAR 100 million was reversed, and what are the plans for the remaining overlays? If current conditions continue, do you expect them to reverse fully by the end of this year?
Linked to it, if I look at the cost of risk guidance, which has not been changed despite very low levels of cost of risk currently, and assuming the overlays get reversed in the H2 of the year, we might be looking at a situation where actual cost of risk would be very low compared to what the guidance is alluding to. Is that fair to think you're moving in the right direction? The other way to think about it is you're probably expecting some defaults or some additional overlays in the H2 of the year, which is why you've kept your cost of risk guidance where it is. Thank you.
Hi, Rahul. We did reverse around SAR 100 million of the overlays. Of course, we did not announce the size of the overlays when we took them, and these were done by the end of Q1. The plan for the remaining overlay is dependent upon now we are updating our models and two, as the situation evolves, any of the sectors that we have simulated or projected that they could be impacted by the situation need the overlay to be specific to these customers or to these sectors, then we will be directing those overlays. So far, we have not seen major shifts. We are expecting to keep reversing if the situation is better, of course, but we will announce those, of course, within our calls. Of course, as everybody knows, we have a year to manage the overlay, either reverse it or target to specific customers.
On cost of risk guidance, yes, it's low, but as we mentioned, there were some material recoveries during the quarter. We've always been saying as a corporate bank, we have a non-linear lumpy cost of risk, as is our lending growth also, which could be material one quarter. This is why we're maintaining the cost of risk, not because we expect any stress in the portfolio, but to monitor the situation and with the expectation that it would be probably business as usual, it could be at the lower end of the range.
Just to add to that. I think, by Q3, there's more confidence in that final ECL number for the year.
Got it. Thanks, Tony. Thanks, Lama. One quick unrelated question. This one is on share of results in associates. That line seem to have dropped sharply in Q2 compared to the run rate of the last few quarters. Just trying to understand what's going on there.
Results for both are down significantly, and it's market conditions. Our market share in investment banking is stable and we're still number one. It's just the activity levels are way down. In SAB Invest, retail activity, again, is subdued. Both entities are down significantly on market conditions, not a change in strategy or anything that we're worried about in particular.
Thanks, Tony. Just a quick follow-up on that. On retail brokerage, you mentioned activity has dropped considerably.
Yeah.
Is it also a factor of activity, the competition that is there in the market with some of the retail or fintech retail brokers offering some amazing offers which could have impacted?
Yeah, there has been some penetration from fintech and zero brokerage stuff. Not really. In fact, I think one of them, from memory, started to lose a bit of market share. They initially were the new kid on the block, but it hasn't continued. We just think the activity levels have subdued, and we're trying to diversify the business, and build the asset management side in terms of growth, which has been good. The fee generation is down because the whole market's down.
Diversifying into property development, et cetera, it has been successful, and we've got some good deals in the pipeline. Look, it'll stabilize, and we're continuing to invest in the business. We've introduced a significant technology upgrade, giving Saudi investors access to overseas assets, equity markets, private equity funds, credit funds, et cetera. Wealth is important for us, and we'll continue to focus on them.
Got it. All clear. Thank you.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Jon Peace of UBS. Please go ahead. Your line is open.
Yeah. Hi. Thanks, everybody. Can I ask a first question, please, on costs? Should we imagine that the growth rate in your absolute costs continues to be in the low single digits? I know you saw a fair bit of seasonality last year, particularly into the end of the year. Should we also anticipate that for the H2 of this year? Just two very quick ones. Firstly, on cost of risk, I know you're not the biggest giga-project lender, but have you seen any upward pressure or any need to provide against giga projects? Secondly, the tax recoveries, is that just a one-off for this quarter, or might we see that recur? Thanks.
On the cost side, no, we expect the H2 of the year to be around the same levels, maybe even an improvement, a lowering in cost in the H2. I'd asked the team to lift every rock and look under it for productivity improvements. As I said, we've started to invest in AI, and without overpromising the benefits on productivity, some of it will begin to come through, in the H2 and into 2027 as well. No, don't expect any surprises on costs in the H2. Some of our costs in the H1 even were as a result of spending more on resilience, which is important in the current environment, and we invested more in technology upgrades around resilience, which we won't need to do as much in the H2.
On the second question- Cost of risk. No, we haven't seen any trends. We obviously track very closely payment flows across our top customers, where the biggest risks are in value. We really haven't seen any significant deterioration there or in the model outputs that we're revising, as Lama said. We haven't seen any deteriorating trends for the rest of the year. Sorry, the tax question was the last one, I think. Sorry, I was just going to add to that point. Our on-balance-sheet exposure to giga projects is actually quite small, less than 5% of the corporate portfolio currently.
On the tax recoveries, the short answer, yes, it's a one-off. We do these reviews very frequently, and anytime we find opportunities to go back to the regulator and adjust the treatment, we do that. This time we've had a sizable return, and I would not model anything further because it's a one-off. Great. Thank you.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Olga Veselova of Bank of America. Please go ahead. Your line is open.
Thank you. Good day. Thank you for the presentation. I have several questions. My first question is on net interest margin, and more precisely about potential upside for your margin outlook for the full- year. I understand that cost of funding pressure in the Q2 was due to CASA. SAIBOR didn't actually go up, it went down. If we assume that there will be less pricing competition for liabilities, given that other banks slow down growth, and you start seeing impact from repricing on your asset yields in the H2, do you think that margin can actually do really better than what you guide for the full- year? Would you say there is upside to what you guide? That's my first question. Second is, on cost of risk.
It is still running well below the range which we view as normalized through the cycle, this is despite the fact that we're in a year when we build overlays and there is a lot of macro uncertainty. How should we think about gross cost of risk build up? Do you think it will start moving gradually to market average, clean of recoveries, clean of overlays, in the next maybe two, three, four quarters? Or you plan to consistently deliver this below market average cost of risk? Third question is on capital. I see that your CET1 ratio is down year to date. It is 12.4. It is closer to the lower end of your comfortable range, 14.5. Do you think that dividend payout will end up being the needed instrument to support CET1, not just optimization of risk-weighted assets at some point? Thank you.
Hi, Olga. Your first question on margins and maybe experiencing less repricing competition, right? This is your question? You see, we have seen our yields show some stability in the Q2, as I said, and which given SAIBOR has also come off an average of 10 basis points quarter-on-quarter, it's a good signal. Going forward, we expect, with the stable rates, our yields should be able to rise, especially if supplemented with the benefit of improved customer margins. Whether there's competition, and the other banks will continue to reprice or not, we are yet to see that. We're now putting the efforts around as much as we put the efforts around loan growth previously, we're going to put the efforts around repricing in the H2 and onwards. Not just on the lending side, we have also started taking steps to further optimize the funding base.
When we're deep diving into the data, we're updating our cash flows and our balances, modules, models, and this will also enable us to efficiently utilize our funding base. It's on both sides, cost of funds as well as the yields and the pricing. Again, our H2 growth aspiration might influence the NIM, particularly if we dial down back to our 10% growth aspiration and as the dependency on term deposits will also be less. That's why we will maintain for now the 2.5%-2.6% NIM guidance. Your second question on cost of risk. Again, as I said, largely corporate bank, material recoveries in certain quarters, sometimes material provisions taken, but overall the credit quality of the book is very strong. That's why the gross charges are low.
Don't forget, again, we keep reminding everybody around the POCI and the provisions that we took within the merger, under the merger accounting. This is now also with curing these accounts, we will be over time reversing. As we head into 2027 and beyond, we feel it is sensible to expect a level of normalization in credit costs. Uncertainty is high, but to some degree, our prudent balance sheet should support a lower cost of risk compared to the sector averages. Your third question on capital. Look, we took, and we continue to take all steps to ensure returns to shareholders are maintained and growing.
We take all steps necessary to ensure dividend distribution is also maintained as per the policy and growing in line with the returns, that's why we are, again, turning every rock around capital optimization, around RWAs, and around the capital structure itself. Within the new strategy, we are now exploring the capital structure for the upcoming five years to ensure that we maintain dividend policy and we enhance shareholder returns.
Thank you, Lama. Just to double check on your second answer. You keep seeing recoveries from POCI despite the fact that M&A was, what, more than five years ago. Is this correct? You're still seeing that?
Of course, to a lesser extent than what it used to be. Yes, we still have those and, on business as usual basis, we manage those, not just the POCIs, but any of these stressed accounts or restructured accounts, et cetera, in a very stringent manner. We have a full team around those and we keep finding recoveries and saves out of these. Yes.
To add to that, some of them take a long time. The recovery we got in the Q1, I think was more than six years' worth of work, Olga.
Yeah.
There's a lot of time and investment that goes into this stuff. Also, just to remind you that when we did the merger, it was more than a SAR 10 billion haircut we took on the ALAW loan portfolio. They're all customers.
Yeah. Thank you so much.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. We will now take our next question. Please stand by. Our next question comes from the line of Naresh Bilandani of Jefferies International. Please go ahead. Your line is open.
Thank you very much. It's Naresh Bilandani from Jefferies. three questions, please. The first one, just keen to understand what led to the reversal of the SAR 100 million of overlays, this early in the cycle. It would be helpful if you could please point to specific factors in the macro variables that offered you confidence for the reversal. If you could please specify in what segments actually you reversed these overlays, that would be super helpful. That's the first one. My second question is on write-offs, which has picked up pace in the Q2 and is running at a higher rate compared to the previous years. Is this an opportunistic move from your side, given the benefits that you are getting in the Q2 from recoveries and the overall reversals, or were there other factors contributing to this elevated pace in the write-offs?
My third question is a bit more technical. It's on the note 12B of your financials, which is highlighting the restatement in the irrevocable commitments to extend credit. It now includes non-firm commitments. Could you please explain this change, and more importantly, will this change eventually weigh on the capital calculations towards the end of this year? Thank you.
I'll take the first one, Naresh. Thanks for the questions. As I said in my opening, the performance of the economy has been pleasing and resilient. Therefore, the conservative approach we took to what happens if the trade numbers fell further than we thought or transport and logistics as sectors would suffer further, tourism disappears. All of those things we stress test. We haven't seen that happen despite the uncertainties. Those customers in those particular areas where activity is held up, that's where we've seen some write back on some of that provision that we took in Q1. We expect, as Lama said, that we could see that in the H2. We're not specifically mentioning a number because it's still highly uncertain, and we don't know what is going to happen necessarily. None of us do. We're just still being a bit conservative.
Hi, Naresh. On your second question on the write-offs, these happen as and when the customers are eligible for write-offs. Again, with a corporate bank, you would expect those to be material sometimes, and sometimes they would not exist. We continue to follow the policy consistently on accounts that are eligible for write-off when they are fully provided for or settled in a compromised manner. Restatement, Sirish?
On the commitments piece, we're doing a bit of a deep dive across the entire commitment portfolio currently. Looking at what's cancelable, non-cancelable, irrevocable, revocable. Depending on the classification, there could actually be a favorable outcome on capital.
Sirish, sorry, what are these non-firm commitments? Could you just please conceptually explain this in very brief?
Sorry, can you repeat? I didn't quite catch that.
Sorry. The number has increased quite significantly to include the non-firm commitments. Could you just conceptually offer a very brief explanation of what this actually includes? Irrevocable commitments to extend credit probably includes the firm commitments that you have to give out a loan, assuming certain conditions are met. Is the non-firm commitment simply just where the commitments are a lot more loose, or is there anything else to be looked into this?
Yes, essentially, it's how the RM will conduct the business with our clients. Therefore, we're looking across that portfolio. Essentially, it's a portfolio because these commitments are provided to customers, but they do have a capital impact. We're looking to be as efficient as possible on that portfolio. If we can rein that down, reduce it, then it'll actually have a positive capital impact.
Okay. I may actually follow- up on that, thank you very much.
Thank you. There are no further questions. I will now hand back to Tony Cripps for closing remarks.
Thank you, thanks for the questions and for others who joined the call to listen. H1 was in line. There were obvious considerations about what actions might need to be taken in various scenarios. I'm pleased that obviously there has been resilience across the sector and for us as well. Pleased that we reduced our interest rate sensitivity in our investment book when yields were around 4%. They're obviously now higher and there's some risks they could even go further. Our customers have rewarded us with franchise growth, and the team have done well. I'm relatively happy. The H2, I think, looks more positive than perhaps people imagined in the beginning of Q2. We're confident of delivering results. Thank you very much. All the best.
This concludes today's conference call. Thank you for participating. You may now disconnect.