Good afternoon, everyone. Thank you for taking the time to join us today. My name is Mehmet Sevim, MENA Banks Analyst at JP Morgan, and we are delighted to host Alinma Bank for their first quarter 2026 results call. Please note that this call is being recorded. The management team will take us through the quarterly highlights before we open up for Q and A. With that, let me hand it over to Arwa Alshehri, Head of Investor Relations.
Thank you, Mehmet. Good day, everyone. Welcome, and thank you for joining us today in Alinma’s earnings call for the first quarter of 2026. Our MD and CEO, Mr. Abdullah AlKhalifa , will begin by providing an overview of Alinma’s performance, financial highlights, followed by our new strategy recap and update on the strategy achievements. After that, our CFO, Mr. Adel Abalkhail , who will be presenting the detailed financial performance for up to this March 2026, ending with the guidance for the rest of the year. We will make sure to have proper time for Q and A, where we will be addressing your questions along with our Deputy CEO, Mr. Saleh AlZumaie , covering retail, digital, and private, and our Chief Corporate Officer, Mr. Jameel Alhamdan. With that, I will hand it over to you, Abdullah, for the guest.
Thank you. Hello, everyone, and welcome. I will start our presentation on slide six on high-level financial performance. Our financing increased by 4% year-to-date, as well as our total assets reached SAR 324 billion. Our operating income increased 7%, and at the same time, our net income increased 11%. First quarter NPL ratio was 93 basis points, and coverage ratio is 167 basis points. Cost of risk is obviously lower than our guidance due to large one-off recoveries that managed to get in the first quarter. Customer deposit increased 5% year-to-date. More importantly, the growth in CASA experienced 11% compared to the overall growth of 5% in customer deposits overall. CASA now reaches 49.5% of our total customer deposits. Our cost to income stands at 32.6%. Our NIMs is 347, 16 basis points lower than same quarter last year. However, it is one basis point higher than Q4.
Our ROE reached 11.4%. On slide eight, I will take you through the presentation on our current strategy. The main headline in our current strategy is to be the most innovative and customer-centric, with a clear focus on profitability and building distinctive differentiation using technology and AI. In terms of customer-centric, we want to engage our customers seamless and memorable journeys throughout their journey through digital and even physical channels. We want to be most innovative, leading with cutting-edge technology and AI to deliver segment-specific offering, intelligent platforms, and beyond bank and digital offering. Underpinned by laser focus on profitability, we want to drive profitability through scalable operating model, improve monetization, and streamline cross-functional cooperation. On slide nine, we will go with more detail. Seen by business, on retail bank, we want to aspire for primacy with all our customers. We want to innovate with segment-specific offering.
We want to delight our customer with their memorable journey using technology and AI. In private, we want to create a market differentiating value proposition and service model for our private bank customers. We want to offer world-class global and exclusive local investment opportunities and services. In corporate, again, the aspiration is for primacy for all our customers, but also building distinctive edge on SME financing. We want to upgrade our transaction banking through the use of technology and AI and build best-in-class scalable operating model. In digital banking, digital banking will help us in developing intelligent banker platform to drive primacies. We want to launch beyond banking digital block offerings, and then obviously enhance our operating model through the use of monetization and technology and AI. In treasury, we want to diversify and innovate on the funding instruments.
We want to grow our FX and other derivatives through other products to our customers, through the unlock and the flows from the business units. We want to obviously continue to work on enhancing our yields on the investment portfolio. On the next page, I'm not going to go through it line by line, but some of the other financial KPI or goals is, one of them is to become a leading employer of choice among the Saudi banks. We want to establish the bank as a digital leader, specifically on innovation and on AI, and leading on the risk-adjusted decision pricing practices. On page 11, this is some of the things that we've achieved during the first quarter. We've launched two open banking products. Microfinance for our youth. We also allowed now visitors to open wallets in our AlinmaPay.
We launched four new private funds with AUMs of SAR 22 billion. We've increased our growth in the SME by 29%, mid-corporate by 31%, two fully digital products. We've issued our first time tier two private placement, $300 million, as well as $475 million in CDs. We've increased our profit rate swaps, which is the IRS, the Islamic version of the IRS, by SAR 2.7 billion. We had a significant increase on our fixed forward by 266% year-on-year growth. On page 12, this is some of the things we're working on. We want to continue to drive end-to-end process streamlining and digitizing customer journeys, build R&D and innovation hub, develop customer focus use cases to hyper-personalize customer journeys. As well as obviously develop a robust client-centric primacy model. Strengthening the trade finance through the use of technology and partnerships.
Develop AI and other use cases, of which the total initiative. This is now a group. We're going to continue to update you as a group wide rather than just the bank. This current strategy have 87 initiatives. I'll start with derivatives, I guess. But we started working on 61 out of those 87. Some of them will be completed this year, some will be completed in the next year, and maybe some others will maybe go up to three years. But we started already in 61 out of the 87 initiatives. With that, I give the floor to our CFO to take you through detailed financial presentation.
Thank you. Good afternoon to you all, and welcome again to our earnings call for the results of the Q1 of this year. As usual, I'll be running you through a bit of more details on the financial performance for the quarter. Arwa was saying before, will be followed by the guidance, then we'll open up for a Q and A. Starting with slide number 14, and overall balance sheet trend. We have seen total assets growing 4%. That was driven by financing that's grown during the quarter by 4%. This was coupled by 2% growth on the investment portfolio. On the total liability side, 5% was the growth on the total liabilities, driven, as mentioned earlier by CEO, 5% on the customer deposits. We will come maybe later on more details on the same.
Worth mentioning the SAR 2.9 billion growth on the other funding source that we continued to tap on, including the new one, which is the Sukuk, the $300 million private placements for the tier two. We continued to tap on the CDs, $ 475 million, during the first quarter of this year. On the second slide number 15 on the P&L. Net income growth was 11% year-on-year. This was a growth of 8% on the funded income. We have seen a modest growth on the non-funded income side year-on-year, along with a growth in the overall OpEx operating expenses by 9%. The impairment is also lower. As mentioned earlier, there was sizable recovery. We have charged the P&L SAR 156 million during the quarter, and this is 50% lower year-on-year. On the next slide number 16 on the financing.
4% growth that we have seen mostly was driven by 10% growth at retail in absolute amounts. That's a SAR 6 billion growth in retail portfolio during the first quarter. The remaining SAR 4 billion, which translates into 2%, was the corporate growth from December 2025. With the growth of retail, we started to see the composition slightly changing from what we used to see in the overall financing portfolio. Corporate now represents 73% and retail is 27%. Clearly, large corporate and project financing as a composition, as part of the overall financing, represent 62%. By end of March, 6% on the mid-corporate, the SMEs is still 5%. Home financing is 13%. The remaining is for personal consumer financing and other retail products. On the next slide number 17 on the customer deposits.
As mentioned again earlier by the CEO as well on the CASA growth, we have seen good growth, from Q4 last year on CASA, which is 8% growth. Retail deposits has grown 3% from December. If you recall, CASA as a percentage of total deposits, by the end of last year was 48.3%. We've seen the growth of CASA, 8% this quarter. CASA as a percentage of total deposits now represent 49.5%. On the next slide number 18 on the yield income. The income from financing and investment, we have seen 7% growth from the financing income. That was coupled by 10% growth in the investment related yield income, which in total translates to a year-on-year 7% on the funded income growth.
Maybe in the lower section of this slide is the analysis around the clarification around the movements on the NIMs year-on-year. We have seen a three basis points drop on the investment yield. The financing yield was lower by 13 basis points, which was offset by positive impact from cost of funding rate by 19 basis points. We've seen the first quarter NIMs is 47 basis points, which is equal to the full-year NIMs of last year. That was standing at 3.47 basis points. Looking at the quarter, Q4, NIMs has improved one basis point during the quarter if you compare it to the quarter-to-date NIMs of last year. On the next slide number 19, on the non-yield income. There was a drop on the non-yield income overall on a sequential basis by 26%.
If you recall, Q4 last year has included some one-offs that were booked during the last quarter of last year. If we normalize the same, the Q1 non-yield income would be lower by 12% if we normalize it for the one-offs that we have taken Q4 last year. We have seen also the drop year-on-year on the FX income. This is part of it relates to the volume impact that we have seen up to February for the market. We are yet to see March, there wasn't really bigger growth in the volume for FX. This was compensated by SAR 27 million. That was an increase of 37% for the investment and dividends and investment related gains. On the next slide, the slide number 20. On the operating expenses, we've seen 2% growth on a sequential basis from Q4 on the overall OpEx.
Nevertheless, the G&A was lower than Q4, the big part of the growth was in the personnel cost. As we used to see this always in every first quarter of the year, that would relate certain adjustments related to the personnel. The depreciation, also 22% growth even though small base. This translates into year-on-year, 9% growth on the OpEx. The drop from Q4 on the total operating income by 5%, coupled with sequential growth on the OpEx by 2%, has negatively impacted cost-to-income, going up from 31.2% last year in Q4 for the full-year to 32.6% by the end of the first quarter. On the next slide, which is the slide on impairment. Q1, as you can see, 46% on a sequential basis from what we have taken in Q4.
This is reason for lower charges because of the one-off recovery that we have realized during the first quarter. This is more details on it in the financials that we have published already in note 16 to the financials. This has dropped the overall impairment charge for financing only by 32%. This has clearly lowered the cost of risk for the quarter to be 26 basis points, down from 47 basis points for the full-year of last year. On the next slide, which is slide 22 on the NPL. NPL has increased 5%, nothing specific. It's normal accumulation. Also, the NPL ratio, if you compare it to Q4, it's almost within the 90 basis points. Also, the coverage ratio has improved from 150 by end of last year to 166.5%.
On the stage-wise coverage, maybe there was a swing on the stage three coverage on the last two quarters. I would say that Q4 stage three coverage was exceptional because of the write-off that we talked about it in Q4. Now we are seeing stage three coverage is getting back to the norm, standing at 63.2%. Also there's no big drop on stage two, slightly from Q4. Stage one coverage remains flat at 40 basis points. On the next slide, the slide on capitalization, slide number 23. On pillar one, tier one and tier two, total CAR is 19.9%. We have seen drop, as mentioned earlier as well, 30 basis points on ROE from which we have to close the year end last year. At the bottom of the page, the provision ratios remain all healthy.
LCR is at 132%, well above the 100%, the regulatory minimum there. LDR as well remains healthy at 80%. This is the weighted one again, well below the 90%, which is the regulatory maximum. Also NSFR remains healthy at 111% or almost 112%, well above the 100%, which is regulatory minimum. On the next section, overall on the outlook and the guidance for the remaining of the year, the way we see it after closing the first quarter. No changes to the guidances. All the guidances were given following Q4 results. No changes to any of the guidances. Financial growth, we realized 4% growth for Q1. The guidance remains low teens for the full-year. Net profit margin year-over-year is 16 basis points.
Yet with the expectations on better funding costs and also the repricing, we are still keeping the guidance as a contraction from five to 3 basis points. Cost-to-income ratio 32.6%. The guidance remains below 30.5%. Return on equity is 18.4%. The guidance remains above 19% by year-end. Cost of risk is 26 basis points. That's the actual for the quarter, and the guidance remains 45- 55 basis points. The overall CAR for pillar one, tier one, and tier two remains at the guidance around 19%. Just a reminder on the 2030 long-term guidance. The assets growth by 2030 is a low double digits on a CAGR basis. Also the return on equity to be above 22% and cost-to-income ratio below 29%. Again, the total CAR pillar one, tier one, and tier two will be above 18%. With that, I will hand it back for the Q and A. Thank you.
If you would like to ask a question, please use the Raise Hand feature or the Q and A box at the bottom of your screen. If you are dialed in by phone, please use star nine to raise your hand and star six to unmute your line. I'll pause for a moment to allow the queue to form. The first question will come from Shabbir Malik. Please unmute and ask your question.
Hi. Thank you very much for the presentation. A couple of questions from my side. The first one is around the recovery that you spoke about. Is this recovery unique to Alinma or is that a sector-wide exposure, and other banks would have experienced something similar as well? My second question is around the loan growth outlook in light of the potential recalibration of Vision 2030. PIF has also come out with new plans for the next few years. How do you see those evolving plans from the government and the authorities affecting your loan growth prospects? Anything in particular that you think is likely to feature more strongly in the coming years in your loan growth versus other sectors? Any color on loan growth outlook, that would be pretty useful. My third question is around the AT1.
I believe you are in the market to renew or raise new AT1 capital. Can you give us a sense of pricing on these AT1s relative to your existing AT1 notes? Thank you.
Thank you, Shabbir. On the recovery, first part of your questions. On recovery, we believe it's a one-off that's unique to us. It's industry-wide. It's one of the clients that we've got more than SAR 400 million of recoveries. That's what drove the cost of risk lower for this quarter. Yet our guidance for the year remains 35 -4 5. In terms of the new PIF strategy and repricing. At the end of the day, I don't think it may lead to a bit of slowness in certain projects, but acceleration in others. To give you an example. Due to this geopolitical risk, and we know there's going to be an acceleration, certain investments in, say, logistics, defense industry, and others. The focus on energy, the focus on renewable, the focus on PPP types of projects is going to continue to be there.
We don't believe that this may change the overall demand on credits. May shift a little bit from one sector to another, but I'm still very positive about the growth of credits or the demand on credits for the years to come. On AT1, obviously, in terms of pricing will be announced in due course. As you know, Shabbir, it all depends on market conditions and the appetite and so on. We'll announce that, I think, in due course.
Thank you.
Our next question comes from Reem Alkuwaiz. Please unmute and ask your question.
Am I audible?
Yes.
Thank you, management, for the presentation. This is Reem Alkuwaiz from Derayah Capital. I have three questions from my side. The first one, given the recent pickup in the deposits across the sector, to what extent do you see this influence transitory versus structural? If you can comment on the current liquidity environment. The second one in non-funded income. During the quarter three, did it imply a reset in run rates in line with the recent regulatory changes? The last one, with some changes in project momentum recently, have you observed any early sign of risk in contracting or project finance exposure? Thank you.
Thank you. Obviously, on liquidity, we see it in a very good position compared to, let's say, maybe a year ago. Level, which is humble. We have seen overall loan growth in the industry. I am not talking about Alinma, but industry was lower, that obviously leads to lower demand on liquidity. Typically, geopolitics or whatever happens in the region may really lead into some more deposits going back to the country rather than placed maybe in the region. In terms of liquidity, I think the level is satisfactory now compared to a year ago. The other questions on non-funded?
Yes, Reem, on the non-yield part, at the growth, as you mentioned, it was modest, only 1% with a big drop from Q4. As I mentioned, if you compare it to the previous quarter, there is obviously one off. Looking ahead and where we are now, the Q1, there was actually a decrease in certain areas within the non-yield. One unit, of course, I think see the effects in income. There was a drop by 10%, as you mentioned earlier, and this is broadly related to the volume that we have seen lower in the market overall. From the fee from banking services specifically, the drop that we have seen came from certain areas. Clearly, the brokerage was lower, much lower if you compare the same. We are talking about year-on-year comparison here. Also, slight drop on the investment banking side.
Also we have seen some drop on the cards-related fees. We have communicated before that the regulatory limits on those certain fees did not have really material impact as far as the number of cards and the size of the business there. Just the other size of the business that was lower year-on-year, as I mentioned, specifically in the brokerage also slightly on the trade as well.
The next question comes from Abdullah Al Buraidi. Please unmute and ask your question.
Hello. Am I audible?
Yes.
Thank you very much for the great presentation and the results. My question is regarding the non-interest income, which the strategy heavily depends on. We noticed that on some banks that the decline in non-interest income came from the curve movement. What we notice in Alinma is that it is both. It's coming from a decline in trading income due to maybe curve movement and even the fee income and the exchange income. I'm not talking about comparing it to a one-off. I'm talking as a last year average. This is for one. When we compare larger banks to smaller banks, we notice that all banks has gained quite a bit loan book growth in the first quarter, except maybe the larger two or three banks.
Would you expect some competition in the upcoming quarters from the larger ones, given that their growth loan book hasn't been that strong in the first quarter?
In the non-yield, Abdullah, not only comparing, maybe I was referring to Q4 as well on what was books, but also even Q2 last year, if you recall, there was also certain one-offs there during the second quarter of 2025. The average of last year might not be the right number. Adjust what you are referring to on the fact that this will remain a focus on the bank strategy. We've talked earlier about the continuous cross-sell, we've talked during our strategy as well, that the bank assurance also is going to be a big part of the overall non-yield growth. We're talking about also the focus on card. Just exceptionally this quarter, I believe, in the coming quarters, we hope to see a bigger picture there on the non-yield itself.
However, the first quarter, I think I referred to the brokerage specifically and investment banking, along with part of the card fees and also almost a flat on the trade that was really the impact.
Yeah. On the other part, Abdullah, on the growth or loan growth among banks and the point you mentioned about the large banks showing single-digit growth. Are we worried that in the future, they may be more aggressive in growing? No, not really. I mean, the market is very competitive anyway. Competition is there, it's healthy, but the pie is getting much bigger. The demand in credit, unlike the old days, the demand for credit is very strong. Competition never worries us, except when certain points of time where we saw aggressive pricing on the assets. At the time when interest, cost of funding was going up. That is hopefully behind us now. I've seen our ability and other banks I'm sure are improving pricing on corporate loans. This is something we could not do when the aggressive competition on pricing was there.
Now we see it is much better, I would say, over the last possibly at least six months, things have improved significantly.
Okay. Given the guidance, we noticed that the loan book growth for this quarter has been really strong. It might be higher than one anticipated. Do you expect that the interest income to offset the non-interest income for the return on equity guidance for the year?
I didn't get that. Well, if you can repeat it, please.
We noticed that the loan book growth for the first quarter has been quite strong, and it might be even higher than what internally guided for. Do you expect that the growth and the interest income to offset the slower non-interest income for the year to achieve the return and equity guidance?
Yeah. As I mentioned, we started aggressively on our repricing of the corporate loans. As you may appreciate, not every single loan you can reprice. There are term loans. Our ability to reprice some of those is limited. The new loans and revolving facilities and unutilized portions is something that we're trying to improve pricing on. We need to see better also lower cost of funding, continue with lower cost of funding. There are also investments, which is fixed rate. It's not something that we're going to be able to reprice. If it's also most of the retail loans, which is basically effectively fixed rate. Certainly we're expecting to improve on the interest income going forward, but not necessarily exactly much in any, let's say, or similar growth to the loan itself.
Okay. Thank you very much. Very informative. [Non-English content].
Next question comes from Naresh Bilandani. Naresh, you may unmute.
Yes. Hi. Thank you very much. It's Naresh Bilandani from Jefferies. Just two quick questions, please. One, the decline in the card services fees is quite notable in Q1. Is the Q1 level a good number to extrapolate from? I'm kind of thinking that the second quarter will also be under pressure as we bake in the full quarter impact of fee regulations. Is that the right way to think about this or that's perhaps not? I think it's quite visible that the first quarter pressure on card fees was quite notable. I'm just trying to think if Q2 will be just around the same or it could be worse, at least on this line. That's the first question.
Second is, also the benefit of recoveries, will that be limited only to this quarter and by second quarter we go back to our old SAR 250 million-SAR 300 million impairment charge run rate? Or do you sense that the recovery that you enjoyed this quarter does have a portion that spills over into Q2 could also be subdued? Thanks a lot.
Thank you, Naresh. I'll take the last part, my colleagues here can address the previous one. In terms of the recovery, we all do our best to continue to improve our process and our capability, our also team capabilities as well as technology to improve the collections and recoveries, generally speaking. The one that we had in Q1, I would love to see that every quarter happening, it's one-off, which basically, done and dusted. It's not going to have a second part in second quarter. It's one case. We're hoping to see that level of recoveries and improve, continue to improve, and we're trying our best. You can drive whatever expected in terms of charge based on the guidance of cost of risk that we've given already.
The other part, Naresh, on the non-yield, again, and the focus on the lower card services related fees. Of course, there will be a small impact as we communicated earlier from regulatory limits on certain charges. However, wouldn't really take Q1 as really the guidance for the full-year. Again, maybe also back to the previous question, asked the question previously, is this how the non-yield would be covering the gap between the ROE that we have, and whether this will be fully compensated by the yield itself. It was many factors. Card services was lower of course, but it depends also, Naresh, where you compare it. You compare it to the average full-year, as I mentioned, the offsets that were not there. But also the other parts that you talked about within the non-yield, that were surprisingly lower year-on-year.
It would remain a focus to improve going forward, which, as we mentioned always, the non-yield would remain a main driver or remain focused as part of the overall strategy, Naresh.
Thank you. Thank you so much.
Our next question comes from Varun Kumar. Varun, please unmute and ask your question.
Hello?
Yes, we can hear you.
Yeah. Hi. Thank you very much.
Go ahead.
Yes, I have three questions. The first question is related to retail growth. It's very impressive, this 10% growth in the quarter. Just want to get an idea how much of this growth is coming from mortgages and how much from the non-mortgage side. How you were able to do it, considering that one of the other leaders, like larger banks, were not able to achieve this growth in the retail side in the first quarter. That's my first question. Secondly, in terms of deposits, you got again, a decent amount of deposits, mainly CASA. I want to understand whether is there any transitory element in those deposits which came in, or do you expect these deposits to stay for [audio distortion] for some time?
Thirdly, I want to understand, if you factor in that, you said the recovery is around SAR 400 million. If you factor that in, the gross impairment will be around SAR 500 million. Just want to understand if you applied any overlays on the ECL model to factor in any downside risks going forward. Thank you very much.
On the recovery, obviously, there is a continuous recovery the likes of, for example, retail. There is always a certain level you'd expect on a monthly basis. This is not what you see in the financials overall recovery. There is a one-off corporates recovery over SAR 400 million. That's what basically increased the level of recoveries. Typically, there is an expected level of recovery on retail. Every once in a while, if it's successful, it'll give you some recoveries from the corporates or large private written-off loans in the past. The other part, first question is on the retail growth that we have seen, the SAR 6 billion net absolute amount in the quarter versus last quarter. Whether this is mortgage. The growth in retail was almost 50/50, coming from mortgage and the same coming from also the consumer finance.
On the CASA, the second question on the CASA, whether these are transitory deposits. I would say the growth is really a mix of both. It was a good growth in CASA. You just assume always that the nature of those deposits, part of it would be transitional, but still it's a mix of both. If I may add on the CASA, I think we have very good track records over the years in terms of growing our CASA. Obviously, nobody has any assurance about whether some of this is transitory or permanent. I think historically, we've been focusing and been able to grow our CASA throughout the period. I think in Q4, we had some unexpected drawdown, but majority, our track record shows that we continue to improve on our CASA.
All right. Thanks. Just a couple of follow-ups. As far as mortgages are concerned, did you end up conducting campaigns or anything to attract this, to create this loan growth? Secondly, following up on the impairments, just to confirm, have you applied any overlays, like any buffers to factor in any potential future loan losses in this quarter?
Again, basically, with the growth in retail, really wouldn't be specific campaigns. There will be always tactical campaigns here and there, which is business as usual. To your question on the environment and what did we do to assess the current geopolitical situation. You can see on the financials themselves, actually, what we did. There are two parts of it. One is the impact of the macroeconomic factors, and clearly you would see negative impact from, for example, GDP growth. That maybe it's lower now for this year, again, the expansion of the growth the year after will be higher. If you take this year, the growth would be negative. On the other hand, the level of oil prices as a macroeconomic factor to the overall model is positive. That's in one hand.
You would assume that the overall macroeconomic factors would be on a net basis positive. There is the other part, which we already disclosed in our financials, is our review of the scenarios for the IFRS 9 model itself. As of December, the scenarios for the base scenario was 50%. We have 30% for the upturn, and we have 20% for the downturn. What has happened during the quarter, we have changed the upturn from 30% to be 20%, and we have increased the downturn from 20% to 30%, where the base scenario remains 50%. This triggered certain overlays. That was not significant at all. Was taken already as part of the ECL charge for the quarter.
Thank you very much. That's very helpful. Wish you all the best.
The next question comes from Mohammed Al Rashed. Mohammed, please unmute to ask your question.
Hello, gentlemen. Thank you for the presentation. Just one question from my side, which is regarding the spread of your interest-bearing liabilities over benchmark rates. It has declined significantly over the last two quarters. It currently stands at just three basis points. That's around a 40 basis point decline on a quarter-over-quarter basis. My question is, how much of this is attributed to a better funding position for the bank and overall better liquidity in the system versus movements or inter-quarter movements, where basically the majority of the interest-bearing liability growth came toward the end of the quarter? In other words, is this three basis points over benchmark rates for your interest-bearing liabilities sustainable throughout the remainder of the year? Thank you.
Mohammed, out of the spread, the spread would remain in total. To be specific on the size of deposits, the maturity, maybe the spread that you have driven, maybe it was in total, of course, alloys and averages of a lot of the quarters. We have made mention also earlier by the CEO on the overall liquidity position, especially Q1 this year. Also not maybe, factoring the fact that the diversification of funding, especially in Q4 and also Q1, that you wouldn't see on the time deposits that we published because it's another line under the Sukuk and other certificates of deposits that we have issued about SAR 1.5 billion in total up to end of this quarter. Liquidity position is high.
We haven't seen maybe, as we have seen before, the liquidity that would trigger more spread that we have to pay in deposits. I believe, I guess the alternative fundings that we have secured to fund the growth also help letting go most of the costly deposits that we have.
Okay. Yeah. Thank you.
The next question comes from Murad Ansari. Murad, please unmute and ask the question.
Yes. Thank you. [Non-English content] . Just one question on fee income. This first quarter had seasonality over here. You had Ramadan Eid and then the conflict as well later in March. You did mention about lower trade fees to a certain extent. The question, I just wanted to check on the fee income momentum, how has that recovered in April? If you could give us some idea if there was any impact of the conflict, given how trade was disrupted. Obviously, we have some regional banks that have also talked about the fact that international travel was restricted, and hence card fees on international spend was lower. Have you seen any of those impacting your fee income as well? How have they kind of behaved now in April? If you can give us a very broad brush idea on that. Thank you.
Yes, you're spot on it. We see the international usage of the card decline due to the unrest in the region and the restriction on the travel. We do believe the impact will continue in April, but going forward from May, we have also the World Cup, we do believe the international use will be increased in the coming few months, and it will recover decline happened in the Q1. The decline is also coming from the international remittances, which also some decline because also people tend to keep their money inside the country without nationals or expats. Those two factors impacted the non-interest income and mainly fees from cards and remittances.
Maybe just to add one point on the trade. Trade, just to correct, I did not say it was particularly lower. I was just referring to it as being more relaxed.
Oh, okay. All right. Thanks for that. Thank you.
The next question comes from Abdullah Al-Wahabi. Please unmute to ask the question.
Yes. Hello, am I audible?
Yes.
Yes. Thank you, management, for the presentation. I have two questions from my side. First, when we exclude the recoveries this quarter, the cost of risk actually has increased significantly, and I believe it's the highest in the last five years. Could you please clarify what are the drivers and what is your outlook for the coming quarters? Second, on the guidance, and correct me if I'm wrong, I believe that when you communicate your guidance, the market was pricing two rate cuts. However, this is not the case anymore. Would you expect further lower contraction in your NIMs? That's my second question. Thank you.
Thank you, Abdullah. On the cost of risk, I think in the presentation with the CFO on the stage-wise coverage, as what happened in Q4, I think the level of coverage on stage three was, I think, 45, was it? Naturally, we've been even transparent that stage-wide coverage is also important. We want to be among the industry average, and that's one of the reasons we took the opportunity is to obviously increase coverage on stage three, and that's gone up from 45, I remember, to 63 coverage at stage three. That's the reason for that. In terms of the guidance, we actually rerun our forecast every literally a day or two before the earnings call, taking the latest data, the latest forward yield curve in our forecast. We don't build our yield curve, forward yield curve based on our own assumption. What is the rate cut?
We take the markets, which is more of the average, the market, how it sees the forward yield curve. That's why our guidance hasn't changed, following that same forecast.
The next question comes from Olga Veselova. Olga, please unmute to ask the question.
Hi. Am I audible?
Yes, you are.
This is Rahul Rajan from Bank of America. Two questions from my side. Firstly is on the real estate reform. Can you sort of help us as to what's the kind of trajectory been or what's the kind of impact do you see.
Rahul, can you repeat the question?
Sorry, the quality wasn't good.
Yes, I will repeat. In terms of the real estate reforms, if you can sort of talk about any implications that you are starting to see, be it in terms of the quality, cost of risk or the real estate prices in Riyadh, especially. That's number one. Second question is on the strategy part. If you can talk any specific new initiatives that you have taken. You mentioned in the starting of your presentation, but something which is more material and which you have started to see an impact, because of the new strategy. Thank you.
Thanks. Obviously, on real estate reforms, honestly, Rahul, I see this as quite positive impact on the economy, because basically that drives more demand on development and building. If you drive around Riyadh, it's now a city of cranes. There are cranes everywhere. The projects, the towers being built everywhere. The supply for the mortgage, more for the mortgage, which helps the affordability. The money for the land or the value of the land is basically sitting, doing nothing in the economy. The other part was about strategy. Obviously, we've been quite successful in our previous strategy, and we're working very hard.
From as soon as the board gave us the green light back in September of last year, we started working on some of these initiatives. We didn't wait for the clock to change to January 1st. We actually started early. There are a variety of initiatives, each one has different financial impact, and some of them have better impact on our staff, our customers, and that will drive more and more results in our business. Essentially, we did not implement those initiatives because it's low impact. Certainly, we believe they have strong impact. That's why 87 initiatives. What's mentioned in the demo, these are not initiatives, by the way. This is just previews of them. We can't obviously disclose what are exactly our initiatives. We sort of put our targets, but the exact initiatives is not something we disclose, of course.
Our next question comes from Murad Ansari. Murad, if you still have a question, please unmute. We'll take a question from Abdullah Al Buraidi. Abdullah, please unmute and ask your question.
Hello. Thank you for letting me ask again. I have question regarding the cost of risk guidance. You're noticing that a handsome recovery that took place that made the cost of risk appear lower than the first quarter. I understand that the gross provisioning is still the same. Keeping the cost of risk guidance as is means that you will achieve the same cost of risk guidance by having a higher gross provisioning in the upcoming quarter. Is my understanding correct?
It is a logical expectation, of course. We're keeping the guidance at 35%-45%, Q1 was 0.6%. Certainly, that means on average, the next quarters, you will see higher provision than what we disclosed in Q1, what we took in Q1.
Yeah, that means that the upcoming three quarters will have an average of the same guidance to even out the guidance for the whole year, right?
Well, look, actually, on a monthly basis, our risk team run this IFRS 9 model. It's discussed with the impairment committee, which is basically chaired by me and all the most relevant N minus one team. I can't forecast. We do our best to forecast today, but things may change from one quarter to another. We may have unexpected recovery. We may have unexpected customer deterioration. It can happen. Generally speaking, we try to forecast every quarter to reassess our guidance. Based on that latest forecast that we did, our expected cost of risk remains.
Okay. Thank you very much. [Non-English content] .
There are no further questions at this time. I'll pass back to your host.
Thank you. Maybe I can jump in with one question, and this is with regards to your direct or indirect exposure to some of the recently canceled projects like Trojena. Last time you spoke, you gave us an optimistic outlook on those. You mentioned those contracts included termination for convenience clauses. The residual values would be positive. Has there been any change in that assessment at all so far? Do you expect any impact at all coming from those exposures?
Obviously, we don't talk specifically about our customer exposure, but certainly, we have a contractor that was involved in one of the projects for specifically preparing Trojena for the Asian Winter Games in 2029. Since that is postponed or changed, the whole thing needs to change. Some of the contractors was canceled, we do have sufficient coverage and there's agreement with the project owner that all due payments or any cost incurred by the contractor will be covered by the project owner.
Super. Thanks very much. Thank you very much for your time today, and let me hand it back to you for closing remarks.
Thank you, Mehmet. Thank you, everyone. Have a good day. For any follow-up questions, please reach out to the IR department. We'll be glad to get back to you. Thank you so much.