In 2021, Alinma set out its ambitious five-year plan based on three primary goals that reflected the positioning of the bank by 2025. During this five-year strategic period, Alinma has delivered consistent, strong financial and operational performance. The strategy has been major catalyst for reaching significant milestone and achieving this growth. For example, ROE more than doubled and net income grew by more than 30% CAGR. Today, we are pleased to be announcing our new Strategic Plan 2030, it's no less ambitious. Our 2030 aspiration builds on the 2025 strategy. They expand on ambitions around four key areas: innovation, customer centricity, profitability, and differentiation, leveraging AI. We aim to be the most customer-centric and to engage clients with seamless and memorable journeys across digital and physical channels. We aim to be the most innovative and to lead with cutting-edge technology and AI.
Our business will be underpinned by a laser focus on profitability through a scalable operating model and streamlined cross-functional collaboration. We will build distinctive differentiation in our markets, leveraging AI in our customer proposition and operating model. In order to achieve our ambitions, we will strengthen our core business and expand into adjacent areas beyond the core, including new business builds. Our main goal for Strategy 2030 is to become the primary financial partner, PFP, for all relevant stakeholders. Together, we believe these new priorities will support Alinma in achieving its goal. Good day, everyone. Welcome, thank you for taking the time to join us today.
During the past five years, Alinma has been working into achieving its 2025 strategic goal of being recognized and celebrated as the fastest and most convenient bank in Saudi Arabia, with a focus on growth and customer acquisition, while making sure to communicate progress to the investment community throughout the journey. Today, I'm glad and delighted to welcome you all to Alinma's Strategy 2030 Review call. I hope you enjoyed the opening film, it gave you a flavor of what we will present today. As of now, we have attached this strategy pack in a newly launched tab in Alinma IR website for our strategy to provide easy access, continuous progress updates, and better transparency. In today's call, our MD and CEO, Mr. Abdullah Ali AlKhalifa, will start by presenting some of the financial transformational growth achieved throughout the bank's previous strategy.
He will also touch points on non-financial and ESG key accomplishments. After that, he will take you through Alinma's vision for the next chapter and detailing by business lines and beyond. The CEO will conclude by providing the bank's 2030 ambitions and aspired targets. We will definitely leave enough time to receive your questions during our Q&A session with our Deputy CEO, Mr. Saleh AlZumaie, covering retail, private, and digital. Our CFO, Mr. Adel Abalkhail, and our Chief Corporate Officer, Mr. Jameel Alhamdan, will be joining us. With that, I'm pleased to pass the floor to you, Abdullah, to walk us through the journey.
Thank you, Arwa. Hello, everyone, and thank you for joining our meeting today. Five years ago, we laid a clear plan to transform the bank from one level of maturity to a much higher level of maturity, and we did deliver on that. Some of you may remember from the earning calls and discussion we had on one-to-one and conference meetings that when we started this journey, we were missing a lot of products in retail, in corporate, in treasury. We were missing also focus on cross-sell. We were missing, underserved lots of segments in the country. We were mainly focused on lending to large and project finance and just providing quality of service for retail without the sales efforts or the sales focus and the cross-selling, and we couldn't offer our clients any derivatives, for example, from treasury.
We've actually delivered, as you're going to see in the presentation. The bank has moved from low level of maturity to a much higher level of maturity, and we will be talking about this in the next few minutes. Today, we're here to talk about a new chapter of the bank, 2030 Strategy. It's a plan that designed not just to navigate the opportunities and challenges ahead, but to actually widen the gap between us and our competitors and provide or continue to create better value for our shareholders. In terms of achievements of the current strategy- As you see on the screen, slide four, we've more than doubled revenue from SAR 4.1 billion in the first nine months of 2020 compared to SAR 8.7 billion of revenue in the first nine months of 2025.
While profits increased more than 3x from SAR 1.6 billion to SAR 4.7 billion in the same period. Cost -to -income, we started with 36.4% for the full year of 2020, and we managed to reduce this by 4.8 percentage points to 31.6% in September. ROE, as mentioned in the introduction, more than doubled during that period. 8.4% was the ROE in 2020. As of September, the ROE is 18.4%, more than 2x increase. Assets also almost increased by 2x from SAR 156.9 billion in 2020 to SAR 307.2 billion in September this year, 2025. Customer deposit also more than doubled from SAR 119.5 billion in 2020 to SAR 234.6 billion in September. CASA also 1.8 x increase from a level of SAR 70.1 billion to SAR 124 billion in September, and ROA also 1.5x Increase from 1.4% to 2.1%.
On the digital side and non-financial achievements, digital embed, which we started measuring this in 2022. At that time, the base was 54 basis points, and now is 74 points in September, 20 points improvement. Digitally active customers was at 64% of our clients in 2021, now 76%. Credit card and personal finance sold digitally, absolutely nothing. In 2020, we didn't have that. Now we have 30% of sales is coming through digital channels. Financial transactions using the mobile app was 74% in 2020. In September, that reaches 86%, 12 percentage points increase. Straight-through processing, another one that we were lacking in 2020. We had nothing, no straight-through processing. STP now is offered through multiple products in the bank. Mobile app. Our mobile app has been highest ranked in mobile apps and among the Saudi banks in 2024 and 2025.
OHI, Organizational Health Index, which we start measuring this in 2021. We improved this by 14 points to reach 78%. As some of you know, the top quartile worldwide starts at 76%. We are in the top quartile in the whole world, in all industries. In terms of AI, we've introduced 10 cases, mainly on the lead management, marketing, risk, and cross-sell. On the next page, on the ESG, between 2023 and 2024, we were 100% increase in sustainable financing, 18x increase in employee volunteering hours, more than 6,000 solar panels installed, 65% increase in female workforce. The board established a board committee for governance and sustainability, and we improved our ranking in MSCI into ESG MSCI to A. Let's talk now about 2030 Vision.
As most of you know, the headlines in our previous strategy has been recognized, celebrated as the fastest and most convenient bank in the country. Our focus at that time was growing our customer base and growing our balance sheet. Obviously, that has shown very good results. As mentioned, we're going to be seeing later on, we are the third largest bank in the country in terms of retail customer base. That was a major achievement. Now we're going to shift to a new way of looking at the strategy. From being the fastest and most convenient bank as the main focus, to be the most innovative and customer-centric bank in the country. From being focused on growth and customer acquisition, to more focused on profitability and building distinctive differentiation leveraging AI. With the next page, it's going to talk about the main components of that.
Obviously, most customer-centric, as I mentioned, most innovative, and underpinned by sharp focus. Let's talk about more customer or most customer-centric. That we aspire to primacy with every customer that we serve through seamless AI-powered journeys, strengthening our trusted and aspirational brand. Most innovative means disrupt with innovative offering that takes the value proposition to the next level, develop the best and most scalable AI-based operating model. Underpinned by sharp focus on profitability, we want to foster a monetization-driven mindset, to forward to becoming the choice of capital deployment and case issuance. Obviously, as very important components of our strategy is the focus on data and AI. As I mentioned, we currently have 10 use cases using AI.
We are going to introduce more than 100 use cases in the next five years, build on our future-ready tech stack and data architecture with all the built-in governance and ethical standards. Data and AI is obviously for customers, for innovation, and for scalable operations. For customers, on enabling customer privacy through proactive needs, anticipation, and hyper-personalized journey. On innovation, we're going to unlock the banking ecosystem to drive new revenue through data products and open APIs. Data AI for scalable operations is to be boosting productivity by leveraging AI to streamline and automate operations. Through these investments, we estimate that anywhere between SAR 600 million - SAR 1 billion impact on the bottom line in the five years. I would say 65% of that estimate is coming from revenue uplift and 35% on cost efficiency. I'm going to dive more into b usiness.
Currently, we have our core business, which we are going to talk about it first, and then, at a later section, we are going to talk about the new business build. On retail and private, as I mentioned before, we are more than double the customer base in the previous strategy, and we have achieved 2.5x growth in assets and about 80% increase in liability. Our focus on retail and private for next year, for the next strategy, is to basically, as I mentioned, this primacy is going to be important for all this business. Obviously for retail, reimagine primacy-driven engagement model with scalable infrastructure, GenAI-enabled daily companions and intelligence wealth advisory, smart tech-powered offering elevating customer experience, and tailored segment-level value proposition and service model, including next generation's wealth.
In corporate banking, some of the achievements in the previous strategy has been 2x in growth in total assets, 8 x growth in total liability, 18 x growth in mid corporates and financing. That's important to show the results of the previous strategy. As I mentioned before, we are really focusing on serving or lending to large and the project finance. We said that mid corporates basically have revenue in excess of the SME benchmark of SAR 200 million, up to SAR 1 billion of revenue. This important segment was not really been served by the bank. We really focused on build the right team, and we managed to achieve this 18x growth in financing. Also another important element of our previous strategy has been the growth on SME.
We introduced more program-based lending and more focus on custom and products to them, and we have achieved 3 x the growth in SME financing. For 2030, again, aspire to primacy to all clients across segments and sectors with distinctive edge on SME financing. We will also have leading AI-enabled digital platforms with personalized journey. We will enhance transactional banking proposition across key corridors. We want to develop structural investments opportunities in K.S.A. corporate credit. On treasury, some of the achievements in the previous strategy has been 70% increase in total assets, 80% increase in yield on investment book. We also, part of our process to diversify funding, we have issued SAR 4.4 billion of Sukuk, whether it's tier one or tier two or senior. In addition to that, we have done more than roughly $1.1 billion of CDs. We have done bilateral loans.
We have done repo to maturity as part of our effort to diversify our funding. The focus for 2030 would be to expand on the level of diversification, innovative funding instruments targeting both our customer base and future customer base. Also, in addition to that, international funding partners. We want to accelerate the focus on sale of FX and derivatives growth through deeper cross-sell, and deeper cooperation and partnership with the businesses. We want to optimize investment portfolio structure with refined liquidity and focus on higher yield opportunities. On banking, which we also we consider it a core business for us. Now, some of the achievements in previous strategy, about 95% of new customer onboarded digitally. NPS score for digital, for internet banking and mobile has reached 74 and 76, respectively. More than 3 million customer was onboarded digitally. The focus for 2030 would be AI-powered intelligence platform.
Enable is very important to us, enable hyper-personalized customer journeys, expand beyond banking digital offering, leveraging strategic partnership and investments to drive innovation, enhance operating model, including monetization level, driving accelerated value realization. On the Landmark Capital, fully owned subsidiary in investment and brokerage. Some of the achievements in previous strategy has been reaching number four in overall assets under management with 40% growth in asset management revenue and eight times growth in principal investment revenue. The focus for 2030 would be leading wealth advisory services and disruptive offering, including new asset classes, distinctive brokerage-related engagement models and capability. Elevate the investment banking brand through deeper global expertise and partnership and cooperation through cooperation with them. Finally, revamp AI-powered operating model to instill intelligent decision-making. Thank you. That has been the focus on our core activities today.
In addition to that, we're going to talk about new business build. Unfortunately, because this is a work in progress and I can't really get deeper in details because a lot of that requires, obviously, regulatory approval. I'm sure, as always, we're going to be fully transparent. As soon as we get the approval ready to launch this, we're going to come to the market and announce it. As you know, the country vision is on the right side. You can see the investment horizon, focused on innovation, empowerment of SME, entrepreneurships and privatization, and deeper private sector partnership. The whole idea is driving economic diversification. We took that, we look at that, and that's where we fully operate. We operate 100% within Saudi Arabia, the country vision is very critical and important to us.
We're going to focus on delivering new businesses, including, without a lot of details, I have to say, premium multi-asset financing, short-term credit solutions for underserved segments. Some of that, by the way, the second part is already launched, which is the iz Business focusing on micro and very small SMEs. That's one aspect of it. We're looking to expand this further to other segments. Also, a comprehensive bancassurance suite. It's really important that insurance business is growing in the country. The outlook is very good, and I think we need to leverage our network, our staff to sell more of this insurance business and to do it through omni-channel delivery model. As I said, there's not a lot of details on the new business builds because what I mentioned before, I can only expand on this once the approval is received.
Finally, we're going to give you some of the guidance on 2030 Strategy. In terms of ROE, in September 2025, our ROE was 18.4%. In our current strategy, we expect that to go beyond 22%. Cost- to- income in September was 31.6%. We should expect to drop this by 3 percentage points. Assets growth on CAGR over those periods, almost five years, was 15.2%. In the new strategy, low double-digit growth in terms of CAGR. On capital adequacy for Pillar 1, including tier one and tier two, 19.2% was in September, and we expect it to be above 18% by 2030. With that, we're ready to open the floor for your questions. Thank you.
Thank you very much. As a reminder, any analysts or investors who would like to ask a question should do so by clicking the raise hand button in the bar at the bottom of your screen, and please ensure that you unmute your microphone only when you're introduced. If you no longer wish to ask a question, please click the lower hand icon also at the same place in the bottom of your screen. We will now take our first question from Naresh at Jefferies. Please go ahead.
Hi. Thank you very much. It's Naresh Bilandani from Jefferies. Good luck with achieving these ambitious targets. I wish you the best. I have a few questions, please. One is, could you please delve a bit more into how you see the evolution of the regulatory landscape currently and over the medium term for achieving these objectives? We've been hearing about SAMA getting a lot more conservative on the capital outlook and also on the liquidity metrics for the banks. If you can please elucidate on that would be extremely helpful. That's the first one. My second question is, could you please elaborate a bit more on how you foresee your comfort on capital in order to achieve these objectives? Clearly, you've set up a strong growth path for yourselves in achieving a higher level of profitability, as we can see from your ROE metrics.
The current level of capital optically looks at the lower end of where the broader industry averages are. If you can please talk about your comfort on capital and how you intend to build up the capital base for achieving your growth targets, that would be super helpful. My third and final question is on, could you offer some more thoughts on what is the management accountability for achieving these targets? Are there any specific KPIs that you put in place for the C-suite as well as for the business heads in order to align their incentives with achieving these ambitious targets? If you can throw some more light there, that would be extremely helpful. Thanks a lot.
Thank you, Naresh. Obviously, through the central bank is becoming more conservative, and I think it's public news that came out about the countercyclical, 100 basis points additional countercyclical buffer is needed.
In May, I think it starts in May 2026. However, for our case, the way we're going to support our growth is basically a combination of lower dividends payouts coupled with higher profits. Obviously, on a yearly basis, that should give more internally generated capital, as well as the efforts to continue to issue tier one and tier two Sukuk in the international market and even in the local market if the opportunity is there. That will continue to support us on that aspect. I would say your first question, second is similar. I think we've shown improvement in CET1 recently in September. We used to be one of the lowest. Now I think we improved. We're moving towards the mid, I guess, in terms of the banks. I look at it as a more efficient use of capital rather than excessive high-end level of capital.
In terms of management accountability, Naresh, of course, one of the things that the board has introduced is a long-term incentive plan. It's actually linking long-term incentive plan to the strategy. When we first introduced the 2025 Strategy, the board introduced the long-term incentive plan linked directly to the KPIs in that strategy. I would expect, obviously, there is discussion about the new LTIP, that should be similar to. As management, all senior management will be subject to this long-term incentive plan, and it's actually conditional to achieving the financial targets that we mentioned in our strategy.
Thank you very much. May I please just have a very quick follow-up, and please allow me to be a bit more direct on this question. I'm sure you've encountered from multiple investors and stakeholders with regards to an emerging risk being perceived by the market on a potential rights issue that should come for Alinma in order to beef up the capital base to ensure that your future growth plans continue seamlessly. In the previous strategy, you had mentioned this in investor meetings, that you don't necessarily foresee a risk of a rights. With the new strategy now in place over the medium term, do you believe that is a risk that investors and analysts should keep in context in order to see you achieving your growth targets?
Well, as you mentioned, I've been very transparent. As I said, to support our growth, we need to generate more internal capital through higher profitability and lower payout ratio. That's one of the important elements of supporting the capital, but as well as issuing tier one and tier two instruments in the local and international markets. Mainly it's really international markets. If there is a situation in the next few years that suddenly there's not much appetite internationally for those capital instruments, or even locally, then certainly the first choice for us would be to cut dividends, even suspend dividends completely if we need to. Last option would be to actually think about rights issue. Rights issue is not something that we plan towards. It's not in our current strategy. We don't foresee a scenario where we had to. I would keep it that way.
Obviously, there is certainly a risk. We may have to slow down the growth coupled with suspension, even possible suspension of dividends. That will allow us to continue to grow, maybe at a lower phase. Certainly in the current strategy, we're relying on internally generated capital, plus capital instruments that we can issue.
Thank you very much. I'll put myself back in the queue for further follow-up questions. Thanks a lot.
Thank you. We'll now take our next question from Olga at BofA. Please unmute yourself and ask your question.
Good day. Thank you so much for this presentation. I have several questions. The first one is, if you can please add for us a digitalization of components on your ROE improvement over the next five years. How much can come from margin? How much can come from cost of risk, fee generation? You put some number for AI, but if you can help us to understand this. It's a big improvement, 3.6 percentage points. That's question number one. Question number two, I appreciate your preference to cut dividends over other capital management choices. What is your dividend strategy? What shall we think is comfortable dividend payout ratio for you for the next five years? My last question is your outlook on the risk management over these five years.
What do you think you will do differently versus the previous five years in risk-taking, in project financing, construction real estate exposures? What would be comfortable coverage and cost of risk going forward? Thank you.
Thank you. I think I missed the first one. Maybe Adel will handle it. In terms of the level of dividends, we certainly, as I mentioned in our presentation, we're going to have to have lower payout ratio. Not necessarily the actual cash paid, but because our profitability is going up, that can reduce dividends payout. In terms of the risk, we continue to invest in our risk capabilities, whether it's human capital, whether it's on training, whether on certifications. Also, as I mentioned, in the AI and the use of AI and risk on credits and others, we don't see specific area of risk. Obviously, every year we go with the board for risk appetite in terms of diversification, in terms of different industries. That's something that we do annually every time.
If there is a sector that showed up some unexpected risk, we would be proactive in terms of reducing the risk appetite for that sector.
Olga, on the other question on digitalization and the breakup of the sources of either the revenue uplift or the efficiencies. As mentioned in the slides by the CEO on the SAR 600 million- SAR 1 billion cumulative throughout the next five years will be, of course, driven by the AI. Talking about digitalization is already embedded in our operations. It's not something that will completely start with the new strategy. It's a continuation of what we are doing already. The revenue uplift and the efficiencies that was mentioned on a range, is specifically on how we will be utilizing the AI, either for the business direct use cases or some use cases are already live as we speak. Those that is supporting the back office and credit, as mentioned by CEO and also operation.
To break down the cumulative numerical impact of the digitalization the next five years between yield, non-yield, and cost, and cost of risk even, I wouldn't go into those details as much as what really matters when it comes to the overall revenue uplift, which is the total operating income, and also what we will have as part of the efficiencies or operation efficiency.
Yes. Thank you. I appreciate that you give a figure for improvement in digitalization and AI. My question is rather, digitalization or components of improvement in ROE over this five years. What comes from where? From margin, from fees, from cost incorporation, from cost of risk? If that is possible to digitalize, that would be very helpful.
Yeah. I'm sorry, I didn't mention. You're specifically talking about the breakup of the components within the ROE that we are-
Yes.
-guiding for. Just taking this back to the statement I was saying before, that the overall impact on the P&L as a bottom line would be the revenue uplift and the cost efficiency, which are be all going into the ROE calculation. Breaking down in basis points the ROE, that is not something that maybe we have or we're going to disclose today, but rather the overall P&L impact from the AI and the overall digitalization.
I apologize. I maybe asked this unclearly. I asked not about digitalization components, but ROE improvement from 18.4% to over 25%. That improvement, if we can break down components, not just the digital components, but this improvement.
That's, again, it would be distributed throughout the P&L. It's coming from all lines, not necessarily a specific top line, either all in yield or specific lines related to the specific cost optimization. It will be collectively a positive impact that would result eventually in this higher ROE.
Olga, if I may add. Olga, with the guidance we gave on ROE, you mentioned 25%. We said above 22%.
Above 22%.
Just to be clear. Above 22%.
22%. Yeah.
Obviously, we were talking about the ability to When we mention primacy for customers, that means more balances impact in the NIBs, right? Because obviously the NIBs have an impact on the cost of funding. More fees because the number of transactions, digital sales, and cross-selling and so on, will also lead to combination of NIBs, if it's cash and trade, on fees if it's credit card and remittances and others. The new business build that we mentioned, that also have an impact on overall return on equity. There are multiple components. Obviously, it is built in our financial model that we've developed for the coming five years. It's not something that we disclose. We don't give specific guidance on level of revenues, components of revenues or growth in fees and others.
NIBs, we were reluctant because NIBs is obviously so many moving aspects when you look at five-year outlook. We didn't prefer to issue a guidance on NIBs. Certainly on a yearly basis, every year, we're going to give guidance on a yearly basis, and that guidance will be continuously updated on a quarterly basis. Giving guidance for NIBs in the next five years, it's already built into what? There's so many assumptions, and any change and different assumption may have an impact on NIBs.
Thank you so much. Good luck from my side.
Thank you.
Thank you. We'll take our next question from Rahul at Citi. If you unmute yourself and ask your question. Thank you.
Thank you. Thanks for taking my question and this very useful presentation, and best of luck with this new strategy. I have few questions, actually. The first one is on provisioning. You've talked about how revenue accretion and cost normalization are kind of the key components of ROE expansion to your 22% guidance. I just wanted to understand, is your base case guidance basically assumes, your strategy assumes cost of risk will remain flat or flattish to achieve the 22% ROE guidance? Or are you expecting a significant change in cost of risk over the horizon? That's my first question. My second question is around the loan growth sort of outlook that you've provided, which is low double digit. I just wanted to understand how are you thinking about market share trends on retail and corporate.
What I am trying to understand is when you say low double-digit growth for Alinma, what are you baking in for the market? Are you expecting market to grow single-digit and you're growing double digits, you're gaining market share? Or you think you will grow in line with the market or ahead of the market? How are you thinking about sort of market trends over the next three to four years? That's my second question. My third and final question, just on ROEs again. We've talked about ROEs going from this 18.5% handle to over 22% handle. Just trying to understand what the shape will be. Will it be a straight line from incrementally moving higher every year? Or you think it will be more back-end loaded, front-end loaded?
We are moving into a phase where interest rates will be lower for the next few years or maybe a year or so, will we see this for the first one to two years, and then it kind of takes a step up, when you start seeing the impact of AI-related investments? I'm just trying to understand how that curve will unfold, roughly, according to you. Those are my three questions. Thank you so much.
Thank you, Rahul. On the provision and cost of risk, we've always been conservative, prudent in terms of cost of risk. We will not go in aggressive in the very low cost of risk with the market and risk in the market. We worked very closely with our risk management team to build this expected cost of risk. We will give guidance on a yearly basis. We didn't give guidance for the cost of risk throughout the period or by 2030, but it's something that will be given on an annual basis. You have to realize, we also, as I mentioned, the new business builds, we mentioned, like financing to underserved segments. Certainly, that typically attracts higher cost of risk for that business. However, that is more than compensated by the pricing that we offer those products too.
Obviously, it will be small compared to the overall, it's not going to significantly shift the cost of risk. We want to be conservative, as we give guidance on a yearly basis. That's exactly also the same in the ROE that you mentioned. Obviously, when you say new business builds, when you look at significant investment, it's certainly not going to show the very positive benefits from day one. It takes time. The new business builds, in addition to building that business and then possibly the first year or two on the loss side, because obviously you're building that business, you need the volume to scale. Naturally, the ROE cannot be a straight line.
Certainly, we're giving guidance on 2030, but we also will be giving guidance on ROE on a yearly basis, and you can look at the performance in terms of how the ROE is moving. Loan growth, no doubts that the loan growth is very in the next three to five years in the market, driven by the country vision, by the project finance, by the growth in SMEs, growth in multiple sectors and mining. Today, I think there's a big conference about mining. There's significant economic activity in the next three to five years. [Equipment industry], whether it's Expo 2030, whether World Cup, just to give examples. That is not going to result in a lower demand on credits. To be fair and transparent, I think it's on the supply side now rather than on the borrower side rather than the lending.
Certainly, liquidity, capital adequacy is a factor. As our plan, as I mentioned, in terms of capital, in terms of diversifying liquidity, we have good assurance that we'll be achieving the growth anticipate. We've never put targets for market share. We certainly monitor it; we certainly review it, even in a monthly basis. The question is, if I put that as a main headline, our strategy, it may result, sometimes may result through aggressive pricing to achieve the market achieve, or maybe you achieve a better ranking in the market share or increase in market share just because others didn't do well, or some of your competitors didn't do well, not necessarily your success. We look at it, we monitor it, but we don't have targets for market share.
I expect the market to show still back to my first point, I think the market will show good, strong growth. Whether it's high single digits or low double digits remains to be seen.
Understood. All clear. Thank you so much.
Thank you.
We'll take our next question from Jon Peace at UBS. Jon, please go ahead.
Yeah, thank you. First question is, I appreciate that we'll get some detailed 2026 guidance with the full year results, but could you maybe just talk a little bit about how you're seeing the project finance market after the slowdown in government spending in 2025? Do you still expect that to be robust double digits in the medium term? Are you seeing any margin pressure from competition from overseas, perhaps? Just a small point on the financial targets. For things like the CAGR and the cost income improvement, do you want us to use the nine-month 2025 as the starting point, or should we apply it to the full year 2025 when you report that? Thanks very much.
Thank you. On the second point, certainly, unfortunately, we came out to the call today without actually yet announcing our Q4, so we had to use the latest public information, which is September. We couldn't use, obviously, December numbers because it's not public yet. That's the reason why we used the September numbers. Now, in terms of project finance, we hear some of the news that came out. I hear it a lot from some of the investors when we meet them, analysts. In reality, we haven't seen a decline in project finance. Actually, there's an acceleration on renewables, for example, as an example of that. The demand is strong, as I mentioned, and we don't expect to see a decline. I mentioned also the recent country commitment about World Cup and Expo and Asian Cup and Asian Winter Games, among others.
The focus on different sectors, more investments, continuous investments. I don't expect to see a reduction in project finance. On the margin pressure, actually, in the first half, if I look at only 2025, I think in the first half, we've seen aggressive pricing on wholesale, especially on large corporate loans. Unfortunately, it was also coupled with a higher cost of funding. Which is unusual to have both events happening at the same time. Typically, when cost of funding goes up, it's actually higher margin, higher pricing, to pass on that incremental cost to your clients. I have to say that [second half] this year, we, in terms of aggressive pricing, we will continue to increase our margin on new proposals or existing facilities. I think that's good news. Yeah, that's what I can talk about in terms of the margin pressure.
Thank you.
Thank you very much. We'll now take our next question from Aybek at HSBC. If you unmute yourself and ask your question. Thank you.
Thank you for the strategy update. Very useful as always. I guess I'd like to ask three questions. The first one, I'm just curious to hear how you see Alinma Bank. Is it a price taker or a price leader, in your opinion, in the corporate market and also in the funding markets? How fundamental is being a price taker or price leader, is it to achieving your long-term ROE targets? You're quoting 22% and higher, right? That's the first one. Second one is, we've seen your cost of funding over the last couple of years. I think it's been a bit vulnerable, in my personal view. As part of your strategy, what can you do to materially improve your cost of funds, especially your competitive position in the funding markets? What can be done on that front?
I think, thirdly, are you having any disposals or spin-offs in mind over this period in order to improve your balance sheet position, release some capital?
Sorry for that. Can you repeat the first point because I think it wasn't clear to me. Sorry.
The first point, do you see Alinma Bank as a price taker or a price leader in the market?
Obviously, we do compete in the market. Volume is important to us, but volume is not the only criteria. Volume, we only go and compete aggressively if it's profitable products or profitable segments. We mentioned that, for example, we've grown significantly in mid corporates, which is much better margin than large corporates. We've expanded significantly in SME, which is again, better. We've grown aggressive on revolving credit card because of better yield. We actually not growing strongly in large corporates because of the pressure on pricing that we've seen, especially I would say late last year and the first half this year. I think it's now things improved, we'll be able to grow that segment again. We focus on cross-selling. We no longer just look at pure lending facilities.
We look at the ancillary business and the potential for cross-sell, the NIBs and so on. That is something we are not actually competing on pricing. We've actually lost, I think we've seen in the first nine months, at least on the corporate side, we were lower than the market average growth because we did not go aggressive on pricing. I don't mind losing market share if it's ridiculous pricing that we've seen example of 50 basis points, 60 basis points, even 45 basis points, and even recently I heard like around 15 basis points, which is really crazy. In terms of the cost of funding, we have done a good job in growing our CASA business throughout the years through customer acquisition and through cross-selling of cash and trade. We're going to continue on that effort for sure. We're diversifying our funding. We're looking at all possible instruments.
As I mentioned, the parts of the diversification is the Sukuk issuance, CDs, bilateral loans. These are not necessarily just looked at as just expenses. They actually have a longer term. It reduces the pressure on us competing on customer deposits, customer time deposits, especially coming from institutional depositors. Those depositors that truly have a full digital, sorry, full treasury department talking to all banks, and they really just move funds just because of 5 basis points or 10 basis points. The more we go with institutional depositor outside the country, medium-term, long-term, three or five years, or even the CDs themselves, even though typically around one year. It's better than taking a two-week deposit, three-week deposits that's continuously putting a pressure on us. We're seeing a higher level of competition on that.
In addition to that, I think the outlook for interest rates is going to go down, and that should help also on the cost of funding. Any spin-off or disposal, not in our current strategy. We have not built anything to do with spin-off or disposal for any businesses.
Clear. Can I ask one follow-up question, is that okay?
Yeah, sure.
You mentioned about the underserved segments of the economy, that's something that you'll be focusing at. Can you elaborate what you see as really underserved? Is there any particular opportunity left which can transform your business, in terms of customer numbers? For example, if I refer to consumer finance, I think Saudi consumer finance is very much like prime market, and there are lots of opportunities there. For you as a bank, what are the main underserved opportunities or segments in the economy, that can transform your profitability? What do you see? Anything that is out of the box that we are not capturing?
Yeah. As I mentioned, Aybek, that I will not try to expand on that business build, but, I did mention the iz Business, which is a digital application, all digital, even credit system, to serve basically, the micro and very small SMEs, which is really underserved in the country. A lot of these business owners, if they want to do any funding, they have to actually apply for a personal finance rather than a business lending. That's a segment that is, we believe, there's good opportunities. We just launched that product. There are certainly other segments, whether it's blue collar, whether it's low income and so on, but I can only talk about it once we get the right approval in place.
Okay. Thank you.
Thank you very much. We will now take our next question from Mohammed at Hassana. Please go ahead.
[Non-English content ]. Thank you gentlemen for the call. Just one question from my side, which is regarding the mix of your capital. You are guiding for a total capital adequacy ratio above 18%. If I think about it from a common equity perspective, how much you are targeting when it comes to how much your common equity will represent out of your total capital by 2030? Because as of now, I think 33% of your capital is tier one and tier two. Related to that, if it would be possible to share, what is your targeted ROE after tier one expense? That would be very helpful. Thank you.
Thanks, Mohammed. On the first part, on how much the common equities would be as a percentage of the total equities, as mentioned earlier, that would be relevant to the previous question on how we are actively managing the capital to support the growth, on a low double-digit CAGR on the total assets for next five years. As mentioned earlier by the CEO, it is a combination really by what we can do when it comes to the increase in profitability, as evidenced by the guidance on the ROE and also, what could be done towards the dividends. Also in parallel is the continuation of the support on the capital support when it comes to tier one and tier two instruments. Unfortunately, we do not guide for the CET1 by itself.
It is a combination, as mentioned, of how we are increasing CET1 through either lower dividends or also the internal generated capital. Also in the meantime, the forecasted issuances for the capital instruments, again, as I mentioned, for tier one and tier two. We do not disclose really the specific guidance on how common equities would be as part of the total equity or indirectly guiding for the CET1 by itself.
Okay. What about the ROE after tier one expense? Let's say ROE return on common equity.
Obviously, we don't also We guide actually, as we have been always communicating to investors in the ROE, which is the one also we are guiding on now, which is excluding the impact of the tier one, that's the shareholders' return on equity. Just the other side of the question, just saying what is the ROE based on the guidance without the tier ones, which reflects how much the common equities is going to be by 2030. This is how we have been reporting ROE, and we will continue, as mentioned earlier also, to guide for every year separately in the same manner that the ROE would be the ROE return on shareholders' equity after excluding the tier ones.
Okay. Thank you.
Okay. Thank you very much for that. I'm afraid that's all we've got time for in terms of questions, so I'd just like to hand it back to management for closing remarks.
Thank you, everyone. Please refer to the strategy tab in the IR website for further information. Otherwise, please contact IR for any follow-up questions.
Just final comments also from my side. Obviously, soon once we announce our financial results, we'll go for earning call as usual. I think early February, I would say. That will be another chance also to talk about the new strategy for the bank. Thank you all. Appreciate it.