MENA Banks10Apr2011

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Middle East United Arab EmiratesBanking

10 April 2011

MENA Banks

Q1 11 preview - core GCC

markets remain resilientRahul ShahResearch Analyst

(+971) 4 4283-261

[email protected]

Ryan AyacheResearch Analyst

(+971) 4 428-3781

[email protected]

Egypt, Lebanon banks most affected by recent events; Qatar, UAE resilientWe present our Q1 11 forecasts and our assessment of the key issues facing thesector. We believe Qatar and UAE bank results should be largely immune to theevents that have engulfed the region. Saudi banks should also be minimallyaffected, save for the one-off salary boost given to workers. The Egyptianeconomy was disrupted in Q1, although better times are likely ahead; theLebanese banks (and NBAD) may provide the earliest indicators of how events inthe country have affected local banks. Top picks: ENBD, FGB, MAR, QNB, Rajhi.

Deutsche Bank AG/London

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from loca

exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche

Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firmmay have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single

factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.

MICA(P) 007/05/2010

Industry Update

Top picksQatar National Bank (QNBK.QA),QAR142.80 Buy

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

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

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

Emirates NBD (ENBD.DU),AED3.47 Buy

Banks Cur (m) Net income (Q1 11)

Riyad Bank SAR 67

Bank Aljazira SAR 1

Saudi Investment Bank SAR 18

Saudi Hollandi Bank SAR 20

Banque Saudi Fransi SAR 68

Saudi British Bank SAR 51

Arab National Bank SAR 49

Samba Financial Group SAR 104

Al Rajhi Bank SAR 160

Bank Albilad SAR 1

National Bank of Abu Dhabi AED 101

Abu Dhabi Commercial Bank AED 51

First Gulf Bank AED 101

Emirates NBD AED 225

Dubai Islamic Bank AED 26

Commercial Bank of Qatar QAR 49

Doha Bank QAR 97

Qatar Islamic Bank QAR 50

Masraf Al Rayan QAR 52

BLOM Bank* LBP 13

Bank Audi* LBP 10

* Figures in bn

Source: Deutsche Bank

Companies featuredRiyad Bank (1010.SE),SAR26.30 Buy

Bank Aljazira (1020.SE),SAR20.05 Sell

Saudi Investment Bank (1030.SE),SAR20.25 Hold

Saudi Hollandi Bank (1040.SE),SAR30.80 Buy

Banque Saudi Fransi (1050.SE),SAR50.00 Hold

Saudi British Bank (1060.SE) ,SAR45.50 Hold

Arab National Bank (1080.SE),SAR34.80 HoldSamba Financial Group (1090.SE),SAR56.50 Hold

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

Bank Albilad (1140.SE),SAR19.45 Sell

Alinma Bank (1150.SE),SAR10.00 No

Abu Dhabi Comm Bank (ADCB.AD),AED2.57 Hold

Bank Audi (AUDI.BY),USD7.12 Buy

Blom Bank (BLOM.BY),USD9.00 Buy

Dubai Islamic Bank (DISB.DU),AED2.16 Sell

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

Emirates NBD (ENBD.DU),AED3.47 Buy

Nat Bank of Abu Dhabi (NBAD.AD),AED10.45 Buy

Qatar National Bank (QNBK.QA),QAR142.80 Buy

Commercial bank (COMB.QA),QAR76.00 Buy

Doha Bank (DOBK.QA),QAR58.00 Hold

Qatar Islamic Bank (QISB.QA),QAR84.00 Buy

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

CIB (COMI.CA),EGP31.58 Hold

NSGB (NSGB.CA),EGP39.78 Hold

EFG Hermes (HRHO.CA),EGP21.51 Hold

GlobalMarketsResea

rch

Qatar earnings boosted by QCB bond and government spendingWe expect record earnings in Q1 for Qatari banks and excellent FY numbers aswell. System liquidity is at an all-time high due to peak LNG production and solidglobal energy prices. As such, funding costs continue to be favorable, whilesystem assets received a huge boost by the QCBs QAR50bn bond and sukukissuance to domestic banks in January. High levels of government spendingshould continue to provide the bulk of credit growth. Top picks: QNB and MAR.

Saudi banks one-off salary boost to hit bottom line in Q1We believe the Saudi banks will likely seek to emulate the recently announced twomonth extra salary being awarded to public sector employees. While this shouldhave a limited impact on FY results, the effect in Q1 could be more material. Yet,we believe investor sentiment should be more closely driven by loan volumegrowth; we see momentum slowly improving. Announced stimulatory measuresshould lift corporate credit demand; the anticipated Mortgage Law could boost

demand for housing loans. Al Rajhi, Saudi Hollandi, Riyad are Buy rated.UAE banks lower risk costs to fuel earnings growthWe believe the pace of the new NPL formation is likely to slow significantly,reflecting a sharp moderation in real estate price deflation and improvingeconomic activity. Volume trends are likely to be muted, although Abu Dhabibased banks should continue to pick up market share. Top picks: FGB, ENBD

Lebanese banks growth still likely despite hitting Egyptian speed bumpPolitical uncertainty is likely to have had a dampening effect on deposit growth inthe domestic business, but the main consequences of recent regional turmoil islikely to have been felt in the Egyptian operations, where we saw minimal volumegrowth and a pick-up in provisions. However, we continue to expect decent(double-digit) earnings growth this year. We have Buy ratings on Audi and BLOM.

Valuation and risksWe value the MENA banks using a two-stage Gordon Growth Model that basestarget prices on discounted terminal value and adds back the discounted value ofinterim dividends. Median inputs across MENA banks include a 5% risk-free rate,7% equity risk premium, 1.0 beta, 4% terminal growth and 19% mid-cycle ROE.Key risks include: the possibility of further significant asset quality deterioration,potentially arising from political/economic uncertainty; the prospect of restrictedaccess to wholesale funding markets; regulatory pressure to increase provisioning,solvency or liquidity; and the scope for margin erosion due to enhancedcompetition.


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10 April 2011 Banking MENA Banks

Page 2 Deutsche Bank AG/London

Qatar

Main investment themes

The QAR50bn QCB bond will likely boost earnings and asset growthThe QCBs January issue of QAR50bn of conventional and Islamic paper (5% coupon, three

year tenor, zero RW) should be a major theme underlying earnings and assets growth in

FY11. The biggest relative gainers are MAR (QAR10bn allocation) and QIB (QAR9bn

allocation), which will see assets rise significantly in Q1: 31% QoQ growth for the former,

19% QoQ growth for the latter. The allocations should also boost earnings and again the

same two banks will likely be key beneficiaries, though DHB should also see a nice boost to

its bottom line. The smallest allocation was given to CBQ (QAR1.5bn), and consequently, we

expect it to derive comparatively smaller benefits in terms of its assets and earnings growth.

Government spending remains the defining feature of the market

High levels of government spending, channeled through various means such as semi-

government agencies, will likely remain the defining source of credit demand in the domesticmarkets for the foreseeable future. While we believe that private sector and retail credit

demand is likely to improve from FY10 levels on a YoY basis, this should still account for a far

smaller share of growth than the public sector at large. The key beneficiaries are banks with

proportionally higher share of government ownership, QNB and MAR, and banks whose loan

book has a high historical bias toward the public sector, again QNB and MAR.

Record liquidity supports low funding costs, but should eventually pressure margins

Peak LNG production capacity was reached in Q4 last year. Combined with rising energy

prices in Q1, this means that state liquidity levels are exceptionally high. Deposit growth is

therefore likely to remain exceedingly solid, given the high share of public sector funding in

the banking system at close to 30%. Deposit costs have already fallen substantially YoY in

FY10 between 50bps and 150bps at our banks and are likely to remain subdued this year.

It is therefore only a matter of time before asset yields also come under pressure. Thus, we

expect NIMs to remain broadly flat YoY as the asset pricing lag effect begins to weigh on

margins by H1.

Asset quality remains solid; DHB and CBQ will likely charge lower risk costs

NPLs have never been a defining issue for Qatari banks, with QNB, QIB and MAR at or below

1% NPL. CBQ and DHB, on the other hand, did see a rise in non-performing loans in FY09/10,

and have paid the price in terms of risk costs. CBQs risk costs already dropped significantly

in FY10, but we see scope for the bank to further lower these by around 10bps to 40bps of

net loans. Investment provisions should also fall, contributing to better earnings. For DHB this

trend is likely to be more pronounced we expect it to lower its risk costs by around 20bps

to 90bps of net loans. Lower investment provisions should also help to boost earnings

further. We believe lower risk-cost dynamic will not impact QNB, MAR or QIB, as we thinkthese names are elsewhere on the asset quality cycle.

What has changed?

The main change for Qatari banks is the skewed earnings and asset growth resulting from

the QCB bond. Funding and credit sources and overall earnings directions are otherwise

broadly similar to FY10. The impact of the regional unrest on Qatari banks should be minimal.


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Deutsche Bank AG/London Page 3

Top picks

Our top picks in the sector are QNB and MAR. In essence, we view Qatari banks as a play on

state liquidity and spending. Proximity to the government in terms of ownership and loan

book bias has historically been a good guide as to the direction of governmental flows. This

premise underlies our preference for these names on a thematic basis, as these banks enjoy

the highest government ownership and the highest bias to the public sector in theirrespective loan books. The implication of the mix of ownership and proximity to government

is seen in deposit volumes, asset growth and asset quality on all counts, both QNB and

MAR score exceptionally well.


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Saudi Arabia


How rapidly will credit growth recover?Loan growth has been extremely weak since mid 2008, but growth rates have steadily

improved since September 2010; credit growth now stands at 5% versus the long-term trend

growth rate of 12%. While retail credit growth has been running at high single-digit levels,

corporate credit (which accounts for two-thirds of system loans) has been broadly stagnant.

We believe improving corporate profitability, strong sales growth and a supportive macro

environment (high oil prices and strong fiscal support), should (over time) lead to a robust

recovery in corporate credit demand.

Have NPLs peaked?

At December 2010, system NPLs/loans stood at 2.9%, marking an improvement from the

June 10 (3.2%) and December 2009 (3.3%) levels. While heightened political tensions in the

MENA region have highlighted that the potential for asset quality deterioration exists, webelieve the Saudi banks should be relatively sheltered from any fallout, reflecting their focus

on the domestic market.

When will margins improve?

Saudi banking margins declined from 3.7% in 2007 to 2.9% currently. The biggest driver of

this downtrend has been accommodative monetary policy, although lower risk appetite by

the banks has also likely contributed. Stronger loan growth should boost margins, as this is

likely to allow the banks to shift out of currently high holdings of liquid assets. Saudi banks

margins are the most positively exposed within the GCC to any normalization in interest

rates.

What has changed?

Q4 10 results were 12% above our forecasts, reflecting lower-than-expected loan impairment

charges. This signals to us that: 1) regulatory pressure to lift coverage ratios has eased we

note that the sector coverage ratio now stands at 115% and 2) asset quality trends appear to

have stabilised NPLs could start to decline if economic growth (aided by expansionary fiscal

policies) persists. While we regard recent stimulatory measures as positive, Q1 results are

likely to be affected by measures to match the recently announced one-off salary boost for

public sector workers.

Top picks

Al Rajhi Bank is the largest retail bank (hence being exposed to current positive consumer

credit trends) with the size and capital strength to participate in public infrastructure projects.

We believe above average profitability and superior loan quality support high valuation

multiples.

Riyad Bank is one of the largest banks in the Kingdom, well capitalized and with strong links

to the public sector. It should be well placed to benefit from growing infrastructure

investment and should also be able to boost market share in the growing retail banking

segment, where the bank is now significantly under-represented.

Least preferred

Bank Albilad is a 2005 start up, which is winning market share as the franchise builds critical

mass. However, the banks cost efficiency significantly lags that of its peers (65% cost-

income ratio), while loan quality (5.8% NPLs/loans) and provisions coverage (89%) also


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compare unfavourably. We note that the consumer loan book grew by 54% in 2010 (to 36%

of all lending); expansion at this pace could result in additional NPLs crystallizing in the future.

Bank Aljazira the bank has been winning banking market share in recent years as

management has sought to grow the balance sheet to offset sharply declining brokerage

revenues (to which Aljazira is heavily exposed). However, rapid credit growth may have

contributed to high NPLs (7% of the loan book); high credit risk costs and low operatingefficiency (69% cost-income ratio) have resulted in depressed profitability.


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UAE


Where do we stand in the asset write-down cycle?UAE banks experienced a significant deterioration in asset quality over the past two years

the effect of a sharp decline in local real estate values, a dramatic slowdown in economic

growth and much tighter liquidity conditions. In our view, we are likely to see a further

increase in non-performing loans in 2011, although the pace of deterioration is likely to slow

considerably, which in turn could allow for risk costs to decline YoY.

Do the banks have sufficient capital and liquidity?

One of the key concerns for investors, and a key factor in the lowly rating of the UAE banking

shares, relates to the level of capital available to absorb asset write-downs. However, the

sectors capital adequacy ratio actually increased from 19.2% to 20.8% in 2010, reflecting

the high structural profitability of the sector and limited risk-weighted asset growth. Liquidity

has improved slightly; the gross loans-deposits ratio declined from 108% to 105% in theyear, while three-month EIBOR has declined below 2.15% from a peak of 2.35% last

summer. However, we believe UAE banks should continue to make concerted efforts to

secure more stable funding.

Will the banks be able to deliver much credit growth?

System loan growth is currently running at 3% YoY. While strong oil prices and rising public

spending, combined with a recovery in tourism and trade are all supportive factors, we

believe banks should continue to deleverage, which suggests to us that system credit growth

will likely remain at single-digit levels. We believe Abu Dhabi-based banks will likely grow

faster than their Dubai-based peers.

What has changed?FY10 results indicate that most banks were profitable in the year, despite experiencing higher

volumes of impaired loans (most notably due to their exposure to Dubai World) and taking

write-downs against real estate. Dubai is benefitting from rising trade flows, while tourism

levels are also improving. High oil prices should underpin fiscal spending, suggesting Abu

Dhabi will likely benefit from high levels of public infrastructure spending.

According to the UAE Central Bank data, total assets were up 10%, loans increased 3% and

the deposit base expanded 13% in the year up to February 2011.

Top picks

FGB is structurally one of the most profitable UAE banks, reflecting above average marginsand the lowest cost-income ratio in the system. Unlike many of its peers, the volume of NPLs

trended lower in the latter part of 2010 as the bank ramped up collection efforts. FGBs CEO

recently commented that the bank may see double digit loan growth in 2011.

ENBD is the largest bank in the UAE and is 56%-owned by ICD, an investment vehicle of the

Dubai government; ENBDs fortunes are closely linked to those of Dubai. In this context, the

sharp recovery in the trade and tourism industries is positive, although the overhang of an

oversupplied real estate market remains. Management has made positive progress in areas

under its control, namely operating costs (down 14% YoY) and liquidity (loans/deposits now

stand at 105%, versus a peak of 132% previously). Q1 results are likely to benefit from a

significant gain arising from the sale of a minority stake in Network International.


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Least preferred

Dubai Islamic Bank took control of mortgage lender, Tamweel, toward the end of 2010. As a

result, real estate-related lending now accounts for over half of the banks loan book. We

believe UAE real estate prices will likely remain depressed, which may put further pressure

on the banks asset quality.


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Lebanon


Heightened local and regional tensionsPolitical uncertainty in Lebanon increased following the ousting of Saad Hariri as Prime

Minister and the subsequent appointment of Najib Mikati to this role. However, these events

have subsequently been overshadowed by widespread protests that have taken place across

the MENA region, some of which have resulted in regime change and others which may yet

do so.

Resilience of deposit inflows

Banking system data for early 2011 has yet to be released, but money supply data is

consistent with YoY deposit growth of about 10%, suggesting that while there may have

been some pullback in deposit flows, overall growth trends have been broadly maintained.

Ability of the banks to continue growing their loan booksBank Audis loan book grew by 27% and BLOM Banks grew by 29% in 2010. While the

relaxation of regulations governing local LBP lending is supportive, the ability (and

willingness) of the banks to grow their lending elsewhere in the MENA region may be

constrained by political and economic uncertainty.

What has changed?

Q4 10 results were in line with our expectations and showed continued strong (28% YoY)

credit growth at both Bank Audi and BLOM Bank. However, the political turmoil that has

engulfed the MENA region since the New Year is likely to have an impact on both banks

international operations; Egypt, Jordan and Syria, in particular, are key to the banks regional

growth strategies. However, in terms of the Q1 11 results, we believe significant additional

provisioning should only be required against the banks Egyptian operations.Top picks

BLOM Bank is our preferred Lebanese bank. The bank is one of the more profitable in the

Lebanese banking system, on account of disciplined spread management and tight cost

control, while growing strongly in higher margin retail lending. The bank is also investing in

products and services, such as brokerage and asset management, which, over time, should

boost fee income levels.

Following YTD price declines, we believe Bank Audi is also an attractive investment. The bank

has a strong track record of earnings growth, even during times of political turmoil and

economic weakness. Successful revenue diversification efforts, combined with strong riskmanagement, in our view, should allow this growth trend to persist. While the current turmoil

will affect the banks MENA operations in the near term, we believe management is

committed to its regional expansion strategy.


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Valuation

Saudi banks are the most highly rated in our MENA coverage universe on a forward PE basis

(UAE and Lebanon the least). In PB terms, Qatar is the most highly rated (UAE the least).

Qatar and Lebanon banks offer the highest likely dividend yields (Saudi and Egypt the least).

Figure 1: Valuation metrics and stock performance for MENA and regional banking sector

P/E (x) P/B (x) Dividend yield (%) ROE (%) US$ Stock Performance(%)2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 1M 3M LTM

Al Rajhi Bank 17.4 13.8 11.4 3.8 3.4 3.0 3.9 4.5 5.3 22.4 25.9 28.4 8.7 (7.4) (9.1)

Arab National Bank 11.7 10.2 7.9 1.4 1.3 1.2 2.9 3.3 4.0 12.9 13.6 15.9 23.9 20.3 (0.2)

Bank Albilad 96.4 22.8 11.0 1.9 1.8 1.5 na 0.8 1.5 2.0 8.1 14.9 9.2 0.8 (7.8)

Bank Aljazira 50.7 22.1 12.0 1.2 1.2 1.2 0.8 3.2 4.0 1.4 5.6 9.9 24.4 12.4 (2.9)

Banque Saudi Fransi 13.0 11.3 9.5 2.0 1.8 1.6 2.3 2.6 3.0 16.1 16.5 17.4 25.5 7.6 2.6

Riyad Bank 15.3 11.5 8.6 1.4 1.3 1.2 3.8 5.7 6.8 9.0 11.5 14.6 20.0 (1.1) (13.4)

Samba Financial Group 11.3 10.2 9.0 2.0 1.8 1.6 2.9 3.5 4.2 18.9 18.4 18.4 21.8 (7.7) (3.8)

Saudi British Bank 17.7 14.2 9.5 2.3 2.1 1.8 1.1 1.7 2.4 13.8 15.3 20.1 24.3 11.7 (6.6)

Saudi Hollandi Bank 14.7 11.4 7.2 1.6 1.4 1.3 1.4 2.4 3.7 11.3 13.3 18.6 11.3 - (11.4)

Saudi Investment Bank 28.4 13.4 7.9 1.2 1.1 1.0 2.6 1.7 2.7 4.2 8.5 13.2 22.8 11.9 30.6

Saudi Median 16.3 12.5 9.2 1.8 1.6 1.4 2.6 2.9 3.9 12.1 13.4 16.62 22.3 4.2 -5.2

National Bank of Abu Dhabi 6.7 5.9 5.1 1.2 1.0 0.8 2.1 3.1 4.1 20.3 19.5 19.0 4.8 (0.5) 1.2

Abu Dhabi Commercial Bank 52.3 10.8 5.1 0.8 0.7 0.6 na 4.0 6.0 2.5 8.0 15.5 6.7 1.3 3.7

First Gulf Bank 8.1 6.1 4.6 1.1 0.9 0.8 3.8 4.7 5.6 14.9 17.7 20.3 5.9 (7.7) (6.4)

Emirates NBD 8.9 4.6 3.5 0.6 0.6 0.5 6.0 6.0 7.6 8.1 13.0 15.4 9.6 19.9 11.1

Dubai Islamic Bank 13.4 8.6 5.8 0.9 0.9 0.8 2.3 4.5 6.8 6.6 10.5 14.1 6.7 1.8 (17.6)

UAE Median 8.9 6.1 5.1 0.9 0.9 0.8 3.0 4.5 6.0 8.1 13.0 15.5 6.7 1.3 1.2

Qatar National Bank 9.6 7.9 6.6 2.3 1.9 1.5 2.1 2.5 3.0 26.6 26.4 25.4 1.9 0.6 1.7

Commercial Bank of Qatar 9.7 8.3 6.9 1.6 1.4 1.3 7.7 7.8 7.2 16.4 17.8 19.3 12.8 (16.3) 4.2

Doha Bank 9.8 8.7 7.3 2.1 1.9 1.6 8.2 4.6 5.5 22.0 22.8 24.0 6.4 (3.6) 31.1

Qatar Islamic Bank 14.6 11.0 8.7 2.0 1.8 1.6 5.4 5.7 6.0 14.8 17.5 19.8 20.2 (9.7) 15.5

Masraf Al Rayan 13.9 12.7 10.7 2.3 2.1 1.8 4.7 5.6 na 18.3 17.5 18.0 2.3 16.7 65.2

Qatar Median 9.8 8.7 7.3 2.1 1.9 1.6 5.4 5.6 5.8 18.3 17.8 19.8 6.4 (3.6) 15.5

COMI 8.6 10.3 9.5 2.2 1.9 1.6 3.1 2.4 3.2 28.8 19.7 18.2 (11.5) (32.9) (8.0)

NSGB 11.5 9.2 8.7 2.1 1.7 1.5 3.0 2.7 2.9 19.2 20.3 18.0 (11.8) (25.7) 16.7

EFG Hermes 12.7 25.6 11.0 0.9 0.9 0.8 13.7 4.6 4.6 7.3 3.6 7.9 (18.0) (37.1) (31.9)

Egypt Median 11.5 10.3 9.5 2.1 1.7 1.5 3.1 2.7 3.2 19.2 19.7 18.0 -11.8 -32.9 -8.0

Bank Audi 8.4 7.0 5.8 1.2 1.1 1.0 5.1 6.2 7.5 15.8 17.1 18.5 4.6 (9.5) (15.7)

BLOM Bank 6.3 5.4 4.7 1.2 1.0 0.9 5.1 6.1 7.2 19.7 20.1 20.0 (1.0) (3.7) (7.2)

Lebanon Median 7.4 6.2 5.2 1.2 1.1 0.9 5.1 6.1 7.4 17.8 18.6 19.2 1.8 -6.6 -11.5

Latin America Median 13.6 11.2 9.8 2.6 2.3 2.0 3.0 3.5 3.8 22.3 22.2 22.0 6.1 (2.2) 21.9

EMEA Median 13.2 10.5 8.6 1.8 1.6 1.3 3.3 3.9 4.9 13.5 15.3 17.5 10.0 7.8 3.7

Emerging Asia Median 15.1 13.3 10.9 1.9 1.8 1.5 1.9 2.4 2.9 15.7 15.7 15.8 9.0 3.6 24.3

GEMS Median 14.6 11.5 9.5 1.9 1.7 1.5 2.3 3.1 3.7 14.9 16.1 17.5 9.0 1.0 17.0

Developed Asia Median 13.0 11.9 10.5 1.0 1.0 1.4 3.4 3.7 4.8 8.7 10.1 13.5 -4.3 -5.4 1.6

Developed Europe Median 12.1 10.6 8.1 0.8 0.8 0.7 3.9 4.3 5.0 7.8 7.7 10.7 -2.2 8.9 -12.7

United States Median 14.8 13.7 11.0 1.1 1.0 1.0 0.6 1.0 1.8 8.4 8.1 9.2 -0.1 0.2 2.1

Developed Market Median 13.0 11.7 9.8 1.0 0.9 0.9 2.8 3.4 4.3 8.4 8.6 10.6 -1.5 3.1 -3.0

Source: Deutsche Bank, Bloomberg Finance LP, prices updated as of April 4th 2011


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All the MENA banking markets we cover are trading at a discount to their historical PB

averages; the discount is most pronounced in Egypt and the UAE. While consensus earnings

for the UAE and Qatar have proved resilient, expectations for the Saudi banking system have

been significantly curtailed over the past 12 months.

Figure 2: Current and historical PB ratios Figure 3: Consensus estimates for selected MENA

markets

3.1

2.7

1.6

2.1

1.4

1.8

2.1

0.91.1

1.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Saudi Arabia Qatar UAE Egypt Lebanon

x

Historical Average P/BV Current P/BV

70

85

100

115

M ar-10 Jun-10 Sep-10 Dec-10 M ar-11

Saudi Arabia Qatar UAE

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

MENA bank share price performance has lagged CEEMEA YTD

Figure 4: YTD share price performance of selected banking markets

-35%

-25%

-15%

-5%

5%

15%

25%

Hungary

Poland

Austria

Russia

Czech

SaudiArabia

UAE

Israel

SouthAfrica

Qatar

Turkey

Lebanon

Egypt

Source: Deutsche Bank, Bloomberg Finance LP


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

performed strongly

-40%

-30%

-20%

-10%

0%

10%

20%

AN

B

ADC

B

ENB

D

MAR

K

Aljazi

ra

SA

IB

SAB

B

BS

F

D

IB

SH

B

QN

B

Albilad

NBA

D

Riyad

DHB

K

BLO

M

AlRajhi

Samba

FG

B

AUDI

Q

IB

CB

Q

NSG

B

C

IB

EF

G

Source: Deutsche Bank, Bloomberg Finance LP


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Appendix 1

Important Disclosures

Additional information available upon requestFor disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see

the most recently published company report or visit our global disclosure look-up page on our website at

http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject

issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any

compensation for providing a specific recommendation or view in this report. Nabil Ahmed/Rahul Shah

Equity rating key Equity rating dispersion and banking relationships

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

holder return (TSR = percentage change in share price

from current price to projected target price plus pro-

jected dividend yield ) , we recommend that investors

buy the stock.

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

holder return, we recommend that investors sell the

stock

Hold: We take a neutral view on the stock 12-months

out and, based on this time horizon, do not recommendeither a Buy or Sell.

Notes:

1. Newly issued research recommendations and target

prices always supersede previously published research.

2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of

10% or more over a 12-month period

Hold: Expected total return (including dividends)

between -10% and 10% over a 12-month period

Sell: Expected total return (including dividends) of -

10% or worse over a 12-month period

58 %

36 %

6 %14 %

10 % 10 %0

100

200

300

400

500

600

Buy Hold Sell

Global Universe

Companies Covered Cos. w/ Banking Relationship


15/16



Regulatory Disclosures

1. Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the

"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2. Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent

or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at

http://gm.db.com.

3. Country-Specific Disclosures

Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the AustralianCorporations Act.

Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) andits(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly

affected by revenues deriving from the business and financial transactions of Deutsche Bank.

EU countries: Disclosures relating to our obligations under MiFiD can be found at http://globalmarkets.db.com/riskdisclosures.Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registrationnumber - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117.

Member of associations: JSDA, The Financial Futures Association of Japan. Commissions and risks involved in stock

transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction

amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price

fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange

fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered as rating agency in Japan

unless specifically indicated as Japan entities of such rating agencies.New Zealand: This research is not intended for, and should not be given to, "members of the public" within the meaning of theNew Zealand Securities Market Act 1988.

Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, anyappraisal or evaluation activity requiring a license in the Russian Federation.


16/16

Deutsche Bank AG/London

Middle East locations

Deutsche Bank Dubai

Dubai International Financial Centre

The Gate, West Wing, Level 3

P.O. Box 504 902

Dubai City

Tel: (971) 4 3611 700

Deutsche Bank Saudi Arabia

Al Faisaliah Tower

17th & 28th Floor

Olaya, Riyadh

Saudi Arabia

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Deutsche Bank Israel

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21st Floor

66883 Tel Aviv

Tel: (+972) 3 710-2000

Deutsche Bank Turkey

Eski Buyukdere Cad. Tekfen Tower

No:209 Kat:17-18

TR-34394 Istanbul

Tel: (+90) 212 317 01 00

International locations

Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

United States of America

Tel: (1) 212 250 2500

Deutsche Bank AG London

1 Great Winchester Street

London EC2N 2EQ

United Kingdom

Tel: (44) 20 7545 8000

Deutsche Bank AG

Groe Gallusstrae 10-14

60272 Frankfurt am Main

Germany

Tel: (49) 69 910 00

Deutsche Bank AG

Deutsche Bank Place

Level 16

Corner of Hunter & Phillip Streets

Sydney, NSW 2000

Australia

Tel: (61) 2 8258 1234

Deutsche Bank AG

Filiale Hongkong

International Commerce Centre,

1 Austin Road West,Kowloon,

Hong KongTel: (852) 2203 8888

Deutsche Securities Inc.

2-11-1 Nagatacho

Sanno Park Tower

Chiyoda-ku, Tokyo 100-6171

JapanTel: (81) 3 5156 6770

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Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists andsales staff, may take a view that is inconsistent with that taken in this research report.Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without

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MENA Banks10Apr2011