QNB Alahli E : Annual Report 2021

Driving growth in the new normal

Annual Report 2021

Who we are

Overview

QNB ALAHLI is the second largest Egyptian private sector bank, and a subsidiary of QNB Group, the largest financial institution in the Middle East and Africa.

The bank offers a wide range of products that serve the financial needs of medium-sized companies, small enterprises and individuals, and provides services and products that suit their specific requirements, with a balanced focus on both the corporate sector and the retail banking sector. It has succeeded in maintaining its position in the Egyptian market, which helped to achieve a remarkable growth in the loan and deposit portfolio, market share, and returns, while maintaining a sound asset quality and cost ratios.

QNB ALAHLI has established a number of subsidiaries in specialized fields, such as QNB ALAHLI Leasing, which was established in 1997,

QNB ALAHLI Life Insurance in 2003, and QNB ALAHLI Factoring in 2012.

QNB ALAHLI currently has a network of more than 231 branches covering the most important governorates in Egypt, more than 872 ATMs, and more than 62,000 points of sale, in addition to allocating a 24/7 customer service call center to serve more than 1,300,000 customers.

Contents

Overview	Corporate Social Responsibility
5	Board of Directors	30	QNB ALAHLI's corporate social
6	QNB ALAHLI's Chairman Statement		responsibility
8	QNB ALAHLI's Chief Executive	31	Human Resources
	Officer Statement	Corporate Governance & Risk Management
12	QNB ALAHLI at a glance
34	Corporate Governance
Strategic Report
40	Risk Management
16	QNB ALAHLI's Strategy	42	Compliance Division Structure
17	Creating and delivering value	44	Internal Audit
19	Sustainability	Financial Statements
Operational Performance
48	Separate Financial Statements
24	Wholesale and Commercial Banking	116 Consolidated Financial Statements
25	Retail Banking	Branches Network
27	Small and Medium Enterprises
186 Branches Network

Report Strategic

Operational Performance

Network BranchesConsolidatedFinancial Separate Governance Corporate Social Corporate Statements FinancialStatementsManagement Risk and Responsibility

2 - QNB ALAHLI Annual Report 2021

QNB ALAHLI Annual Report 2021 - 3

Board of Directors

Mr. Mohamed Osman Ibrahim El-Dib

> Chairman - Non-Executive

Mr. Ali Rashid Ali Al-Mohannadi

> Vice Chairman - Non-Executive

Mr. Mohamed Mahmoud Ali Bedeir

> CEO and Board Member - Executive

Mr. Tarek Abdel Raouf Magdy Fayed

> Board Member - Executive

Mr. Khaled Ahmed Khalifa Al-Sada

> Board Member - Non-Executive

Mr. Nedhal Shafi Hassan Al-Nuaimi

>Board Member - Non-Executive

Ms. Heba Ali Ghaith Al-Tamimi

> Board Member - Non-Executive

Mr. Adel Ali Mohamed Al-Malki

> Board Member - Non-Executive

Mr. Abdullah Nasser Salem Al-Khalifa

> Board Member - Non-Executive

Ms. Shikha Salem Abdullah Al-Dosari

> Board Member - Non-Executive

Overview

Report Strategic

Operational Performance

Network BranchesConsolidatedFinancial Separate Governance Corporate Social Corporate Statements FinancialStatementsManagement Risk and Responsibility

4 - QNB ALAHLI Annual Report 2021

QNB ALAHLI Annual Report 2021 - 5

QNB ALAHLI's Chairman Statement

Along with our board of directors, our executive management and employees are all determined to advance QNB ALAHLI's positioning in the Egyptian banking sector

QNB ALAHLI's figures demonstrate its pioneer

positioning in the market

Reflecting on 2021, we are proud of the successive achievements which reflect our strength and established leading position among private banks in the financial sector. Accordingly, we are tirelessly advancing in our journey to serve the aspirations of our partners, custom- ers, and shareholders. We are also committed to offering

the latest in innovative banking services and products to

satisfy our customers' needs and fulfil our goal of being

their bank of choice.

Furthermore, QNB ALAHLI highly considers the safety of its customers, employees, and their partners from the repercussions of coronavirus and its variants. As such, we stress on the implementation of all safety and preventive measures in all our QNB ALAHLI's branches as well as the headquarter. Moreover, we ensure continuous sterilization of buildings, social distancing, wearing face masks, and giving the necessary precautions and attention to the elderly and those with chronic diseases, where we support them with relieved workloads or the opportunity to work from home. The bank is also keen on offering vaccines in collaboration with healthcare authorities along with adhering to the relevant regulations and guidelines of the Central Bank of Egypt.

Green economy is QNB ALAHLI's gateway to achieving sustainable development

Sustainability is one of the key topics influencing the entire world today. The growing demand by investors, regulatory authorities and customers on the topic, broadened the conversation around the bank's sustainability to include daily financial, environmental, and social activities, thus, positively affecting all stakeholders.

By adopting innovative mechanisms and tools,

needs of our customers, enabling them to manage their accounts remotely, with the highest safety and security standards.

Accordingly, it is worth noting that QNB ALAHLI is one of the leading banks that provide state-of-the-artbanking services and advanced financial solutions; such as online banking, E-wallets, and POS, to meet the needs of all its corporate and individual customers. QNB ALAHLI is at the forefront of financial institutions launching the latest digital products and solutions to serve its customers, as the bank prioritizes the govern- ment's strategy for the digitization of payments being the main guarantee in ensuring full governance and efficient management of the country's resources.

QNB ALAHLI adheres to key governance principles

QNB ALAHLI is keen on applying the best practices of governance for optimal professional performance and full transparency in all its business operations. The bank recognizes the importance of implementing governance procedures and adopting these principles as a general culture, vision and long-term strategy in a sustainable manner with the aim of maximizing the value of the institution, maintaining the confidence of customers and investors, and preserving the rights of all stakeholders including the bank's employees and customers. QNB ALAHLI is therefore committed to

publishing its financial results thoroughly and in

compliance with the regulatory guidelines that govern

the bank's business and activities across key pillars;

responsibility, accountability, transparency and

integrity, in order to ensure financial stability and enhance the bank's financial performance. QNB ALAHLI takes pride in its role within the Egyptian market as one of the leading banks abiding by the

Overview

Report Strategic

Operational Performance

Corporate Social Corporate Risk and Responsibility

Mr. Mohamed Osman El-Dib

Chairman

QNB ALAHLI's board of directors supports the executive management's strategy to empowering fintech's, which have become a cornerstone of the present challenges and future hopes.

QNB ALAHLI has succeeded in being at the forefront of financial institutions in 2021 despite the many challenges facing the banking sector, including the repercussions of the coronavirus pandemic. We managed to prove the bank's pioneering role & footprint in the Egyptian banking industry during the past year.

QNB ALAHLI strongly relies on the management's clear vision, experienced employees, its longstanding history of success and accomplishments since it started its operations in Egypt, along with its established reputation in the banking sector. QNB ALAHLI's progressive

growth is driven by its clear vision, strategic ideas & plans, all backed up by the flexibility, wisdom & functionality of the Egyptian monetary policies, which played a major role in maintaining the resilience of the Egyptian banking sector and the national economy.

Applying the highest standards of compliance and anti-money laundering

2021 witnessed QNB ALAHLI's commitment to implementing and abiding by compliance rules in all its banking operations, where all the bank's activities have been subject to the banking regulations and relevant laws & ethics. To achieve this, the bank relied on identifying, monitoring, and assessing any risks resulting from non-compliance,along with offering the technical expertise and ongoing monitoring of risks. The bank was also keen on adhering to the highest standards and applying the best practices of professional conduct in banking to achieve the requirements and objectives of shareholders and customers.

QNB ALAHLI has also worked vigorously to combat money laundering and financial crimes, including any form of corruption that may threaten the financial ecosystem, by strictly applying regulations that prevent

any illicit financial flows into the banking system.

QNB ALAHLI plays an essential role in achieving the target goals of sustainable development in general, and particularly in the transition into a green economy. As such, the bank is keen on providing all credit facilities for green projects, such as renewable and solar energy as well as participating in the CNG-powered vehicles initiative, with the aim of improving environmental issues and climatic conditions. The bank has also participated in various initiatives dedicated to boosting economic growth and offering job opportunities to reduce unemployment rates.

QNB ALAHLI is focused on implementing its green transition strategy through supporting SME's custom- ers, offering green bonds, developing new service & product-based projects, enhancing the conditions for existing projects to comply with the current environmental standards and equipping them with all the financial tools to overcome any potential challenges. The bank strongly believes in the essential role that green economy plays in establishing a tangible, sustain- able, and resilient economy.

Supporting electronic payments and digital solutions

QNB ALAHLI's board of directors supports the executive management's strategy to empowering fintech's, which have become a cornerstone of the present challenges and future hopes. We strive to develop our digital channels to conveniently meet the banking

concepts of sound governance.

Along with the board of directors, our executive management and employees are all determined to advance QNB ALAHLI's positioning in the Egyptian banking sector, highlighting its transparency, integrity, proactive and objective vision. In addition, we're committed to deliver-

ing on our promise in providing quality services that are

in line with the latest international practices, positioning the bank at the forefront of financial institutions despite global challenges and the negative impact of coronavirus pandemic on all economies internationally and locally.

Our goals empower us into adopting flexible policies and measures to keep pace with such changes and to take bold steps to mitigate the negative impacts of the pandemic and maintain safety, stability, and growth rates.

QNB ALAHLI is committed to fulfilling its role in giving back to the community in various sectors including healthcare, education, and women & youth empower- ment, with the aim of developing the society, both economically and socially. Our long-termdedication towards the community is part of our true belief in the

significance of this role, which is evident through our

extensive and solid experience in sustainability projects. In conclusion, I would like to extend my appreciation to our success partners; shareholders, customers, and employees for their joint efforts, commitment to the resolutions of the Central Bank of Egypt, supporting work processes and boosting our long-standing institution.

Network BranchesConsolidatedFinancial Separate Governance Statements FinancialStatementsManagement

6 - QNB ALAHLI Annual Report 2021

QNB ALAHLI Annual Report 2021 - 7

QNB ALAHLI's Chief Executive Officer Statement

QNB ALAHLI achieved strong financial performance and unprecedented indicators towards a stronger and faster growth during year 2021

Mr. Mohamed Bedeir

QNB ALAHLI's Chief Executive Officer

These entities reached top ranks during such conditions. Among these, was QNB ALAHLI that achieved high growth rates, remarkable indicators and tangible results in all of its sectors. Such figures and records make us proud of our strength in continuing our leading path of success.

2021: A Major Milestone in the Bank's History

From the beginning of 2021, QNB ALAHLI set a number of goals to achieve, the most important was to grow in all sectors that demonstrate its strength and positioning in the market, especially at the level of large-scale portfoli- os, small, medium and micro enterprises' and the retail portfolio. In addition, we planned to achieve high profit rates befitting its long-standingposition. The Board of Directors placed the clients' satisfaction on top of its priority list; ensuring the fulfillment of their wishes in a professional and advanced manner. We focused on increasing the deposit portfolio and utilizing a large percentage in the lending portfolio to be one of the leading banks in implementing that policy. Financial inclusion and digital transformation were not far from the consideration of the Board of Directors. We took a number of decisions to implement these plans such as opening free accounts for customers to support financial inclusion, providing digital services and products to facilitate customers' banking operations. QNB ALAHLI was engaged in the Central Bank of Egypt initiatives that

The gross consolidated loans portfolio recorded EGP 183 billion, with a growth rate of 6% during 2021 in comparison with 2020, while the bank's market share of total loans reached 5.96% at the end of 2021.

The ratio of non-performing loans reached about 3.81% by the end of 2021, which is one of the best ratios in the banking sector, while the provision coverage ratio for substandard loans amounted to 143%, and the capital

adequacy ratio reached 21.6% in light of the optimal application of credit policies.

The consolidated customer deposits portfolio increased and amounted to EGP 295 billion by the end of 2021, achieving a growth rate of 27% - compared to 2020 - driven by growth in all activities. The bank's market share of total deposits reached 4.59% in 2021.

The loans to deposits ratio exceeded 62% by the end of 2021, compared to an average of 48% within the banking sector, which is a high rate for deposits, in light of the focus on the growth of basic banking operations while maintaining high liquidity ratios in all currencies, while the total combined assets amounted to EGP 360 billion by the end of 2021 with an increase of 24% compared to the year 2020.

Extended & Influential Partnerships

During the past year, we succeeded in expanding QNB ALAHLI's circle of stakeholders and partners by activating and signing extended and influential partner-

Overview

Report Strategic

Operational Performance

Governance Corporate Social Corporate Management Risk and Responsibility

QNB ALAHLI achieved high growth rates, remarkable indicators and tangible results in all of its sectors. These figures and records make us proud of our strength and the leading position we hold in the banking sector.

The pandemic has disrupted lives across all countries and communities and negatively affected global economic growth in 2020. However, year 2021 marked a stronger beginning and a better economic growth. This was due to the vaccination race lead by major countries to provide vaccines to the developing ones. As the global economy is still recovering on all levels, it is expected that the return to pre-covidnormal conditions will lead to a more sustainable and inclusive economy for all sectors of the

society. Economic recovery insights are promising mainly due to the vaccination programs and the exceptional measures that the countries and markets are implementing to support business and investment ecosystem.

QNB ALAHLI took several fast measures and policies that were efficient and flexible to develop its operations,

overcome crises, address strong competition in the markets and take advantage of the opportunities available. These decisions were not by coincidence or luck. They were developed in line with the powerful vision and strategy of QNB Group that anticipated and addressed future needs and developed emergency solutions allowing us to seamlessly achieve our goals in the Egyptian market.

What QNB ALAHLI achieved during last year is a real success in the banking sector, given the circumstances enforced by the pandemic, which affected many financial institutions locally and globally.

Only few were able to survive the repercussions and move forward without looking back.

support digital transformation such as activating electronic payments, increasing POS and ATM machines, and many other initiatives.

Towards a Stronger & Faster Growth

QNB ALAHLI achieved strong financial performance and

unprecedented indicators during 2021 in all of its sectors.

We maintained efficiency rates and risk ratios in line with our growth strategy, and delivered on the promised business sustainability and customer satisfaction KPIs. In 2021, The bank consolidated net profit exceeded EGP

7.6 billion with a 2% growth rate compared to the same period in 2020, with a net profit on standalone basis, exceeding EGP 7.4 billion by the end of December 2021.

QNB ALAHLI continued its success in the SME's sector in line with the Central Bank of Egypt ambitious plan of urging all banks to grant small companies 25% of their total banking portfolio and 10% of their facilities.

QNB ALAHLI managed to achieve these percentages one year before the Central Bank of Egypt's target date. As such, we continue to lead the banking sector in supporting the growth of the Egyptian economy.

ships in many important sectors that contributed to the bank's records and added to the economy's value and growth. These partnerships, in addition to the bank's tools, provided all needed funds for large, small and medium-sized companies which goes in line with the Central Bank of Egypt initiative. It also enabled the bank to participate in most syndicated loans in the market to finance major projects.

QNB ALAHLI has been commissioned to manage a number of loans in order to finance local, multinational and governmental companies. These projects were successfully and timely managed in various business sectors such as oil and gas, petrochemicals, communica- tions, infrastructure, energy, construction and building materials, and others.

QNB ALAHLI is keen to participate in all initiatives, launched and directed by the Central Bank of Egypt that support the digital economy, including SME's initiative, mortgage finance initiatives with a return of 8% for middle income and 3% for middle and low income, as well as supporting the agriculture, tourism, industrial and contracting sectors.

Network BranchesConsolidatedFinancial Separate Statements FinancialStatements

8 - QNB ALAHLI Annual Report 2021

QNB ALAHLI Annual Report 2021 - 9