Islamic Finance Driving Forces The Management Team Perspective March 2010, Dead Sea, Jordan CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of Al Rajhi Bank is strictly prohibited

Contents Islamic Banking Trends & Challenges Al Rajhi in Jordan

Islamic Finance represents 1% of global assets Islamic Finance represents 1% of global assets. The market has been growing over 30% annually since 2000 and is set for continued strong growth. Financiers in the Islamic world as early as the 8th century Sarrafs Mostly Retail Banking Prior to 1990 Commercial Banking 1990s Project finance & Syndication Capital Markets Leasing 2000s Advanced treasury services Innovative asset management Investment Banking Future Retail Corporate 470 1,000 22% 34% 175 420 50 20 60 28 Source: Oliver Wyman; Figures are in Billions

Islamic banks outperform market growth in core geographies 8 Islamic banks outperform market growth in core geographies Al key market have their share of Islamic assets increasing. Growth above 30% in most of the markets Even in the UAE, the figures shows some flattening, but this is was a temporary effect of end of 2007, which was due to excess cash and looking into the share as of mid 2008 shows Growth drivers are - general economic growth and banking under penetration - demographics and Islamic preference - increasing awareness of Islamic finance - improved supply from Islamic banks which have bridged the gap with conventioanl banking of product offering, e.g. credit cards, sukuks, The key question is what will be the cap for islamic banks? Some industry experts consider that in GCC countries for example a majority of retail, up to 80% in some countries will be Islamic, while corporate will be more selective based on product offering and service levels % in 2003 % in 2008 17% 20% 30% 10% 12% 16% 13% * ** 4% Notes: * Malaysia at 16%, Indonesia at 2% ; ** Estimated total (including Islamic windows) around 40 - 50% Source: Bankscope, CIA Fact Book and Oliver Wyman analysis

Top ten largest Muslim populations Source: CIA Factbook and Oliver Wyman Analysis

Islamic banking players increasing interest to become global NOT EXHAUSTIVE 2007- Oct 2009 France Islamic banks from Bahrain and Qatar reportedly applied for licenses Kuwait Finance House, Al-Baraka, Gatehouse also reported to be interested Jordan 2 new entrants: Dubai Islamic Bank and Al-Rajhi Bank. Turkey 3 out of 4 Turkish Islamic Banks (Turkiye Finans, AlBaraka, Kuveyt Turk) have a strategic GCC partner Azerbaijan 2008: International Investment Bank (Bahrain) bought 49% of Amrahbank and converting it to an Islamic bank Pakistan 2009: Unicorn increases stake in Dawood Islamic Bank to 37%. Dubai Islamic banks have started operations. (Emirates Global Islamic Bank, Dubai Islamic Bank) Morocco 2007: Government authorizes segments of Islamic finance; 10 banks reported to have express interest Malaysia 2005-7: New Entrants: KFH, Al-Rajhi Bank, AFB (QIB) 2009: Two new foreign players reportedly shortlisted for licenses & takaful license available Egypt 2008: Abu Dhabi Islamic Bank buys 51% of Egypt’s National Bank for Development Among the largest cross-border acquisitions was the 2007 purchase by National Commercial Bank (Saudi Arabia’s largest bank) of a majority interest in Türkiye Finans Katilim Bankasi A.S. (one of Turkey’s largest Islamic banks). More details about this purchase are presented on the next slide. India 2009: Government issues its first Islamic banking license; operations to commence in 2010. Bangladesh 2009: Sonali and Janata banks, state players, to open Islamic windows. Indonesia 2008: Asian Finance Bank of Malaysia announces investment, operations to commence in 2010 This year’s report will discuss potential expansion opportunities in North Africa Al-Baraka Group (12 countries): Jordan, Egypt, Tunisia, Sudan, Turkey, Bahrain, Pakistan, South Africa, Algeria, Lebanon, Syria, Indonesia KFH Group (4 countries): Kuwait, Malaysia, Bahrain, Turkey

Reported profitability remains higher for Islamic banks especially in the GCC region Return on Average Assets for Top 5 banks versus Islamic banks1 Percent , 2008 SELECTED MARKETS Profitability for Islamic banks remains generally higher as usual, mainly driven by reliance on deposit funding which is less expensive and also premium for Islamic products for some players. However, the operational efficiency of Islamic banks remains generally lower than conventional banks as we’ll see later in this presentation Kuwait Qatar Saudi Arabia UAE Malaysia Indonesia GCC Non-GCC 1 Top 3 Islamic banks by assets considered for all countries except the UAE (top 5) Malaysia and Indonesia (top 4). Source: Central banks; annual reports; Bankscope; McKinsey

There are still four main priority areas which Islamic banks should focus on going forward Potential actions for Islamic banks Change business mix in product areas where Islamic banks have not been traditionally focused or where there is growth potential such as Credit cards / Personal Loans Fee-based businesses such as Asset Management, Treasury operations, Capital Market Islamic Investment Banking(as an upcoming growth area) Enhanced and diversified business mix 1 Make efforts to lower cost of operation and improve service quality in order to improve competitiveness Efficiency in operations 2 Well positioned Islamic banks can consider international growth opportunities in countries with Sufficient target population and strong un-met demand Feasible market entry based on competitive environment and regulatory climate Explore global growth options 3 Upgrade risk management systems and capabilities in anticipation of required capability to manage in crisis environments, i.e. focus on Credit risk as an important area of focus given high real estate concentration and potential for increased non-performing loans. Liquidity risk via improved sources of funding, new hedging tools and enhanced infrastructure. Critical to manage liquidity in light of limited sources of funding for Islamic banks. Risk management 4

Robust Business Model is a prerequisite to success in any business Performance Measures Robust Risk Management Stable IT infrastructure Efficient Processes Good Governance Talent Brand Customer Channels Products & Services

Contents Islamic Banking Trends & Challenges Al Rajhi in Jordan

17 The Islamic market in Jordan is smaller than peer countries, but is growing quickly Share of total market; % Size of Islamic banking market based on assets, 2008 $b Total Jordanian Islamic assets $m Bahrain 9.8 3,886 +17% Kuwait 29.3 3,091 2,878 Qatar 20.3 2,420 IIAB Malaysia 15.9 2,607 UAE 16.9 2,253 2,066 JIB 1,867 10.7 Jordan 2005 06 07 2008 Turkey 3.5 8.9 8.8 8.8 10.7 SOURCE: Company annual reports; Zawya; Association of banks in Jordan 10 10

Al Rajhi Bank in Jordan Regional Presence Our expansion to Jordan is an integral part of our regional strategy We estimate that 700K Jordanian expatriates will be residing in GCC by 2012 (out of which 350K are in KSA / Kuwait) KSA / Jordan ties Trade between KSA / Jordan is increasing with export flows reaching approximately 3.5 Billion $ in 2008 Seats on flights between KSA / Jordan are increasing by 12% YoY Regulation / Macro Climate Jordanian government continuously shows significant progress by reducing debt to GDP, increasing privatizations & public investment as well as opening trade routes. Central Bank of Jordan has significantly upgraded banking regulations in recent years Increasing bankable population Installation of innovative Islamic Banking solutions and products already proven successful in KSA and Malaysia 11

We are on track to launch operation in Jordan by end of 2010 Business / Operating Model Design Registration with CBJ Systems development kick-off HO / Main Branch location finalization CEO in place Launch of Commercial Operations Sep 2009 Nov 2009 Jan 2010 Mar 2010 Apr 2010 Nov 2010 2 3 4 5 6