Interview: Bernd van Linder
What is the liquidity outlook for banks in Saudi Arabia, particularly in view of today’s challenging economic environment?
BERND VAN LINDER: Saudi banks remain extremely liquid. The local regulator has long imposed conservative metrics to ensure this, and consequently banks hold substantial portfolios of liquid assets and are able to comfortably meet the Basel III liquidity requirements. With the expectation that interest rate regimes will move back toward something more typical globally, some increase in the cost of funds is anticipated. However, the liquidity positions of the banks remain firmly underpinned by stable non-interest bearing deposits and large portfolios of high-quality liquid assets.
With low oil prices looking as though they will persist for some time, will banks manage to maintain high levels of loan growth?
VAN LINDER: The retail segment has driven a significant part of recent loan growth, including a healthy take-up of home financing products. This growth has been driven by strong customer demand and facilitated by focused government support. We believe demand for these products, which have a very attractive risk/reward profile for the banks, will remain strong, supported by recent regulatory developments. On the corporate side, whilst the pace of growth is likely to slow, banks will continue to support their client base and provide financing for viable projects and capacity expansion in a range of sectors.
With the Kingdom now running budget deficits, how is the local banking industry supporting the government’s debt financing needs?
VAN LINDER: The local banks have always been, and will continue to be, supportive of the government in every possible way. This includes their participation in government debt issues, as well as support for government initiatives such as public-private partnerships, privatisation, and the development of the small and medium-sized enterprise (SME) sector, all of which are important parts of the Kingdom’s agenda for transformation.
What opportunities can SMEs expect from banks looking for growth opportunities?
VAN LINDER: In recent years, many of the Saudi banks have greatly increased and expanded their interactions with SMEs. This covers both financial services, such as loans, deposits and transaction banking, as well as non-financial services, such as training and development programmes for SMEs. This expansion is reflected in the significant increase in bank lending under the Kafalah guarantee programme, which is a cooperative initiative between the Saudi Industrial Development Fund and the Saudi banks. The programme encourages banks to deal with the SME segment and, given the strength of this programme and the importance of SMEs for further growth of the Kingdom, banks will continue to give SMEs their full support.
How are banks dealing with the Kingdom’s drive to increase the participation of Saudi nationals in the private sector workforce?
VAN LINDER: There is a sizeable talent pool of Saudi nationals in the country’s labour force, and for some time banks have tapped into this pool and have hired a substantial number of workers from it. The result is that banking as an industry employs a higher percentage of Saudi nationals than any other in the private sector. Given the availability of local talent, and given the expected growth of the banking sector, I expect opportunities to continue to be created, resulting in increasing numbers of Saudi nationals taking up employment with banks.
