Banking
From The Report: Saudi Arabia 2018
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Despite the effects of lower international oil prices placing downward pressure on sector profitability, Saudi Arabia’s banks have succeeded in expanding their assets over the past year. While the trend of lower profits is likely to prevail over the medium term, the Kingdom’s banks are well positioned to capitalise on the growth opportunities encompassed in the country’s new economic development strategy. The modern banking landscape emerged from the oil boom that followed the Second World War, a period of economic transformation driven by strong revenue flows from growing hydrocarbons exports. A rapidly expanding money supply and an increasing number of banking institutions called for greater supervision of the market, and in 1952 the Saudi Arabian Monetary Authority was established and tasked with regulating the banking industry.

This chapter contains interviews with Ahmed Alkholifey, Governor, Saudi Arabian Monetary Authority; Rania Nashar, CEO, Samba Financial Group; and Soren Nikolajsen, Managing Director, Alawwal Bank.

Articles from this Chapter

Overview

Showing resilience: Retail loans and stability ratios stay strong despite tightening liquidity and lower revenues
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Despite the effects of lower international oil prices placing downward pressure on sector profitability, Saudi Arabia’s banks have succeeded in expanding their assets over the past year. While the trend of lower profits is likely to prevail over the medium term, the Kingdom’s banks are well positioned to capitalise on the growth opportunities encompassed in the country’s new economic development strategy. The modern banking landscape emerged from the oil boom that followed the Second…

Viewpoint

Financial ecosystem: Ahmed Alkholifey, Governor, Saudi Arabian Monetary Authority (SAMA), on maintaining the monetary and financial environment for growth
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Viewpoint:Ahmed Alkholifey The story of Saudi Arabia over the past few decades has been its continuing integration into the global economy. This has provided opportunities and challenges in both the real and financial economy. In order to ensure a monetary and financial environment conducive to growth and prosperity, SAMA is committed to maintaining exchange rate stability, while adjusting domestic banking and monetary policies to meet changing conditions in global financial markets. The…

Analysis

Going with the flow: Liquidity constraints ease thanks to internal adjustments and external financing
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The year 2017 has seen a welcome recuperation in the liquidity position of the banking sector. In October 2017 the Saudi Arabia Interbank Offered Rate (SAIBOR) stood at 1.79%, a considerable improvement on the 2.39% that was reached in the same month of 2016. The interbank rate has been below 2% since February 2017, suggesting the liquidity situation could be contained for the first time since the rate began to climb in late 2015. The upward march was the result of the drop in oil prices…

Interview

Judicious policies: Rania Nashar, CEO, Samba Financial Group, on the responsiveness of the banking sector to new policies
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Interview:Rania Nashar What specific opportunities does Vision 2030 provide for the growth of bank financing? RANIA NASHAR: Vision 2030 is paving the way for a qualitative change in the Kingdom’s economic system. We foresee a recovery in the business environment, given the active investment and economic movement that we believe will accompany the restructuring of critical infrastructure plans and mega-projects. This recovery will attract foreign investment, prompt the development of new…

Analysis

Strong results: Sharia-compliant banks maintain steady performances
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Within the global Islamic financial services (IFS) industry, Saudi Arabia occupies a prominent position. The professional services firm EY identifies the country as one of the nine core markets that is driving the growth of Islamic banking, along with Bahrain, Qatar, Indonesia, Malaysia, the UAE, Turkey, Kuwait and Pakistan. Together, these countries account for 93% of worldwide industry assets, estimated to have exceeded $920bn in 2015, according to the firm’s “World Islamic Banking…

Interview

Financing success: Soren Nikolajsen, Managing Director, Alawwal Bank, on the digital banking revolution
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Interview:Soren Nikolajsen In what ways will the pursuit of Vision 2030’s goals affect the banking sector’s fundamentals? SOREN NIKOLAJSEN: Diversifying Saudi Arabia’s economy away from the high reliance on oil and growing the private sector will be critical for the Kingdom. Vision 2030 includes a range of bold targets, posing both challenges and opportunities for the financial services sector. These include financing of long-term infrastructure projects, privatisations and public-private…

Analysis

A digital touch: Mobile banking uptake brings greater reach and innovative offerings
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Reaching a dispersed population across 2.15m sq km has always been a key challenge for Saudi Arabia’s commercial banks. While coastal business centres and the capital are well served by banking infrastructure, the connection between the public and the industry is patchier in other parts of the country. According to the World Bank’s most recent data on global banking density, the Saudi market was served by 8.9 commercial bank branches per 100,000 customers in 2015. This is a relatively…