Saudi Banking

Pages 58
Tables 27
Charts 15
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Decline in oil prices has substantially affected the fiscal and current account balances and moderated growth in KSA during 2014 and 2015. Presence of.....


Decline in oil prices has substantially affected the fiscal and current account balances and moderated growth in KSA during 2014 and 2015. Presence of large fiscal reserves and ability to borrow due to low debt levels cushioned the impact to a large extent. However, over the next 12-18 months, the operating environment for Saudi banks is expected to weaken. The expected 14% reduction in public spending in 2016, persistent lower oil prices would exert pressure on the KSA banking sector and also increase the credit risks across the system. In-line with the discussed concerns for the KSA banking industry, the rating agency Moody's revised outlook on Saudi Arabia's banking system to negative from stable in March 2016.

As per Marmore’s analysis, the Saudi banking system has been showing signs of weakening asset quality in the recent years and the industry also faces concentration risk. We expect KSA bank’s profitability to be subdued in the coming years (2016 & 2017). Our expectations are underpinned by tightening liquidity and restrained credit off-take. Declining liquidity amongst the KSA banks has become a major concern and subsequently SAMA has eased rules on bank lending to improve the liquidity.


  1. Executive Summary
  2. Operating Environment
    • Fiscal consolidation policy to hinder economic growth
    • Saudi Vision 2030 for Banks
  3. Asset Quality and Capital
    • Asset quality weakening in recent years
    • Concentration Risk with potential of asset quality deterioration
  4. Funding and Liquidity
    • Deposits predominantly funded by private sector
    • Deposits are pre-dominantely short-term in nature as real rates are negative
    • Liquidity levels declining among KSA banks
  5. Profitability and Efficiency
    • Steady Growth of Net Income
    • Operational Efficiency is Stabilizing    20
    • Net Interest Margins have been on the downtrend
  6. Profitability expectations remain muted
    • Net Interest Margins to be compressed
    • Sovereign Issuance to lend support to bottom-line
    • Higher provisioning would affect profitability
  7. Implications of Lower Oil Price
    • Liquidity Squeezed, NIMs to be pressurized
    • Government plans to issue bonds to fund deficit
    • Would the Private sector be ‘Crowded Out’?
  8. What could banks do? Strategies for 2016 & beyond
    • Mortgage Lending
  9. Regulatory Developments
    • Saudi Arabian Monetary Authority (SAMA)
    • Basel Accords: Move towards adequate capital buffers
    • Limits and Governance
    • Governor Appointment
    • Foreign Account Tax Compliance Act (FATCA)
    • ‘Expected Loss Model’ to be adopted in the Coming Years
  10. KSA Commercial Banks
    • Al Rajhi Bank
    • Alinma Bank
    • Arab National Bank
    • Bank AlBilad
    • Bank AlJazira
    • Bank Saudi Fransi
    • National Commercial Bank
    • Riyad Bank
    • Saudi British Bank
    • Samba Financial Group
    • Saudi Hollandi Bank
    • The Saudi Investment Bank
  11. Appendix
    • Forecasting Model: A Mathematical Approach

Tables & Charts

2.1    KSA – Key Macroeconomic Indicators
2.2    Key Metrics for Saudi Banking Sector
3.1    Peek into corporate & govt. loan book composition
3.2    Composition of consumer loan book
6.1    KSA Banking Expectations
9.1    Banks regulated by SAMA
9.2    Overview of Basel III Implementation
10.1    Financial Highlights, Al Rajhi Bank
10.2    Financial Highlights , Alinma Bank
10.3    Financial Highlights, Arab National Bank
10.4    Financial Highlights, Bank AlBilad
10.5    Financial Highlights, Bank AlJazira
10.6    Financial Highlights, Bank Saudi Fransi
10.7    Financial Highlights, National Commercial Bank
10.8    Financial Highlights, Riyad bank
10.9    Financial Highlights, Saudi British Bank
10.10    Financial Highlights, Samba Financial Group
10.11    Financial Highlights, Saudi Hollandi Bank
10.12    Financial Highlights, The Saudi Investment Bank
11.1    Rankings by Net Loans  
11.2    Rankings by Deposits
11.3    Rankings by Assets
11.4    Rankings by Equity
11.5    Rankings by RoE
11.6    Rankings by RoA
11.7    List of Foreign Banks operating in KSA
11.8    Banks under our analysis

2.1    Credit Growth could accelerate further with the implementation of Vision 2030
3.1    Bad loans largely contained, likely to remain low (in %)
4.1    Predominantly funded by deposits
4.2    Predominantly funded by private sector deposits (as % of total deposits)
4.3    Deposits Type (as % of total deposits)
4.4    Government deposits to total funding across GCC banks
4.5    Real 1-year bank deposit rates have been negative for a long time (%)
4.6    Loan growth has outpaced Deposits growth
5.1    Net Income (USD mn)
5.2    Operational Efficiency is Stabilizing
5.3    Net Interest Margins (NIMs) have decreased over the years
7.1    KSA Money supply is deteriorating (Growth rates)
7.2    3-month SIBOR (in %) have doubled in the past year
8.1    Retail and Corporate Real Estate Lending (USD MN)
8.2    KSA Mortgage Loans Outstanding (USD Bn)



Saudi Banking

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