On 25 June, Saudi Arabia’s largest bank, National Commercial Bank (NCB) announced it had entered into talks to acquire Samba Financial Group for up to $15.6bn. If the transaction goes ahead it will create the region’s third largest bank by assets, with more than £200bn in assets.
Throughout 2019, NCB had been in talks to acquire rival Riyad Bank, the country’s fourth largest bank. However, in December 2019, it announced the talks had ceased, without providing a reason.
If successful, this merger would be the latest in a long line of bank consolidations in the region in recent years. Saudi Arabia, however, had been less active than other Gulf nations in this respect until last year when Saudi British Bank (40% owned by HSBC) completed its acquisition of Alawwal Bank, marking the country’s first banking sector merger in 20 years.
Cost pressures and a desire for increased efficiencies in a time of constrained oil revenues have been the backdrop for many of the region’s banking consolidation. However, for Saudi Arabia, which is currently in the midst of overhauling its economy under the Vision 2030 framework, which includes strengthening the country’s financial sector, there is a wider strategic imperative.
While Saudi banks continue to account for a significant share of regional banking profits, at 28.9% of pre-tax profits in the Middle East, it is no longer the region’s definitive leader. UAE banks account for 27.25% of the region’s profits, up from 10.86% two decades ago, and Qatar has seen its share of regional profits increase from just 2.33% in 2000 to 15.05% in 2020.
