Strong oil revenues, real GDP growth of 6.4% and surging expansion in consumer finance provided the right conditions for a bumper year for Saudi Arabia’s banks.
According to figures supplied by the Saudi Arabian Monetary Agency (SAMA – the central bank), the aggregate net income of the nine reporting commercial banks (National Commercial Bank had not announced its results at the time of going to press) rose by 14.4% in 2003 to SR9434m ($2516m). And with NCB’s net income estimated at SR3.1bn, the total aggregate profits of all 10 Saudi banks is put at a record SR12.5bn.
Strong growth rates
For all banks, consumer lending provided huge growth potential, with many banks expanding by more than 20% in this sector. The introduction to banks of salary assignments has revolutionised the virtually non-existent area of consumer finance, which is expected to continue to show strong growth rates in the years ahead. Customer deposits showed healthy expansion at most banks, with Arab National Bank (ANB) leading the larger banks with 19.7% growth and the smallest, Bank Al-Jazira, increasing deposits by a whopping 79.8%.
Impressive profits
In terms of net income, Al Rajhi Banking Corporation and Al-Jazira both reported impressive growth in profits with 44.2% and 57.8%, respectively. ANB also did well, with 31.2% growth, as did Saudi British Bank.
The only bank to show a decline in profits was Samba (formerly Saudi American Bank), which posted a 22.7% drop in net income to SR1.4bn, a rare downturn for an institution that has been the most profitable bank in the kingdom in the past decade or longer.
Dramatic fluctuations
Samba saw some major changes in 2003 as Citigroup withdrew from its management contract and cut its ownership stake from 23% to 20%. Besides showing a small 0.3% decline in shareholder funds, Samba posted a surprising 513.6% jump in loan loss provisions, a 48.4% hike in total operating expenses and a 49.9% surge in retained earnings.
The largest bank, NCB, has not yet published results for all of 2003, but for the first three-quarters of 2003, profits amounted to SR2.4bn, a 20% jump, and assets were up by 11.4%to SR114bn.
