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| One of the main sources of profit
for banks in 2004 was the growth in
consumer finance. |
on the back
not just of high oil revenues but of a growing
non-oil private sector, the banking sector
is experiencing an all-time high. In 2004,
the nation’s ten existing commercial
banks posted record combined profits of
SR14.7billion ($3.9billion).
The kingdom’s
largest banking entity in terms of capital,
National Com-mercial Bank, showed the highest
profits at SR3.5billion ($933 million),
a 17.2% increase on 2003. Al-Jazeera Bank
made the largest year-on-year increase in
profits at 101%, followed by Samba Financial
Group, which registered a growth rate of
74.4%. Arab National Bank (ANB) saw its
net income go up by 52.2% and the Al-Rajhi
Banking and Investment Corporation saw it
increase by 44%, while Saudi British Bank,
Banque Saudi Fransi, Saudi Investment Bank,
Riyadh Bank and Saudi Hollandi Bank produced
profit rates ranging between 20% and 30%.
The most recent
Saudi arrival to the banking sector is Al-Bilad
Bank, approved in June 2004 by the Council
of Ministers, and which started up with
a capital of SR3 billion ($0.8 billion).
It is expected to have opened 30 branches
by the end of 2005, replacing the 200 offices
of the eight money exchanges that merged
to form the bank. The Council of Ministers
is also allowing three major international
banks – Germany’s Deutsche Bank,
France’s BNP-Paribas, and U.S. bank
JPMorgan-Chase – to open branches in
the kingdom. They will join the growing
number of regional banks entering the market.
One of the
main sources of profit for banks in 2004
was the growth in consumer finance. A new
system has borrowers assign a portion of
their salaries to banks, creating a secure
sector and an enormous new market. Fees
from banking services also increased by
a massive 72.8%.
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The Saudi stock
market grew by a record 28% in the
first quarter of 2005
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In June 2003
the Saudi Government approved a new capital
markets law to create and regulate the first
formal stock market in the kingdom. The
law created the Saudi Arabian Stock Exchange
(Tadawul) as well as the Capital Market
Authority (CMA) to oversee and regulate
the exchange. Given the CMA’s assigned
functions of regulating and developing the
capital markets, and protecting investors
from unfair and unsound practices, investment
banking activities are likely to increase.
The Saudi stock market grew by a record
28% in the first quarter of 2005 and the
banks are making the most of stock market
increases through their brokerage arms.
Two initial
public offerings (IPOs), those of telecommunications
company Etihad Etisalat and National Company
for Cooperative Insurance (NCCI), attracted
huge interest, helping to get the CMA off
to a good start.
Thanks to the
new insurance law, banks are now entering
the insurance market, which was recently
opened up to the private sector and is likely
to grow substantially. Many banks are establishing
joint ventures with international insurance
companies.
Banks are also
focusing on the small- and medium-sized
enterprise (SME) sector, one of the fastest
growing in the economy.
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