Saudi banking assets grew by 14% in 2012
Saudi banking assets grew by 14% in 2012
During the last two years, Saudi banks have returned to a higher growth trajectory after a lackluster performance in 2009 that saw total credit and in turn profitability shrink on an annual basis by 1.1 percent and 0.2 percent, respectively.
The inflection to double-digit net income growth that started in Q2, 2011 aided banks in crossing the SR35 billion threshold in 2012 for the first time since 2006, according to a report by the National Commercial Bank (NCB).
In comparison to other countries, the Saudi banking system had a comfortable loan to deposit ratio (L/D) of 77.3 percent by the end of Q1, 2013, a level that reflects excess capacity to lend and a lower systemic risk.
Meanwhile, the capital adequacy ratio (CAR), which rose to 17.4 percent, is another signal of an ample cushion to match the embedded risk in assets, especially after taking into consideration the lower capacity utilization compared to regional and international counterparts, with the UAE, Kuwait and Russia at 90.4 percent, 91.6 percent and 124.3 percent L/D ratios, respectively.
The improvement in asset quality since mid-2011 is another plus for the domestic banking system, illustrating the prudent management and supervisory practices that have been applied by banks and SAMA (Saudi Arabian Monetary Agency).
Indeed, the buoyant domestic business cycle had reduced credit and investment provisions, as NPLs fell drastically from a record SR25.8 billion in 2009 to SR19.9 billion by the end of 2012.
Given the robust economic growth Saudi Arabia is experiencing, banks have been able to expand their portfolios and improve their asset quality.
The government's expansionary fiscal policy is providing adequate opportunities for businesses, thus, creating a favorable landscape for banks.
During 2012, total banking sector assets grew by an annual 14.0 percent, the first double digit growth in assets post the financial crisis, and the momentum was carried over with a growth of 11.7 percent by the end of March 2013. The oligopolistic market structure remains to be dominated by NCB, Al-Rajhi, Samba Financial Group, and Riyad Bank, holding a combined 58.2 percent of total assets by the end of Q1, 2013.
NCB maintains its dominant position with regards to total assets at 20.4 percent, followed by Al-Rajhi that captures around 17.1 percent of the banking sector's assets.
The newest bank in the Saudi financial system, Alinma Bank, has been growing rapidly with its assets rising by 41.0 percent Y/Y, reaching SR56.2 billion by the end of Q1, 2013.
This helped Alinma Bank to surpass Bank AlJazira’s SR54.1 billion and judging by Alinma’s pace of growth, the bank will establish itself in the middle-sized bracket within the next couple of years.
Regarding banks' assets, the NCB report said, they are mainly composed of loans and investments, representing a combined share of 82.4 percent by the end of March 2013. Almost 10 years ago, the banking system's growth strategy was focused on investments as they were the largest item on the asset side of the balance sheets. However, with continuous remodeling towards conventional core banking over the past decade, loans and advances have been amassing the majority of total assets. Net loans and advances climbed over the SAR1 trillion mark in 2012 and extended its rise by 16.4 percent Y/Y in Q1, 2013 given the improved risk appetite that is expected to continue this year. Credit to the private sector sustained a healthy pace throughout last year and early 2013, yet it is likely to moderate as banks pause to assess asset quality. During Q1,2013, commercial loans grew annually by 13.9 percent, while consumer loans accelerated at a faster pace of 22.6 percent Y/Y. Al-Rajhi’s strong retail presence translates into a 17.2 percent market share of total net loans. In its pursuit of joining the top players, Alinma Bank expanded its loans portfolio by 42.8 percent to reach SR39.4 billion by the end of the first quarter 2013. The Saudi Investment Bank was the second top performer following their "clean up" of non-performing assets, recording a growth of 32.2 percent Y/Y, while Riyad Bank set the slowest pace at 6.4 percent Y/Y, during the same period.
On the liability side, industry-wide deposits posted a new record of SR1.36 trillion by the end of Q1, 2013.
EU to respond to any US auto tariff move: report
- Trump threatened to impose 20 percent tariff
- Shares in carmakers slip on trade war fears
PARIS: The European Union will respond to any US move to raise tariffs on cars made in the bloc, a senior European Commission official said, the latest comments in an escalating trade row.
US President Donald Trump on Friday threatened to impose a 20 percent tariff on all imports of EU-assembled cars, a month after his administration launched an investigation into whether auto imports posed a national security threat.
“If they decide to raise their import tariffs, we’ll have no choice, again, but to react,” EU Commission Vice President Jyrki Katainen told French newspaper Le Monde.
“We don’t want to fight (over trade) in public via Twitter. We should end the escalation,” he said in the comments published on Saturday.
The European Autos Stocks Index fell on Friday after Trump’s tariff threat. Shares US carmakers Ford Motor Co. and General Motors Co. also dropped.
“If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US Build them here!” Trump tweeted.
The US Commerce Department has a deadline of February 2019 to investigate whether imports of automobiles and auto parts pose a risk to US national security.
US Commerce Secretary Wilbur Ross said on Thursday the department aimed to wrap up the probe by late July or August. The Commerce Department plans to hold two days of public comments in July on its investigation of auto imports.
Trump has repeatedly singled out German auto imports to the United States for criticism.
Trump told carmakers at a meeting in the White House on May 11 that he was planning to impose tariffs of 20 or 25 percent on some imported vehicles and sharply criticized Germany’s automotive trade surplus with the United States.
The United States currently imposes a 2.5 percent tariff on imported passenger cars from the EU and a 25 percent tariff on imported pickup trucks. The EU imposes a 10 percent tariff on imported US cars.
The tariff proposal has drawn sharp condemnation from Republican lawmakers and business groups. A group representing major US and foreign automakers has said it is “confident that vehicle imports do not pose a national security risk.”
The US Chamber of Commerce said US auto production had doubled over the past decade, and said tariffs “would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.”
German automakers Volkswagen AG, Daimler AG and BMW AG build vehicles at plants in the United States. BMW is one of South Carolina’s largest employers, with more than 9,000 workers in the state.
The United States in 2017 accounted for about 15 percent of worldwide Mercedes-Benz and BMW brand sales. It accounts for 5 percent of Volkswagen’s VW brand sales and 12 percent of its Audi brand sales.