Saudi banking mega merger reflects Kingdom’s reform agenda

Olaya District Street with Modern Buildings In Riyadh, Saudi Arabia. (Shutterstock)
Updated 05 October 2018
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Saudi banking mega merger reflects Kingdom’s reform agenda

  • Prominent Saudi businesswoman Lubna Al-Olayan will become the first woman to chair a publicly traded company in the Kingdom
  • Both the merger and the appointment of Al-Olayan are significant in the context of Saudi Vision 2030

LONDON: Saudi British Bank (SABB) and Alawwal bank have agreed to merge to create the third biggest lender in the Kingdom in the latest move toward banking industry consolidation.
Prominent Saudi businesswoman Lubna Al-Olayan will become the first woman to chair a publicly traded company in the Kingdom when she is appointed to the role at the enlarged lender that will have SR268 billion ($71 billion) in assets.
Both the merger and the appointment of Al-Olayan are significant in the context of Saudi Vision 2030, the country’s social and economic reform blueprint that has a major focus on developing the financial services sector as well boosting the representation of women on boards.
The proposed merger, which is still subject to shareholder and regulatory approval, coincides with a number of financial sector reforms in Saudi Arabia.
“Our bank will supply entrepreneurs with the financial tools needed to grow and create jobs and we will have enhanced capacity to underwrite large-scale transactions to support infrastructure and privatization projects,” said SABB Chairman Khaled Olayan.
No involuntary staff redundancies are expected as a result of the merger, the pair said in a statement on Thursday. Neither will there be any immediate change for customers as both banks will remain independent until the merger has completed.
Banks throughout the Gulf are mulling merger deals as the industry reacts to both changing economic realities and the advance of digital banking that is replacing many of the roles that previously required staff.
“When banks merge the key savings are on employee costs given the service oriented nature of this sector,” Mazen Alsudairi head of research at Al Rajhi Bank, told Arab News.
“So, as per the merger announcement and our calculations, around SR450 million to SR650 million are the savings expected in the future for the combined entity.”
Alawwal shares closed almost 3 percent higher on Thursday following the announcement while SABB closed about 1.1 percent lower.
SABB shareholders will own about 73 percent of the enlarged lender with Alawwal shareholders holding 27 percent.
SABB Managing Director David Dew will be the managing director of the combined entity.
The proposed merger comes as the Saudi banking sector emerges from four tough years as a low oil price, reduced government spending and payment delays took their toll on the banking sector, encouraging lenders to look at how they could cut costs.
“Given the current economic scenario, we don’t see any meaningful improvement in asset quality compared to the last quarter and thus expect provisions to be in the similar range as seen in the first couple of quarters,” Al Rajhi said in its sector report released last month.
The appointment of Al-Olayan to chair the enlarged bank follows other high profile moves by women to senior roles in the country’s financial services sector, including Sarah Al-Suhaimi who heads the Tadawul stock exchange.


Iran falls to sixth biggest oil supplier to India as sanctions bite

Updated 14 December 2018
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Iran falls to sixth biggest oil supplier to India as sanctions bite

  • Tehran dropped two places to become only the sixth biggest supplier after New Delhi cut purchases due to the impact of US sanctions
  • The UAE, which was the sixth biggest oil seller to India in October, became the third-top seller to India in November

NEW DELHI: India’s monthly oil imports from Iran plunged to their lowest in a year in November with Tehran dropping two places to become only the sixth biggest supplier after New Delhi cut purchases due to the impact of US sanctions, according to ship tracking data and industry sources.
Last month, the US introduced tough sanctions aimed at crippling Iran’s oil revenue-dependent economy. Washington did, though, give a six-month waiver from sanctions to eight nations, including India, and allowed them to import some Iranian oil.
India is restricted to buying 1.25 million tons per month, or about 300,000 barrels per day (bpd).
In November, India imported about 276,000 bpd of Iranian oil, a decline of about 41 percent from October and about 4 percent more than the year-ago month, ship tracking data obtained from shipping and trade sources showed.
After abandoning the 2015 Iran nuclear deal, US President Donald Trump is trying to force Tehran to quash not only its nuclear ambitions and its ballistic missile program but its support for militant proxies in Syria, Yemen, Lebanon and other parts of the Middle East.
India’s imports from Iran in November, included some parcels that were loaded in October. In November, Iraq and Saudi Arabia continued to be the top-two oil sellers to India.
The UAE, which was the sixth biggest oil seller to India in October, became the third-top seller to India in November, knocking down Venezuela to fourth position.