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.


Former Nissan chairman Ghosn appears in Tokyo court

Updated 4 min 4 sec ago
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Former Nissan chairman Ghosn appears in Tokyo court

  • It is the first of a series of hearings to iron out logistics for Carlos Ghosn’s actual trial
  • Nissan’s former chairman has hired a strong legal team as he fights to clear his name

TOKYO: Nissan’s former chairman, Carlos Ghosn, appeared in a Japanese courtroom Thursday for a hearing ahead of his trial on accusations of financial misconduct.
It was the first of a series of hearings to iron out logistics for Ghosn’s actual trial. The trial date has not been set, and experts say it could be months away.
Ghosn, who led the Japanese automaker for two decades, was arrested in November and charged with underreporting his income and breach of trust. He was released on bail in March, rearrested in April on fresh accusations and then released again on bail on April 25.
Ghosn insists he is innocent and says he was targeted in a “conspiracy” by others at Nissan Motor Co.
Nissan, which is allied with Renault of France, has seen profits nose-dive amid the fallout from Ghosn’s arrest.
Ghosn has hired a strong legal team as he fights to clear his name. One of his top lawyers, Junichiro Hironaka, was seen walking into the courtroom Thursday with Ghosn.
One of the conditions of Ghosn’s release on bail is that he is forbidden to contact his wife. Prosecutors say that’s to prevent evidence tampering.
Ghosn’s lawyers challenged that restriction, saying it is a violation of human rights, but the Supreme Court rejected their appeal Tuesday.
The lawyers can appeal again to have the restriction removed.
In a briefing Thursday, Deputy Chief Prosecutor Shin Kukimoto welcomed the Supreme Court’s decision.
“For married people to be together is important, but I feel there was enough reason for the Supreme Court to support us in this restriction,” he said.
Kukimoto declined comment on the hearing, which was closed to reporters and the public.
Kukimoto also said the maximum penalty upon conviction of all 15 counts of the charges Ghosn is facing is 15 years in prison and a fine of ¥150 million ($1.4 million).