RIYADH, 22 May 2005 — Saudi Arabia’s biggest bank, National Commercial Bank, has converted over 90 percent of its retail branches to Shariah-compliant banking and will complete the process by the end of this year, its general manager said.

Abdulhadi A. Shayif said the switch to banking services complying with Islamic Shariah law, has been driven by customer demand in the Kingdom.

“Today we’re at 90 plus (percent) and by the end of the year it will be 100 percent,” Shayif told Reuters on the sidelines of a banking conference in Riyadh last week. “The reason is simple. That’s what the customer wants.”

Two of Saudi Arabia’s 10 existing commercial banks, Al-Rajhi Banking and Investment Corporation and Bank Aljazira are fully Shariah-compliant, as well as the newly-formed Bank Albilad.

Others have some Sharia-compliant branches or products.

NCB’s first move toward Islamic banking came 15 years ago, when it opened a single Islamic branch, Shayif said. At the time Islamic banking was in its infancy and Sshariah-compliant facilities were scarce. “We committed to change toward Islamic banking in a gradual basis, as and when an alternative Shariah-compliant product is available to replace conventional product,” he said.

“We led the way and we worked hard on bringing to the market a number of products from scratch. Now every single Saudi bank has Islamic product services,” he added.

NCB offers its retail customers, who make up 70 percent of its SR130 billion ($35 billion) balance sheet, everything from Shariah-compliant mortgage finance to credit cards.

Shayif said some customers still seek “conventional” banking services, particularly corporate clients who need complex products such as swaps and options that “have elements of interest in them”.

“We will continue to serve them but not through the branches. We are establishing centers that will service them separately, and that will continue as long as we still can’t develop the alternative Islamic product,” Shayif said.

The bank, which is owned by the government and a few private shareholders, is slated for partial privatization, but no date has been announced.

Last year, NCB’s income rose 17 percent to SR3.5 billion, making it in its own words the Arab world’s most profitable bank. This year, with the Saudi economy benefiting from even higher oil prices, the outlook is better still.

“The country is booming and the bank is doing very well,” Shayif said.