NCB and Samba announce merger to form Saudi Arabia’s $220 billion mega-bank

NCB and Samba announce merger to form Saudi Arabia’s $220 billion mega-bank
The merger will create Saudi Arabia's largest bank. (Reuters/File)
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Updated 12 October 2020

NCB and Samba announce merger to form Saudi Arabia’s $220 billion mega-bank

NCB and Samba announce merger to form Saudi Arabia’s $220 billion mega-bank
  • Merger of NCB and Samba creates ‘national champion and regional powerhouse’

DUBAI: Two of Saudi Arabia’s biggest banks signed a deal on Sunday for a merger to create a “national champion” for the Kingdom and a “regional powerhouse” for the Middle East.

National Commercial Bank, the oldest in the country, is to combine with Samba Financial group in a $32 billiondeal that will create the most profitable bank in the region. Together, they will control $223 billion in assets.

The merger is part of the financial sector development program of the Vision 2030 strategy to diversify the economy, and is the second big banking merger of the past 12 months. It is likely to lead to other major tie-ups in the Kingdom’s financial sector as the Vision plan unfolds.

Account holders and employees are likely to benefit from cost reductions and efficiency gains from the deal, which will involve “no involuntary job losses” from either bank, a joint statement said.

Saeed Mohammed Al-Ghamdi, the chairman of NCB who will become managing director and group chief executive officer of the merged banks, said: “Saudi Arabia is undergoing a historic transformation with Vision 2030. Such a transformation requires a robust financial services sector, especially highly capitalized, resilient banks that can fund economic development, as well as support Saudi Arabia’s trade and capital flows with the region and the rest of the world.

“Our ambition is to create a national champion that can facilitate the transformation envisaged under Vision 2030 and create a pioneer for next-generation banking services that nurtures tomorrow’s industry leaders.”

Ammar Alkhudairy, chairman of Samba who will assume the same position at the new bank, said: “Our merger with NCB will create a local leader and a regional powerhouse that can unlock considerable value for shareholders, provide exceptional banking services for the people of Saudi Arabia and help local entrepreneurs capitalize on opportunities for domestic and international business growth.

“This merger process marks the start of a new era for Saudi banking supporting the realization of many Vision 2030 goals. We are focused on making sure that the combined and larger bank comes together seamlessly to serve our customers, partners, investors and talent across both teams.”

The new bank is expected to come into existence next year, assuming regulatory and shareholder approvals are forthcoming. It will have a market share of about 25 per cent of retail and corporate banking in Saudi Arabia, and a commanding position in trade finance and investment banking.

The Public Investment Fund, Saudi Arabia’s sovereign  wealth fund, is a major shareholder in both NCB and Samba.

The merger will result in savings and efficiencies of $213 million a year, leading one analyst to conclude that other similar mergers could follow.

Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, told Arab News: “This shows the extent to which the banking sector has scope to increase efficiencies, and may encourage further mergers.”


Saudi private sector rebounds with growth at 10-month high

Updated 04 December 2020

Saudi private sector rebounds with growth at 10-month high

Saudi private sector rebounds with growth at 10-month high
  • Steep rise in sales and growing business confidence spark jump in purchasing, hiring activity

RIYADH: Business activity in Saudi Arabia has risen to its highest level since January this year, showing the Kingdom’s economy is beginning to overcome the worst effects of the coronavirus pandemic.

According to IHS Markit’s Purchasing Managers’ Index (PMI) Survey, the acceleration of output growth in the Saudi economy in November was driven by a steep rise in sales and strengthening business confidence.

The survey found that input purchasing rose, while employment growth also returned for the first time since January. Input cost inflation also quickened, leading to a stronger increase in average output charges.

The index has now registered above the 50.0 no-change mark for three months in a row, highlighting a sustained recovery after the economic downturn due to the pandemic.

The Saudi PMI rose to 54.7 in November from 51 the previous month — the strongest improvement since January. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared with the previous month, and below 50 an overall decrease.

Both domestic and foreign sales rose last month, marking only the second upturn in new export orders since February.

Business confidence for the year ahead also improved notably during the month. In particular, firms were encouraged by the Saudi government’s easing of lockdown curbs and news of a breakthrough in the development of a vaccine.

Accelerated rises in output and new orders led Saudi firms to sharply expand purchasing activity during November. In addition, hiring activity turned positive and a number of companies linked increased employment to rising demand.

Commenting on the latest survey, David Owen, an economist at IHS Markit, said: “A third successive rise in the Saudi Arabia PMI pointed to an economy getting back on its feet in November. Supported by output and new business growth reaching 10-month highs, the data suggests a strong end to the year for the non-oil private sector. Notably, employment started to rise, while business confidence strengthened in the wake of encouraging vaccine news and sharper demand growth.”

Saudi economist and financial analyst Talat Zaki Hafiz told Arab News: “The improvement is due to many factors, such as the reopening of the market with the ease in lockdown and, finally, the lifting of the curfew. The return to normality has had a significant impact on private sector performance.”

Hafiz added: “Things will get much better by the next year. We have also noticed an improvement in oil prices recently and this will improve things significantly.”