Saudi Arabia achieves new milestone in banking sector

Saudi Arabia achieves new milestone in banking sector
The combination of the KSA’s largest with its fourth-largest lender creates a national champion across the board. It is bound to be profitable for shareholders. (Reuters)
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Updated 01 April 2021

Saudi Arabia achieves new milestone in banking sector

Saudi Arabia achieves new milestone in banking sector
  • With the merger of NCB and Samba, a heavyweight player has entered the industry

BERN: Today marks a legal milestone in the merger of National Commercial Bank and Samba Financial Group under the name of Saudi National Bank (SNB). As the execution of mergers and acquisition transactions are complex and time-consuming, the legal date of April 1 will be followed by continuous efforts to combine the entities.

With SR837 billion ($223 billion) in assets, SNB will be Saudi Arabia’s largest bank, accounting for a market share of 25 percent across all metrics. It will be well capitalized with a combined equity of SR120 billion. The combination of the country’s largest with its fourth-largest lender creates a national champion across the board. It is bound to be profitable for shareholders, with estimated synergies worth SR800 million. It was already profitable for Samba shareholders, who received a premium over the unaffected share price.

The largest shareholder in SNB is the Public Investment Fund — the Saudi sovereign wealth fund — who, together with the Public Pension Agency and General Organization for Social Insurance, holds just above 50 percent of the shares.

The scope and size of the new entity will allow it to take on an important position in both commercial, retail and mortgage space, with the added benefit of honing in on the digital transformation. It will also become a place for leadership development for the banking sector as well as the country at large. 

Saudi Vision 2030 has explicitly advocated national champions, and SNB fulfills this role in the banking sector. Vision 2030 also has a number of flagship projects that will require financing from solid banks. Last Tuesday, Crown Prince Mohammed bin Salman furthermore launched a $3.2 trillion initiative to boost the private sector. This will require institutions to finance and refinance private sector entities, some of which have been hard hit by the pandemic.

He announced that the Shareek program will enable the private sector to play a much more prominent role in the development of the country, amounting to 65 percent of the gross domestic product (GDP) within this decade. The Kingdom needs a strong banking sector led by great institutions to live up to this goal.

From a more macro perspective, SNB will be the region’s third-largest lender. The Gulf Cooperation Council (GCC) is overbanked, as is Europe. In Saudi Arabia, 30 banks cater to 30 million inhabitants. The merger of Samba and National Commercial Bank is an important step toward the consolidation in the sector. In 2019, we saw this in the UAE, with the combination of Abu Dhabi Commercial Bank, Union National Bank and Al-Hilal Bank.

FASTFACTS

• With SR837 billion ($223 billion) in assets, SNB will be Saudi Arabia’s largest bank.

• From a more macro perspective, SNB will be the region’s third-largest lender.

On March 14, S&P Global published a report on the banking sector in the region. The authors delineated that the banking sector was suffering from a triple shock of lower lending revenues due to a pandemic-induced economic downturn, lower for longer interest rates and higher costs due to higher risks, resulting in the need for further consolidation, especially in a region as overbanked as the GCC.

The authors also argued that the first wave of consolidation induced by shareholders’ value will be followed by a second wave that will stem from the shock to profitability in 2020.

All of the above proves that creating a national champion in a sector that is vitally important for the future of the country’s development makes sense during the current circumstances when the Kingdom, the GCC and the world at large are recuperating from the economic aftershocks of the pandemic.

The region is overbanked, and consolidation needs to happen. First movers always have an advantage. The SNB can build its business on the basis of a strong capital base and alignment with Saudi macroeconomic strategy and direction.

• Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources. Twitter: @MeyerResources


US, Qatar discuss gas supplies amid Ukraine invasion fears

US, Qatar discuss gas supplies amid Ukraine invasion fears
Updated 22 January 2022

US, Qatar discuss gas supplies amid Ukraine invasion fears

US, Qatar discuss gas supplies amid Ukraine invasion fears
  • As Europe faces record energy prices, concerns especially high over possible supply dip
  • American official: ‘There’s no magic wand. It’s all really hard, really complicated’

LONDON: The US is holding discussions with Qatar and other gas exporters amid fears that a Russian invasion of Ukraine could spark a decline in supply.

The talks with the Gulf state and some EU nations have focused on new ways to secure alternative seaborne liquefied natural gas cargoes.

The discussions have become more intense in the last week as security talks between senior American and Russian ministers made little progress.

As Europe is facing record energy prices, concerns are especially high regarding a possible dip in gas supplies.

“We’re looking at what can be done in preparation for an event, especially midwinter with very low (European natural gas) supplies in storage,” a senior US administration official told the Financial Times.

“We discussed what can be moved around the market, what can help … the things we can prepare now for deployment if and when there is an escalated crisis.”

Officials are concerned that Europe could face widespread chaos, with blackouts and industrial disruption, if Russian gas exports fall sharply following an invasion. Gas stocks are at a record low for this time of year.

The US administration official said existing contracts between LNG exporters and Asian buyers risk disrupting any new plans to divert supply to Europe.

“There’s no magic wand,” the official said. “It’s all really hard, really complicated. Looking to do it within the constructs of how markets work, how commercial terms work, how cargoes work.”

An energy industry executive warned that Europe would almost certainly face extremely high energy prices amid an invasion, which could require coordinated government action to secure alternative LNG supplies.

“They will effectively have to compete for all the supply in the market, taking cargoes away from Asia, and the likely end result is the taxpayer will pay,” the executive told the FT.

“It would be like procuring PPE (personal protective equipment) at the start of the pandemic, with governments needing to intervene.”


Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis

Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis
Updated 21 January 2022

Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis

Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis

Lebanon’s debt-ridden government expects a 20.8 percent deficit for the coming year, according to a draft budget released on Jan 21. 

The plan, seen by Reuters, will see ministers put forward a long-term treasury advance to Electricité du Liban, Lebanon’s electricity company, of 5.25 trillion Lebanese pounds ($3.5 billion).

The advance will be provided to pay for fuel purchases, interest and loan installments, in a country that has been hit by energy shortages.

Last year, Lebanon’s projected budget had a deficit of 31.3 percent, and the plan was not passed by the country’s parliament.

Political dissension and escalating tensions between communities have had a negative impact on economic growth, compounding Lebanon’s woes since its 2019 default on a $90 billion debt.

Nassib Ghobril, head of research at Lebanon’s Byblos bank, warned that the government’s projection of a lower deficit depends on whether it can “improve the investment climate for business.”

Speaking to Arab News, he argued that a 10 percent tax increase on imported goods “won’t be effective if the government keeps on avoiding combatting custom evasion and smuggling.”

Ghobril said the cost of smuggling to other countries, more specifically Syria, runs into the hundreds of millions of dollars.

He added that Lebanon’s 2022 growth, which he estimates contracted by 12 percent in 2021, and 25 percent in 2020, will depend on the Lebanese government’s next policies.

“There are two scenarios: either the government reaches an agreement on economic reforms, with a deal with the IMF (International Monetary Fund), and this will push growth into positive territory after four years of contraction; or it won’t and we will face another year of economic contraction,” he said.


Gulf electricity interconnection project saves members $3bn

Gulf electricity interconnection project saves members $3bn
Updated 21 January 2022

Gulf electricity interconnection project saves members $3bn

Gulf electricity interconnection project saves members $3bn

RIYADH: Gulf countries have saved $3 billion since the establishment of the Gulf Cooperation Council Interconnection Authority in 2019, it said.

Savings have come from a reduced need for new generation plants, thus lower operating and maintenance expenses, and reduced carbon emissions, SPA reported.

The Authority has agreed an action plan for the establishment of a joint electrical interconnection project with the Egyptian Electricity Transmission and Jordan’s National Electric Power Co., it said.

In a two-day meeting, the parties agreed on preparing a business case to explain the benefits of electrical connection and to complete the required procedures, SPA reported.


Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves

Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves
Updated 21 January 2022

Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves

Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves

LONDON: Twitter’s premium users can display non-fungible tokens in new hexagonal profile pictures, as the social media giant embraces the growing craze of digital collectibles known as NFTs.

Currently, the feature is only available to Twitter Blue subscribers on Apple’s iOS platform, allowing them to link their accounts with crypto wallets where they keep their NFTs.

To distinguish them from regular profile pictures, NFTs are displayed in hexagons that, when clicked, display details about them including ownership.

Last year, Twitter — founded by Jack Dorsey — began allowing users to send and receive bitcoin. Dorsey quit as Twitter CEO in November to focus on another company he founded, Square, which has since changed its name to Block, a reflection of Dorsey’s desire to further embrace blockchain and Web3 technologies.

Sales of NFTs reached about $25 billion in 2021, according to data from DappRadar, but growth is believed to have slowed toward the end of the year.

The most-traded cryptocurrencies experienced another day of selling on Friday as Bitcoin slumped almost 9 percent to $38,464.90 as of 1:07 p.m. in London. Ethereum declined 11 percent to $2,794 and Solana lost 14 percent to $118.

Bitcoin was trading above $67,000 as recently as November.

“Crypto markets have been sitting on a critical support level for some time,” Stack Funds told CoinDesk. “Macro market weakness is causing a sell-off in risk assets. Further continuation of this sentiment will likely see BTC trade in the mid ‘30s.”

Risk assets are being hurt by expectations of at least three interest-rate hikes by the US Federal Reserve this year as it looks to counter accelerating inflation.

The selloff in cryptocurrencies has not deterred the new mayor of New York City Eric Adams, who said he plans to convert his first paycheck this week into bitcoin and Ethereum.

“New York is the center of the world, and we want it to be the center of cryptocurrency and other financial innovations,” Adams said in a statement. “Being on the forefront of such innovation will help us create jobs, improve our economy, and continue to be a magnet for talent from all over the globe.”


Mobily prepares major announcements for LEAP22 tech conference

Mobily prepares major announcements for LEAP22 tech conference
Updated 21 January 2022

Mobily prepares major announcements for LEAP22 tech conference

Mobily prepares major announcements for LEAP22 tech conference

RIYADH: Etihad Etisalat, known as Mobily, said it will launch a range of innovative and disruptive digital solutions during LEAP22, the technology event scheduled for Riyadh in February.

Mobily’s announcements will be in the area of the Internet of things, artificial intelligence, smart cities, smart health care systems and others, it said in a statement.

“LEAP is a turning point in the Kingdom’s journey toward digital transformation, elevating its position at the forefront of global players who develop and empower the latest technologies that shape the future of our world,” said Mobily CEO Eng. Salman Al Badran. “As the Kingdom moves toward enabling a leading digital economy, Mobily seeks to provide individuals and corporates with the tools they need to unlocking opportunities and pursue their ambitions.”

“At Mobily, we persistently contribute to the realization of Vision 2030 through providing advanced telecommunications services and digital solutions that contribute to transforming the Kingdom’s digitalization ambitions into reality, he said.

Leap will be held in Riyadh from Feb. 1 to Feb. 3, 2022.

Saudi Arabia has been embracing technology as a means to loosen the economy’s dependency on hydrocarbons.

In August, $1 billion of initiatives aimed at improving digital skills in the Kingdom were unveiled under the name Launch. Among the targets is an ambition to train one in every 100 Saudis to be programmers, and the creation of 25,000 jobs in data science and AI by 2030.

Saudi Arabia has also attracted the Middle East’s first Apple Developer Academy, which will initially focus on women coders.

LEAP will host 700 start-ups and will feature a host of keynotes, workshops and assemblies on topics from smart cities to space and satellites, health tech, future energy.

The LEAP Forward stage will tackle issues around the most prominent future technologies, including self-driving vehicles and AI, exosuits, nanorobotics, augmented reality, and bionics.

International speakers include Raghu Raghuram, CEO of cloud-computing giant VMware, Börje Ekholm, president and CEO of Ericsson, and Dr. Saket Kumar, chief data scientist for Global Premium Services at Google. Regional speakers include Manar Al-Moneef, regional CEO of GE Renewable Energy, and Ghinwa Baradhi, HSBC’s chief information officer in the Middle East and North Africa.

Altogether 450 speakers and 40,000 visitors are expected at the event.