JEDDAH, 28 October — The assets of Saudi commercial banks rose to SR460 billion by the end of August, according to figures released by the Saudi Arabian Monetary Agency (SAMA).
The huge figure reflects the growing liquidity of Saudi banks and their ability to provide long-term loans. The amount included SR97.9 billion in foreign assets, SR181 billion in dues owed by the private sector and SR131.5 billion dues of the government and semi-public sectors.
The banking sector has gained 6.2 percent so far this year while the overall market has risen by 5.6 percent.
The market with an average daily turnover of SR246 million is the biggest in the Middle East in terms of capitalization.
Meanwhile, the Saudi American Bank (SAMBA), the most highly-rated Saudi commercial bank, said yesterday it had not been hit by the global economic slowdown so far and expected continued rise in profits.
SAMBA Managing Director Mike de Graffenried said there had been no sign yet of a downturn in credit business generated by Saudi Arabia’s non-oil sector, the revenue mainstay of the country’s ten commercial banks. "All the signs we see tend to point to future growth," he told Reuters in an interview.
"My visits to customers tend to indicate that despite what is happening to the outside economy their business is moving along — plans are not changing." Historically low interest rates, which closely track the US market, were also a factor, he said.
But Graffenried said that if oil prices remained low, there would be a lagged impact on government spending, which is still the main engine of growth in the country’s oil-based economy.
The non-oil sector is expected to expand by three to four percent this year, outstripping overall growth of just one percent.
SAMBA, the Kingdom’s second-biggest bank in terms of assets, has reported record profits so far this year, with net profit up by 12 percent in the first nine months at SR1.17 billion.
Graffenried said that like other Saudi banks, SAMBA was complying with a global crackdown on funding for groups and individuals suspected of having links to terrorism. He declined to say whether the bank had frozen any assets, but noted that an internal investigation of transactions dating back five years had not generated significant one-off costs.
The probe, conducted by 45 existing staff members, would be finished in two to three weeks, he said.
US ratings agency Moody’s has given SAMBA a Baa3 rating on its long-term bank deposits, and a financial strength rating of C+ — which is the highest in Saudi Arabia.
Graffenried said he expected other Saudi banks — which also unveiled double-digit profit increases in the first half of 2001 — to benefit from new infrastructure projects in the oil, petrochemical and shipping sectors. "Saudi banks are shielded from the global slowdown because they take less from investment banking than international banks," he said.
In SAMBA’s case, 78 percent of the bank’s business involved taking deposits and lending the money to domestic companies or investing in Saudi development bonds — which was a very stable system, he said.
Graffenried said that SAMBA’s retail and corporate Internet banking service, launched in May 2001, had attracted 10,000 clients — a "significant" share of its overall customer base.
"It’s early days yet but we’ve been pleased with the uptake. People can register online and certainly this will help us win more customers over time," he said.
Two other Saudi banks, National Commercial Bank and Arab National Bank, have launched IT services.
Next year, SAMBA would offer an Internet online service for share brokerage, Graffenried said. He said that SAMBA was awaiting the introduction of a new capital markets law, due by the end of 2001 and expected to result in the creation of an independent bourse, replacing the electronic market managed by the central bank.
The rules were expected to pave the way for a market in corporate bonds and deepen the existing share market by making it easy for players to issue equity to raise capital, he said.
So far in 2001 SAMBA’s share has been flat, largely because the bank paid an interim dividend of SR879 million for the first time, following a change in Saudi laws allowing the step.
