saudi economic forum

SAUDI ECONOMIC FORUM

March 2 2011

Banking in KSA and Challenges Ahead

© 2008 Alinma Bank

TABLE OF CONTENTS

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© 2008 Alinma Bank

Highlights of the Saudi Economy

• Largest budget announced for 2011

• Government spending and oil revenue key to

economic growth

• Sound fiscal position provides ample scope for

sustained growth

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• Government has been consciously reducing debt from around 80% of

GDP to 10%

• Foreign assets are currently US$440 billion

Source: SAMA

Highlights of the Saudi Economy

© 2008 Alinma Bank

Overview of the Saudi Banking Sector

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• Continued Growth in Financing despite the

financial crisis.

• Increasing trend in deposits – pre and post

financial crisis.

Source: SAMA

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Overview of the Saudi Banking Sector

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• Total assets increased – pre and post financial crisis.

• Net Income declined pre crisis but was constant post

financial crisis.

Source: SAMA

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Overview of the Saudi Banking Sector

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• Total equity shows a rising trend in both pre and post

financial crisis.

• CAR showed an increasing trend.

(SA

R in

m

illion

)

Source: SAMA, Al Inma

© 2008 Alinma Bank

Overview of the Saudi Banking Sector

• Role of banks critical in contributing to corporate growth

• Shareholder equity not always the most efficient way to fund

growth (cost of equity greater than cost of financing)

• Low relative corporate leverage in Saudi compared to

international benchmarks provides scope for growth through

bank financing and capital market issuance8

2.28

10.06

Source: Bloomberg

© 2008 Alinma Bank

• Effect of the crisis on Saudi banks was very

limited

• General Implementation of more robust

controls

• Improved credit assessment and corporate

due diligence

Saudi Banks – Post Financial Crisis

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Potential Growth Drivers

• Infrastructure (power, water, transportation)

• Housing (affordable low cost units)

• SME (potential for growth but with government support

through awareness / grants / guarantee)

• Innovation and Product Development (alternative

investment products to optimize returns)

• Development of capital market activity (secondary

market for bonds / Sukuks and securitization)

• Financial planning solutions such as education financing

schemes, retirement plans etc.

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Challenges Ahead

• Geopolitical situation

• Continuing low interest rate environment

• Limited capacity to grow under current traditional

banking

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© 2008 Alinma Bank