Dubai: The financial services sector in Saudi Arabia has weathered the COVID storm well, and has thrived again from a financial performance perspective, according to the latest KPMG Banking Pulse Quarterly.
The study provides a timely snapshot into CEOs’ expectations on business growth resumption, the impact of vaccine roll-outs, evolving organizational requirements, and business transformation priorities.
“Although we have been experiencing our fair share of trials and tribulations over the past year, we clearly see a bright future for Saudi Arabia’s banking industry which performed better than it ever has over the past year,” said Khalil Ibrahim Al Sedais, Office Managing Partner – Riyadh at KPMG in Saudi Arabia .
“With the sector’s total assets crossing SAR 3 trillion ($799.9 billion) and total deposits approaching the SAR 2 trillion ($533.2 billion) mark, generally the banking system is in great shape.”
Appetite for M&A
The survey found that 56 per cent of bank CEOs have a newfound appetite for M&A – and the recently concluded merger between SAMBA and NCB may pave the way for further consolidation in the Kingdom’s banking sector.
The top drivers for investment have shifted into the digital realm to transform the customer experience and value proposition while increasing market share and transforming business models at a significantly faster pace. Moreover, the changes which have taken place over the pandemic have pushed CEOs to reconsider their firm’s priorities. Customer-centricity and technology are now at the forefront of their minds, alongside investments in data security measures, digital communications and cloud computing.
Decline in credit losses
KPMG recorded the gradual decrease in credit losses which translated to approximately 19 per cent, courtesy of the various measures taken by the Saudi government, SAMA and banks themselves. T
here was a strong increase in loan books which translated into 20 per cent growth in average net income across the sector. Positive progress was made in terms of the maintenance of an average coverage ratio with an average above 169 per cent which in conjunction with the average capital adequacy ratio of 21 per cent created a decent reflection of the sector’s shock absorption capacity.
“Among the positive performance indicators across various fronts, Saudi banks have shown stellar growth in the real estate finance division over the past two years in particular. With an astounding increase of approximately 100 per cent since 2018, and the total financing on this front fast approaching the SAR 500 billion ($133.3 million) mark,” said Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia.