{Kantakji Group}. Add '9908' NCB Saudi Banking Sector Review - June 2011

FYI


 Nawaf Y. Husein

 Faculty Member
 Msc, CRP , CLBB
 Saudi Training Society Member

 Institute of Banking
 Saudi Arabian Monetary Agency ( SAMA)
  P.O.Box : 10820   Riyadh 11443 Saudi Arabia
 Tel : + 966 1 463 3000   Ext. 3825
  Fax: + 966 1 466 2368
  Mobile : + 966 55 48 44 828

  SKYPE : abuhejleh2     


 

Dear Readers,

 

 

Please find attached our latest NCB Saudi Banking Sector Review titled: Weathering Crisis Repercussions yet Cautious on Lending 

 

 

 

Executive Summary

 

·         The overall Saudi banking sector structure remains unchanged, nor do we foresee any major changes that might alter asset compositions in the short– to medium-term.

 

·         Banking, industry-wise, special commission income dropped by 11.3% to SAR44.4 billion in 2010, following 2009's drop of 17.3%, as the yield on earning assets declined to a record low of 3.9%.

 

·         Special commission expense recorded a staggering 49.3% drop due to the decline in cost of funds from 0.98% in 2009 to 0.48% in 2010, which helped soften the contraction in Net Special Commission Income (NSCI) to an acceptable 1.3% for the industry.

 

·         The fact that aggregate past due but not impaired loans have declined to SAR17.8 billion is indicative of the reduced stress on Saudi banks. We  expect the provisioning cycle to have already peaked, and that bank-wide provisions will take a downward trajectory going forward.

 

·         Saudi Banks will need to redeploy their liquid assets as the economy has proved to be resilient to external shocks. Coupled with the recent royal decrees, and expected approval of the mortgage law, banks must shift from amassing liquidity to lending opportunities.

 

·         Banks continued their rather tight policy into 2011 as loans-to-deposits ratio decreased to a six-year low at 71.1%, validating banks' rather risk averseness stance.

 

·         Lower medium grade to non-investment grade assets have declined by 13.4% Y/Y in 2010, which symbolizes the tendency of local banks to opt out of risky securities. 

 

·         Overall, the Saudi banking system remains profitable with plenty of room to grow. As the global risk averseness mood continues to diminish, Saudi banks cautiously follow suit and deem  to expand their loans portfolios.

 

·         Our profitability expectation for the remainder of the year is positive, supported by lower provisioning as NPLs and Past Due but Not Impaired remain suppressed.

 

       Best regards,

 

NCB Economics Department 

PO Box 3555, Jeddah 21481

Telephone: +9662646-3232    FAX: +9662644-9783

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