Saudi banks moving towards a better year: KPMG report

KPMG’s latest report on the financial sector, Banking Perspectives 2021, records the sector seen moving towards a better year.  Backed by government reforms, halt in credit losses (ECL), stable liquidity, stronger CAR, and transformational changes, banks are heralding a stable year, as compared to a shaky outlook in the corresponding period last year.

KPMG reported that the 11 Tadawul-listed banks stayed resilient at the end of Dec.31, 2020 reflecting signs of recovery since uncertainties evolved in March 2020 and a promising outlook for FY 2021.

These 11 banks are Alinma Bank, Arab National Bank, Al Rajhi Bank, Bank Al Jazira, Bank Al Bilad, Banque Saudi Fransi, National Commercial Bank, Riyad Bank, Saudi British Bank, Saudi Investment Bank and Samba Financial Group.

The analysis further reveals that 2020 definitely started as a challenging year due to pandemic, but for the banking industry in Saudi Arabia, it concluded as a year of reflecting “cohesiveness” of industry and how the banks and the regulator can play a joint-role in economic recovery. The Saudi Central Bank came out proactively with the stimulus programme to support borrowers and simultaneously helped banks to accelerate their digital journey for ensuring the continuation of all banking services without physical interaction with customers.

The financial performance of the 11 banks in 2020 reported a fall of only 6.32 per cent in net income - excluding the impact of a one of goodwill impairment recorded by SABB.

Meanwhile, total assets increased by 13.14 per cent combining SAR 2,771 billion, against SAR 2,449 billion in 2019. Total customer deposits saw a 9.18 per cent spike calculating SAR 1,975 billion, as compared to SAR 1,809 billion in 2019, whereas, ECL saw a staggering rise to 39.05 per cent involving SAR 17.33 billion, as compared SAR 12.46 billion in 2019.

“A cursory glance at the FY2020 financial highlights of the Saudi Arabian banking sector reveals the unmissable effects of Covid-19. However, there is absolute unanimity that the full year numbers are a significantly better end to a year than many would have anticipated this time last year”, said Ovais Shahab, Head of Financial Services KPMG in Saudi Arabia.