Awards for Excellence 2020
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Banking is evolving in Saudi Arabia – the Gulf’s largest economy – with government and regulatory initiatives boosting growth in the sector.
Saudi banks reported an average asset growth of 12% in financial year 2019 and a healthy 40.9% growth in net profit, according to KPMG. In such a strong sector, however, one bank stands out as a highly profitable and increasingly modern institution: Al-Rajhi Bank, Euromoney’s best bank in the Middle East this year.
The world’s largest Islamic bank by assets, Al-Rajhi is playing an essential part in the diversification of Saudi Arabia’s economy, facilitating home ownership, private-sector growth and the development of the small and medium-sized enterprise sector to help the government meet its Vision 2030 objectives.
Waleed bin Abdullah Al-Moqbel took over as chief executive of the bank from Stefano Bertamini in January. Al-Rajhi saw a 12% increase in profit before tax in 2019 and a 13% rise in income year on year.
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Waleed bin |
Al-Rajhi’s profit after zakat in 2019 stood at SR10.2 billion ($2.72 billion), up from SR3.8 billion in 2018, a 170% increase.
Zakat is the annual Islamic tax that amounts to a 2.5% levy on each bank’s net worth. The substantial rise in profits was due largely to retroactive zakat demands in 2018 that meant several large banks had to pay additional zakat fees for the years going back as far as 2002.
Al-Rajhi’s vast mortgage programme has driven the transformation of the Saudi housing market, dramatically increasing the number of homeowners. Centralizing its mortgage functions and focusing on improving its processing automation enabled the bank to grow its mortgage portfolio by 63%, from SR32 billion in 2018 to SR55 billion in 2019.
The improvements helped Al-Rajhi increase its mortgage market share by five percentage points in Saudi Arabia to 32.9% in 2019 from 27.9% a year earlier. It saw 6% growth in current accounts over 2018 and maintains the largest distribution network in the kingdom, with 546 branches.
In 2019, it established a real estate structured finance team with a focus on ministry of housing developer financing and a view to diversifying its portfolio.
The bank continues to invest in digital as it looks to attract millennial customers: it implemented several improvements to its mobile and internet banking services, adding additional capabilities for cheque book management, direct debits, soft tokens, point-of-sale management, invoicing and Aramco payment management.
It also launched its personal finance solution, Watani, on its app. The bank has also entered into a partnership with MoneyGram international, a leader in cross-border payments and money transfers.
More than half of the bank’s account openings are now digital, while the majority of customer transactions are carried out using the bank’s digital platforms.
Robotics
Al-Rajhi positions itself as one of the biggest users of robotics in the Middle East, saying that the use of 253 bots has helped it process over 25,000 transactions a day, with vastly improved turnaround times. This led to a 126% increase in transactions a month between 2015 and 2019.
SMEs will play a vital part in the future growth of Saudi’s economy and after merging its SME and retail banking businesses in 2018, the bank reports a growth in lending to the sector. In 2019 it provided SR4.9 billion in loans to SMEs.
Total assets grew 5.5% to reach SR384.1 billion, with financing assets growing 7.7% and deposits growing 6.3%. Return on equity was 20.49%. Retail banking net income increased 11.1% year on year to reach SR6.42 billion, while corporate banking group net income grew 28% year on year to SR2.15 billion.
In 2019, the bank launched its first ever sustainability report. It is also the largest employer of women in the Kingdom’s banking sector.
Al-Rajhi expanded its international footprint with branches in Kuwait, Jordan and Malaysia and has plans to deliver enhancements across its Gulf operations and in Malaysia over the course of this year.
