Surprisingly for a sector that for a long time has consisted of only a handful of players, most Saudi bank bosses say they would welcome more competition. But they are less than enthusiastic at the prospect of competing with Alinma Bank, the new state-owned bank that was recently floated on the Saudi stock exchange (Tadawul).
The kingdom’s banks are already having to cope with the twin pressures of a lack of human resources and the rising cost of funding. Alinma will make both situations worse.
Its huge capital base has already prompted several rivals to seek fresh funds so they can match it for size. But what frightens bank managers most is staffing. Keeping salary costs under control while attracting staff is already a major headache. Alinma is expected to provide a new, and higher, salary benchmark.
Alongside all this, the new bank’s close links to government will help it secure some lucrative deals. Rivals wonder how much pressure Alinma will be under to make a profit, and whether that will depress margins for everyone else in the market.
They have some time on their side at least. The new bank has big ambitions, and wants to launch with a wide branch network and a fully functioning investment banking team. It hopes to have this in place within the next 12 months, which is an ambitious goal.
Investors who have bought Alinma shares ahead of its listing will make a quick return on their investment, because of Riyadh’s habit of issuing shares at a low initial value.
For the rest of the banking community, it will be a year or more before the winners and losers emerge from the latest increase in competition.