The results reveal the full-extent of the balance sheet re-engineering that has taken place over the last four years. The arrival of PIF into the bank's shareholder structure in May 1999 led to the appointment of a new chairman and managing director, Abdulla Bahamdan. With a new management team supporting him, Bahamdan conducted an extensive review of the bank's position. By the end of the year some SR 4,000 million ($1,067 million) of non-performing loans (NPLs) had been uncovered. The decision was taken to stage a one-hit solution and provisioning for the year was raised to SR 6,568 million ($1,751 million). This swamped profits and eroded shareholders' equity. However, strong operational profits since then have seen the capital base more than rebuilt, and NPL coverage has been built back up to stand at 108 per cent at the end of last year, from a probably overestimated 57 per cent at the end of 1998 (MEED 3:5:02, Cover Story).

Net profits of SR 2,433 million ($649 million) in 2002 establish NCB as not only the largest bank in the Arab world, in terms of assets and equity, but also the most profitable by a considerable margin.

It has built a dominant franchise in Saudi Arabia - it is particularly strong in the fast-growing Islamic retail banking market - which, dependent on pricing, will make it an attractive investment opportunity if the government is to carry through its stated intention of listing the bank and staging an initial public offering of its stock.

For detailed analysis of NCB's past, present and future - and a full assessment of the health and prospects of the Saudi banking sector - see MEED's Saudi Banking Special Report in next week's edition (MEED 9:5:03).