In common with many Saudi banks, Sabb has been through a difficult period. Profits fell in three of the past five years and management of the bank has changed twice in that time.
Progress is now improving, as shown by the most recent financial results, and Sabb is well positioned to continue growing strongly in the future. Through HSBC Saudi Arabia, it has one of the strongest investment banking businesses in the kingdom and ties to some of the country’s biggest clients, including oil firm Saudi Aramco, chemicals manufacturer Saudi Basic Industries Corporation (Sabic) and the Saudi Arabian Mining Company (Maaden).That puts it in a prime position to win mandates to arrange and advise on project finance and bond issues for some of the kingdom’s top-tier clients.
The retail arm and local deposit-taking businesses provide a good liquidity source for the investment banking arm to support its advisory work with the local balance sheet. That will continue to bode well for winning investment banking deals and puts the firm ahead of other foreign banks trying to win business in the kingdom.
The challenge is in growing market share, something all the banks are trying to do with little success. Instead, market shares tend to remain the same while the size of the overall banking sector increases.
That is symptomatic of the intense competition in Saudi Arabia’s banking sector. While bankers say this is beginning to come to an end, there is still a great deal of pressure to book assets, which means loan pricing will probably not increase in the short term.
With the kingdom set for strong economic growth, Sabb will benefit from an increasingly active domestic finance sector that will continue to drive profit growth.