SAUDI American Bank (Samba) occupies an enviable position as the bank to beat. In 1994, it became the first Saudi bank to declare profits of more than SR 1,000 million. In terms of profitability, return on assets and return on equity, the bank ranks among the top institutions in the country. And Samba has global reach, through its close relationship with the US’ Citibank.

Yet the bank still sees room for improvement. ‘Our focus is to provide the best service to our clients and to try to be the number one,’ says Abdulrahman Saad al-Sadhan, corporate secretary of Samba.

History and structure: Samba is the largest of the joint-venture banks in the kingdom, and ranks number three among all Saudi banks in asset terms. The bank was set up in 1980, taking over the existing branches of Citibank, and the US bank took a 40 per cent stake in the new institution. The remaining 60 per cent is held by the Saudi public. Since then, Citibank has reduced its stake by 10 per cent, selling 5 per cent each to two local institutions, the General Organisation for Social Insurance (GOSI) and the Pension Fund.

Despite the reduced shareholding, the relationship with Citibank remains as strong as ever. In July 1993, a five-year technical management agreement with Citibank was renewed without any changes. Of the present senior management team, 35 are seconded from Citibank as part of the agreement. Of Samba’s 1,650 employees, 62 per cent are Saudi nationals.

The managing director and chief executive officer, James Collins, was himself seconded to Samba in August 1993, after 26 years at Citibank. Much of his previous experience was in the Asia-Pacific region.

Samba had 43 branches in the kingdom at the end of 1994, and plans to open a further two branches by the end of this year. However, its expansion plans have focused on automation. By the end of 1995, the bank expects to operate 89 automated teller machines (ATMs), up from 75 at the end of last year. It also plans to increase the number of point-of-sale (POS) payment machines to 1,500 by the end of this year, from 985 at the end of 1994.

The bank is divided into six groups, each with its own manager. The retail banking group covers a wide range of financial services for individuals and small businesses. This includes accounts in Saudi riyals and foreign currencies. It also covers telephone banking and credit card services. The services management group controls the quality of all the bank’s services and products, including technology developments and branches.

A private and investment banking group covers international and local brokerage services. There are 12 investment funds. These include a local mutual fund, which is one of the largest run by any bank in the kingdom.

The bank has separate corporate and treasury groups. The corporate group operates three regional offices organised to respond to specific industrial sectors. The treasury group manages several investment portfolios, and develops new products for customers.

In 1994, Samba set up a merchant banking group to focus on private placements, project finance, and, looking ahead, privatisation.

Samba also operates several wholly owned subsidiary companies overseas, including the London-based operations of the bank and Samba Capital Management, the Geneva-based Samba Finance and a specialist lease financing company, Samba Leasing, incorporated in the Cayman Islands. In addition, the bank set up Samba Investment Management (Luxembourg) in 1994, to specialise in mutual funds.

Strategy: ‘We are looking to develop more and more in our international efforts,’ says Al-Sadhan. However, he also makes clear that the international offices depend on business referred to them from Saudi Arabia, the core market. The international operations are seen as a way of improving the service to Saudi customers, under the basic maxim that if the flow of Saudi capital or trade justifies a business presence in another country, Samba will consider establishing one.

The bank aims to develop its fee-based income from a wide variety of sources, including retail, treasury and international operations. ‘Retail banking is expanding more than any other area now,’ says Al-Sadhan. High net worth individuals are being targeted in particular, which encourages the development of new treasury products.

However, the bank is not aiming to increase the size of its balance sheet, and this is particularly true of the loan portfolio. ‘It depends on the market needs,’ says Al-Sadhan. ‘No banks are trying to increase loans for the time being.’ The slowdown in the economy is likely to increase the need for extra provision for loan losses. This is likely to lead to a flat year for profits, but it will lead to strong growth in shareholders’ funds.

Performance: Net income for 1994 of SR 1,014 million, 8 per cent up on a year earlier, set a new record for Samba and Saudi Arabia. It also came in a year when several local banks reported a drop in earnings. Samba was able to improve both its interest and fee income during the year.

Samba’s loan portfolio grew by about 30 per cent in 1994, when many banks reported a flat performance. However, many of the new loans were made to existing customers. This was the main reason for a 10 per cent increase in the bank’s assets to SR 43,605 million.

The bank also strengthened its capital base, by doubling paid-up capital to SR 2,400 million in May last year, through a bonus share issue.

First quarter results for 1995 confirmed the bank’s expectations of a flatter performance during the year. Net income was SR 245 million, down almost 14 per cent on the corresponding period a year earlier. However, the bank’s assets grew by almost 7 per cent to SR 42,760 million during the same period.

Outlook: The bank will concentrate on its consumer business, and private and corporate banking activities. Samba’s efforts are also increasingly moving towards asset management and corporate finance. With Citibank’s support, Samba believes its products and service will still prove hard to beat.