Saudi Arabia’s investment banks are struggling with a sharp rise in staff departures as low bonus payouts, the declining dollar and inflation hit salaries, prompting bankers to switch jobs.

A poor performance by the Saudi banking sector in 2007, when total profits at the country’s banks fell by 14.5 per cent, has been reflected in low bonus payments, which has prompted some senior staff to move on, seeking higher salaries.

Bankers in the kingdom say attracting and retaining staff is becoming a serious challenge for the sector, and that major players such as Samba and Saudi Hollandi have been hit particularly hard by departures.

One source at Samba says several people have left the bank because of bonus payouts being lower than expected, while others have walked out because their dollar-denominated salaries have dropped in value and the bank has not acknowledged this in its remuneration packages. “Some people wanted compensation from the bank to reflect the movement of the dollar and didn’t get it, so they moved on,” says the source. “There has also been a lot of complaining about bonuses.”

Senior managers at other banks in the kingdom also say that retaining staff has become a major issue, and the rising Saudi inflation rate is increasingly being reflected in wage negotiations.

“There is no question inflation expectations are starting to seep through in wage talks and people are asking ‘how do I protect my income?’” says Abdulkareem Abu Al-Nasr, chief executive officer of National Commercial Bank.

At Saudi Hollandi, a series of management changes have been followed by staff losses. Towards the end of 2007, Tom Lind, who helped create Hollandi’s investment banking capabilities, and Mark Hanson, former head of corporate finance at the bank, left.

They were followed by Giel-Jan van der Tol, who left in early 2008 in anticipation of ABN Amro ending a management deal with the bank.

The difficulty in transferring employment visas between rival Saudi businesses means some expatriate bankers have chosen to move to companies based in Qatar and Dubai.

Saudi nationals, however, find it easier to move between banks in the kingdom.

One director at a Saudi bank warns that high staff turnover could happen to any bank given the inflationary environment, which is putting pressure on salaries, and the shortage of experienced investment bankers.

“I know a lot of people have left Samba but given the skills shortage, I think it is something that can affect any bank,” says the director.

“Especially with new banks being formed that will put further strain on human resources.”

Samba says its staff turnover rate is no higher than other banks in the kingdom. Saudi Hollandi was unavailable for comment.