The Banking Executive Magazine, Issue 154, October 2021

Coronavirus Coronavirus IMPACT ON SAUDI BANKS HAS BEEN CONTAINED The impact of the pandemic on Saudi Arabian banks has been contained, while pressures on the operating environment have eased and the economic activity is gradually recovering, sup- ported by higher oil prices, Fitch Ratings says in a new report. Deterioration in asset quality and profitability was limited and the banks’ financial metrics have sta- bilised. These have been under- pinned by government support measures that included interest- free deposits, but also by the strong loan growth in 2020 and 1H21 (14.9% and 19.0%, re- spectively) which was boosted by the sustained momentum in retail mortgages. Delayed recog- nition of impairments remains a key risk but we believe the im- pact on the sector’s asset quality and overall financial profiles will be contained. Fitch revised the Outlooks on all Saudi banks’ Long-Term Issuer Default Ratings to Stable in 2Q21 and 3Q21 to reflect re- duced pressures on the operating environment and the Stable Out- look on the sovereign rating. Saudi banks' weighted average Viability Rating of ‘bbb+’ re- mains the highest in the Gulf Co- operation Council. Pressures on the operating envi- ronment from the pandemic and lower oil prices are easing, helped by recovering global oil demand and increasing non-oil economic activity. Some sectors remain under pressure and the operating environment has not fully recovered but we believe the downside risk for banks has reduced. group's Treasury and Trade Solutions business, which saw revenue decline 4% even as it collected more fees and saw growth in trading. Revenue from Citi-branded cards in North America declined 1% and rev- enue from cards issued for retailers fell 6%. The results included the impact of a loss on the previously announced sale of its Australia consumer bank- ing business. Excluding the loss on the sale, revenue increased 3%, driven by the institutional business. EXPENSES RISE Operating expenses increased 5% to $11.5 billion as the company ramped up spending on technology and personnel to improve its control systems to comply with demands made by regulators a year ago. Investors have been particularly con- cerned about Citigroup's expenses as the bank has not said how much money and time it will take to meet requirements of regulators and fix its systems. The bank is also spending more on its wealth management business and its transaction services to companies. Fraser expects the increased spend- ing to bolster what she has described as Citigroup's "transformation" into a more efficient and focused company that will earn returns closer to its peers. Expenses for marketing credit cards have been rising at Citigroup and at competing card-issuers. JPMorgan said on Wednesday that it will likely spend more on card marketing to at- tract spending from customers as the pandemic eases. Citigroup has produced lower re- turns on equity than competitors for more than a decade and the stock market values the company at less than shown on its balance sheet. ISSUE 154 OCTOBER 2021 the BANKING EXECUTIVE 41