The Banking Executive Magazine - March 2021

Saudi Banks and simultaneously helped banks to accelerate their digital journey for ensuring the continuation of all banking services without physical in- teraction with customers. In his forword to the report , Abdul- lah Hamad Al Fozan Chairman KPMG in Saudi Arabia, noted : “In Saudi Arabia, the government swiftly launched support programs to miti- gate the economic impact of the pan- demic on individuals and local businesses. Within these programs the SAMA played a pivotal role, ex- tending liquidity support against pay- ment deferral program, providing guarantees and other mitigation measures.” “Banks facilitated the government and SAMA’s financial support mech- anisms, while at the same time weathering their own storms though business continuity management sys- tems.” The financial performance of the 11 banks in 2020 reported a fall of only 6.32 percent in net income -- exclud- ing the impact of a one-off goodwill impairment recorded by Saudi British Bank (SABB). Meanwhile, total assets increased by 13.14 percent to Saudi riyal (SAR) 2,771 billion, against SAR 2,449 bil- lion in 2019. Total customer deposits saw a 9.18 percent spike amounting to SAR 1,975 billion, as compared to SAR 1,809 billion in 2019, whereas, ex- pected credit loss (ECL) saw a sharp rise of 39.05 percent amounting to SAR 17.33 billion, as compared to SAR 12.46 billion in 2019. DOUBLE-DIGIT GROWTH IN MORTGAGE FINANCE “A cursory glance at the financial highlights of the Saudi Arabian bank- ing sector reveals the unmissable ef- fects of Covid-19. However, there is absolute unanimity that the full-year numbers are a significantly better end to a year than many would have anticipated this time last year,” said Ovais Shahab, Head of Financial Services KPMG in Saudi Arabia. “Banks are reporting a strong capital and liquidity base, and catering to in- creasing housing demand, mortgage financing witnessed double-digit growth.” The KPMG report reflects on post- pandemic lessons learned in the field of operational resilience, digital transformation and internal control. Shahab said the 2021 financial year will see the “evolution of important trends” like the rise of digital banking and fintech, “and how large banks compete with medium and smaller banks; how blue-chip corporates will have a better bargaining power in a low interest rate environment.” Underlining the implications for the industry itself, he said: “The new working reality will affect the earn- ings and we expect to see more branch network rationalization.” “In this report, we have encompassed a dynamic shift in society and preferences of people, regula- tory and compli- ance measures and digital acceler- ation that was widely observed in last 12 months and expected to continue during the remaining 2021,” said Khalil Ibrahim Al Sedais, Managing Partner Riyadh at KPMG in Saudi Ara- bia. “The Covid-19 era has demonstrated a re- newed focus on the pur- pose of banks, manifested in diversity and gender inclusion issues and expanding ESG (Environmental, Social, and Governance) agendas.” Looking forward, the KPMG report makes the argument that taking ad- vantage of “the optimism generated by the introduction of various vac- cines and overall improving funda- mentals, it is up to the individual banks to sustain the asset growth without compromising credit quality while maintaining adequate liquidity and capital levels.” ISSUE 147 MARCH 2021 the BANKING EXECUTIVE 13