Saudi Arabia

Better Banking Standards Needed, Say 62 % of KSA Respondents

As high as 38 percent of KSA respondents would recommend their bank as a first choice to friends or colleagues according to the first ever NPS Survey conducted in the Kingdom by Souqalmal.com. Respondents were asked to evaluate various aspects of the overall banking experience. The parameters covered customer service, product offerings and financial education, among others. The results of the survey have been used to conceptualize the inaugural Souqalmal Bank Satisfaction Index. The ripple effect of the findings will be discussed in greater detail at a FINTECH event to be held in Dubai on February 25. Souqalmal.com will also be factoring in data from the NPS Survey to award the Most Recommended Bank in KSA and UAE at the event. The nominees from KSA are National Commercial Bank, the Saudi British Bank and Alinma Bank.

Saudi's Bank Albilad plans 1-2 billion riyal sukuk issue in Q2 -CNBC

Saudi Arabia's Bank Albilad plans to issue 1 to 2 billion riyals ($267-533 million) of sukuk by the end of the second quarter of 2016 to finance expansion, chief executive Khaled al-Jasser said. The bank plans to open 25 new branches and hire more employees, which Jasser said would likely increase costs this year by 15 to 17 percent. The bank will also move toward a strategy of owning rather than renting its branches, he said. Given weak market conditions, Jasser said the bank would prefer not to distribute dividends at the moment.

Alkhabeer Capital unveils IPO Fund

Alkhabeer Capital, an asset management and investment firm in Saudi Arabia, has announced the launch of Alkhabeer IPO Fund. The Alkhabeer IPO Fund is a Sharia Compliant, Open-Ended Investment Fund targeting IPOs and newly listed companies in Saudi Arabia during their first three years on the market. The fund may also invests part of its assets in the same at other GCC capital markets. Ahmed Saud Ghouth, Deputy Chief Executive Officer of Alkhabeer Capital, commented that year-on-year the firm has reported increases in assets under management and has assessed the IPO performance of securities in the GCC, which have seen improvements in the money raised over 2015.

Fitch: Islamic Banking Is Dominant in Saudi Arabia

In a new report, Fitch Ratings says Islamic finance is a mature and developed industry in Saudi Arabia, representing about two-thirds of total bank financing. About 38% comes from Islamic banks and 28% from the Islamic windows of conventional banks. Due to the largely Islamic finance nature of the lending market in Saudi Arabia, the performance and credit matrices of both Islamic and conventional banks are to a large extent similar. All banks are subject to a single supervisory authority and the same disclosure requirements. The Saudi Arabian Monetary Agency (SAMA) regulates sharia-compliant banks in the same way as it regulates conventional banks. However, one of the key differences between conventional and Islamic banks is the structure of their liquidity/investment portfolios.

Saudi banks to face further downward pressure on profits

The fourth-quarter results of leading Saudi banks show a number of these institutions are facing a squeeze on profits as both loans and deposits decline and asset quality deteriorates further. At the close of the fourth quarter, Saudi Hollandi Bank reported a 2.3 per cent fall in fourth-quarter net profit on higher staffing costs and provisions for bad loans. Saudi British Bank (SABB), an affiliate of HSBC Holdings, posted a 3.1 per cent drop in fourth-quarter net profit and Riyad Bank posted a 19.7 per cent fall in fourth-quarter net profit, in line with analysts’ forecasts as Samba Financial Group reported flat net profit for the fourth quarter. The notable exception was Al Rajhi Bank which reported a 28.2 per cent rise in its fourth-quarter net profit.

UPDATE 1-Profits up at Saudi's Al Rajhi Bank, flat at Samba

Saudi Arabia's Al Rajhi Bank reported a 28.2 percent rise in its fourth-quarter net profit on Thursday, beating analyst forecasts as operating income was pushed up by higher fee income from banking services and other revenue. The kingdom's second-largest lender by assets made 1.95 billion riyals ($519.6 million) in the three months to Dec. 31, up from 1.52 billion riyals in the same period a year earlier. Samba Financial Group, the kingdom's third-largest bank by assets, reported flat net profit for the fourth quarter. It concludes a mixed earnings season for banks, with as many profit falls as rises at the kingdom's major lenders as the slump in oil prices begins to take some toll. Samba made a profit of 1.23 billion riyals in the three months to Dec. 31, the same figure it reported for the corresponding period a year earlier.

Saudi Arabia plans sovereign wealth fund

Saudi Arabia plans to set up a sovereign wealth fund to manage part of its oil fortune and diversify its investments. The nation is seeking proposals from investment banks and consultants. The sovereign wealth fund is said to be focusing on businesses outside the energy industry and may be active within one to two years with an office in New York. Saudi Arabia is trying to manage declining oil prices and rising tensions among countries in the Middle East including Iran. Saudi Arabia’s net foreign assets dropped to US$640 billion (RM1.97 trillion) in October, the lowest level in three years, as the oil rout strains government finances in the biggest Arab economy.

Ratings on Saudi Arabia lowered to 'A+/A-1'; outlook remains negative

On Oct. 30, 2015, Standard & Poor's Ratings Services lowered its unsolicited long- and short-term foreign- and local-currency sovereign credit ratings on the Kingdom of Saudi Arabia to 'A+/A-1' from 'AA-/A-1+'. The outlook remains negative. At the same time, S&P revised its transfer and convertibility (T&C) assessment on Saudi Arabia to 'AA-' from 'AA'. Standard & Poor's has converted its sovereign credit ratings on Saudi Arabia to "unsolicited" following Saudi Arabia's decision to terminate its rating agreement. A pronounced negative swing in Saudi Arabia's fiscal balance has prompted our downgrade. The kingdom has run fiscal surpluses over the 10 years to 2013 (averaging 13% of GDP).

Saudi Arabia Considers World’s Largest IPO for Aramco

Saudi Arabia is considering offering shares in the largest oil company in the world, Saudi Aramco, in an initial public offering (IPO) which may mean that assets of about 3.63 trillion US dollars will be accessible to citizens and investors. Saudi Aramco yesterday confirmed that it had been considering various options to provide the opportunity to a large segment of investors via an IPO in the finance market. The company said in a statement that it is studying two scenarios to present its shares for an IPO; the first is to sell an appropriate share of its assets directly, and the second is to offer a package of major projects for the IPO in several sectors, particularly the refining and chemicals sector. In addition to this, Aramco could sell about 5% of its assets which amounts to about 181.5 billion dollars in the stock market.

Saudi insurance sector to outperform oil

The Saudi insurance sector will grow by up to 17 per cent a year over the next five years thanks to regulation enforcement and growth in motor insurance, the Dubai-based investment bank Arqaam Capital said yesterday. Arquaam expects the Saudi insurance sector to be the least affected by weaker oil prices, budget cuts and the tightening liquidity as the enforcement of existing regulations will propel motor and medical premiums growth at a rate of 15-25 per cent and 14-16 per cent respectively. According to an Alpen Capital report released last year, the Saudi central bank has issued several new regulations regarding underwriting practices, reserving, actuarial-backed pricing and solvency requirements in the past two years, to help grow the industry.

NCB announces successful completion of subordinated Tier 1 Sukuk by way of private placement

The National Commercial Bank (NCB) has settled an issuance of subordinated Additional Tier 1 Capital Sukuk on Wednesday 23 December 2015, in the amount of SAR 2.7 billion through a private placement offer in Saudi Arabia. The issuance is intended to strengthen the Bank's capital base in accordance with the Basel III framework and sustain its growth while maintaining healthy capital adequacy levels. Additionally, the Sukuk will continue to extend the maturity profile of NCB's liabilities while continuing to diversify its sources of funding. The Sukuk are perpetual securities with no fixed redemption date. However, NCB has the right to call the Sukuk on a predefined date. All required approvals from the regulatory authorities have been obtained for the issuance. NCB Capital Company acted as Sole Lead Manager.

IIRA reaffirms Fiduciary Ratings of Bank AlJazira: Jan 2016

Islamic International Rating Agency (IIRA) has reaffirmed the ratings of Bank AlJazira (‘BAJ’) on the international scale at ‘A-/A2’ (SingleA Minus/A Two) and at ‘A+(sa)/A1(sa)’ (Single A Plus/A One) on the national scale. Outlook on the assigned ratings is ‘Stable’. The fiduciary score has also been reassessed in the range of ’71-75’, reflecting adequate fiduciary standards wherein rights of various stakeholders are adequately protected. The consistent growth in business volumes at BAJ, facilitated by expansion in branch network has been noted. The bank’s low net impairment ratio and sufficient liquidity held, lends support to the assigned ratings. Although financing counterparty concentration remains higher than desired levels, an improving trend has been noted. Capitalisation is adequate and above the regulatory minimum.

Alinma Bank to disburse SR745 million dividend

The Alinma Bank Board of Directors has recommended the distribution of share dividend to its shareholders for the 2015 fiscal year. After approval at the bank’s next general assembly meeting in March 2016, shareholders will receive SR0.50 per share (5% of nominal value). The total disbursal will amount to SR745 million. Alinma Bank Chairman Engr. Abdulaziz Al-Zamil congratulated the bank’s staff and shareholders on a year of growth and success.

S.Arabia licenses 900-mln-riyal national home finance company

Saudi Arabia's central bank has granted a license to its national home finance company, Bidaya and it will launch with 900 million riyals ($239.94 million) in capital. The decision by the Saudi Arabian Monetary Agency (SAMA) joins efforts to boost home ownership in the kingdom, where a shortage of affordable housing has become an economic and social issue. In development since 2010, Bidaya is a venture between the finance ministry's Public Investment Fund and the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD). The company aims to make financing more readily available in a kingdom where home ownership levels lag behind the global average of 70 percent.

Saudi Arabia approves 2.5% ‘white land tax’

Saudi Arabia has approved proposals for a 2.5% ‘white land tax’, which will apply to undeveloped residential and residential/commercial plots within urban boundaries. The law will come into force six months after the Ministry of Housing’s release of detailed regulations, the publication of which will take place within the next six months. Once implemented, proceeds from the tax will be deposited into an account of the Saudi Arabian Monetary Agency, and will be used to fund housing and related infrastructure projects in the Kingdom. The law is intended to stimulate further development to meet the demand for middle-income housing in Saudi Arabia. JLL predicts that some land owners will bring forward plans and begin development in order to avoid the additional tax burden of holding undeveloped land. Others, it suggests, will seek to sell sites to other developers, which should help to reduce land values.

Bahrain's Arcapita and Saudi's Al Rajhi Capital exit real estate fund

Bahrain-based Arcapita has sold real estate assets it jointly held with Saudi Arabia's Al Rajhi Capital for 1.35 billion Saudi riyals ($359.81 million), the two companies said in a joint statement. The ARC Real Estate Fund, which had a lifespan of five years, acquired seven assets in logistics, warehousing and retail in Saudi Arabia and the United Arab Emirates, they said in the statement. The fund appointed an external consultant to advise on the sale in April. They did not say who they had sold the assets to. Al Rajhi Capital is the investment banking arm of Saudi Arabian lender, Al Rajhi Bank.

UPDATE 1-Saudi's Kingdom Holding, Alinma plan $2.2 bln fund for tallest building

Saudi Arabia's Kingdom Holding said its affiliate Jeddah Economic Co (JEC) had arranged financing to complete construction of the world's tallest building. JEC agreed with Alinma Bank to establish an 8.4 billion riyal ($2.2 billion) real estate development fund that will finish work on the $1.2 billion Kingdom Tower in Jeddah. The Islamic fund will also develop the 1.5 sq km (0.6 sq miles) first phase of the Jeddah Economic City project. In addition to Kingdom Tower, the scheme is to include Saudi Arabia's largest shopping mall. Alinma Bank will finance the new fund, which is to be managed by Alinma Investment, Kingdom added without elaborating on how the money would be raised.

MENA Sukuk market expanded 14 % YTD

The Middle East and North Africa region recorded strong growth in the Sukuk market in the first 10 months of 2015, according to Michele Leung, Director, Fixed Income Indices, S&P Dow Jones Indices.
The market value, as tracked by the S&P MENA Sukuk Index, rose 14 % YTD to 37 billion, compared with the mere 1 % growth in the conventional bond market in the region. The Sukuk market has expanded 37 % since the S&P MENA Sukuk Index’s inception in July 2013. United Arab Emirates is the most active issuing country in the region, and it remains dominant in terms of country exposure at 52 %, followed by Saudi Arabia at 17 %.
Overall, governments have continued to diversify their funding platforms, and the global Sukuk market has witnessed solid support from the lack of primary supply. Looking at the indices’ total return performance, there has been a 1.1 - 1.3 % decline in both Sukuk and bond markets month-to-date. As of Nov 18, 2015, the S&P MENA Sukuk Index rose 1.05 % YTD, while the S&P MENA Bond Index outperformed and gained 1.90 % in the same period.

Experts: Real estate prices in Saudi Arabia will fall gradually

Expected to decrease by up to 30 % of land and real estate value. Real estate experts expect property prices in Saudi Arabia to decline gradually over the coming years and return to normal levels.
According to their forecasts, this will only happen with implementing the new regulation of fees on undeveloped plots of land in urban areas (white lands), the decline in real estate mortgage and the drop in oil prices in the Kingdom. Prices are expected to fall by up to 30 % of the land and real estate value, reports investing.com.
On this basis, Ihsan Buhulaiga, a former member of the Shura Council and an economic expert, says: “White lands’ law will ensure that landlords have only two alternatives: the first one is selling the land and the other is to develop an economic project based on market need.”
Eng. Mohammed Babahar says: “These new procedures are considered an excellent step to cure the Saudi real estate market and escape the inflation that has swept the market and pushed the prices up by more than 300 % and doubled the rental rates.”

UPDATE 1-MOVES-Standard Chartered appoints CEO for Islamic banking business

Standard Chartered has appointed Rehan Shaikh as chief executive of its global Islamic banking business, it said in a statement on Wednesday.
Shaikh moves to Standard Chartered Saadiq from Dubai Islamic Bank, where he was senior vice president and business head, private sector and transaction banking. He previously worked for StanChart in Pakistan from 1998 to 2007, the statement said.
He takes over from Sohail Akbar, who was interim chief executive of the Islamic banking operation after the departure of Afaq Khan earlier this year.
StanChart remains committed to the business despite a period of hiatus across other parts of the bank as global chief executive Bill Winters moves to restore profitability. It announced plans this month to reduce costs by $2.9 billion by 2018 and cut 15,000 jobs.
"Islamic finance is an integral part of the business at Standard Chartered and we continue to see growing demand from clients in many of our markets," said Sunil Kaushal, the bank's regional chief executive for Africa and the Middle East.

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