Compared to the relatively “mixed” experience of global markets, Saudi Arabia has enjoyed stability and growth in economic performance during 2010. The economy and stock market has outperformed other countries in the region which reflects customer and business index confidence in both the regulatory handling of the economy and the general financial health of business across The Kingdom. The Government’s $400bn injection into the economy over the course of five years has resulted in a number of major infrastructure projects being financed and the effects of this is already working through the system. Indeed, NCB has secured a number of leading project finance mandates in 2010 and this has helped establish us as the number one project finance institution across the Gulf region.
More lending is also working its way through the economy and banks are being encouraged and are responding to the need to support businesses, large and small, with their growth plans. Indeed, 2010 has been a record year for NCB’s Corporate Banking Sector in terms of lending to our customer base. This reflects both our appetite to support Saudi business and our robust financial capital and liquidity position.
Indeed the relative strength of The Saudi Economy has seen many customers adopt a “Flight to Quality and Safety” in their financial approach and planning with significant growth in loans and deposits being experienced.
This is certainly the case at NCB and we put this customer “vote of confidence” down to our ownership, the strength of our financial performance and the resilience of our core franchise.
Economic challenges
There still remain risks in the system both internationally and domestically. Abroad, the fundamental core issues of unemployment, budget deficits, sovereign debt, political compromises and the constant media speculation on double-dip scenarios in economic indicators all combine to ensure that challenging times lie ahead and no country or region can be complacent about the future. Domestically, the key challenges for the banks are a low interest rate environment and a less than vibrant capital markets backdrop. These factors ensure that revenues will continue to be under pressure in 2011.
At NCB, we believe we are a portfolio of businesses and that being pro-active – we have the ability to quickly move on opportunities that present themselves and leverage our financial performance. We have done this in 2010 and will do so again next year.
International expansion
The Saudi banking sector is still very profitable and competitive. NCB has a market leading position in a number of key business lines but we never take our position for granted and treat all competition with the utmost respect.
We concentrate on our own performance and how we can make things better and that is why we place a great deal of importance on the customer experience, service quality and our investment in people. We believe that allied to our brand franchise – these areas differentiate our performance and continue to make NCB the leading Bank in Saudi Arabia.
Internationally, our majority shareholding in Turkiye Finans (acquired in 2008) continues to perform well. Turkey continues to be an emerging economic success story and our presence in the country can only be mutually beneficial moving forward.
NCB continues to assess potential future geographic expansion opportunities but they have to be right for our franchise, bring value to our shareholders and fit with our strategy of becoming the premier financial services group in the region.
NCB in 2010
NCB has performed well in 2010 and we have grown market share, attracted more customers to our business and enhanced the health of our core business.
Our balance sheet continues to be strong, service quality indicators are positive and key business relationships have deepened thus generating increasing revenues and better understanding of customer needs.
Retail distribution has grown, consumer finance has benefitted from the new mortgage product and treasury services in volatile international market conditions have been well sought and valued by customers. Corporate banking has enjoyed an impressive year and will be a key component of our 2011 growth plans.
Islamic banking performance
2010 has been about reinforcing NCB’s strong leadership and commitment to Islamic Banking. A leader in the provision of Islamic Investment Products, NCB launched the world’s first Shari’ah Compliant Real Estate Fund and was the first Saudi bank to provide its clients with a wide range of Shari’ah compliant funds. As a result, NCB is today still the kingdom’s largest Shari’ah compliant fund business and the world’s largest Shari’ah compliant asset manager. In addition, NCB developed and offers the first and largest listed Shariah equity fund in the world and the capital preserve fund is used by many leading financial institution worldwide.
Our ongoing drive in retail distribution growth means that we are still one of the leading providers of Shari’ah compliant products to customers. In the corporate sector, our project finance support of key infrastructure projects in 2010 has overwhelmingly been done via Shari’ah Compliant product and this has been a source of great pride and achievement to us.
Electronic distribution channels
Providing customers with new ways to do business with us has seen a rapid increase in our “e” capability across the NCB Group. In retail, corporate, investment banking and consumer finance we have invested in new technology and systems that now mean that over 80 per cent of transactions are now conducted by our two million plus customers through alternative delivery channels. At the same time, our 282 branches across the kingdom continue to provide quality service and access to banking for many of our customers both in main centres and remote locations.
Sustainability
Our strategy on sustainability focuses on people, profit and planet. As the first company in Saudi Arabia to produce an internationally accredited sustainability report in 2008 and the winner of The King Khaled Award for Sustainability and Business Excellence in 2008 and 2009 – NCB firmly believes that building a sustainable company that supports its economy, society, people and environment is of paramount importance.
As a financial services company our carbon footprint is relatively small but we believe that we can and should endeavour to act on what we can influence within our own organisation such as re-cycling, printing, water consumption and energy usage. We also can help raise awareness through our leadership position on the issue and we shall continue to pursue this across our diverse range of stakeholders.
Our objectives for 2011 are to continue to be financially resilient, prudent in decision-making, grow our core franchise, develop our people and at all times manage risk in an appropriate and responsible manner.
Abdulkareem Abu Al-Nasr is CEO of National Commercial Bank of Saudi Arabia
