How Saudi Arabia’s Tadawul-listed banks fared in pandemic-hit 2020

22 March 2021 Consultancy-me.com 5 min. read

In a new report by KPMG, the firm’s financial services experts have cracked the numbers on the audited 2020 financial results of Saudi Arabia’s eleven Tadawul-listed banks, shedding light on how the Kingdom’s banking sector has fared in the pandemic-hit year.

The analysis reveals that while 2020 definitely started as a challenging year due to the Covid-19-induced downturn, Saudi Arabia’s banking sector has managed to curb the impact. “The effects of Covid-19 have been unmissable, however, 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 at KPMG in Saudi Arabia.

Across the board, operating result declined by 6% on the year previous to SAR 42.27 billion. According to Shahab, this is was a direct consequence of the commendable government support through SAMAs relief programs, along with conscious measures that were invariably taken by the banks. Such measures included asset protection via restrained and cautious credit underwriting and re-balancing of prop books.

SAMA stimulus program

Notably, the lending book has been 2020’s silver lining with a healthy 12.6% net increase relative to prior year fuelled by a strong growth across mortgage finance. On the other front, SAMA’s injections of deposits under the support program and overall liquidity protection by corporates and individuals alike has enable an impressive 9.2% growth across bank and non-bank deposit base.

As a result, total assets increased by 13.3% and total equity by 7.8%. However, average returns on assets and equity both dropped, standing at 1.02% and 7.46% respectively as compared to 1.84% and 13.44% respectively for FY 2019.

Beyond the plain numbers, the banking sector played a key role in the Kingdom’s stability and economic recovery. In a one-two between the Saudi Central Bank and banks, the central bank created a stimulus programme to support borrowers and provide financial mitigation measures to corporates and SMEs, and banks facilitated this support mechanism while taking large strides to adapt to the new digital and remote way of working.

Net profit after zakat and tax

Looking into 2021, Khalil Ibrahim Al Sedais, Managing Partner of KPMG’s Riyadh office said that banks will focus on a number of top priorities, not surprisingly including digital acceleration, keeping their people safe and motivated, meeting regulatory and compliance requirements, and aligning to changing client demands driven by shifts in society and preferences of people. 

On the latter, Al Sedais elaborated, “The Covid-19 era has demonstrated a renewed focus on the purpose of banks, manifested in diversity and gender inclusion matters and expanding sustainability agendas.” 

A benchmark of performance

The eleven Tadawul-listed banks are: Alinma Bank, Arab National Bank, Al Rajhi Bank, Bank Al Jazira, Bank Al Bilad, Banque Saudi Fransi, National Commercial Bank, Riyad Bank, Saudi British Bank, Saudi Investment Bank and Samba Financial Group. A comparison of the performance of these banks across a number of key financial metrics: 

Net income

Net interest income is the difference between revenues generated by interest-bearing assets (for example: commercial and personal loans, mortgages, construction loans and investment securities, etc) and the cost of servicing liabilities (primarily of customers' deposits). 

Net income

Total assets & Total loan book

Total assets include cash held at the Saudi Central Bank (reserves) and assets such as commercial and personal loans, mortgages, construction loans and investment securities, and more. 

Total assets & Total loan book

ROE & ROA

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. It is considered a metric of the return on net assets. Return on assets (ROA) is an indicator of how profitable a bank is relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its assets to generate earnings. 

ROE & ROA

NPL coverage ratio

A non-performing loan (NPL) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. The non-performing loan coverage ratio looks at the ability of banks to absorb future losses.

NPL coverage ratio

Capital adequacy ratio

Capital adequacy ratio (CAR) is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities. It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process. 

Capital adequacy ratio

For more information on KPMG's expertise in financial services see the page KPMG | Financial Services.