Al-Ahly & Samba Merger, Support Transforming the Kingdom into Leading Financial Economy

Positive Results of Al-Ahly & Samba merger, Support Transform Kingdom into Leading Financial Economy -Al-Khudairi, Al-Ghamdi Reassert 

NCB Capital will take advantage of stock exchange new IPOs, partnership with BNY Mellon will meet demand, adopt global practices, in terms of asset management, financial brokerage -Al-Khudairi explains 

With as much as SR111 bln worth of the bank’s housing finance portfolio, Al-Ahly among the largest providers of real estate loans, in the Kingdom, we succeeded in securing over $500 mln estimated savings (synergy) in 2021, or SR800 mln on annual basis, our estimated savings goal to hit SR1.2 bln in 2023 -Al-Ghamdi elaborates  

Chairman of the Saudi National Bank (SNB) reaffirmed that the bank will contribute to meeting the aspirations and ambitions ofnfuture projects, in support of the Kingdom’s vision 2030

These are the reasons for the decrease, in the cumulative balance of provisions for bad loans for the two banks (Al-Ahly and Samba) before the merger, by the end of the Year 2020, CEO and Managing Director of the SNB pointed out

Our international branches will serve the bank’s strategic vision to expand regionally and occupy a leading global position, in the field of financial services -Al-Ghamdi states 

Ammar Abdul Wahed Al-Khudairi, Chairman of SNB and Saeed bin Muhammad Al-Ghamdi, the Group CEO and Managing Director have revealed, in an exclusive interview, at length, with Maaal, the leading Saudi online daily, that their expectations for the Saudi banking sector and its future, in the light of the Kingdom’s Vision 2030, aim at transforming it into a leading financial economy, by the end of the current decade.

Al-Khudairi pointed out to the success of the merger of “Al-Ahly” and “Samba” and its resulting significant strategic gains, including transforming SNB into the largest bank in the Kingdom, with a wider customer base, and greater power, in terms of assets, liquidity, and infrastructure, thus attracting more qualified employees as well as enhancing the market competitiveness’ edge.

Banks shall play a pivotal role in attracting foreign direct investment and accelerating the pace of economic diversification, in accordance with Vision 2030. Thus, mergers and acquisitions in the banking sector, if well-planned and implemented, can help the merged entities to gain influential strategic advantages and reaping opportunities fruits of merger and acquisition, which will, in turn, positively impact the Saudi economy, in light of the Kingdom’s plans to transform into a leading financial economy by 2030, Al-Khudairi stated.

According to SNB Chairman, the bank is the largest banking group, across the Kingdom of Saudi Arabia, and among the largest, regionally speaking (Notably, the GCC member state-wise), with an overall value of assets amounting to SR903 billion on September 30, 2021.

At that time, the market share of SNB assets among the whole banking spectrum, represented about 31%, and SNB also has a financing market share of about 27% after the merger.

Such a steady growth rate in terms of the market share, supported by liquidity and a strong capital position, enables financing of economic development plans, and supports national projects, in the Kingdom.

The market is still within the foreseen limits, while it is widely expected to grow, in the near future, especially the retail banking, Al-Khudairi added.

Referring to the continuous reality of SNB mushrooming, with wide-range branches, especially the investment ones, after the merger, saying that the Kingdom of Saudi Arabia, is currently embarking on writing a new chapter in the story of public offerings, region-wide. Pointing out that the extensive local experience of the SNB constitutes a competitive advantage, during this period, as it allows us to enhance our role in providing financial advice and support the operations to NCB Capital, Al-Khudairi concluded.

On the other hand, Maaal asked Al-Ghamdi about the rationale of the merger of Al-Ahly and Samba, that as of the end of 2020 there are liabilities on Samba Financial Group, amounting to SR15.2 billion, including debt bonds, loan and other liabilities.

Maaal went to put it more precisely: What happened to these liabilities?

It is natural that these liabilities shall be transferred to the new entity, or the SNB, that was Al-Ghamdi’s decisive answer.

Therefore, these liabilities will form part of the group’s financing base, he added.

SNB enjoys a balanced global class recognized business model and great liquidity that enhancing its competitiveness’ cutting edge, at the local and regional levels, a fact that we consider as the most pivotal power of the bank, reflecting on its growth and development over 68-year, in line with the Kingdom’s orientation towards modernity, progress and best quality of life, Al-Ghamdi remarked.

Regarding the decrease in the cumulative balance of provisions for non-performing loans for the previously known two banks (Al-Ahly and Samba) at the end of 2020, have been decreased from SR12.76 billion to SR10.8 billion, he explained.

Maaal kept asking: What was the reason for the decrease in the provisions balance? Were that because of the non-performing loans collected? or were they classified as bad debts and thus their allocations, reversed?

Al-Ghamdi answered: The main reason for this decrease in the allocations for bad loans, during the Q2, 2021, is primarily due to technical accounting reasons, as the transfer of the previous Samba portfolio, after deducting provisions to the NB of Saudi Arabia, at a fair value.

In other words, he highlighted, that we considered the provision balance as a part of the net loan balance.

Once again, the floor has gone back to the Chairman of SNB, to answer Maaal question about the steady increase in the Saudi stock market’s IPOs.

How will the banking sector, in general, and the SNB, in particular, can benefit from these listings?

He proudly, rather slightly, said: The Kingdom of Saudi Arabia is writing a new chapter in the story of public offerings, in the region.

The extensive local experience of Al Ahli Bank of Saudi Arabia constitutes a competitive advantage, during this period, as it allows us to enhance our role in providing financial advice and support to the operations of NCB Capital, our investment banking and asset management arm.

And we partnered with global investment company BNY Mellon to meet the demand for adopting global best practices, in asset management, brokerage, and securities custody functions, in the Kingdom.

Selection of NCB Capital as the lead manager for the initial public offering of the Saudi Tadawul Group, he added, was a tangible evidence of the contribution of our enhanced capabilities to serving the Saudi capital market, as a whole.

Al-Ghamdi intervened to talk about another success in the SNB group, as he refers to its real estate loans portfolio, in the Q3, 2021, where its value of the housing finance portfolio amounted to SR111 billion, meaning that the SNB has become one of the largest providers of real estate loans, in the Kingdom.

In accordance with its strategy, it will continue with its strong partnership with the Real Estate Development Fund and the Ministry of Municipal, Rural Affairs and Housing, in order to develop the bank’s mortgage portfolio, and work to support the national goal of increasing housing ownership among the Saudi citizens.

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However, there are some Is still hanging in the air, which shall be dotted, following the merger of “Samba” and “Al-Ahly”, as there were undoubtedly eye raising points about the estimates of the costs of the merger, which amounted to SR1.1 billion.

Were the costs gone in line with the estimates before the completion of the merger?

With the possibility of giving us more details about that, whether the costs coincide with the estimates or there are differences, and what are their causes?

Al-Ghamdi said: First, the costs of the merger process were estimated at SR900 million, with a one-time expense of only SR200 million, less than what was previously announced.

The bank has succeeded in achieving estimated savings (synergy) of more than $500 million for the Year 2021, equivalent to SR800 million, on an annual basis.

Accordingly, the expected target of estimated savings has been updated to reach SR1.2 billion, by 2023

Do not forget that the bank has completed the largest merger process, in the history of the Kingdom, he added, resulting in the formation of the largest Saudi bank and among the largest banks in the region, with total assets of SR903 billion (on September 30, 2021).

Such a position is strongly enabling it to finance economic development plans, he commented.

That prompted us to ask him about the commercial activities, regarding the companies that the bank will focus o,n in its financing following the completion of the merger?

What is the bank’s strategy, regarding individual financing?

Al-Ghamdi began by saying: As the largest bank in the Kingdom and the largest institutional financier, the strengths its financial position would enhance the huge financing capabilities of SNB, as it will contribute to meet the aspirations and ambitions of future projects. Supporting the Kingdom’s Vision 2030, too he said, as well as contribute to greater capabilities to facilitate trade and enhance cash flows to and from the Kingdom, through regional and global markets, he stressed.

All above statements will be reflected in the bank’s services, that it will provide, in the form of the best financing and digital solutions for its individual customers, residential ownership products for citizens, and support for micro, small and medium sized enterprises.

The bank also seeks to be the most trusted partner and the largest supporter of mega deals and projects, in the Kingdom, and the main provider of the largest base of Sharia-compliant banking products, for all sectors, where we believe that growth opportunities, lie in supporting national projects that contribute to job creation and keep pace with the latest business models, he said.

Not to mention that SNB is considered the largest bank in the treasury and financial market activities, and it owns a financial arm that is the largest asset manager and provider of brokerage and investment banking services, in the Kingdom.

SNB also enjoys a strong presence, in the global markets, benefiting from the spread of its branches in the Middle East, South Asia and Turkey, which will serve the bank’s strategic vision to expand regionally and occupy a leading global position, in the field of financial services, he concluded.