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Saudi Arabia Commercial Banking Report Q3 2008Published by: Business Monitor International Published: Sep. 17, 2008 - 38 Pages Table of Contents
AbstractOver the last year, the crisis in the inter-bank market, and the soaring prices of oil and other raw materials,tended to obscure several other important trends. In most of the developing world (i.e. the vast majority ofthe countries whose banking industries are surveyed by BMI), lending has been growing quickly. In manyemerging markets, inflationary pressures have been boosted by a rapid increase in credit. In a number ofemerging markets, macro-economic imbalances are evident.The figures on the tables above provide a snapshot of the banking sector in Saudi and the changes thathave taken place within it over the last year. To place the figures in context, it may be useful to bear inmind certain aspects of the 59 countries whose banking sectors are currently surveyed by BMI. Acrossthis sample, the median growth in assets in local currency terms was 21.3% (in Colombia). The medianloan growth was 21.6% (in India). The median growth in deposits was 17.9% (in Brazil).On their own, the ratios of loans to deposits, assets, and GDP mean little: however, they can provideuseful hints when combined with other data. Across the 59 countries, the median loan/deposit ratio is92.3% (in Greece). The median loan/asset ratio is 56.0% (in Poland). The median loan/GDP ratio was63.9% in India. From Q308, we have included a new section that examines the risks associated with each country’sbanking sector in a new way. We have essentially sought to ask this question: to what extent will thebanking sector likely need to source funding from banks in the rest of the world over the course of 2008.Given that the answer is not necessarily, on its own, meaningful, we have looked at other key issues suchas the size and recent movement in the loan/deposit ratio, macro-economic developments and recentmovements in financial markets. Booming oil prices - and, in Iran at least, highly inflationary monetary policies - have led to a surge inbank lending in much of the Middle East and North Africa. It is not clear that all of this lending has beenprudent. Nevertheless, the massive current account surpluses being achieved by many of the countries inthe region indicate that - quite unlike Southeast and East Asia in 1997-8, for instance - the currencies areundervalued. There is no reason why the boom should stop anytime soon. The Middle East and NorthAfrica should, collectively, continue to be a significant supplier of capital to the rest of the world.However, in part because of the relative underdevelopment of financial services and banking in mostcountries, relatively little of this money should come directly through the local banks. As in previous reports, we include a SWOT analysis for Saudi Arabia. Overall, the report highlightsaspects that can be considered to be strengths. By Middle Eastern standards, the banking sector is large,rapidly growing and well trusted by the country’s middle class. The main constraints come from the lackof competition that has prevailed in the past. Also, it remains to be seen how the Saudi Arabian MonetaryAuthority (SAMA) deals with mounting inflationary pressures. Since Q108, we have calculated, on a consistent basis, a Commercial Bank Business Environment Rating(CBBER) for each of the 59 countries surveyed. The CBBER includes an assessment of the limits ofpotential returns: it does this by taking into account the size, growth potential and bancassurancepotential of the banking sector, as well as aspects of the economy in 2007. The CBBER also depends onan assessment of the risks to the realisation of potential returns: this reflects BMI’s assessments ofoverall country risk, together with the regulatory and competitive environment. Saudi Arabia’s overall CBBER is 63.4. Within the limits to potential return, the banking elements and thecountry elements are rated relatively evenly - with scores of 56.3 and 63.6 respectively. Within the risksto the realisation of potential returns, the banking elements and the country elements are rated moredistinctly- with respective scores of 65.0 and 78.8. Get Full Details About This Report >> |
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