Saudi Arabian banks are expected to display better performance in 2009 with the rising interest income and sufficient liquidity in the Saudi market.
National Commercial Bank (NCB), the largest bank in Saudi Arabia, has anticipated that the banking industry will show better performance in 2009 by reaping good interest income, as reported by Emirates Business 24-7.
As per the figures released by the NCB, in Q1 2009, the collective net profit of nearly SR6 Billion has been realized by the seven Saudi banks that have announced their quarterly results, while their total profit amounted to SR1 Billion in Q4 2008.
According to NCB, balance sheets of the seven out of 12 commercial banks in Saudi Arabia clearly imply that the banking industry has so far been performing well. Their total income increased nearly six folds in Q1 2009 from the previous quarter (Q4 2008).
The recent research report "Middle East Banking - Corporate Loan A Hot Opportunity" from RNCOS also gives a similar positive view that with the growing profitability of banks, the banking assets in Saudi Arabia will see a CAGR of around 11% between 2009 and 2012 despite the global economic turmoil.
The government has revealed that the banking industry took a number of measures to ensure continuous economic growth. The decision of investing $400 Billion in the oil and public sectors in the coming five years was the most important. Besides, the monetary policies of the government are primarily focused on reducing lending costs, financial stability and ensuring adequate liquidity in the market.
Saudi Arabia, which is the largest economy in the Middle East, is anticipated to make a quicker recovery than rest of the Gulf countries on account of its business confidence and sufficient liquidity. Initial public offerings on Saudi Arabian bourse in 2009 suggest that local Saudi investors possess significant liquid assets that are being used to support various business plans across the kingdom.
However the banking industry in Saudi Arabia is not free from the challenges, but they relatively less tough than the challenges faced by banks in Europe and North America, said NCB.
According to a Research Analyst at RNCOS, “The Saudi Arabian banking industry is expected to witness healthy growth in coming years on account of rising interest margins and low funding cost. However, the sector will not remain untouched from the global economic slowdown, but will be less affected because of conservative method of investments.”
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