The company believes that the troubles of the Saudi financial sector are cyclical rather than structural

Jeddah, 03 May 2009: Speaking at the third annual Investment Horizons International Exhibition and Forum, held in Riyadh 27-28 April 2009, Dr. Jarmo Kotilaine, Chief Economist of NCB Capital, gave a presentation highlighting the resilience of the Saudi financial sector amidst the global economic turmoil, focusing on significant growth in the last few years and the prospects for future growth, especially in the large untapped market in banking and associated services.

At the event, which was themed The challenges and opportunities facing GCC Countries amidst the crisis and was attended by key investment dignitaries from GCC governments and institutions, including Amr Moussa, Secretary General of the League of Arab States, and Abdurrahman bin Hamad Al Attiyah, Secretary General of the GCC, Dr. Kotilaine's presentation stated that the Kingdom's banking assets have more than doubled in the last five years, reaching a total worth of USD 347 billion in 2008, placing Saudi Arabia second only to the UAE in the GCC region, with the robust growth largely due to personal finance mortgage lending and corporate lending.

He went on to note that the Kingdom of Saudi Arabia is the largest player in the GCC region's asset management and insurance market, presenting data showing that the KSA insurance market's gross written premiums account for 29 percent of the GCC total, and in the GCC asset management industry KSA-focused funds account for USD 15 billion of the total USD 40 billion assets under management in the GCC. 

Dr. Kotilaine next focused on the Kingdom's considerable convergence potential, demonstrating that the Saudi banking sector penetration is low even by regional standards with only 57 bank branches per million of the population, which is significantly lower than in the UAE and Kuwait where there are 181 and 92 branches per million population respectively.

He also stated that the Kingdom's loan-to-GDP ratio of 42.8 percent in 2008 is among the lowest in the GCC region, while the deposit--to-GDP ratio of 46.8 percent in 2008 is also well below the GCC average of 60.4 percent.

Commenting on the Saudi financial sector remaining an emerging sector, Dr. Kotilaine pointed out that, although in absolute terms the Kingdom's financial sector is the second largest in the GCC, as a proportion of GDP it is still smaller than some of its regional peers.

He emphasized this point by stating that with 8 percent contribution to the Kingdom's GDP (2008), the size of the Saudi financial market lags behind other key emerging markets with banking assets as a percentage of GDP standing at 75 percent, which is still significantly lower that the US average of 97 percent, the EU average of 112 percent and the GCC average (excluding KSA) of 104 percent.

Returning to the subject of the global economic crisis, Dr. Kotilaine explained that the troubles of the financial sector in Saudi Arabia are cyclical whereas in the West they are cyclical and structural.  While a cyclical correction can be painful, a structural crisis is a problem of a different order of magnitude that can shake a system to the core.

Dr.  Kotilaine was pleased to confirm that major financial sector reforms and initiatives by SAMA and the CMA have considerably aided growth in the sector in recent years and praised the authorities' strong supervision of the financial sector and the pre-emptive measures taken to help the sector deal with the downturn.

He went on to stress that a well capitalized banking system is the first line of defence amidst financial turmoil and that the Kingdom is continuing to strengthen its financial system by raising capital. He also noted that despite significant growth in lending, the asset quality has improved considerably.

In summary, Dr, Kotilaine observed that the Saudi economy remains in robust shape despite the slowdown and the drop in oil prices, concluding his presentation on the optimistic note that there are huge opportunities for growth in the Kingdom's financial sector.

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About NCB Capital:
Launched in April 2007, it is growing a strong reputation and profile as an important player in investment banking throughout the Middle East region with institutional, corporate and individual clients, and it is also growing its international presence.

Its strong links to its parent, National Commercial Bank, which is the region's largest bank, bring it peerless expertise in the markets locally.

NCB Capital organizes its 360 employees in three main business groupings - Wealth and Asset Management, Brokerage and Investment Banking.

NCB Capital has a presence in other parts of MENA through its subsidiaries: HC Securities in Egypt and Al Futtaim HC Securities in Dubai, EastGate Capital Group based in Dubai and Turkiye Finans in Turkey.

In 2008, NCB Capital acquired The Capital Partnership, a London-based specialist asset manager, to accelerate its growth specifically in asset management.

With around $13 billion of assets under management and one million clients, it is the Kingdom's largest manager of wealth for high net worth individuals.

In brokerage, it is the third largest player in terms of value traded with a market share of 12.5 percent (at March 09).

It is the market leader in the local Saudi mutual funds market with 33 percent market share (at March 09). NCB Capital launched the world's first Sharia-compliant real estate fund.

© Press Release 2009