Saudi Arabia Commercial Banking Report Q2 2008

In March 2008, we updated all data for the 59 countries surveyed with official figures, sourced from central banks and regulators. In most cases, we were able to find data that pertained to the end of 2007: in almost all other cases, the data pertains to September 30 2007. As a result, the insights that we derive on particular countries are based on consistently sourced information that is far more current than it had been previously.

Although we gather data for countries such as the US, Japan, Australia and the eurozone, the vast majority of the 59 countries whose banking industries we survey are, or are generally seen as being, emerging markets. For all the widely publicised problems of large banks in developed countries, in the wake of the subprime banking crisis in the US, 2007 was an extremely good year for the banking sectors of the emerging markets. In local currency terms, the median growth in assets was 21% (in Brazil). The median rates of growth in loans to non-bank customers and in deposits were 22% (in India) and 18% (in Morocco). In some countries - and not just those enjoying oil booms - the figures were spectacular. In Ukraine, for instance, assets and deposits rose by 76% and 62% respectively. Loans grew by more than one-third in Bulgaria, Estonia, Latvia, Lithuania, Romania, Russia, Serbia, Slovenia, Peru, Bahrain, Iran and Nigeria. Deposits also rose by more than one-third in most of these countries.

In absolute terms, Saudi Arabia's banking sector enjoyed reasonable growth through the year to December 31 2007. In local currency terms, total assets, total loans and total deposits increased by 25%, 20% and 21% respectively. The loan/deposit and the loan/asset ratios fell, while the loan/GDP ratio rose.

As always, changes in Saudi Arabia's banking sector must be considered relative to other countries. Of the 59 countries surveyed by BMI, Saudi Arabia ranks 23rd in terms of local currency asset growth, 36th in terms of local currency loan growth and 22nd in terms of local currency deposit growth. Saudi Arabia's rankings in terms of its loan/deposit, loan/asset and loan/GDP ratios are 20th, 11th and 38th, respectively.

In a country with per capita GDP of US$15,708, deposits per capita are US$7,875 or so.

In Q108, we envisaged that total assets, total loans and total deposits would rise by 15%, 12% and 7% annually through the 2007-2012 forecast period. Now, despite using an improved forecasting method, we are still looking for similar growth rates - 15%, 13% and 13% respectively.

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 of potential returns: it does this by taking into account the size, growth potential and bancassurance potential of the banking sector, as well as aspects of the economy in 2007. The CBBER also depends on an assessment of the risks to the realisation of potential returns: this reflects BMI's assessments of overall country risk, together with the regulatory and competitive environment.

Saudi Arabia's CBBER is 65.0. In the context of the Middle East, this means it is a fairly attractive country, given that the CBBERs are higher in each of Bahrain, Israel, South Africa and the United Arab Emirates. The scores for the banking elements of the risks to potential returns are the third highest in the region (after United Arab Emirates and Libya). The ratings score for the market structure - the most important component of the assessment of the limits to potential returns - is 56.3. This is quite average for the region.

• Executive Summary
  • Table: Levels (SARbn)
  • Table: Levels (US$bn)
  • Table: Levels At December 31 2007
  • Table: Annual Growth Rate Projections, 2007-2012 (%)
  • Table: Ranking Out Of 59 Countries Reviewed In Q208
  • Table: Projected Levels [SARbn)
  • Table: Projected Levels (US$bn)
• Key Issues
• Changes To The Commercial Banking Forecast
• Commercial Banking SWOT
• Saudi Arabia Commercial Banking SWOT
• Commercial Banking Business Environment Rating
  • Table: Saudi Arabia Commercial Banking Business Environment Ratings
  • Table: Middle East & Africa Commercial Banking Business Environment Ratings
• International Context
• Lending Trends And External Accounts
  • Table: Comparison Of Lending Trends And External Accounts, End-2007
  • Table: Comparison Of Lending Trends And External Accounts (% of GDP)
• Total Assets, Client Loans And Client Deposits
  • Table: Comparison Of Total Assets, Client Loans And Client Deposits (US$bn)
• Per-Capita Deposits
  • Table: Comparison Of Per-Capita Deposits, Late 2007 (
• Macroeconomic Trends And Developments
  • Table: Saudi Arabia Economic Activity
• Industry Forecast Sce23
  • Table: Annual Growth Rate Projections, 2007-2012 (%)
  • Table: Projected Levels (bn Units of Local Currency)
  • Table: Projected Levels (US$bn)
• Comment On Developments In 2007
• Comment On Forecasts
• Comment On Trends And Ratios
  • Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios - Middle East & Africa, Late 2007
• Banks' Bond Portfolios
  • Table: Bond Portfolios, Late 2007
• Competitive Landscape and Protagonists
• Methodology
• Basis Of Projections
• Commercial Bank Business Environment Rating
  • Table: Commercial Banking Business Environment Indicators And Rationale
  • Table: Weighting Of Indicators