Saudi Arabia's banking sector continues to grow while embracing the digital agenda: KPMG

KPMG recently released its fourth edition of the “GCC listed banks’ results” report, which analyzes the published results of listed commercial banks across the region for the year ended 31 December 2018.

The report, titled "Embracing Digital", shows that Saudi Arabia's banking sector saw positive results in 2018, with an average 11.3 percent growth in net profit, and 2.1 percent growth in total assets.

Speaking about the report, Muhammad Tariq, the Head of Financial Services at KPMG Al Fozan & Partners, Saudi Arabia, commented, “Overall 2018 was a positive year for listed banks in Saudi Arabia. Average net profitability improved, underpinned by higher average SAIBOR rates, modest growth in assets and a slight decrease in costs."

Tariq further commented, “credit quality remains an area of focus. Loan impairment charges increased by 14.8 percent from the prior year, which in part reflects new expected credit loss (“ECL”) methodologies in accordance with IFRS 9."

As predicted last year, the regulatory agenda continues to evolve both locally and globally. Tariq noted, “accounting standards, Basel III requirements, and an increasing focus on Anti Money Laundering (AML) and Know Your Customer (KYC) requirements will not only maintain regulatory pressure, but will also require banks to reshape strategies to ensure compliance while retaining agility.”

Looking to the future of the financial services sector, Tariq commented, “In order for banks to differentiate themselves in a competitive market and remain relevant, they need to continue to innovate their practices and digitize their processes. Whether that be through their go-to-market channels, or through the use of innovative technology in the back and front office, we expect an increased investment in technology platforms in preference to traditional bricks-and-mortar."

Commenting on Saudi Arabia's efforts to embrace the digital agenda, Tariq stated that, “Financial institutions and SAMA are showing greater support for the FinTech sector, through various initiatives such as Fintech Saudi and the Sandbox regulatory environment. FinTech solutions have the potential to lower barriers of entry to the financial services market; and elevate the role of data as a key commodity to enhance the customer experience.”

The report notes that most countries across the region have seen banking mergers or talks to merge in 2018. Commenting on the situation in Saudi Arabia, Tariq said, “the consolidation in the market is expected to bring synergies, efficiencies and expanded product offerings, however, it will take some time for integration projects to complete”.

The report titled “GCC listed banks’ results: Embracing Digital”, analyzes the results of selected listed banks in the Kingdom of Bahrain, the State of Kuwait, the United Arab Emirates, the Sultanate of Oman, and the State of Qatar. It summarizes bank’s results against selected key performance indicators for the year ended 31 December 2018 and compares these with the same information for the year ended 31 December 2017.

KPMG in Saudi Arabia plans to complement this "GCC listed banks' results" report with the launch of our first edition of the "KSA Banking Perspectives" report in July.  In this report, KPMG will examine the key issues and trends impacting the global banking industry today, and in the context of KSA.  KPMG subject matter experts will drill down into the key challenges, opportunities and potential strategies across topics including embracing innovative technology, regulatory and risk, culture and governance, SME lending, and mergers and acquisitions.