Banks In Saudi Arabia

Updated on March 19, 2024
Article bySayantan Mukhopadhyay
Edited bySayantan Mukhopadhyay
Reviewed byDheeraj Vaidya, CFA, FRM

What Are Banks In Saudi Arabia?

The banks in Saudi Arabia are an interesting topic of discussion in the financial market at the global level. It is in the process of reducing the dependence on oil as a source of income and development, concentrating more on modernization initiatives, and boosting tourism, all of which is improving the performance of banks.

Banks in Saudi Arabia

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Its banking industry constitutes the lending process as well as accepting deposits for investment. This particular sector of Saudi Arabia has developed significantly over the millennium and continues to do so. However, the sector within the country operates strictly based on Islamic law and, hence, follows rules different from other countries.

Banks In Saudi Arabia Explained

The banks in Saudi Arabia have a lot of opportunities to grow and expand in the global financial market. The best banks in Saudi Arabia in the business of both lending and accepting deposits that help the banking process to sustain and generate revenue. The banks of the country have more than doubled their assets over time, which is a great idea to reduce the country’s dependency on oil as a source of revenue.

It is to be noted that Saudi Arabia strictly follows the rules of Islamic Banking because it is a Muslim country. However, banking in Saudi Arabia has faced a huge diversification in the business environment due to various new laws that have been put in place to encourage new initiatives and entrepreneurship, resulting in the promotion and protection of the rights of investors.

The country has been investing to stimulate the private sector, which brings us to the topic of banking since it is the main source of funds that will give financial support to every other sector and investment ideas and opportunities. However, sectors of organizations that are contrary to the morals of Islamic law, are not supported by the banking sector of the country.

Commercial banking, which is loans given out to large and small corporate houses, is more prevalent over there as compared to borrowing by individuals. The Saudi banking performance mirrors the oil price movement of the country to a large extent. With the rise in oil prices, the loan demand of best banks in Saudi Arabia has also increased, with both loans in the corporate and retail sectors showing a significant surge.

As per Moody’s Investors Services, the banking system in Saudi Arabia is now stable. Moody has changed their rating from negative to stable due to the following reasons –

  • They have noticed high-risk absorption buffers for the banks in Saudi Arabia.
  • They have also seen how the funding pressures on the banks have been eased out.
  • Finally, the credit profiles of the banking system have been improving, and Moody’s Investors Services is expecting the credit profiles to evolve to the next level within 12 to 18 months.

Plus, the banking system in Saudi Arabia has also been getting huge support from the Government, which will allow the Saudi economy to recover at the highest pace.

Structure

Among the banks in Saudi Arabia list, there are a total of 24 banks in Saudi Arabia. Out of these 24, 12 are local banks, and the rest are the branches of foreign banks.

The Saudi Arabian Monetary Authority (SAMA) controls and regulates the whole banking system in Saudi Arabia. It is the central bank of Saudi. Therefore, it ensures the smoothness of operations and the stability of the exchange rate. At the same, it also issues Saudi Rial, which is the currency of Saudi Arabia.

Even if there are two types of banks, we can further sub-categorize them into another four – commercial banksCommercial BanksA commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits.read more, real estate banks, industrial banks, and agricultural banks.

However, according to the Fitch Rating, the banking performance will continue to improve and become favorable and bring about profitability. This economic growth, without the dependence on oil as a revenue source, will be due to growth of credit facility to the private sector, leading to increase in government expenditure and increase in employment opportunities.

This will create more opportunities for the banking sector to flourish through better channelizing of funds for productive initiatives. Already there is a very high demand for mortgage financing. However, rise in rate of interest and saturation in the market brought about due to too much lending, may result in a fall in loan demand among the banks in Saudi Arabia list.

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List Of Top 10 Banks

The strategies and plans that the country has in place with a wide-ranging view to bring about a considerable and positive change within the financial sector and banking in Saudi Arabia, will surely give a boost to the banking sector, which is expected to show a dramatic growth in the years to come. A good growth opportunity is already in the process and will continue to be so in the future.

In this context, let us study a list of top 10 banks of Saudi Arabia which have been and will be the catalyst in economic development of the country.

  1. National Commercial Bank
  2. Al Rajhi Bank
  3. Samba Financial Group
  4. Riyad Bank
  5. Banque Saudi Fransi
  6. Saudi British Bank
  7. Arab National Bank
  8. Alinma Bank
  9. Alawwal Bank
  10. Saudi Investment Bank

Let’s look at each one of the banks in Saudi Arabia list in detail in terms of total assets acquired as per relbanks.com

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#1. National Commercial Bank

This is the largest financial institution in Saudi Arabia. In terms of total assets required, this is the biggest. In the year March 2017, it was found that the total assets acquired were SAR 448.717 billion. It was founded in 1953 and converted into a joint-stock company in the year 1997. Around 8035 employees work here. They serve around 5 million customers, and the customers’ deposits were SAR 313.646 billion at the end of March 2017.

#2. Al Rajhi Bank

This is one of the largest Islamic banks in Saudi Arabia. In terms of total assets, it is the second largest. At the end of March 2017, the bank had acquired around SAR 337.230 billion of total assets. Around 14,000 employees work here. Its head-quarter is situated in Riyadh. It has branches worldwide, in Malaysia, Kuwait, Jordan, etc. At the end of March 2017, the customers’ deposits were SAR 271.290 billion.

#3. Samba Financial Group

Among the biggest banks in Saudi Arabia, it was established in the year 1980. After the merger with United Saudi Bank in 1999, it has become one of the top banks in Saudi Arabia. At the end of March 2017, it had acquired around SAR 231.9 billion of total assets. This group has employed around 3500 people. Its head-quarter is located in Riyadh. The customer deposits at the end of March 2017 were SAR 170.4 billion.

#4. Riyad Bank

It was founded in 1957, and it is the oldest publicly held bank. In terms of total assets acquired, this is the fourth top bank. At the end of March 2017, the total assets acquired by the bank were SAR 216.323 billion. Around 6300 people work here. It has more than 340 branches and 2700 ATMs. The customer deposits of this bank at the end of March 2017 were SAR 154.187 billion. The head-quarter of this bank is located in Riyadh.

#5. Banque Saudi Fransi

It was established in the year 1977. Around 3000 employees are employed here. The head-quarter of Banque Saudi Fransi is located in Riyadh. This is the 5th largest bank in terms of total assets acquired. The total assets acquired by Banque Saudi Francis at the end of March 2017 were SAR 204.4 billion. At the same time, the customers’ deposits were SAR 158.5 billion. It provides retail, investment, and corporate banking.

#6. Saudi British Bank (SABB)

This is a joint-stock company and part of HSBC Holdings PLC. This bank stands at number six in terms of the total assets acquired. The total assets acquired by the Saudi British Bank at the end of March 2017 were SAR 182.5 billion. During the same time, the customers’ deposits were SAR 138.3 billion. The head-quarter of this bank is also situated in Riyadh. Around 3200 employees work here.

#7. Arab National Bank

Another one of the biggest banks in Saudi Arabia, this It was established in the year 1979, around 38 years ago. Its head-quarter is also located in Riyadh. This is the 7th largest bank in Saudi Arabia in terms of the total assets acquired. The total assets acquired by the Arab National Bank at the end of March 2017 were SAR 168.427 billion. During the same time, the customers’ deposits were SAR 135.02 billion. It provides mainly retail and corporate banking. Around 4400 employees are employed here.

#8. Alinma Bank

Alinma bank is one of the top banks in Saudi Arabia. As it is an Islamic bank, it is fully Sharia-compliant, and it also offers the whole gamut of retail banking services. In terms of total assets acquired, this bank stands at 8th. The total assets acquired by Alinma bank at the end of March 2017 were SAR 105.256 billion. It has around 80 branches all across Saudi Arabia.

#9. Alawwal Bank

This bank is quite old; it was established in 1926, around 91 years ago. During that time, it was the only bank that existed in Alawwal bank and it acted as a central bank as well. In terms of total assets acquired, it stands at 9th. The total assets acquired by Alawwal bank were SAR 100.369 billion. During the same time, the customers’ deposits were SAR 80.297 billion. Its head-quarter is also located in Riyadh.

#10. Saudi Investment Bank

This bank was established in 1976, around 41 years ago. About 1600 employees work here. This bank is the 10th largest bank in Saudi Arabia in terms of total assets acquired. The total assets acquired by the Saudi Investment Bank were SAR 97.546 billion. The customers’ deposits at the same time were SAR 64.4 billion. It has around 50 branches all across Saudi Arabia, and it provides a whole gamut of wholesale and retail bankingRetail BankingRetail banking or personal banking refers to the financial services offered by the financial institutions exclusively to the individual clients. The consumer banking provides personal loan, savings account, debit cards, credit cards, locker, etc.read more products regarding investments.

However, according to the Fitch Rating, the banking performance will continue to improve and become favorable and bring about profitability. This economic growth, without the dependence on oil as a revenue source, will be due to growth of credit facility to the private sector, leading to increase in government expenditure and increase in employment opportunities.

In spite of all the huge list of banking giants prevailing and working within the country, there may be some weakness in the sector related to reduction in mortgage lending opportunity and the Net Interest Margin (NIM) due to fall in government spending and high borrowing cost. This can be counteracted through research and development of new avenues of revenue earning strategy and encouragement of other funding strategy like boosting term deposits or wholesale funding.

If the interest rates are favorable, banks should take the initiative to increase their customer base by offering them products and financial solutions that will encourage savings. Improvement in financial literacy will help in the process.

More upgradation of the banking infrastructure using digital platform and encouraging the use of online and mobile banking will bring the sector of the country at par with the rest of the world very easily. It will enhance customer experience and make the process of customer journey interesting and fast, provided the macro-economic conditions and sector growth permits it. This will also help the country to increase competitiveness and reduce cost.

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