The analysis reveals that while 2020 definitely started as a challenging year due to the pandemic-induced downturn, Saudi Arabia’s banking sector has managed to curb the impact
In a new report by KPMG, the firm’s financial services experts have cracked the numbers on the audited 2020 financial results of Saudi Arabia’s eleven Tadawul-listed banks, shedding light on how the Kingdom’s banking sector has fared in the pandemic-hit year.
The analysis reveals that while 2020 definitely started as a challenging year due to the pandemic-induced downturn, Saudi Arabia’s banking sector has managed to curb the impact.
The effects of Covid-19 have been unmissable, however, the full year numbers are a significantly better end to a year than many would have anticipated this time last year, said Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia.
Across the board, operating result declined by 6% on the year previous to SAR 42.27 billion ($11.27 billion).
According to Shahab, this is was a direct consequence of the commendable government support through SAMAs relief programs, along with conscious measures that were invariably taken by the banks. Such measures included asset protection via restrained and cautious credit underwriting and re-balancing of prop books.
Notably, the lending book has been 2020’s silver lining with a healthy 12.6% net increase relative to prior year fuelled by a strong growth across mortgage finance. On the other front, SAMA’s injections of deposits under the support program and overall liquidity protection by corporates and individuals alike has enable an impressive 9.2% growth across bank and non-bank deposit base.
As a result, total assets increased by 13.3% and total equity by 7.8%. However, average returns on assets and equity both fell, standing at 1.02% and 7.46% respectively as compared to 1.84% and 13.44% respectively for financial year 2019.
Beyond the numbers, the banking sector played a key role in the Kingdom’s stability and economic recovery. The central bank created a stimulus programme to support borrowers and provide financial mitigation measures to corporates and SMEs, and other banks facilitated this support mechanism while taking large strides to adapt to the new digital and remote way of working.
Looking into 2021, Khalil Ibrahim Al Sedais, Managing Partner of KPMG’s Riyadh office said that banks will focus on a number of top priorities, not surprisingly including digital acceleration, keeping their people safe and motivated, meeting regulatory and compliance requirements, and aligning to changing client demands driven by shifts in society and preferences of people.
On the latter, Al Sedais elaborated: The Covid-19 era has demonstrated a renewed focus on the purpose of banks, manifested in diversity and gender inclusion matters and expanding sustainability agendas.