At home to SMEs.
Saudi Hollandi Bank (SHB) has a history of 'firsts' in the KSA, including the launch of the first investment fund in 2001, the first smart credit card in 2003, the first regulatory subordinated bond in 2004 and the first Tier II Capital Mudaraba Sukuk in 2008. In 2009 SHB became the first Saudi bank to introduce teller cash recycler (TCR) technology in its branches, servicing customers at an open desk, without barriers. In 2011 it was the first to launch the premium MasterCard World Credit Card in the KSA (and the first in the Middle East to offer it with a silver mark).
SHB offers a full range of conventional banking services and also offers Shari'ah-compliant versions of all personal banking products and of key corporate banking products. In November 2012, the bank raised SAR 1.4 billion through a Sukuk. Robin Amlot asked SHB's Managing Director Bernd van Linder what plans the bank has to expand its Islamic finance business?
"The development of the Islamic banking and finance market in the Kingdom has been driven primarily by customer demand. Customers demand these products and services, and banks continue to develop to meet their customers' demands. Saudi Hollandi Bank is no exception, and we expect further growth of our Islamic finance business. The Sukuk that we issued provided additional capital and funds that will be deployed to support this growth."
That Sukuk was priced at the lower end of guidance... would you consider further issues to reduce overall cost of borrowing/finance?
"Saudi Hollandi Bank constantly looks at its sources of funding, and aims to maintain a well-balanced funding profile. The issuance of the Sukuk provided us with attractively priced Tier II capital and further improved our funding mix. We will continue to look for ways to support our growth in terms of both liquidity and capital, and in this light it is certainly possible we would consider further Sukuk issues in future."
What are your views on the current state of the debt capital market in Saudi Arabia? What needs to been done to foster growth?
"A vibrant capital market requires many elements to be in place, including interested issuers and investors, and good regulation. Over the past twelve months we have seen a range of new issuers coming to market, including some of the biggest corporate names in the Kingdom. With the supportive regulation, and with an increasing number of investors (such as specialised funds and the insurance companies), I believe most of the elements are in place for further substantial growth of the capital markets in the Kingdom.
"It is also interesting to note that the recent suite of legislation commonly referred to under the banner of the mortgage law, contains a number of provisions that may facilitate the development of debt capital markets. This includes provisions regarding the establishment of Special Purpose Vehicles for debt issuance as well as other measures supportive of the creation of securitised products in the mortgage and wider asset-backed space."
How important is the partnership with International Finance Corporation announced early November - what benefits will you be able to offer SMEs?
"The SME sector is a key sector in many economies, including in the Kingdom. SMEs are typically the most important creators of jobs, and provide critical functions in their own right and as suppliers to larger corporations. SMEs have their own specific requirements, which are different from those of both large corporates and of retail customers. Hence it is very important to get your service offering to SMEs right, where you cannot rely on just doing the same thing you're doing for your large corporate or retail banking customers. Developing a credible offering to SME customers is a major strategic objective for Saudi Hollandi Bank, and this is where the IFC came in.
"The IFC has broad and deep experience in developing SME- business across a wide range of countries. This expertise has helped us to establish a solid platform on which we can grow our SME offering. Partnering with the IFC allowed us to start with best practices they gained through their many projects rather than developing all of these from scratch. With IFC's help, we have established a fully fledged service for SMEs, with dedicated Relationship Management teams operating out of nine dedicated SME centres across the Kingdom."
Your results so far this year (2012) show strong growth in lending, at what level are the bank's non-performing loans and are you happy with your provisions?
"At the end of September 2012, non-performing loans were 1.7 per cent of our overall loan book, and our coverage ratio was at 143 per cent. Saudi Hollandi Bank has always been, and will continue to be prudent when it comes to recognising, and providing for non-performing loans.
What are the prospects for credit growth/financing growth in Saudi Arabia - is the demand consumer- led or business-led?
"The economy in the Kingdom is doing very well and I expect it will continue to do so for many years to come. The Government's wise expansive fiscal policy, the positive demographics, the strong development of the private sector and the supportive regulatory framework are all very positive for continuous economic growth. Both households and corporations are driving this growth, and both are boosting demand for financing. This is particularly visible in the demand for home finance and the growing demand for finance from SMEs. Both segments are of particular importance for Saudi Hollandi Bank."
How do you see local Regulator/Regulatory framework playing a role in sustainable banking sector growth in KSA?
"Both SAMA and the CMA have played a crucial role in the development of the banking sector and capital markets. Both regulators are very prudent in their approach, and this has helped to shield the Saudi banking sector from the excesses seen both before and during the global financial crisis. The banks in the Kingdom are focusing on providing value- adding banking services to their long-term relationships, which is ultimately the only sustainable business model for banks anywhere in the world."
How do you view the prospects for growth in the mortgage finance market given the legislative changes?
"The home finance market has shown substantial growth over the past years. There clearly is a large, unsatisfied demand for housing among the citizens of the Kingdom, and banks have stepped in to try and meet this demand. In light of the demographics of the Kingdom and the relatively low home ownership, I expect this strong growth to continue for the foreseeable future. The recently issued mortgage regulations will help to support this growth by providing legal and regulatory certainty to banks and financing companies alike. Additionally, development of the mortgage market will give a boost to the construction industry and therefore, various industries related to construction will also thrive. The ripple effect is bound to have a positive impact on the construction related SME segment."
Where do you see the major opportunities for the Saudi banking sector in 2013?
"I expect the economy in the Kingdom to do well in 2013, across all sectors. There will be many opportunities for the Saudi banking sector, including long-term project financing, financing of working capital or capacity expansion of corporate customers, and personal finance. As mentioned earlier, the two main areas of growth for Saudi Hollandi Bank will be in home finance and providing services to SMEs. Both home financing and SME banking are essential for the Saudi economy, and with the unwavering support of the local regulators and the Government the banking sector will have an excellent opportunity to play a pivotal role in the exponential growth of these markets."
What are the growth opportunities for Saudi Hollandi Capital - will you be investing further in services for private clients?
"The services provided by Saudi Hollandi Capital are an integral part of the bank's overall offering, and we will continue to invest in these. A good example is the recent launch of a state-of-the-art online brokerage system, which gave us the best internet brokerage platform in the Kingdom. We will continue to make improvements to both our product portfolio and service offering."
In investment banking activities is Saudi Hollandi's focus solely on Saudi Arabia or would you be seeking international mandates?
"SHC offers local and international investment opportunities and will always be in pursuit of exploring new lucrative investment opportunities both locally and internationally to fulfil the investment needs of our private clients. Having said this, there are many opportunities in the Kingdom, which surely is one of the most attractive markets in the world for commercial and investment banking services. Hence we will always be strongly focused on the Kingdom."
Do you expect to see changes to Saudi Hollandi's product range and if so, what would you add?
"One of my colleagues once said in your magazine that banks essentially offer only two products, either taking money from people or lending it to them, with all the rest being wrapping and packaging. Augmenting this by the advice we provide through our investment banking subsidiary Saudi Hollandi Capital and the insurance products offered through the bank's bankassurance agency gives us a complete product range. Within this product range there will obviously be continued development of variants to existing products to meet the changing demands of both existing and potentially new customers."
What is the outlook for the bank for the medium term? For example, do you have plans to expand the branch network over the next five years?
"The bank is always focused on providing the best possible service to our customers through all distribution channels. Over the last twelve months, we have launched a new internet banking delivery channel for our retail customers, which is now among one of the market-leading platforms in the Kingdom. We have also improved and expanded the functionality of our ATMs; are poised to launch a new suite of applications for mobile phone banking; opened two new branches, and are in the process of opening several more. In short, we are investing in all our channels, including additional branches, and will continue to do so."
Finally, two questions on a personal note - what would you have done if you had not become a banker?
"I started my working life as a researcher and teacher at university and became a banker almost by accident. If this wouldn't have happened, I would probably have remained in academia, and would have devoted most of my time to teaching."
Which film star would play you in the movie of your life?
"I will stay close to home on this question and pick Rutger Hauer - if not the best Dutch actor, then easily the most famous one. The movie will not be as exciting as Blade Runner, but Rutger should still be able to make something of it!"
Dr. Bernd van Linder
Dr. Bernd van Linder has been Managing Director of Saudi Hollandi Bank since May 2009 and served as its Treasurer from 2006 to 2009. He is a Director of Saudi Hollandi Bank, of Saudi Hollandi Capital, the bank's wholly- owned investment banking subsidiary, and of Wataniya, a listed general insurance company affiliated with Saudi Hollandi Bank. Prior to joining Saudi Hollandi Bank, Dr. van Linder worked at ABN AMRO Bank in a variety of roles in the bank's Global Markets division. He holds a PhD from the University of Utrecht, an MSc from the University of Nijmegen, and an MBA in Finance from Bradford University School of Management. Dr van Linder is married with three children and lives with his family in Riyadh.
Saudi Hollandi Bank
SHB was the first operating bank in the Kingdom of Saudi Arabia (KSA) and was originally founded in 1926 as a branch of the Netherlands Trading Society to serve Hajj pilgrims from what was then the Dutch East Indies, now Indonesia.
As then the only bank in the country, SHB also functioned as the Central Bank and in 1928 assisted in the launch of the Saudi Riyal. In 1969, ABN Bank, the successor of the Netherlands Trading Society, was the first foreign bank to implement Saudisation initiatives from the Saudi Arabian Monetary Agency (SAMA). In 1977 Saudi Hollandi Bank was established as a joint-venture company with a paid-up capital of SAR 35 million and in 1994 it became the first foreign bank to become a majority Saudi-owned bank.
SHB is listed on the Tadawul with a free float of 29.6 per cent. ABN AMRO retains a 40 per cent holding while the bank's other major shareholders include Olayan Saudi Investment Company (20.8 per cent) and General Organisation for Social Insurance - Saudi Arabia (9.6 per cent). The bank sits at 25 in the CPI Financial 100 for 2012, up from 53 in 2011. It has 44 branches, 15 ladies branches/ sections, 22 Preferred Banking Centres and 259 ATMs throughout the Kingdom. More than 88 per cent of SHB's 1,473 staff are Saudi nationals.
2013 CPI Financial. All rights reserved.
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