Saudi banks’ aggregate profit reaches an all-time high of $2.1bn; loans hit $744.4bn

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Updated 13 September 2024
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Saudi banks’ aggregate profit reaches an all-time high of $2.1bn; loans hit $744.4bn

RIYADH: Saudi banks aggregate profit before zakat and tax reached an all time high of SR7.83 billion ($2.1 billion) in July, marking an annual 23 percent rise, newly released data has revealed.

According to the Kingdom’s central bank, also known as SAMA, from January to the end of July the financial institutions reported total profits of SR50.22 billion, up 13 percent from SR44.5 billion during the same period last year.

Total deposits grew by 8 percent during this period, reaching SR2.64 trillion, with term deposits experiencing the highest growth at 20 percent, totaling SR930.24 billion.

Demand accounts, which make up 53 percent of total deposits, saw a more modest increase of 5 percent, bringing the total to SR1.4 trillion.

On the asset side, total bank credit rose to SR2.79 trillion, marking a 12 percent increase in July compared to the same month of 2023.

The loans-to-deposits ratio, a key metric for assessing a bank’s liquidity, climbed to 80.73 percent, up from 78.84 percent a year earlier.

The expansion of Saudi Arabia’s banking sector is being driven by a combination of favorable economic conditions and strategic initiatives.

High oil prices, coupled with continued government spending, have created a robust operating environment for banks, enabling them to support the Kingdom’s ambitious giga-projects and the broader Vision 2030 strategy.

This economic backdrop has also contributed to solid non-oil GDP growth, further bolstering the banking industry’s performance.

In addition to these traditional growth drivers, the rise of fintech is playing a transformative role in reshaping the sector’s landscape.

SAMA has been pivotal in regulating this sector, ensuring that innovation thrives within a secure and well-governed framework.

By implementing initiatives such as the open banking framework and supporting fintech companies through its regulatory sandbox, SAMA is driving technological advancements that enhance efficiency, improve consumer experience, and expand financial inclusion.

High interest rates in the Kingdom have further boosted profits on loans, as banks benefit from the increased interest income. 

However, this environment has also intensified competition among financial institutions for financing opportunities, as they vie to attract borrowers and secure their market share.

McKinsey’s research on the Saudi banking sector revealed that the those institutions distinguishing themselves are those increasingly focused on meeting the high expectations of young, tech-savvy consumers — a strategy that offers a significant competitive advantage.

The research underscores a strong link between positive customer experiences and improved financial performance, demonstrated by higher cross-sell and retention rates.

To capitalize on this trend, GCC banks are fully digitizing their customer journeys, transforming every step from the initial touchpoint to successful fulfillment.

In the UAE and Saudi Arabia, several banks are reimagining both retail services, such as onboarding, personal loans, credit cards, and home financing, and corporate services, including MSME and midsize corporate onboarding and credit renewals.

Beyond revamping these journeys, GCC banks are also leveraging generative AI and other advanced technologies to enhance customer self-service capabilities, reduce reliance on assisted service channels, and automate issue resolution, thereby further improving customer satisfaction and operational efficiency.


Egypt’s external debt drops to $152.9bn by end of June

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Egypt’s external debt drops to $152.9bn by end of June

  • Long-term external debt decrease to $126.9 billion by the end of June
  • External debt decreased to $80.2 billion from $84.8 billion in December

RIYADH: Egypt’s external debt decreased to $152.9 billion by the end of June, a significant reduction from $160.6 billion at the end of March and $168 billion at the close of December 2023, official data showed. 

The country, which has a fiscal year running from July 1 to June 30, saw long-term external debt decrease to $126.9 billion by the end of June, down from $138.6 billion the previous year. Short-term debt also dropped to $26.02 billion, compared to $29.5 billion before, according to the Central Bank of Egypt. 

The Egyptian government’s external debt decreased to $80.2 billion from $84.8 billion in December. The CBE’s own debt also saw a significant reduction, falling to $34.67 billion from $45.3 billion at the end of 2023. However, debt owed by Egyptian banks rose slightly to $20.67 billion by the end of June, up from $20.1 billion at the close of last year. 

The overall decline in external debt highlights the Egyptian government’s ongoing efforts to manage its financial obligations amid a challenging global economic environment. 

The country’s economic challenges, including inflation and fiscal deficits, have necessitated a careful balance between managing external obligations and sustaining growth. 

The reduction in overall external debt is viewed as a positive signal to international markets and may bolster future creditworthiness, particularly as Egypt seeks international assistance and investment. 


Saudi Arabia’s global pension index score rises amid ongoing reforms: Mercer 

Updated 48 min 21 sec ago
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Saudi Arabia’s global pension index score rises amid ongoing reforms: Mercer 

RIYADH: Saudi Arabia’s Global Pension Index score improved to 60.5 in 2024, up from 59.5 last year, driven by ongoing reforms, a new analysis showed. 

According to the latest Mercer CFA Institute Global Pension Index, the Kingdom’s pension system rating upgraded to C+ from C, placing it alongside the US, the UAE, and Spain. 

The index defines C+ as a system with good features but significant risks that need addressing.

Saudi Arabia’s retirement system includes an earnings-based pension and lump-sum award – while those who do not qualify for monthly payouts receive just the one-off benefit.

In July, the Kingdom raised the retirement age from 60 to 65 for both public and private sector employees, as part of a key Vision 2030 reform aimed at ensuring sustainability and improving retirees’ living conditions. 

The reform also raised the required contribution period for early retirement from 25 to 30 years, a move aimed at encouraging longer workforce participation, thereby reducing the financial strain on the pension system. 

Tarek Lofty, president of Mercer in India, the Middle East and Africa, said: “Saudi Arabia continues to make steady progress in reforming and enhancing its pension system and stands to benefit as more private pension options are provided to complement existing retirement programs.” 

He added: “As these reforms are rolled-out, they will provide an important tool to retain talent in the Kingdom’s buoyant job market and support the wider aims of the Vision 2030 strategy by contributing to the financial well-being of its citizens.” 

Saudi Arabia held its position at 28th in the index, which compares 48 pension systems globally. Its sustainability score rose to 58 from 54.9, driven by factors like increased female workforce participation, updated demographic data, and clarity on retirement arrangements. 

The Kingdom ranked 20th in the sustainability sub-index but was lower in adequacy at 32nd and integrity at 42nd. Mercer highlighted that the Kingdom could improve its score by increasing support for low-income retirees and boosting labor participation among older workers. 

Mercer’s ranking analyzes factors such as system design, government support, and home ownership to calculate scores in the adequacy sub-index, while the sustainability index considers elements like pension coverage, government debt, and economic growth. 

The integrity sub-index evaluates regulation, governance, protection, along with communication and operating costs. 

“With a youthful population and increasing labor force participation, Saudi Arabia is in an ideal position to observe the challenges that many of its global peers are facing and guide the development of its pension system accordingly,” said Claudia Maldonado, head of savings and pensions at Mercer Middle East. 

Mercer also outlined several measures the Kingdom could implement to improve its overall index score, including increasing the minimum support provided to low-income seniors and raising the labor force participation rate among older individuals as life expectancies rise. 

The report further noted that enhancing communication with members regarding private pension arrangements could also play a crucial role in boosting the Kingdom’s overall index score in the coming years. 

A report released by the World Bank in July also lauded Saudi Arabia’s pension reforms and called it a groundbreaking development for the Middle East and North Africa region. 

The international financial institution added that achieving a robust system also requires further measures including diversifying pension funds, designing adjustment mechanisms, and enhancing private savings options.

“These measures can offer greater flexibility and security, addressing the diverse needs of the population. By adopting a holistic approach that balances fiscal sustainability with social equity, countries can better protect against economic, demographic, and political risks,” said the World Bank’s blog. 

It added: “Such initiatives set a precedent for forward-thinking policies that other nations can follow to enhance their social security frameworks, and Saudi Arabia, with its most recent reform, sets a great example for the rest of the region.” 

Emerging trends 

The Mercer report revealed that most retirement systems worldwide are increasingly moving away from defined benefit plans and shifting toward defined contribution arrangements. 

“The ongoing shift to defined contribution pension plans introduces many financial planning challenges, which are falling squarely on the shoulders of tomorrow’s retirees,” said Margaret Franklin, president and CEO of CFA Institute. 

She added: “DC plans require individuals to make complex financial planning decisions that may significantly impact their financial circumstances, and yet many individuals are not well prepared to manage the required decisions.” 

Despite these challenges, the report noted that as people live longer, the increased flexibility and personalization offered by DC programs will be critical. 

Mercer also highlighted that the concept of retirement is evolving, with many individuals gradually transitioning into retirement or rejoining the workforce in different capacities after their initial retirement. 

The report pointed out that these plans also offer essential benefits to gig and contract workers, who are often excluded from traditional DB schemes. 

“Significant retirement income system reforms are needed to meet the financial needs of retirees and their evolving work expectations. There is no single solution to getting retirement systems onto more solid ground,” said David Knox, lead author of the study and senior partner at Mercer. 

He added: “Now is the time for governments, policymakers, the pension industry and employers to work together to ensure that older populations are treated with dignity and can maintain a lifestyle similar to what they experienced through their working years.” 

The analysis noted that increasing longevity, high interest rates, and rising costs of care have placed additional pressure on government budgets to support pension programs, leading to slightly lower overall scores this year. 

Global outlook 

According to Mercer, the Netherlands retained the top spot in the index with an overall score of 84.8 and a grade of A, followed by Iceland and Denmark in second and third place, with scores of 83.4 and 81.6, respectively. 

“The Netherlands’ pension system has continued to be the best system, as it moves from a DB structure to a more individual DC approach. The system also features strong regulations and offers participants guidance regarding their pensions,” said Mercer. 

Israel secured the fourth position, while Singapore, Australia, and Finland ranked fifth, sixth, and seventh, respectively. 

Norway placed eighth, followed by Chile in ninth and Sweden in tenth. 

China ranked 31st on the list, while India and Japan were positioned at 48th and 36th, respectively. 


IsDB to finance $3bn in 20 socio-economic projects across 17 countries

Updated 15 October 2024
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IsDB to finance $3bn in 20 socio-economic projects across 17 countries

  • Initiatives target key sectors such as agriculture, water resources, and energy, as well as health care and infrastructure

RIYADH: The Islamic Development Bank is set to finance over $3 billion for 20 socio-economic development projects across 17 member nations, following its 357th board meeting chaired by President Muhammad Al-Jasser.
These initiatives target key sectors such as agriculture, water resources, and energy, as well as health care and infrastructure to strengthen resilience and promote sustainable growth.
In Kazakhstan, $1.15 billion will support water resources development, improving agricultural output and ensuring food and water security.
Jordan has been allocated $200.3 million to bolster food security by expanding strategic reserves. 
Kyrgyzstan will receive $45.11 million for agricultural mechanization to aid smallholder farmers, along with an additional $58.25 million to enhance energy infrastructure in the Issyk-Kul region.
Senegal is set to receive €65.1 million ($70.96 million) to accelerate agricultural industrialization.
Togo has been granted €55.23 million to foster income-generating activities and improve the livelihoods of vulnerable populations.
Azerbaijan has been allocated $96.73 million for water resource management to support agriculture and food security, and the Maldives has been allotted $64.65 million to expand its fishing industry.
Morocco was allocated €441.82 million for a hydropower project to meet peak demand with renewable energy.
Gambia will receive $40 million to improve its transport sector, and Sierra Leone has been assigned €70.32 million to enhance infrastructure through soil stabilization technology.
Comoros will benefit from $15 million to improve maritime connectivity and safety. Uzbekistan will acquire $138.8 million to expand a key road, improving traffic flow and safety, while Cameroon has been awarded $176.3 million to upgrade its transport infrastructure.
In Turkiye, €246.4 million will support the Eastern Turkiye Middle Corridor Railway Project, with an extra $100 million allocated to post-earthquake recovery efforts to enhance productivity. 

Pakistan will receive $118.4 million to reduce poverty and improve food security in vulnerable communities.

Mozambique has been allocated $19.8 million to strengthen health care access, while Cote d’Ivoire has been granted €260 million ($278.2 million) to support highway construction for regional integration and agriculture. 

Al-Jasser said that these initiatives align with the IsDB’s goal of fostering sustainable economic growth, enhancing infrastructure, and integrating regional economies.

The bank also approved a $10 million grant in collaboration with the World Health Organization to support global health care initiatives. 

The projects reflect IsDB’s commitment to inclusive development, aimed at strengthening resource management and promoting shared prosperity across member countries.


Global public debt expected to exceed $100 tn this year: IMF

Updated 15 October 2024
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Global public debt expected to exceed $100 tn this year: IMF

  • Global public debt to hit 93% of global GDP this year, and to approach 100% of GDP by 2030

WASHINGTON: Global public debt is expected to reach a record $100 trillion this year, the IMF said Tuesday, warning that the fiscal outlook for many countries may be even “worse than expected.”
In its latest report on fiscal policy, the International Monetary Fund said it expects global public debt to hit 93 percent of global gross domestic product (GDP) this year, and to approach 100 percent of GDP by 2030 — 10 percentage points higher than in 2019, before the Covid-19 pandemic hit.
“Global public debt is very high,” Era Dabla-Norris, the deputy director of the IMF’s Fiscal Affairs Department, told reporters ahead of the report’s publication.
“There are very good reasons to believe that the debt burden — or the debt outlook — could be worse than expected,” she said, pointing to current spending pressures to address issues like climate change, overly-optimistic debt projections, and the possibility of large amounts of unidentified debt.
“So the bottom line is that it’s time for countries to get their fiscal house in order,” she said.
The IMF report introduced a new “debt-at-risk” approach to assessing the risks to debt projections.
It estimated that, in a worst-case scenario, global public debt could hit 115 percent of GDP by 2026 — almost 20 percentage points higher than the Fund’s baseline estimate.
The report found that “global factors increasingly drive the fluctuations in government borrowing costs across countries,” suggesting that elevated levels of debt in key countries could “increase the volatility of sovereign yields and debt risks” for others.
Moderating inflation and interest rate cuts in many economies meant now was an “opportune” time for countries to rebuild their fiscal buffers, the IMF said, adding that they were “better placed” than before to absorb the effect of fiscal tightening.
The size of the fiscal adjustment needed to bring global public debt back under control was between 3.0 and 4.5 percent of GDP, on average, the IMF said — almost twice the size of past adjustments.


Oil Updates – prices fall as demand outlook weakens, Iran supply disruption concerns ease

Updated 15 October 2024
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Oil Updates – prices fall as demand outlook weakens, Iran supply disruption concerns ease

  • Brent, WTI down nearly 4 percent
  • Israeli PM Netanyahu says willing not to strike Iran oil targets

SINGAPORE: Oil prices slid as much as $3 to a near two-week low during Asian trade on Tuesday on the back of a weaker demand outlook and after a media report said Israel is willing not to strike Iranian oil targets, which eased fears of a supply disruption.

Brent crude futures were down $2.81, or 3.6 percent, to $74.65 per barrel at 9:40 a.m. Saudi time, having dropped earlier to $74.26, its lowest since Oct. 2.

US West Texas Intermediate futures fell $2.72, or 3.7 percent, to $71.11 per barrel. The contract fell as low as $70.75, its weakest since Oct. 3.

Both benchmarks had settled about 2 percent lower on Monday. They are down almost $5 so far this week, nearly wiping out cumulative gains made in the seven sessions up to last Friday when investors were concerned about supply risks as Israel planned to retaliate against a missile attack from Iran.

Israeli Prime Minister Benjamin Netanyahu told the US that Israel is willing to strike Iranian military targets and not nuclear or oil ones, the Washington Post reported late on Monday.

“Weakening demand has led to traders withdrawing the ‘war premium’ from prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

“However, geopolitics still continues to support oil at this level. Without geopolitics in the equation, oil would have tumbled even more, maybe even below $70 per barrel mark amid the current weakening demand narrative.”

OPEC on Monday cut its forecast for global oil demand growth in 2024, with China accounting for the bulk of the downgrade. China’s demand is now seen growing by 580,000 barrels per day this year, down from 650,000 bpd.

OPEC also lowered its global oil demand growth projection for next year to 1.64 million bpd from 1.74 million bpd.

China’s customs data showed that September oil imports fell from a year earlier, as plants curbed purchases because of weak domestic fuel demand and narrowing export margins.

Independent market analyst Tina Teng said that while the demand outlook remains weak due to record high US production and soft Chinese demand, “oil retreated from the Middle East-tension-led surge as the market reaction may have been overdone.”

In the Middle East, Israel expanded its targets in its war against Hezbollah militants in Lebanon on Monday, killing at least 21 people in an airstrike in the north.