SAUDI ARABIA'S FINANCIAL sector is about to undergo its biggest transformation in a generation with the arrival of new local and international banks in the market and the likely rapid growth in demand for Islamic products.
The result is expected to be tougher competition, particularly in areas such as project finance and asset management, as well as reduced costs and a broader range of financial services. Saudi Arabia's established banks – a combination of joint-venture operations and wholly locally owned ones – remain confident that they will be able to meet the challenge.
"I think it is very healthy that the market is opening up," says Peter Baltussen, managing director of Saudi Hollandi Bank. "We need the presence of the international investment banks to make the market more solid. I think the major competition will come in asset management and brokerage."
This confidence is in part at least a reflection of the strong recent performance of Saudi Arabia's banks. Aggregate bank profits last year, at more than $12.5 billion, were considerably up on 2002 and results in the first quarter of 2004 suggest that this trend will continue.
In this period Saudi British Bank recorded a SR359 million ($96 million) net profit, an increase of 30.3%