corporate banking group
Al Rajhi Bank’s impressive corporate portfolio growth accounted for 36% of total growth in the entire Saudi corporate market as of 3Q 2022, with a steep growth in assets being offset by a similar growth in liabilities during the reporting period.
In the face of fierce competition for deposits, high cost of funds and interest rate hikes that defined the year, Al Rajhi Bank Corporate Banking Group (CBG) stood out as a high-performing competitor within the sector, recording a 3.6% YoY growth as of 3Q 2022 in market share to rank in the top three corporate banks in the Kingdom as of year-end 2022.
This broad-based growth was the direct result of a sharper focus of well-established corporate brands with solid internal structures to help diversify CBG’s client base whilst maintaining a below-average cost of risk. The Bank leveraged on its better performing products during the reporting period for this purpose, supported by an advanced pool of top talent nurtured through dedicated Graduate Development Programmes focused on Corporate Banking.
2022 saw substantial expansion of Al Rajhi Bank’s client base with the Bank attracting new corporate customers across multiple segments by leveraging its strengths in balance sheet size, and market leading repute across other banking verticals such as retail, microfinancing, payments and loyalty.
Optimising synergies for growth
Corporate Banking recorded a stellar performance in 2022 across multiple avenues despite the market volatilities that dominated a better part of the year. The corporate segment operating income rose up by 58% to SAR 4,507 Mn., with net income increasing by 85% to SAR 3,357 Mn.
One of the performance highlights for the year was the marked drop in non-performing loans (NPL), down from 1.66% in 2021 to 0.84% in 2022, while maintaining a low Cost of Risk at 47 basis points, a significant improvement from the previous year’s 70 bps that can be attributed to higher gross assets, lower gross charge and higher recovery in the reporting period.
During the year under review, CBG continued to build on the Bank’s 360-degree client coverage model that covers both Relationship and Product perspectives with a “One Client, One Bank” approach, evidenced by the formalisation of several financing agreements with Retail Banking. This, together with the adoption of agile delivery mechanisms, enabled CBG to garner more liabilities and generate incremental fee income from other business verticals including Al Rajhi Capital, Treasury Group, Private Banking and Al Rajhi Takaful. CBG successfully concluded derivative deals during the reporting period, increasing active foreign exchange (FX) clients by 83% YoY, adding to the Bank’s fast-growing client base along with a number of new Private Banking accounts also opened during the year under review.
CBG retained strategic focus to refinance high quality assets in a post-COVID financial landscape, with timely endeavours to serve critical client needs, and ensure financial support for business continuity.
An expansive year
72% increase in B2B product portfolio with a high-throughput rate of 167%
Corporate Cards recorded a 700% increase with 4,400 new cards issued
Virtual accounts grew by 236%
Escrow accounts grew 193% at a throughput of 313%
Card spending accounting for a 517% increase.
Cash Deposit24 Cards customers activated, witnessed a solid increase during the period
During the reporting period, CBG continued to increase its Small and Medium Enterprise (SME) portfolio by continuing to expand its market share and structured product offering, including the Sharia-compliant (Murabaha) overdraft facility as well as receivable financing, fleet financing, Point-of-Sale (PoS) financing and real estate (Eirad) financing solutions.
Al Rajhi Bank retained its leading position in the KSA market with a 37.5% PoS market share, with 533,442 terminals. Almost 85% of all terminals were upgraded to 4G with the Near-Field Communication (NFC) feature in 2022.
Boosting client engagement
The Corporate Banking Business Team continued to engage with clients in 2022 with over 3,294 joint client visits and calls with the Product Team, to better understand customer needs, create new opportunities across the Bank’s various business units and accommodate customer requirements.
In a bid to reward customer loyalty, CBG also integrated several strategic accounts with the Mokafaa loyalty programme, further increasing client satisfaction during the year. A CBG roadshow was conducted in December across the three regions.
Under the “One Stop Shop” initiative, CBG continued to consolidate resources and co-locate by setting up 56 additional Corporate Desks at Al Rajhi Bank branches, taking the total corporate desks to 100 by the end of the year. CBG also continued to operate the dedicated Corporate Business Solution Centres in the key cities of Riyadh, Jeddah and Dammam during the reporting period, ensuring a holistic coverage of account service, financing, cash management and trade finance operations.
Making unrivalled strides in digitalisation during the reporting period, Al Rajhi Bank became the first bank to launch an end-to-end digitised LG service in both issuance and advising, streamlining the processes on the Wthaq digital platform launched by fully-owned subsidiary of PIF – Tabadul, the Saudi Company for Exchanging Digital Information. Al Rajhi Bank also became the first bank in the Kingdom to launch a B2B LG Automation Service for LG beneficiaries in partnership with the budding fintech BwaTech, while enabling customers to utilise the Etimad financial digital services platform for issuance and advising of LGs.
CBG also launched an end-to-end cross-border digital trade solution for LCs in partnership with Contour, a Singapore based fintech that is engaged in digitalisation of Trade Finance.
The Bank continued system enhancements to improve customer experience, enhance business delivery and support growth momentum during the reporting period; these included the integration of Al Rajhi Bank’s e-Corporate portal with its e-Trade portal to enable single-sign on, enhanced dashboard features for CBG’s customer relationship management (CRM) system to enable business with a holistic view of customer accounts and details for faster decision making, and mobile device access for the Bank’s loan origination system (LOS), which also expanded its scope to include the SME segment.
Corporate Banking also relied on the latest technologies, data science, data visualisation and analytics tools to finalise the automation of Management Information System (MIS) reports, including regulatory reports, incentive calculation, and monthly performance report.
Aligning with Vision 2030
The Bank continued to broaden and strengthen its ties with the public sector in 2022 through long-term sustainable projects and initiatives in order to further align with and contribute towards the Kingdom’s Vision 2030. Having supported its establishment, Al Rajhi Bank became the primary bank for the National Development Fund (NDF) in 2022, easing its operational and financial requirements.
Al Rajhi Bank was also the Kingdom’s bank of choice for Hajj and Umrah seasons of 2022, successfully partnering with the Ministry of Hajj and Elm – an IT services company owned by the Public Investment Fund (PIF) to improve fund collections through system enhancements. The Bank also worked closely with government and semi-government entities to equip them with tools and technology for more efficient payment and digital solutions, in order to improve their outreach to citizens, residents and visitors to the Kingdom.
The Bank continued to be a major contributor to the primary drivers of Vision 2030, engaging with major public and private sector stakeholders during the reporting period to offer best-in-class financial solutions across the real-estate, tourism, entertainment and industrial sectors.
On the ESG front, the Bank assisted Tarshid – the National Energy Services Company, in achieving their strategic goals to develop, fund and manage impactful energy efficiency projects that resulted in significant energy savings for the Kingdom.
The Bank has adopted a dedicated strategy to align closely with the growing electric vehicles (EV) sector in an effort to enable its growth and expansion by supporting infrastructure development and introducing retail financing and leasing programmes, further contributing towards energy transition targets in Vision 2030.
The Corporate Banking Group is set to launch a series of new initiatives in 2023 to maintain its market-leading growth and realise its vision to become the Best Corporate Bank in the Kingdom, including a new core banking solution to revamp corporate credit products and services.
A credit facilities dashboard is currently under development to be made available through the Bank’s e-channels to allow customers to review outstanding utilisations, while an end-to-end loan disbursement solution via the Bank’s digital channels is expected to be launched by the third quarter 2023. CBG is also working on introducing a new, cutting-edge Supply Chain Finance Solution for SME and mid corporate segments next year, with strong collaborations with Neoleap in the pipeline for new product innovations to power advanced merchant ecosystem. SWIFTNet connectivity will be another highlight for Corporate Banking in 2023.
Corporate Banking will continue to support various initiatives of the Kingdom’s Vision 2030 strategy and the vision realisation programmes (VRPs). Leveraging its digital capabilities and with the added strength of Ejada, the newly acquired ITC solutions company, CBG will further enhance its partnerships with government institutions such as the Ministry of Justice, the Ministry of Human Resource and Social Development, the Ministry of Education as well the Ministry of Hajj and Umrah. Corporate Banking services for public sector projects will be further supported through platform enhancements and advanced financing solutions.