Al Rajhi Capital (ARC) – the largest broker in the Kingdom – maintained its leadership position in traded brokerage value with more than 18.1% market share, the highest in the Saudi Capital Market. This was in spite of the challenging operating environment, where Global capital markets faced significant challenges in 2023, negatively impacting major financial hubs including the local market, where trading volumes saw a decrease of -22% YoY.

The introduction of ARC’s new mobile super app at the beginning of the reporting period further strengthened this position, leading to a 42% increase YoY in the number of active clients.

ARC extended coverage to 38 markets around the world for international brokerage by the end of the reporting period, thereby increasing cross-selling opportunities within local and international brokerage and asset management portfolios, all which are available in one mobile app. Several attractive promotional campaigns were conducted to encourage participation in international brokerage, enhancing ARC’s growing presence in this business vertical.

ARC also became the first equities market maker in the Saudi Exchange Main Market in 2023, with market making introduced to the Saudi Exchange as per the directives of the Kingdom’s Vision 2030 Financial Sector Development Programme. The subsidiary has three companies in its portfolio as at the end of the year in review, and will be responsible for enhancing liquidity and contributing to increasing trading volumes for their shares.

With overall market retail trading also recording a -7% decrease YoY, ARC continued executing its strategic ‘Expand Institutional Offering’ initiative, enhancing its institutional brokerage activities during the year in review. By year end, the institutional trading values have more than doubled compared to the preceding financial year.

All efforts to retain the subsidiary’s leading position were complemented with capacity building across all business departments. ARC continued to develop and equip its employees to meet market demand and business growth through training programmes ranging from leadership to technical development.

Expanding the asset management portfolio

Since the launch of ARC’s strategy in 2020, the subsidiary’s Fund Factory has launched 24 funds, including the well-received Al Rajhi Monthly Distribution Fund – the first open-ended fund of its kind. In 2023, the Fund surpassed SAR 1.2 Bn. in assets under management (AuM), and performed at more than 16% outperforming it’s benchmarking index, which decreased by -0.04% during the same period. Following the promising response and performance of the Monthly Distribution Fund, the subsidiary launched the Al Rajhi Monthly Distribution Fund 2 during the year in review, with AuM of over SAR 550 Mn., along with three more Public Equity Funds. The Al Rajhi Saudi Equity Fund performed well at 31.8% during the reporting period, given a 14.2% increase in the Tadawul All Share Index (TASI) in 2023, while the Al Rajhi GCC Equity Fund performance rose to 31.3% for the year. The launch of more such diversified investment products, backed by the reduction of the minimum subscription to invest in mutual funds down to only SAR 10 in several public funds, resulted in the number of unit holders increasing significantly by 547% YoY.

Public Funds Launched in 2023:

• Al Rajhi Momentum Fund
• Al Rajhi Inclusion Fund
• Al Rajhi Mid/Small-Cap Fund
• Al Rajhi Monthly Distribution Fund 2
• Real Estate Monthly Distribution Fund

On the real estate front, ARC increased its first Real Estate Investment Traded (REIT) Fund’s capital by SAR 1 Bn. during the reporting period, which was the largest capital increase for a REIT fund in the Saudi Market. In addition, the subsidiary also launched three private funds totalling to nearly SAR 7 Bn. in assets under management.

Evolving financial advisory services

ARC’s Investment Banking services marked another strong year with successful execution of 13 deals representing a combined value of over SAR 82.4 Bn. During 2023, the Investment Banking Department completed several transactions in Debt Capital Markets (DCM), Equity Capital Markets (ECM), and Mergers and Acquisitions (M&A). Some notable transactions for ARC include:

• PIF Sukuk issuance of USD 3.5 Bn., in which ARC was the sole local broker acting as joint lead arranger
• Al Rajhi Bank Sukuk offering of USD 1 Bn.
• IPO of Jamjoom Pharma raising SAR 1.26 Bn.
• Rights offering of National Agricultural Development Company (NADEC) raising SAR 2.0 Bn.
• M&A transaction of Red Sea International Company valued at SAR 544 Mn.

Al Rajhi Capital has established itself as a prominent player in local, regional and global Sukuk markets, demonstrating its ability to structure and manage Sukuk offerings, while further strengthening the unparalleled trust and confidence that issuers and investors have in the Company. As a result, ARC was awarded the Best Debt Capital Markets House Award at the Saudi Capital Market Forum 2023 hosted by Saudi Tadawul Group.

Leveraging the successful execution of large and complex transactions, ARC’s Investment Banking service was able to build a healthy deal pipeline across all product lines with several mandated deals setting the stage for another strong year.

The International Investments Department which was established during the previous financial year continued to activate the diversification into international investment products, setting up full governance structures and internal policies and procedures, as the department expanded its product scope to both public and private investment strategies.

With evolving international investment policy frameworks and a niche demographic of socially conscious investors, ARC remains committed to creating a positive impact through capital investments. The subsidiary has created a foundation to provide a comprehensive suite of investment options for its clients in the coming years.

During 2023, ARC introduced sustainable financial products that contributed towards social cohesion by launching seven endowment funds, established to promote investments particularly in non-profits.

Endowment funds launched in 2023:

• Shifa Health Endowment Fund
• Autism Associations Endowment Fund
• Doyof Al Rahman Associations Endowment Fund
• Orphans Associations Endowment Fund
• Quran Kareem Associations Endowment Fund
• Eastern Region Associations Endowment Fund
• Health Associations Endowment Fund

Digitally ahead of the competition

During the first quarter of the reporting period, ARC introduced a comprehensive, convenient and user-friendly ‘Super App’ that offers access to ARC services and products, as an all-in-one platform. Users can download the app and access brokerage services to trade in the Saudi Tadawul market, as well as an international brokerage feature that allows users to access a diverse range of investment opportunities.

The functionality and features include a smooth onboarding process to register and open an investment account, with seamless, effortless navigation between each product and service. The development of the application was complemented by the regular upgrades of features based on customer feedback, to achieve the desired benchmark in line with ARC’s strategic objectives in both digital transformation and customer experience.

As a result of digital upgrades, trades conducted via digital channels increased by nearly 8% in 2023, with its cross-selling metric recording a two-fold increase YoY from users easily accessing different products and services on one platform. Additionally, the new mobile app was well-received by clients, with a 4.4/5 App Store rating.

ARC’s Digital Department continued its digital transformation momentum during the year in review, complementing the upgrades across both brokerage and asset management backend systems. During the year, several features have been introduced to its clients, such as the reinvestment of returns, where clients can reinvest their mutual fund returns automatically, and the monthly subscription, where clients can automate their subscription to any fund on a monthly basis. Adding cash became easier through multiple methods, such as credit card, bank transfer, or funding the investment account via “Apple Pay”. Furthermore, clients can redeem their “mokafaa” rewards points into buying power and invest in the Saudi Market at a glance.

Exploring group synergies

The subsidiary maintains constant dialogue with Al Rajhi Bank during 2023 in order to explore mutually beneficial collaborations and leverage Group synergies; the seven Endowment Funds were made accessible through the Al Rajhi Bank App’s homepage, while the reinvestment process was also simplified for investors via the Bank App through the ‘Smart Investor’ feature. The subsidiary also participated in Al Rajhi Bank events to introduce investment opportunities to the Bank’s customers, and promote the ARC mobile super app for easy access to financial instruments.