business portfolio review

corporate banking group

A favourable operating environment led to strong profitability metrics and growth prospects for Saudi corporate banks in 2024. This was underpinned by high oil prices, and by government spending directed towards the rapid execution of multiple Vision 2030 transformation programs and Giga projects. Collectively, these Vision 2030 initiatives continued to create opportunities across non-oil sectors including manufacturing, retail, trade, construction and logistics during 2024, creating a high credit demand in the Kingdom’s corporate banking sector. This also led to pressure on spreads, especially for top-tier credit due to the intense competition for corporate banking market share.

Corporate banking therefore, remained the major focus for most KSA banks during 2024, with consecutive QoQ increases in aggregate loans and advances mainly driven by the segment. Even though liquidity has once again tightened, Saudi banks remained financially well equipped to meet the expected surge in corporate borrowing with US interest rates expected to fall towards the end of the reporting period. The funding however, while being available, remained more expensive, with rate reductions likely to be very gradual.

Against this promising backdrop, alrajhi bank’s Corporate Banking Group (CBG) strengthened its position as one of the top 3 Corporate Banks in the Kingdom, recording a 31% growth during the year in review.

A primary pillar of the bank’s new strategy

With the launch of alrajhi bank’s new overarching ‘harmonize the group’ strategy at the onset of 2024, the collective portfolio of corporate products and services spread across the alrajhi group continued to grow under the Business-to-Business (B2B) strategic pillar. Four key segments were identified within the B2B business: Corporate and Investment Banking; Micro, Small and Medium Enterprises; Government and Enterprises; and Private Banking, each segment discussed in more detail in this chapter.

One of the key objectives of the B2B pillar is to ‘Become the ‘House Bank’ of Large Corporates’. Beyond the core corporate banking solution, CBG offered corporate customers a broader set of products and services leveraging alrajhi group synergies; Trade Finance and Treasury products to facilitate foreign trade and commerce, Corporate Insurance products from alrajhi takaful, Wealth Management and Brokerage from Al Rajhi Capital, exclusive Private Banking services for HNWI customers, alongside payments, payroll, and accounting solutions tailored to meet evolving business needs.

For 2024, CBG successfully recorded a notable 1.47% YoY growth in foreign exchange (FX) business, with a 23.7% increase in Trade Fee income during the year.

The second strategic imperative under the B2B pillar is ‘Developing the Investment Banking Business’; here, CBG collaborates with the Capital arm of alrajhi group to expand its Investment Banking offering and establish advisory services, including Mergers and Acquisitions (M&A), Advisory and Underwriting services, Access to Equity/Debt Capital Market (ECM/DCM) and more. CBG recorded a 427% YoY revenue growth through its investment banking business in 2024.

This overall concentrated effort contributed a strong performance by CBG in 2024; Total gross financing recorded a YoY increase of 31% to reach SAR 179 Bn. at the close of the year. Corporate operating income increased by 6% to SAR 7.8 Bn., Non-performing loans (NPL) improved to 1.63% and net credit losses (NCL) were held at 0.58%, stabilised by significant recoveries made during 2024. At the close of 2024, alrajhi’s corporate banking market share had risen to 13.6%.

Corporate banking group offering

Introducing innovative products and solutions

A number of new products and solutions were introduced under alrajhi bank’s B2B offering during the reporting period; a real estate financing solution with a unique value proposition focused on cross-selling to existing private banking clients was added to the bank’s growing private banking portfolio for affluent and high net-worth individuals (HNWI). alrajhi became the first bank in KSA to launch a Travel Account in 2024, introducing a virtual card solution targeting travel agencies to support the Kingdom’s emerging Tourism sector.

Corporate client acquisition was further expanded via a novel approach during the year in review; CBG partnered with aggregators – networks or platforms of related service providers under one company or brand name – to provide them with the Embedded Finance offering. By leveraging the synergies between alrajhi bank and its subsidiaries, CBG now delivers aggregators a combination of financial products such as payments, lending, insurance, so that the aggregators can provide their own clients and end consumers a highly convenient digital customer experience.

A similar approach was taken with several Government entities, to support their digitisation efforts with alrajhi bank’s collective group capabilities.

A segmented approach to better serve customers

For Small and Medium Enterprises (SMEs), a suite of SME financing solutions was revamped with bespoke variants of the products, to better address specific needs of SMEs. At the time of launching, the suite contained Point-of-Sale (POS) Finance, Fleet Finance, and Transaction Finance solutions. alrajhi dominated the aggressively growing merchant ecosystem of Saudi Arabia during the reporting period with a leading POS market share of 41.0%, with nearly +786K POS terminals and 742,220 merchants.

The Supply Chain Finance (SCF) Programme also continued to support private sector growth and its growing financing requirements. Key features of the SCF Programme includes customer assessments, receivables verification, concentration management, ledger reconciliation and control of customer payments, enabling the bank to manage product, dispute, fraud and other risks that may result in non-payment by the Buyer. Furthermore, the SCF Programme is powered by a strong technological platform/solution that is accessible to all supply chain participants, which contributes to the progress of Saudi Arabia’s evolving merchant ecosystem.

Overall, CBG follows a more focused approach to servicing the Kingdom’s growing Micro and SME sector, with product portfolios tailored to meet distinct business needs, with Group synergies leveraged to provide the segment with comprehensive, bundled banking and financial solutions. More details on these initiatives can be found on our dedicated MSME Business section on page 63 of this Report.

Banking solutions for multinational corporations (MNCs) and government entities

Beyond the strong support provided to SMEs through tailored banking solutions, CBG offered solutions across its carefully segmented approach to corporate customers, continuing to be a major contributor to several other primary drivers of Vision 2030 in 2024; the bank engaged with major public and private sector corporations to provide best-in-class financial solutions across emerging verticals such as tourism, entertainment and industrial sectors, as well as the emerging construction sector (with special focus on large-scale contractors and MNCs involved in such construction/infrastructure projects).

CBG formalised memorandums of understanding (MOUs) with government institutions such as the Ministry of Investment, the National Centre for Privatisation, and the Local Content and Government Procurement Authority in 2023, to support public sector projects through advanced financial solutions. Charitable accounts were also shifted under the B2B pillar, and have been segmented alongside Government accounts and other projects that are part of the Kingdom’s Vision 2030 agenda. CBG also continued to collaborate with the Kingdom’s Public Investment Fund (PIF), formalising facilities for infrastructure projects in line with Vision 2030, strengthened by PIF’s plan to increase domestic funding during the reporting period.

Driving growth through digitisation

CBG continued to enhance the digital functionality of corporate banking products and journeys during the year in review, with a superior customer experience underpinned by the deployment of numerous digital and technology enhancements throughout the year.

The Customer Relationship Management (CRM) system established to better service customers was made accessible via tablet devices during the reporting year, contributing towards further enhancing the corporate customer experience. Letter of Credit (LC) and Letter of Guarantee (LG) issuances were enabled digitally on the alrajhi bank business app for simplified documentation and reduced turnaround time, while the digital activation of POS financing and Buyer Invoice financing under SCF offered customers easier and faster access to credit. Further development efforts are ongoing at the time this report is being compiled, to offer end-to-end digital onboarding services to embedded finance solutions, overdrafts, fleet finance and payroll finance facilities.

We saw increased utilisation of both e-Business Portal and the alrajhi Business Mobile App in 2024, with a 14% YoY growth in the number of e-Business Accounts opened online. More statistics on the digital transformation of the B2B offering can be found in the Digital Footprint and Technology section on page 186 of this report.

The development of a unified dynamic pricing engine for CBG-wide products got underway during the reporting period, which will allow the bank to offer rates and fees tailored to corporate client segments and risk profiles, benefiting customers with a strong credit history with the bank. Other facilities that also kicked off the development phase during the reporting period include unified loan application solutions and unified credit scoring.

Enhancing client engagement

One of the key differentiators of alrajhi bank’s B2B offering is client engagement, which remains a key driver of business growth and expansion. With the overarching strategy driving group synergies forward, CBG continued to build on the bank’s 360-degree client coverage model during the year in review, with a 360-degree approach to holistically cover customer requirements and manage corporate relationships.

The Corporate Banking Group connects frequently with clients, making 15,433 calls/client visits during the year in review. This consistent engagement has given CBG greater insight into corporate client needs, concerns, and market sentiments, enabling CBG to address specific, otherwise overlooked or undetected customer concerns.

CBG leveraged collective digital and data capabilities of the alrajhi group to provide relevant product recommendations and create new cross-sell opportunities. Regular reporting and monitoring enabled a strong data-driven performance.

As alrajhi bank continued to consolidate resources and co-locate under the ‘One Stop Shop’ initiative during the reporting period, CBG Business Solution Offices (BSOs) or ‘Corporate Desks’ at alrajhi Retail Banking branches reached 100 at the close of the reporting year. As a result, alrajhi bank recorded a Net Promoter Score (NPS) of 78 for Corporate Banking, leading the market in customer loyalty and satisfaction.

Awards and recognition

The focused effort made by CBG during the year in review to provide segmented and highly-curated corporate banking solutions to clients won several recognitions including:

• Best Private Banking in the Middle East Award presented Meed
• Best Project Finance Bank in the Middle East Award presented by Meed