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business in perspective
chief financial officer’s review of 2024 performance
Abdulrahman Abdullah Al-Fadda
The year saw alrajhi bank take advantage of improving economic activities and market opportunities that emerged in the Kingdom
An overview
Government-backed economic diversification efforts across the Kingdom steadily advanced during 2024, resulting in Saudi Arabia’s economy exceeding previous estimates to grow by 1.3% at the close of the year. With the non-oil sector expanding at a healthy pace, Saudi Arabia’s GDP is expected to accelerate to 3.3% in 2025. Consumer spending continued its positive trend with an increase of 7.5% in 2024 on the back of improved economic activity. Furthermore, the migration to cashless transactions across Saudi Arabia reached 61%, with more individuals and businesses adopting new technologies for payments and transactions. Credit growth too, is expected to remain positive in 2025 and beyond, supported by government initiatives around Vision 2030 and a lower interest-rate environment.
Backed by this positive outlook, alrajhi bank continued its momentum from 2023 to deliver a strong performance across all business lines, driven by our new ‘harmonize the group’ strategy and its key objectives. we leveraged an ecosystem of banking and financial services and capabilities that were strategically built and strengthened over the years, to meet the growing financial needs of our customers.
In FY 2024, our balance sheet recorded a growth of 20.6% YoY. The growth was mainly driven by alrajhi’s financing portfolio growing at 16.7% YoY, reaching to SAR 693 Bn. Mortgage has grown 13.8% YoY, and represents almost 38% of our total financing portfolio, as well as 55% of our retail book. Additionally, our non-retail book grew by 30.7% YoY, supported by a 31.8% growth in our corporate book and 29.6% growth in SME financing, as alrajhi bank continued to strengthen its reputation as one of the top 3 corporate banks in the Kingdom. Also, our assets growth was further boosted in 2024. By a notable 31% YoY growth in our investment portfolio, exceeding SAR 175 Bn. by year end.
We also delivered a solid net income of SAR 19.7 Bn. in 2024, driven by both net-yield income and fee income, with net yield income representing more than 77% of total operating income.
In line with asset growth, we intend to expand and diversify our funding mix to accommodate and further support the expansion of the balance sheet. In 2024, the bank successfully issued a USD 1 Bn. AT1 Sustainable Sukuk at a competitive price for the first time in the global markets. The bank also successfully re-tapped an international sukuk issuance of USD 1 Bn. senior unsecured sukuk in March 2024, bringing its total to USD 2.13 Bn. at the close of the reporting period. The funding mix was further diversified in 2024 with the introduction of Syndicated and Bilateral deals amounting to more than USD 4.6 Bn. We continue to focus on enhancing our customer experience which resulted in a leading Net Promoter Score (NPS) of 85 in the local banking sector.
Five-year summary of the income statement
GRI
201-1
| Description | 2024 SAR ‘000 |
2023 SAR ‘000 |
2022 SAR ‘000 |
2021 SAR ‘000 |
2020 SAR ‘000 |
| Income | |||||
| Gross financing and investment income | 47,018,123 | 38,737,616 | 28,201,631 | 21,441,506 | 17,377,963 |
| Return on customers’, banks’ and financial institutions’ time investments | (22,175,077) | (17,468,497) | (6,028,944) | (1,049,570) | (464,946) |
| Net financing and investment income | 24,843,046 | 21,269,119 | 22,172,687 | 20,391,936 | 16,913,017 |
| Fee from banking services, net | 4,692,727 | 4,225,650 | 4,624,140 | 3,933,107 | 2,659,680 |
| Exchange income, net | 1,292,866 | 1,246,450 | 1,162,162 | 787,898 | 783,894 |
| Other operating income, net | 1,226,664 | 790,190 | 616,030 | 603,457 | 364,669 |
| Total operating income | 32,055,303 | 27,531,409 | 28,575,019 | 25,716,398 | 20,721,260 |
| Expenses | |||||
| Salaries and employees’ related benefits | 3,723,809 | 3,525,096 | 3,395,191 | 3,132,346 | 2,977,344 |
| Depreciation and amortisation | 1,981,914 | 1,578,009 | 1,330,119 | 1,141,932 | 1,118,148 |
| Other general and administrative expenses | 2,264,941 | 2,394,841 | 2,725,760 | 2,652,244 | 2,646,409 |
| Operating expenses before credit impairment charge |
7,970,664 | 7,497,946 | 7,451,070 | 6,926,522 | 6,741,901 |
| Impairment charge for financing and other financial assets, net | 2,116,744 | 1,504,178 | 2,001,259 | 2,345,086 | 2,165,740 |
| Total operating expenses | 10,087,408 | 9,002,124 | 9,452,329 | 9,271,608 | 8,907,641 |
| Income for the year before Zakat | 21,967,895 | 18,529,285 | 19,122,690 | 16,444,790 | 11,813,619 |
| Zakat Expense | (2,236,709) | (1,908,126) | (1,971,865) | (1,698,579) | (1,218,071) |
| Net income for the year | 19,722,206* | 16,621,159 | 17,150,825 | 14,746,211 | 10,595,548 |
* Excluding Non-controlling interests
Subsidiaries operating income 2024
| SAR ’000 | |
| ARC | 1,817,356 |
| Tuder | 145,749 |
| Atmaal | 1,006,392 |
| Emkan | 2,302,739 |
| Tawtheeq | 24,446 |
| Neoleap | 545,167 |
| Ejada | 410,052 |
| Drahim | 11,601 |
| ARB Malaysia | 393,750 |
| ARB Kuwait | 109,953 |
| ARB Jordan | 197,080 |
| Total | 6,964,284 |
Total operating income
alrajhi bank delivered a strong 16.4% growth in operating income amounting SAR 32.1 Bn. for the year 2024, mainly driven by a 16.8% YoY growth in yield income, which was further supported by a 15.2% YoY growth in non-yield income. This increase was the result of a key strategic imperative to ‘leverage the customer base via cross-sell’ under the bank’s new ‘harmonize the group’ strategy; our focus on cross-selling products saw the percentage of alrajhi customers with more than one product increasing to 42.4% at the close of 2024, directly contributing to the increase yield and non-yield income.
Trade and cash management fee income corresponding to the growth of the corporate business registered a strong YoY increase and contributed to the revenue mix. coupled with fees from digital-payment services such as cards and POS, all these factors contributed to 11.1% YoY higher fees from banking services. Exchange income grew by 3.7% YoY.
Operating expenses
The bank’s operating expenses for the period reached SAR 7.9 Bn., recording a 6.3% YoY increase that corresponds with the overall YoY growth of the bank’s balance sheet and transaction volumes compared to the same period last year. A number of strategic investments were also made during the year to meet ambitious targets of the new strategy cycle, contributing towards the increase in operating expenses. At the close of the reporting period, alrajhi bank delivering a cost-to-income ratio (CIR) of 24.9%, holding our position as one of the most operationally efficient banks in KSA.
Impairment charges
In accordance with IFRS 9 requirements issued by the International Accounting Standards Board (IASB), we updated the bank’s ‘expected credit loss’ (ECL) model for the recognition of impairment, taking into consideration the positive macroeconomic outlook for the Kingdom of Saudi Arabia. The net impairment charge for 2024 amounted to SAR 2.1 Bn., a YoY increase of 40.7%. The cost of risk for the period increased by 7 basis points to 0.32%, given the higher impairment charges and the solid growth of the financing portfolio during the year in review.
Profitability
alrajhi bank delivered the highest net income after Zakat since its establishment in 2024, amounting to SAR 19.7 Bn. with a strong 18.7% YoY increase. In addition, the bank continued to deliver industry leading return metrics, with a steady Return on Risk-Weighted Assets (RORWA) at 3.49%, Return on Assets (ROA) 2.3%, and market leading Return on Equity (ROE) at 21.1% for 2024.
Statement of financial position: five-year summary
| Description | 2024 SAR ‘000 |
2023 SAR ‘000 |
2022 SAR ‘000 |
2021 SAR ‘000 |
2020 SAR ‘000 |
| Cash and balances with Central Banks | 53,244,710 | 41,767,641 | 42,052,496 | 40,363,449 | 47,362,522 |
| Due from banks and other financial institutions, net | 19,529,727 | 9,506,673 | 25,655,929 | 26,065,392 | 28,654,842 |
| Investments, net | 175,033,587 | 133,375,565 | 101,325,425 | 84,138,142 | 60,285,272 |
| Financing, net | 693,409,723 | 594,204,806 | 568,338,114 | 452,830,657 | 315,712,101 |
| Investment in associates | 1,034,262 | 923,046 | 820,717 | 295,253 | – |
| Investment properties, net | 1,358,638 | 1,362,658 | 1,364,858 | 1,411,469 | 1,541,211 |
| Property, equipment, and right of use assets, net | 13,894,302 | 12,852,774 | 11,338,782 | 10,147,688 | 10,234,785 |
| Goodwill and other intangible assets, net | 1,435,512 | 1,510,568 | 1,214,547 | 518,111 | – |
| Positive fair value of Shariah complaint derivatives | 1,905,903 | 877,676 | 996,143 | 352,085 | – |
| Other assets, net | 13,540,292 | 11,716,865 | 8,511,877 | 7,522,382 | 5,033,990 |
| Total Assets | 974,386,656 | 808,098,272 | 761,618,888 | 623,644,628 | 468,824,723 |
| Due to banks, Saudi Central Bank and other financial institutions | 173,434,597 | 97,246,889 | 70,839,117 | 17,952,140 | 10,764,061 |
| Customers’ deposits | 628,238,501 | 573,100,607 | 564,924,688 | 512,072,213 | 382,631,003 |
| Negative fair value of Shariah compliant derivatives | 1,679,043 | 793,541 | 961,405 | 311,138 | – |
| Sukuk issued | 8,450,753 | 3,789,117 | – | – | – |
| Other liabilities | 39,444,531 | 26,408,687 | 24,668,643 | 26,027,573 | 17,311,141 |
| Total liabilities | 851,247,425 | 701,338,841 | 661,393,853 | 556,363,064 | 410,706,205 |
| Share capital | 40,000,000 | 40,000,000 | 40,000,000 | 25,000,000 | 25,000,000 |
| Statutory reserve | 38,373,547 | 33,442,996 | 29,287,706 | 25,000,000 | 25,000,000 |
| Other reserves | (311,814) | (96,606) | (427,569) | 282,107 | (134,728) |
| Retained earnings | 21,417,282 | 16,913,041 | 9,864,898 | 16,999,457 | 8,253,246 |
| Proposed dividends | – | – | 5,000,000 | – | – |
| Equity attributable to shareholders of the Bank | 99,479,015 | 90,259,431 | 83,725,035 | 67,281,564 | 58,118,518 |
| Equity sukuk | 23,553,815 | 16,500,000 | 16,500,000 | – | – |
| Total equity attributable to equity holders of the Bank | 123,032,830 | 106,759,431 | 100,225,035 | 67,281,564 | 58,118,518 |
| Non-controlling interests | 106,401 | – | – | – | – |
| Total equity | 123,139,231 | 106,759,431 | 100,225,035 | 67,281,564 | 58,118,518 |
| Total liabilities and equity | 974,386,656 | 808,098,272 | 761,618,888 | 623,644,628 | 468,824,723 |
Assets
The year in review saw alrajhi bank reaching yet another major milestone as we are about to reach SAR 1 trillion. in total assets, closing 2024 with assets amounting to SAR 974 Bn., a 20.6% YoY growth. The bank’s asset quality continued to lead the market with 96.9% of our financing portfolio falling under the definition of stage 1 assets under the IFRS 9 classification. In addition, stage 2 and stage 3 assets stood at 2.0% and 1.1% of the financing portfolio respectively. Our stage coverage ratios remained healthy, with a stage 3 coverage of 54.8%, a stage 2 ratio of 12%, and stage 1 ratio stable at 0.4%.
Our prudent risk management and strong credit quality continued to be reflected in our NPL ratio, which remained one of the lowest in the market at 76 bps. The bank’s NPL coverage ratio was healthy at 159.4% the close of the year.
Deposits and other liabilities
Total liabilities of alrajhi bank stood at SAR 851 Bn. at the end of the reporting period, a YoY increase of 21.4%. We recorded a notable SAR 55 Bn. increase in our customer deposits in 2024 to reach SAR 628 Bn., a YoY growth of 9.6%. Demand and other non-profit bearing deposits made up almost 73.4% of the overall customer deposits, while time deposits decreased by 19.7% YoY. Interbank borrowing increased to SAR 173.4 Bn. It is worth mentioning that of the syndicated loan facilities of SAR 17 Bn. raised by the bank, nearly SAR 10 Bn. comes from a USD denominated syndicated green loan, which will be issued under alrajhi bank’s Sustainable Finance Framework, further underscoring our commitment towards meeting the growing appetite among consumers for sustainable, climate-linked financing instruments.
Stability
With a strong balance sheet backed by market-leading asset quality, healthy regulatory liquidity position and comfortable levels of capital ratios, alrajhi bank successfully maintained its steady growth and consistent performance, demonstrating the stability, shareholder loyalty and creditworthiness of the bank.
Liquidity position
alrajhi bank retained a healthy liquidity position in 2024, with a Liquidity Coverage Ratio (LCR) of 120.1%, and a regulatory Loan-to-Deposit Ratio (LDR) of 85.5%. Our Net Stable Funding Ratio (NSFR) stood at 108.7%, comfortably above regulatory requirements. Additionally, alrajhi’s High-Quality Liquid Assets (HQLA) stood at SAR 128.1 Bn.
Capital position
alrajhi bank maintained a strong capital position in 2024, with a tier 1 ratio of 19.3%, and a total capital adequacy ratio of 20.2%. Our total Tier 1 and Tier 2 capital stands at SAR 123.6 Bn., out of which 95% is Tier 1 capital. Our total Risk-Weighted Assets (RWA) stand at SAR 611.4 Bn., a 17.5% YoY increase mainly driven by the growth in the financing book that led to a 17.6% increase in Credit Risk RWAs. Our RWA density improved to 62.8% at the close of the year.
Overall, alrajhi bank’s financial health continues to strengthen, as demonstrated by an increase in shareholders’ equity (excluding equity sukuk) from SAR 90 Bn. to SAR 99 Bn., marking a rise of 10% YoY. Total assets climbed to SAR 974 Bn., up by 21%, while customer deposits grew by 10% to reach SAR 628 Bn. The bank also reported a return on assets and shareholders' equity of 2.3% and 21.1% respectively, with a market leading return on risk weighted assets (RORWA) stands at 3.49%. Notably, higher return metrices with improved RWA density at 63% have contributed effectively in our internal capital generation.
Future outlook
We are proud of the record-breaking performance that has been achieved by alrajhi bank at the close of 2024, demonstrating the overall impact of the execution of the new ‘harmonize the group’ strategy. During the subsequent financial year, alrajhi bank will continue to focus on our core retail banking vertical, while resolutely improving our corporate position in the Kingdom. Given the improved outlook and continued diversification of the Saudi economy, alrajhi bank will explore and capture new opportunities through tapping into new segments, with greater focus on fee-generated income across the SME business, with the SME sector playing a key role in growing the Kingdom’s non-oil economy.
The bank will continue the mandate to create a digital financial ecosystem, providing our loyal customers with innovative, accessible and seamless financial solutions that address their evolving needs. Guided by the new strategy, we will continue to focus on cross-selling and increasing products per customer, and optimising synergies across alrajhi bank and its subsidiaries, providing customers solutions in investments, microfinancing, digital payment and other financial needs, addressing evolving needs of a growing customer base with an incomparable customer value proposition.