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SAUDI ECONOMIC FORUM Banking in KSA and Challenges Ahead March 2 2011 TABLE OF CONTENTS 2 © 2008 Alinma Bank Highlights of the Saudi Economy • Largest budget announced for 2011 • Government spending and oil revenue key to economic growth • Sound fiscal position provides ample scope for sustained growth 3 © 2008 Alinma Bank Highlights of the Saudi Economy Source: SAMA • Government has been consciously reducing debt from around 80% of GDP to 10% • Foreign assets are currently US$440 billion 4 © 2008 Alinma Bank Overview of the Saudi Banking Sector Source: SAMA • Continued Growth in Financing despite the financial crisis. • Increasing trend in deposits – pre and post financial crisis. 5 © 2008 Alinma Bank Overview of the Saudi Banking Sector Source: SAMA • Total assets increased – pre and post financial crisis. • Net Income declined pre crisis but was constant post financial 6 crisis. © 2008 Alinma Bank Overview of the Saudi Banking Sector (SAR in million) Source: SAMA, Al Inma • Total equity shows a rising trend in both pre and post financial crisis. 7 • CAR showed an increasing trend. © 2008 Alinma Bank Overview of the Saudi Banking Sector Saudi Corporates Eurostoxx 50 corporates Total Liabilities Total Liabilities Total Shareholders equity Total Shareholders equity 2.28 10.06 Source: Bloomberg • Role of banks critical in contributing to corporate growth • Shareholder equity not always the most efficient way to fund growth (cost of equity greater than cost of financing) • Low relative corporate leverage in Saudi compared to international benchmarks provides scope for growth through bank financing and capital market issuance 8 © 2008 Alinma Bank Saudi Banks – Post Financial Crisis • Effect of the crisis on Saudi banks was very limited • General Implementation of more robust controls • Improved credit assessment and corporate due diligence 9 © 2008 Alinma Bank Potential Growth Drivers • Infrastructure (power, water, transportation) • Housing (affordable low cost units) • SME (potential for growth but with government support through awareness / grants / guarantee) • Innovation and Product Development (alternative investment products to optimize returns) • Development of capital market activity (secondary market for bonds / Sukuks and securitization) • Financial planning solutions such as education financing schemes, retirement plans etc. 10 © 2008 Alinma Bank Challenges Ahead • Geopolitical situation • Continuing low interest rate environment • Limited capacity to grow under current traditional banking 11 © 2008 Alinma Bank © 2008 Alinma Bank