Al-Rajhi on prowl for foreign expansion
Riyadh, August 7, 2007
Al-Rajhi Banking & Investment Corp., the Gulf's largest bank by market value, is considering further expansion abroad.
"We are always open to the idea of further international expansion. We evaluate any business opportunity that may be arising from time to time anywhere and would be willing and ready to go for it," chief executive Abdullah Sulaiman Al-Rajhi said in written replies to Reuters questions. He did not elaborate.
Al-Rajhi plans to expand its branch network in Malaysia, where it opened a subsidiary in 2006, from 13 to 50 within three years.
"The Malaysian banking clients' response has been very positive," he said.
The Islamic lender expects positive growth in earnings this year despite a slowdown in consumer lending and a drop in brokerage fees, he added.
"The bank has met its first half-year's budget and as originally planned we expect to close the year with positive growth," Al-Rajhi said.
The bank made a net profit of 1.61 billion riyals ($429.3 million) in the second quarter, down 9.3 percent from the year-earlier period. The annual decline in net profit was 10.3 percent in the first quarter of 2007.
The bank's total net income has been growing with a cumulative annual growth rate of 53 percent during the 2003-2006 period, mainly through strong growth in retail operations supported by brokerage fees, he said.
"Throughout this period, the bank's dependency on brokerage income has been substantially lower compared to its key competitors," Al-Rajhi said.
The bank's strategic plan for the 2007-2009 period has identified retail banking and corporate banking as main engines of growth, Al-Rajhi said.
The bank said in June it would open branches in Saudi Arabia's main shopping malls as it pushes into the kingdom's burgeoning consumer lending market.
"Emphasis in mortgage loans and car leasing (and) re-establishing and entering aggressively the corporate and investment banking arena," the CEO said, citing the key sectors.
Several Saudi banks are offering mortgage financing but analysts say the vast majority of potential customers are excluded in the absence of a mortgage law which the justice ministry has been preparing for several years.
Saudi Arabia needs 1 million housing units over the next five years which will cost $14 billion, Abdelmounaim Mourad, chief executive of Jeddah-based Iwa'a al-Deira property developer, said in remarks published this month. - Reuters