SNB Chairman says merger with Samba ‘at right time’, profit growth maintained in 2021

Saeed Al-Ghamdi, CEO and Managing Director, and Ammar Alkhudairy, Chairman, SNB

The merger of National Commercial Bank and Samba Financial Group took place at the right time and was an outstanding success, Saudi National Bank (SNB) Chairman Ammar Alkhudairy told Argaam.

The merger, which gave rise to SNB as the largest bank in the Kingdom, had positive impacts on the bank’s financial performance and its profit growth rates, he said.

SNB largely maintained its profit growth rates in 2021, despite the merger expenses, even if that profit was lower than expected, Alkhudairy said, drawing a bullish outlook for the future.

On the other hand, Saeed Al-Ghamdi, Chief Executive Officer (CEO) and Managing Director at SNB, said the bank has various potentials, including a 27% market share in the finance market, in addition to a market share of 31% to total assets.

Alkhudairy affirmed that SNB completed the transfer of more than 1.4 million accounts of Samba Financial Group’s retail clients in less than six months, ahead of closing accounts by the end of this January.

Commenting on the merger costs estimated earlier at SAR 1.1 billion, Alkhudairy said these charges will reach up to SAR 900 million maximum, a decline of SAR 200 million compared to the previous estimate.

Here’s the full interview:

Q: After 15 months from reaching a binding agreement on NCB-Samba merger, how can you describe the biggest consolidation deal in the Saudi market and banking sector?

A: It was an exciting journey despite challenges. It was full of responsibility and strong desire for making this merger succeed. This merger might be one of the most important or even the most important deal in the Saudi banking sector. The consolidation took place at the right time, simultaneously with the economic and development transformations witnessed by the Kingdom. Therefore, it was honestly an excellent experience, highly appreciated by everyone contributing to its success in a record time.

Q: How do you see the added value of this merger in the Saudi banking sector?

A: We believe that the merger timing is highly important, as the process coincided with the major transformation of the Kingdom on the economic and investment, as well as development levels in line with Vision 2030. Today’s transformation and the mega projects launched by the Kingdom to attract foreign investors, along with other serious steps to consolidate the Kingdom’s economic position regionally and globally, require giant banking entities that are able to respond to the various needs arising from the changes. Accordingly, a Saudi bank with such strong potentials, rich experience, and transborder network of relations can become the solid, reliable economic and financing partner of the national economy. The bank’s assets totaled SAR 903 billion as of Sept. 30, 2021, which strengthened SNB’s position not only locally, but regionally.

Among other strengths that might serve as a qualitative addition is the bank’s focus on digital banking and the creation of an unprecedented experience to speed up digital transformation, being a priority of the Vision 2030 strategic agenda. This, in turn, required financial strength to continue investment in financial technology (Fintech). Other strengths include a professional team of human cadres, which is available at SNB, and allows it to take initiatives; thus, enhancing the quality of banking services and Saudi banking reputation.

Q: What about the merger results on SNB’s market share and growth ratios?

A: SNB is the Kingdom’s largest bank by assets with a local market share of 31% and by capital, which exceeds SAR 44 billion. These strengths allow the bank to capture a market share of nearly 27%, accounting for 28% of total retail loans and 24% of total corporate funding in the Kingdom. Additionally, the bank has a large customer base, solid presence, a far-reaching network branch, and efficient services and products, which will help record increasing growth rates in the coming period.

Q: On the financial level, what is the merger’s impact on the bank’s profit growth rate and expected earnings in 2021?

A: To a great extent, SNB maintained its profit growth rates during 2021 despite the merger costs, but they were lower than expected. In the third quarter of 2021, SNB net profit grew by 20% to SAR 3.8 billion from SAR 3.2 billion a year earlier. We are optimistic about the future, as we are still at the beginning. We have a lot to do to leverage on the merger and the existing strengths, which can create more growth opportunities and demonstrate solid performance. The merger pushed the stock price almost 80% higher since entering into the non-binding framework agreement announced on June 25, 2020, to date.

Q: There are mixed figures of the merger costs, can you shed light on the actual expenses of the deal?

A: The merger costs were estimated at around SAR 900 million as one-off costs, which are SAR 200 million less than the previously-announced costs. The bank managed to record a cost synergy of more than SAR 500 million in 2021, which is equivalent to SAR 800 million year-on-year (YoY). Accordingly, the target synergies were increased to reach SAR 1.2 billion YoY by 2023.

Q: Do you expect NCB-Samba merger to encourage other banks in Saudi Arabia to follow suit? Is the sector ready for other similar deals?

A: We affirm that it is not possible to consider any developments of the banking entities, without taking into account the macroeconomics, as banks and the banking sector, in general, represent a key driver and an essential pillar of the national economy. Hence, the banks are a major driver of attracting investments and providing an effective incubator for business development and stimulation. If we look at the accelerated developments in the Kingdom, which are supported by strong aspirations to move the economy towards more productive prospects, we will find that this requires major banking entities to support the transition processes, and this is clearly evident in NCB-Samba merger. However, the next experiences cannot be judged except after knowing the mechanism of

how to perform them and the necessity of conducting extensive studies to achieve the desired results.

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