SAB's mortgage portfolio grew 27% in 2023: CEO

Tony Cripps, CEO of Saudi Awwal Bank (SAB)

Saudi Awwal Bank's (SAB) mortgage portfolio saw a remarkable 27% growth, amounting to SAR 27.9 billion by the end of 2023, compared to a year earlier, CEO Tony Cripps told Argaam in a phone call.

This expansion is a result of the bank's consistent efforts and ongoing focus to grow its market share in the mortgage industry, especially after making its initial investments in this field two years ago, he continued.

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The bank almost doubled its market-wide share volume in 2023, reflecting higher market penetration for its mortgage products. This is in addition to the increase of 22% and 16% in credit card balances and personal lending, respectively, which underpins SAB's diverse lending activities, the top executive added.

He also indicated that the strong growth in the bank's mortgage segment shows its dedication to catering to clients' changing financial needs while fostering long-term business growth.

Further, the uptick in credit loss provisions, according to the CEO, reflects charges across both corporate and retail portfolios. However, this still only represents a cost of risk of 0.27%, which is significantly below market levels and lower than the bank's through-the-cycle guidance.

He indicated that elevated interest rates have led to increased financing costs (FCs) for both corporate and retail clients, which affected their willingness and capacity to borrow.

"We have focused on optimizing our loan portfolio by prioritizing high-quality lending opportunities while exercising caution in riskier segments. Additionally, we have diversified our funding sources and enhanced our deposit mobilization efforts to mitigate the impact of rising FCs," said Cripps.

The top executive also highlighted that SAB's corporate strategy is focused on providing digital solutions and long-term financing to support its clients' plans.

"Overall, we remain resilient in the face of interest rate fluctuations, with a strategic focus on maintaining profitability, managing risks, and delivering sustainable value to our stakeholders," Cripps said.

The bank's loans-to-debts ratio stood at 90% by the end of 2023, compared to 100% for the sector. Thus, the bank is “in great shape for funding and liquidity,” he noted.

Commenting on Q4 2023 financial results, the CEO said the 50.6% year-on-year (YoY) surge in net profit was supported by the strong loan growth of 18% YoY, alongside the corporate and retail segments’ growth of 18% and 16%, respectively.

These factors have played a vital role in SAB’s financial performance for the year and helped expand its loan portfolio and attract new customers in both the corporate and retail segments, leading to improved profitability, Cripps added.

“We have also benefitted from having a largely corporate-focused portfolio that is mainly floating and therefore has benefitted from the higher rate environment in 2023,” the CEO further stated.

"Given the dynamic nature of the global economy, SAB will be keeping a close eye on the Federal Reserve's monetary policy decisions for the remainder of 2024. Although the future of such decisions is still undetermined, we are ready to modify our plans as necessary," he continued.

Cripps explained that despite potential challenges, SAB’s 2024 outlook for the Saudi economy remains positive. The bank is still strategically positioned and adaptable to navigate the changing market conditions.

In response to such possible pitfalls, SAB has taken steps to reduce the sensitivity of its balance sheet to interest rates, said Cripps. However, he added that, while policy forecasts are subject to change, the prospect of higher rates for a longer period suggests that current yields will likely remain stable.

"Our strategic aim for 2024 is to maintain returns at current levels, and we expect rates to be cut in the second half of the year," he was quoted as saying.

The CEO further stressed that, as economic conditions evolve, SAB is committed to staying agile and responsive, continuously assessing market dynamics and adjusting its strategies accordingly.

SAB reported a 45% surge in net profit to SAR 7 billion in 2023, compared to SAR 4.82 billion in the previous year. The fourth-quarter profit amounted to SAR 1.85 billion, according to Argaam's data.