Saudi American Bank leads the banking sector in a survey of Top 25 banks

Riyad Bank gained a very close 2nd place with $2.56 billion capital, followed by Arab Bank Group of Jordan with $2.35 billion capital. With Al-Rajhi Banking and Investment Corporation on 4th place, three out of the top five slots went to Saudi banks. Arab Banking Corporation (ABC) gets the 5th place in the Top 25 ranking.

The rankings of the top five players in terms of size remain unchanged during 2001. Unlike rankings among top international banks that change frequently due to mergers and acquisitions, the GCC banking sector rankings at the top remain largely unchanged. A key exception was the merger between SAMBA and United Saudi Bank in 1999 that catapulted the combined bank to its current leading position in the ranking.

The report highlights that consolidation in international banking sector has made the largest of the GCC banks look miniscule in comparison with financial services giants created by mega-mergers in Western economies. Even the combined $30 billion capital of the Top 25 banks is less than many of these large banks. Citigroup boasts a capital base of $81 billion. HSBC has a capital base of $46 billion. JP Morgan Chase has a capital of $41 billion and Deutsche Bank's capital base is $36 billion.

The report concludes that the market position of some of the key players in the Top 25 would be jeopardized as competition intensifies with the gradual liberalization in the GCC financial services sector and the very survival of some of the smaller players could be at stake.

Financial Performance
The analysis by Gulf Banking Consultants confirms that size alone does not necessarily indicate a bank's ability to deliver top financial performance. The largest five banks have posted significantly different financial performance during 2001. SAMBA set the benchmark with an ROE of 22.7% thereby showing other banks how it is possible not only to be the largest, but also the most profitable bank. On the other end of spectrum, Arab Banking Corporation had the lowest ROE of 5.3% and Arab Bank Group was not far behind at 19th position with an ROE of 11.1%. Despite its size and large market share, Riyad Bank only generated an ROE of 14.4% that puts the bank in the middle of the ranking table on 13th position.

In contrast, Saudi Hollandi and Kuwait Finance House (KFH) show how it is possible to deliver top quality financial performance notwithstanding their relatively small size. In spite of being almost a quarter of the size of SAMBA in terms of capital, Saudi Hollandi gained 2nd position with an ROE of 22.6% that was only marginally different from SAMBA's 22.7% ROE. KFH gained 3rd position with an impressive 22.5% ROE in spite of its relatively small size. The hairline difference between the ROE shows that the fight for the Top 3 spots was exceptionally tough.

International Comparison
In order to benchmark performance with international banks, Gulf Banking Consultants developed a Top 10 index of international banks by taking four leading banks from the US, four from Europe and another two from the UK banking sector. The analysis suggests that, on average, the International Top 10 did not post as healthy returns for 2001 as their GCC counterparts. The International Top 10 average ROE of 12.5% is somewhat lower than the average GCC ROE of 15.3%. The performance of international banks, however, is much better on a pre-tax basis.