Saudi banks resilient, trust at all-time high despite pandemic: KPMG

Banks in Saudi Arabia continue to demonstrate hyper-vigilance across the aspects of risk management and asset protection, despite an increase in delinquencies and influx of credit losses, financial advisory firm KPMG said in a recent report.

The report, which comes after listed banks in the Kingdom posted their second-quarter 2020 earnings, also pointed to growing optimism as banks attain the capability to deal with the COVID-19 crisis, with trust in banks reaching an all-time high.

The domestic banking sector during the last six months reflected proactive approaches to deal with the liquidity, credit and market risk challenges, as well as close engagement with stakeholders, especially the Saudi Arabian Monetary Authority (SAMA).

Although there were apprehensions that the decline in earnings was only the “tip of the iceberg” in terms of emerging losses at the end of Q1 2020, proactive action by the government, central bank and regulators played a vital role in the handling of distressed segments and providing additional liquidity and rapid roll-out of the forbearance measures, the consultancy noted.

“It has not been all ‘doom-and-gloom’, and as a silver lining, we have seen success stories of the proactive role played by governments, central banks and regulators,” Khalil Ibrahim Al Sedais, office managing partner (Riyadh) at KPMG, said.

He added that SAMA’s liquidity support enabled the banking sector to continue posting period-on-period improvement in its cumulative deposit and asset base even since Q1 2020.

Ovais Shahab, head of financial services at KPMG in Saudi Arabia, stated that overall trust in banks is at an all-time high, with stakeholders viewing them in a positive light.

“The key now is to retain the collective gains from the various aforementioned factors and build on them for a brighter, more prosperous tomorrow,” he added.