Arthur D. Little Report Highlights Strategies for KSA Banks To Build A Future-Proof Business

 Arthur D. Little (ADL) has published a new Viewpoint, “Pursuing Excellence in Corporate Banking” exploring challenges and opportunities that illustrate the lasting and even increasing importance of the corporate segment for banks in the Kingdom of Saudi Arabia (KSA). The Viewpoint reviews the impacts of recent disruptions and expected, and explores options for banks to strengthen and grow their corporate and investment banking (CIB) business.

CIB in the Kingdom of Saudi Arabia represents $485 Bn. assets and $15 Bn. revenue. CIB assets are about twice the ones of retail banking . According to the report, regional banks however focus their external communication primarily on the consumer segment, whether it is fintech, strategy, digital transformation, products, or applications. Further, corporate banking is often perceived as a specialist area and, as a result, innovation is frequently thought to be focused in the retail banking sector. The report outlines an increasingly competitive, fast-evolving, and complex environment for CIB businesses, which includes a variety of challenges caused by structural trends, COVID-19, and the war in Ukraine.

ADL Viewpoint calls for the primary focus to return to corporate banking for a few important reasons – an  inflationary storm is ahead and CIB will be critically exposed to it and CIB is heavily impacted by environmental, social, and governance (ESG) efforts. While the retail segment is more competitive, CIB still benefits from several growth drivers. Clients are facing increasingly complex issues that require new solutions from banks. In addition, the SME segment remains underpenetrated. The potential of digital optimization remains mostly untapped as well, and sizable innovation opportunities exist in the space of blockchain and cryptocurrencies.

Philippe DeBacker, Managing Partner and Global Head of Financial Services, Arthur D. Little, said:“The region offers a positive and transformational environment for corporate and investment banking, which accounts for about 70% of assets in the GCC amid high hopes for the economy and enormous private and public sector spending. As highlighted in the Viewpoint, banks should anticipate further sector consolidation due to shrinking margins and high regulatory requirements. To accelerate their journey to becoming banks of the future, banks need to redesign their business models to maximize revenue per customer, protect capital and ensure risk resilience by optimizing the use of financial technology.”

Stephane Ulcakar, Associate Director and Head of Corporate and Government Financial Services, Arthur D. Little, said:“ The digital transformation trend has caused widespread disintermediation and the need for scale across industries. As a result, banks must transform in much the same way that car manufacturers — and many other industries — did during the 20th century. This means moving away from an integrated model and outsourcing most value steps except a few strategic ones, such as design, assembly, and control. In response to these disruptive forces, however, bankshave an unprecedented chance to broaden their business, reduce costs, and become more reactive. However, as was true with car manufacturing, this can lead to additional challenges.”